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The real distinction between Obamanomics and Reaganomics involves government's role in achieving growth and broad-based prosperity. The animating idea of Reaganomics was that the economy grows best from the top down. Lower taxes on the wealthy prompts them to work harder and invest more. When they do so, everyone benefits. Neither Reagan nor the apostles of supply-side economics explicitly promised that such benefits would "trickle down" to everyone else but this was broadly understood to be the justification...
Obamanomics, by contrast, holds that an economy grows best from the bottom up.
dday at Political Animal: KRUGMAN OPENS THE OVERTON WINDOW...
The upcoming cover of Newsweek, the Village weekly reader, will feature Paul Krugman, or at least 60%-65% of his face, with the headline "OBAMA IS WRONG: The Loyal Opposition of Paul Krugman.Krugman, who won the Nobel Prize in economics last fall, has been arguing that Obama is doing too little to respond to threats to the nation's banking and economic system, and he has contended that the $787 billion stimulus bill should have been bigger [...]Newsweek Editor Jon Meacham explains the choice in a letter to readers: "Every once a while, … a critic emerges who is more than a chatterer—a critic with credibility whose views seem more than a little plausible and who manages to rankle those in power in more than passing ways. As the debate over the rescue of the financial system—the crucial step toward stabilizing the economy and returning the country to prosperity—unfolds, the man on our cover this week, Paul Krugman of The New York Times, has emerged as the kind of critic who, as Evan Thomas writes, appears disturbingly close to the mark when he expresses his 'despair' over the administration's bailout plan. …
"There is little doubt that Krugman—Nobel laureate and Princeton professor—has be come the voice of the loyal opposition. What is striking about this development is that Obama's most thoughtful critic is taking on the president from the left at a time when, as Jonathan Alter notes, so many others are reflexively arguing that the administration is trying too much too soon.
"A devoted liberal, Krugman hungers for what he calls 'a new New Deal,' and he prides himself on his status as an outsider. (He is as much of an outsider as a Nobel laureate from Princeton with a column in the Times can be.) Is Krugman right? Is the Obama administration too beholden to Wall Street and to the status quo, trying to save a system that is beyond salvation? Does Obama have—despite the brayings of the right—too much faith in the markets at a time when prudence suggests that they cannot rescue themselves? We do not know yet, and will not for a while to come. But as Evan—hardly a rabble-rousing lefty—writes, a lot of people have a 'creeping feeling' that the Cassandra from Princeton may just be right. After all, the original Cassandra was."
The full Newsweek article is here. Now, some supporters of the President might see this rise of Krugman as a negative development. I see it differently. Krugman has been remarkably consistent to his principles, praising Obama where warranted, even on economic issues. He appreciated Obama's budget and his very legitimate move toward health care reform. His is not a knee-jerk reaction in opposition. Rather, Krugman has taken a critical look at each Obama proposal and made his judgments on the merits based on his own expertise. He has consistently argued that we are in a crisis where the normal rules no longer apply, and we need to look to the past to use the principles of Keynesian economics to dig us out of this rut. And with respect to the banks, he has argued the increasingly consensus view that insolvent banks must be taken over temporarily, their management and bad assets cleared out, and their institutions sold off after the debts are resolved, rather than what he sees as the half-measure of the Geithner plan. In addition, he has the opinion that banks that are "too big to fail" are too big to exist, and we need to fundamentally restructure the financial sector instead of making the sector whole and just turning back the clock to a couple years ago.
