Daily Archives: June 24, 2011

“Aftershock: The Next Economy and America’s Future”

An excerpt from the book, Aftershock: The Next Economy and America’s Future by Robert Reich is on the truth-out.org web site.  Since I don’t have express written permission from the copyright holder, I cannot even show you an excerpt from the excerpt.

I can tell you that in Reich’s telling of the story, bankers as a class during the Great Depression did not necessarily have a social conscience or if they did, the didn’t have the knowledge to fix the problem of the continuing depression.  In the story,as told by Reich, one particular banker, Eccles,  had a social conscience and had the knowledge.  Some others who lacked the knowledge at least had the ability to know what it was that they didn’t know so that they knew enough to ask for help.

I need to read this book, and you probably do, too.

If only the Mormon, Eccles’ knowledge had been passed on to the current Mormon politician, Mitt Romney.

June 26, 2011

I have obtained a copy of the book from my local library. Just in the first few chapters my eyes are opening wider and wider.

I now realize that there are some things about Keynesian economics that I was not taught in college. I was taught about the value of deficit spending during a steep recession or depression and the need to run surpluses during boom times.

What I don’t remember learning about was the need to make income distribution somewhat more level (not completely level) as a necessary step after the deficit spending phase in order to make the recovery last beyond the deficit spending phase.

If you haven’t figured it out, rescinding the Bush tax cuts is not only not a job killer, it is absolutely essential to making the recovery self-sustaining.

June 27, 2011

Here are some remarks I have posted on comment boards about President Obama’s getting involved in the budget talks.


According to the book “Aftershock: The Next Economy and America’s Future” by Robert Reich, things like the Bush tax cut are exactly what is holding the economy back. Without rescinding those tax cuts and giving the middle class more spending power there will never be a self-sustaining recovery.

So the Repubs are exactly wrong when they say raising taxes is a job killer. In fact, not raising taxes on the wealthy is the job killer. It is Obama’s duty to make this point very strongly and very publicly. It is about time the American public got an education so that they would know what they ought to be fighting for.


The Great Depression was overcome not only by deficit spending but also by shifting the distribution of income toward the middle class. It was not until the distribution of the wealth of the nation was shifted to a little more equity that the middle class had the purchasing power to sustain the recovery.

This is the part of Keynesian economics that my college courses in economics failed to teach.

I hope Bernanke, who claims to be a an expert on the causes and cures of the Great Depression, understands both parts of the solution. There is the part about the government temporarily replacing the lost private demand with public demand to get investment going again. He has demonstrated that he understands this part.

He should demonstrate that he also knows that a premanent increase in demand to draw forth investment can only come when enough wealth is put in the hands of the middle class. With so much wealth in the hands of the top few, there is not enough purchasing power to buy all the things that the economy would be capable of producing in a complete recovery.

The Right Solution At The Right Time

Whenever I hear the Republicans touting an economic policy, it is usually at a very inappropriate phase of the economic cycle. I always hark back to an old folk tale that I heard as a child.

I finally found a retelling of the story online.

Whenever you hear about cutting the deficit when unemployment is high, or you hear about cutting taxes when the economy is booming, remember the following story. Just remember an economic policy action might be a good thing to do when it is applied to the right situation at the right time, but it can be a horrible thing to do in the wrong situation at the wrong time.


A Folk Tale Retold

Epaminondas lived with his mama in a little house on a hill. He was a sweet boy, but as his mama always said, not the brightest bulb in the lamp! Most days, Epaminondas went to visit his auntie. She lived on the other side of the hill. He loved to walk through the forest and cross the stream to her house. Most days she gave him something to take home.

One day Auntie gave Epaminondas half a cake. He grabbed it in his fists and carried it home. When he got there, it was smeared all over his hands. “What have you got there?” asked Mama.

“Cake, Mama,” said Epaminondas.

“Epaminondas, that’s no way to carry cake!” said Mama. “You wrap it in clean leaves and put it in your hat. Now will you remember that?”

“Yes, Mama,” said Epaminondas.

The next week, Auntie gave Epaminondas some fresh, sweet butter. He wrapped it in leaves and put it in his hat. It was a hot day. The butter began to melt and when he got home, it was all over him. His mama cried, “That’s no way to carry butter! You wrap it in leaves, cool it in the brook, and carry it home! Will you remember that?”

By and by, Auntie gave Epaminondas a puppy. He wrapped it in leaves, cooled it in the brook, and carried it home. His mama rubbed the poor shivering pup with a soft towel and fed it warm soup. “That’s no way to treat a puppy!” she said. “You tie a string around its neck, put it on the ground, and walk it home! Will you remember?”

“Yes, Mama,” said Epaminondas.

Today, Auntie gave Epaminondas a freshly-baked loaf of bread. He tied a string around it, put it on the ground, and walked home! The birds loved it because there were enough crumbs on the ground to feed a flock for a week! But when he got home, all he had left was a small, sticky lump of bread stuck to the string!

His mama shook her head and said, “No sense telling you any more, Epaminondas! Now I’m going to get more bread from Auntie. You see those pies cooling on the porch? They’re for the bake sale. While I’m gone, you mind how you step in those pies!”

Now we know she meant “be careful and don’t step in the pies,” but Epaminondas minded his mama. He stepped right in the middle of each pie! When his mama got home and saw the mess, she just laughed. “Oh, Epaminondas, you haven’t got the brains you were born with … but I love you anyway!” Then she gave him a big hug … and a slice of fresh bread.