Follow this link to read Robert Kuttner’s prescription for the economic crisis.

Perhaps he said it before, or someone else may have said it.  Japan didn’t get out of its economic malaise of the 1990s until it finally made the banks realize the losses that were hidden in their books.  He is now saying the U.S. must do the same.

One of the things that I have been saying for a while is that with so many of our manufacturing jobs having been outsourced, soon the world will discover that the management of these jobs can be outsourced as well.  The only thing the U.S. will have left in our economy is the financing through our banks.  Then the world will realize that, with the jobs and the management having been outsourced, they no longer need money management from the U.S.  Then we will have nothing to support our economy.

Maybe that day is arriving much sooner than I thought.

The American Prospect has the article The Politics of Gesture by Robert Kuttner. “None of Obama’s proposals will fundamentally change the distribution of wealth and power in America.”

These initiatives are welcome. It probably sounds churlish to say that measures such as these should have come much earlier in his presidency, and could have been a lot stronger. Late in the game, when there is no risk that his proposals will be enacted, Obama is belatedly pursuing policies that seek to underscore the differences between Democrats and Republicans in terms of the practical situation of regular people.
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The White House policy of business-as-usual for Wall Street plus marginally increased help for working families calls to mind a very useful British expression—”horse and rabbit stew,” a supposedly equal ragout made from one horse and one rabbit.

When you add it all up, it still amounts to Rubinism, the ideology associated with America’s most influential Wall Street Democrat, Robert Rubin. The former Goldman Sachs co-chair, later chair of the executive committee of Citigroup—with a stint as Clinton economic policy czar and later treasury secretary in between—had a neat formula for serving the interests of Wall Street while signaling concern for America’s struggling working families.

The policy was one part financial deregulation and trade deals crafted to enable banks and corporations to outrun the constraints of domestic law. The other part was small-bore initiatives to signal help for ordinary working families. Such proposals are unobjectionable, except for the fact that they don’t fundamentally change the political economy of American inequality.

If Hillary Clinton should be the next president, we run the risk of having Rubinism as the dominant Democratic economic ideology for three successive Democratic presidencies—and we will keep wondering why working people increasingly give up on Democrats and on government itself. (While Obama is cautiously proposing some modest spending initiatives, Bill Clinton keeps on showing up at events sponsored by the Peter G. Peterson Foundation, sounding the alarms about the federal deficit.)

Kuttner is right.  The concept of horse and rabbit stew is quite useful.  In this country we are getting elephant and donkey stew.

Reader BillM brought The American Prospect article The Hidden History of Prosperity to my attention. The following excerpts are from the article.

In the crisis of World War II, the nation made the political choices that created the robust egalitarian economy of the next 30 years. Can we respond to the climate crisis with similar policies to rebuild the middle class?

This article by Robert Kuttner debunks many of the myths that some leading economists and pundits try to use to explain the increasing inequality of wealth and the shrinking middle class.

Tinkering with education and training or even a higher minimum wage will not restore good earnings for the working and middle class. But the wartime experience demonstrates that a different structure of a capitalist economy, rooted in public investment and full employment, is possible. The current failure to spread productivity gains has little to do with technology, skills, or even globalization—and everything to do with our failure to constrain great private wealth, empower labor, and creatively use democratic government for national purposes.

The article then has a great discussion of the changes that the two Roosevelt presidents brought about.

Several aspects of TR’s presidency illuminate our current situation. Significantly, there was no deep economic crisis, and no war. There was, however, a set of robber barons with unprecedented concentrations of wealth. With indignation and passion, Teddy rallied his countrymen to right the imbalance. He did not fully succeed—that was left to his cousin. But he made a good start.

The significance of this description is that Theodore Roosevelt was able to bring about great change without the need for a deep economic crisis or a war.

With that lesson in mind, it seems like the article’s search for a deep crisis to trigger reform is not the most important part of the article.

First, because there is something else other than a crisis that is needed to get us started down the path of reform.  If the collapse of the world financial system weren’t a big enough crisis, one has  to wonder what would be. Timid leadership from Obama was enough to get us over the crisis stage without getting us to the  reform stage.  During the great depression, the timid leadership of Herbert Hoover similarly did not produce great reform.

Second, I am not sure that global climate change will reach, any time soon, an obviously enough crisis level to spur people to action in the face of the crisis deniers.

What it may boil down to is for the public to find the bold leader that they can get behind and support the changes that we need.  Any such bold leader on the horizon?  Hillary Clinton? Elizabeth Warren? Bernie Sanders?  Alan Grayson?  Which one does not belong in the above list?

Presented for your consideration, the video from the Politicus USA article Bernie Sanders Delivers A Gut Punch To the Republican Agenda To Screw Ordinary Americans.

The American Prospect has the article Warren’s Challenge to Clinton: A more insurgent campaign, like the one Elizabeth Warren waged for the Senate, could make Hillary Clinton a stronger candidate by Robert Kuttner. This is an updated version of an article they have previously published (and maybe something I already blogged about).

There is a good analysis of Warren’s possible moves.  Although it does leave out any consideration for what may happen if the Republican’s take over the Senate in 2016.   The ramifications of this possibility were brought up in an article I blogged about in my previous post 6 reasons Elizabeth Warren should run for president.