Now, you don't have to agree with everything Krugman says - I've seen some very good critiques of things he's said recently. But he is a serious thinker and this is his area of expertise, and he performs an important function. It's an odd quirk of fate that Krugman has as big a megaphone as he does, and so using it to put pressure on the Obama Administration from the left does several things: 1) provides a counter-weight to the conservative critiques of the President, which are usually so nutty that they pale in comparison to reasoned dissent, 2) forces Obama to at least debate the merits of his proposals rather than dismiss all critics, and most important, 3) gives Obama space on the left to put out an more progressive agenda than otherwise. Bill Clinton sums up the dynamic:
I recently heard an interesting anecdote about the 1993 budget fight. While it is probably the most progressive piece of sizable legislation to pass into law in two decades, it was a grueling fight--passing both branches of Congress by a single vote--and it still could have been better. At the signing ceremony, President Clinton found then Representative Bernie Sanders, and told Sanders that he, Sanders, should have made a much bigger public display of how he, Clinton, wasn't giving enough to liberals in the new budget. Such a public display would have provided Clinton more room to maneuver on the left.The moral of the story is that if no one is criticizing a Democratic administration from the left, then there is no rationale or political space for that Democratic administration to operate on the left. Such criticism is thus even useful to, and desired by, a Democratic administration. If the left stays quiet, it will not be relevant.
Krugman is fulfilling that role, opening what many have called the Overton window, moving the conversation away from the failed conservative ideas of the past.
I also appreciate Krugman's modesty in reacting to the cover story:
I've long been a believer in the magazine cover indicator: when you see a corporate chieftain on the cover of a glossy magazine, short the stock [...] Presumably the same effect applies to, say, economists.You have been warned.
- DougJ adds:
What’s most important about Krugman right now isn’t whether he’s right or wrong but that he’s starting to get traction attacking Obama from the left. Obama’s stimulus package was, in my view, not as large as it should have been in large part because the debate was all about whether or not it was too big. The Geithner bank plan is drawing little scrutiny from the cable chatterers because Wall Street seems to like it and the Republicans are yet to produce their own alternative 19 page flow chart on the subject. In effect, for now, the economic debate in the mainstream media ranges from Geithner-Summers banksterism to Bachmann-Santelli-Shelby currency craziness/tax holiday idiocy/”let them fail” know nothingism. That is not a healthy situation.It’s worth remembering that criticism of Roosevelt from the likes of Huey Long, Francis Townsend, and Charles Coughlin, crackpots though they were, played an important role in setting the stage for the Second New Deal. One can only hope that Krugman and his ilk will succeed in moving the debate from moderation versus right-wing craziness to moderation versus more aggressive policies.
Josh Marshall: SuperSized, Pt. 2
I wanted to share this graph with you. It's not dispositive of any specific questions in itself. But it's a valuable set of data for evaluating the question we've been discussing in many posts today -- the relative size of the financial sector relative to the rest of the economy.
The graph comes from an article by Simon Johnson in the current issue of The Atlantic, 'The Quiet Coup', which I strongly recommend.
The text is a little small. So the first graph shows financial sector profits as a percentage of US business profits going back to the end of World War II. The second charts income per worker in the financial sector as a percentage of average compensation across the economy. As you can see, the pivot in each case is around 1980.
The number that jumps out at me is that at that peak point upwards of half the profits in the entire US economy was in the financial sector. And it's been near or above a third for most of the last decade. Quite apart from the public policy implications, but rather in the realm of political economy, these graphs provide a revealing look at what the 2005 push to privatize Social Security was all about and what the implications of its success could have been.
For now, late as it is, I'll leave you to make your own judgments about what it means and, I'd strongly recommend, read Johnson's article. And we'll return to this subject over the weekend.
Also check out our TPMtv interview with Johnson from last month.
Chris in PARIS (AmBlog): Judge to issue subpoenas against Bush team of torture
It's a judge in Spain, but this could be interesting to watch. He's the same judge who sought and caught Pinochet. I might wonder about why the US has failed to pursue possible human rights violations at home, but I'm sure political leadership is already occupied with pursuing a fair deal for the Wall Street bailout, since they've been leading the way there as well.Criminal proceedings have begun in Spain against six senior officials in the Bush administration for the use of torture against detainees in Guantánamo Bay. Baltasar Garzón, the counter-terrorism judge whose prosecution of General Augusto Pinochet led to his arrest in Britain in 1998, has referred the case to the chief prosecutor before deciding whether to proceed.
The case is bound to threaten Spain's relations with the new administration in Washington, but Gonzalo Boyé, one of the four lawyers who wrote the lawsuit, said the prosecutor would have little choice under Spanish law but to approve the prosecution.
