Thursday, February 11, 2010

Growing Faction Of Angry Americans Making Meaningful Economic Policy Difficult

The high unemployment, bailouts, and bonuses have angered people from a wide range of political affiliations which Robert Reich calls the "I’m Mad As Hell" Party. This faction of Americans are creating a political climate that discourages policies that would accelerate the economy. See the following post from Economist's View.

Robert Reich defends Obama's economic policies:

Obamanomics one year out, by Robert Reich , Commentary, Salon: Obamanomics suffers from a misunderstanding of what the President is trying to achieve and what he’s up against. Into the breach come Republicans, Tea Partiers, nay-sayers, deficit vultures, and Raging-Dog Democrats, all viewing Obamanomics as more taxes and more spending. That’s nonsense. ...

You don’t have to be an orthodox Keynesian to understand that as long as the private sector is deleveraging, the public sector has to borrow and spend in order to keep the economy moving forward. ...

Obama needs to spend more. Just look at projected unemployment. ... The Council of Economic Advisors foresees 10 percent unemployment through the rest of 2010, falling only to 9.2 percent in 2011. ... High unemployment ... allows firms to keep wages low. That’s good for corporate profits but not for ... employees. ...

The federal budget deficit is a huge problem, to be sure. But you need to distinguish between deficits occurring this year and next when the economy is still trying to climb out of a hole, and deficits five to ten years from now. ... The public doesn’t quite get this distinction, which is probably why the President thought it necessary to freeze discretionary nonmilitary spending. ...

The economic stresses of continued high unemployment and low wages are contributing to the growth of the "I’m Mad As Hell" Party -- a rag-tag collection of Tea Partiers furious at establishment Republicans, left-wing Democrats angry at what they consider lily-livered Democrats in Washington, and Independents disgusted with everybody inside the Beltway.

Mad-as-hellers on the right hate government; mad-as-hellers on the left hate big business. Both share a growing sense that the economic game is rigged against them. The two are also united by how much they detest Wall Street and its bailout, and their contempt for any cozy relationship between big business and government. They distrust the Fed, and have no particular fondness for international trade, either. Mad-as-hellers are likely to be a formidable force in the upcoming midterms and beyond.

Obama is responding. That’s one way to view his newly-proposed crackdown on Wall Street... It also explains why the President is making another attempt to increase taxes on the overseas earnings of multinational corporations, and reduce tax breaks for hedge-fund managers and oil and gas companies. And why he feels it’s a good time to let the Bush tax cuts expire on higher-income individuals..., although not on the middle class. ...

They're still mad. That won't change for some members of this group no matter what. For the rest, the anger will persist until economic conditions improve, labor markets in particular, and there is some sense that justice has prevailed.

I think it will take a long time for labor markets to improve, policy has not been adequate to change that, and there's no sign that the help that is needed will be forthcoming. The political climate won't allow it.

I also think it will be far, far longer, if ever, before there is any general sense that the actions that were taken during the crisis served the needs of middle and lower class households rather than the needs of bankers. Charging banks for the cost of the bailout and other such proposals from the administration is an attempt to change this perception, but the perception of unfairness will be difficult to overcome.

This article has been republished from Mark Thoma's blog, Economist's View.

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2 comments:

February 12, 2010 at 4:37 AM Anonymous said...

This is a stupid, elitist thing to post on a normally useful investor site.

February 12, 2010 at 11:06 AM Eric Ames said...

I'm sorry you feel that way. We try our best to offer views from different angles on various topics. So you will see articles from authors on both ends of the debate. This is just one author's opinion.

I would suggest, though, that if you don't agree with the author, rather than just saying their article is stupid, you should explain why. Why do you feel like this article is elitist? This will foster a much more interesting and useful discussion.

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