One of the things that struck me in Kuttner’s piece was the following quote:

Populism is damned in some quarters as demagogic, but there is a progressive brand of populism epitomized by Franklin Roosevelt that mobilizes the frustration of regular Americans against elites, in an entirely salutary form of class warfare. Progressive populism has been in short supply lately.

In my tirades on “the class war” that you will see from time to time on this blog, I am aiming for “an entirely salutary form of class warfare”.  Hence the need to bring this up explicitly.

Not all people in the top 1% are waging class warfare against us.  However, the people who are not waging the war present no significant obstacle to the ones that are waging it.  If we should be so fortunate as to win a couple of battles in this war and start to turn the tide, let us not go off the deep end.  This is not even a war against the oligarchic people.  It is a war against what they are doing to us.  If we  can build in enough protections against the bad behavior like this country did in the aftermath of the Great Depression and World War II, then there would be no need for further punishment of the oligarchs.

In a casual retelling of the aftermath of World War I, we tried stringent punishment to hold Germany down so that they would not repeat what happened.  That effort totally backfired.  We must not dehumanize our enemies as they would dehumanize us.

The American Prospect has the article The Snake in the Market Basket: Can the Company Recover From Employee Revolt Without Loading Up With Debt? by Robert Kuttner.

The article closes with these two paragraphs.

Until now, Market Basket has operated with no debt and lean management, which  enabled it to combine good wages and low prices. Mackin views the Market Basket victory as the rare thwarting of a trend to rationalize retailing to the benefit of shareholders and middlemen at the expense of workers and independents that often manage more efficiently.

Yet the piper must be paid, and the money to pay back the private equity partners (whose entire business model is quick windfalls) must come from somewhere. Worse case, we have variant of Orwell’s Animal Farm, where after a while you can’t tell the humans from the pigs.

This is exactly the issue I worried about when I heard that the deal to buyout the “bad” cousins involved a lot of debt.  It may not have been obvious to all readers, but the issue was behind my comments in my previous post A Scary Thought.

Naked Capitalism has the article Krugman v. Morgenson on Too Big to Fail by David Dayen.

The bottom line is that this exhibits pure party-based tribalism. Take whatever half-truth you can turn into a talking point and parade it. And because it comes from an anointed spokesman of the Left in the mainstream circles, the hedged conclusions get spun into iron laws. The Reuters daily roundup Counterparties puts Krugman atop a summary they call “Farewell to Too Big to Fail.” (On the other hand, I was glad to see Bob Kuttner call Krugman out for this, however gently.)

If Krugman wants to become the President’s mouthpiece in the second term, that’s his business. But doing so by fudging the data is pretty weak.

This is the first I have read about this topic.  I have a feeling that when I read more news, I am going to hear about Krugman and the GAO report in highly favorable terms.  I thought I would post this article on my blog so I would have a record of it as a counterpoint to what is in the MSM.

Ralph Nader has the blog post The Wild and Cruel Gap Between Debtors and Creditors.

In his fine new book Debtors’ Prison, Robert Kuttner recounts the history of debt, including the centuries when under Anglo-American law debtors were imprisoned or executed. He also describes how large corporate debtors today get bailed out or go through bankruptcy proceedings that save the company under a sweetheart rebirth process, complete with allowing executive compensations past and present.

The individual debtors, however, are driven deeper into debt with fiendishly high interest rates (as high as 30% on unpaid credit card balances to over 400% on rolled over payday loans and rent-to-own rackets). Then there are the hundreds of different fees, penalties and costly fine-print impositions that ravage consumer borrowers.

I am surprised at how few people seem to understand all that is going on.  The people who don’t seem to understand include Joe Biden who pushed the draconian tightening of bankruptcy laws for individuals, but not corporations.

This just proves that the Supreme Court was wrong in proclaiming that corporations are people.  In fact, corporations are better than people according to our laws.  We need an addition to the Bill of Rights that would say that all people will be accorded all the same privileges that are accorded to corporations.  Or would it be better to say that no corporation can be given a privilege that individual people do not get?

Who remembers this from the 14th Amendment “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

Does abridgment include giving someone a right not given to others?  What about immunity from punishment because of childhood affluenza?

William Black has written the article The Great Betrayal – and the Cynicism of Calling it a Grand Bargain .

Kuttner wrote to warn that Obama intends to seek a “grand bargain” causing the U.S. to adopt the type of austerity program that threw the Eurozone back into a gratuitous recession.

Worse, Obama intends to begin to unravel the safety net (Social Security, Medicare, and Medicaid) to convince the Republicans to enter into this Faustian bargain.  Just as only a conservative Republican could visit “Red” China, only a Democrat can begin the destruction of the safety net.  The difference, of course, is that normalizing relations with China was a good thing while unraveling the safety net is a terrible thing.

I had been hoping to keep this controversy among Progressives under wraps until after the election, but I can see that it is difficult to keep this hidden.

Electing Mitt Romney is not the solution to preventing the Great Plague (aka Grand Bargain). What is the solution is for the Progressive Community to be able to turn on the proverbial dime after the election. As soon as we know that Obama has been re-elected and that the Democrats are in firm control of Congress, we must start applying immediate pressure to prevent the Great Plague from coming to fruition.

November 7 cannot be the time to take it easy and think our problems have been solved.