"The only route of escape the prosecutor might have is to ask whether there is ongoing process in the US against these people," Boyé told the Observer. "This case will go ahead. It will be against the law not to go ahead."
The officials named in the case include the most senior legal minds in the Bush administration. They are: Alberto Gonzales, a former White House counsel and attorney general; David Addington, former vice-president Dick Cheney's chief of staff; Douglas Feith, who was under-secretary of defence; William Haynes, formerly the Pentagon's general counsel; and John Yoo and Jay Bybee, who were both senior justice department legal advisers.
- John Cole adds:
... this part made me laugh:Mr. Feith, who was the top policy official at the Pentagon when the prison at Guantánamo was established, said he did not make the decision on interrogation methods and was baffled by the allegations. “I didn’t even argue for the thing I understand they’re objecting to,” he said.I believe that the last eight years the response to that would be: “If you haven’t done anything wrong, you don’t have anything to hide.”
hilzoy: Not To Blame
From CNN:
"Thousands of buildings at U.S. bases in Iraq and Afghanistan have such poorly installed wiring that American troops face life-threatening risks, a top inspector for the Army says. (...)
"It was horrible -- some of the worst electrical work I've ever seen," said Jim Childs, a master electrician and the top civilian expert in an Army safety survey. Childs told CNN that "with the buildings the way they are, we're playing Russian roulette."
Childs recently returned from Iraq, where he is taking part in a yearlong review aimed at correcting electrical hazards on U.S. bases. He told CNN that thousands of buildings in Iraq and Afghanistan are so badly wired that troops are at serious risk of death or injury.
He said problems are "everywhere" in Iraq, where 18 U.S. troops have died by electrocution since 2003. All deaths occurred in different circumstances and different locations, but many happened on U.S. bases being managed by various military contractors. The Army has has reopened investigations in at least five cases, according to Pentagon sources.
Of the nearly 30,000 buildings the Army's "Task Force Safe" has examined so far, Childs said more than half "failed miserably." And 8,527 had such serious problems that inspectors gave them a "flash" warning, meaning repairs had to be completed in four hours or the facility evacuated.
He said the majority of those buildings were wired by contractor KBR, based in Houston, Texas. KBR has faced extensive criticism from Congress over its performance in the war zone. KBR has defended its performance and argued it was not to blame for any fatalities."
Let's see: inspections disclose "some of the worst electrical work I've ever seen", work that puts people's lives at risk, and has already killed 18 people. The majority of this work was done by KBR. And yet KBR is "not to blame". That's totally plausible! For instance, it could be that after KBR's crack electricians got done wiring the buildings, and after their quality control teams checked and double-checked every last circuit to make sure it was done right, bands of evil gnomes went burrowing around behind the wallboards and switched all the wires around.
I'll bet all you KBR bashers didn't think of that. But it could have happened! Blame the gnomes!
Seriously: can you imagine what it would be like to be the parents or spouse or child of someone serving in Iraq, hoping against hope that your loved one would make it home, learning that she had died, and then finding out that it wasn't an IED or a sniper that killed her; it was faulty wiring installed by an American company that hadn't bothered to do its job right?
On the other hand, can you imagine being the kind of person who would decide that despite your company's having gotten billions of dollars in contracts, despite its repeatedly overcharging the government, despite "an impossibly high cost overrun of $436,019,574 on one job, charges of $114,308 for an oil spill cleanup that failed to remove any oil and another set of tasks in which the overruns were 36.9 percent of all costs", you were not going to make sure your company did a good enough job to keep our soldiers from getting killed?
How, exactly, would you live with yourself?
***
Oops, I forgot to add this:
"Defense contractor KBR Inc., which is under criminal investigation in the electrocution deaths of at least two U.S. soldiers in Iraq, has been awarded a $35 million contract by the Pentagon to build an electrical distribution center and other projects there."I've tried to find out whether it has been cancelled since then, but if it has, I can't find word of it.
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