“A Mistake Of Historic Proportions”

Juan Don has brought to my attention a post last week by Wallace Turbeville, a former Vice President of Goldman Sachs and now a visiting scholar at the Roosevelt InstituteThis is serious stuff.

I recommend reading the entire piece (which is only Part 1, with more to come), but I will excerpt a few nuggets here:

Unemployment seems strangely intractable in this particular recession, and no one will cut the party in power a break until the economic system’s wounds heal.

Believing this would be a mistake of historic proportions.

Decades of conservative policies, vigorously promoted by conservative Republicans and timidly acquiesced to by progressive…Democrats, have torn a hole at the center of the economy…For decades following the New Deal, prosperity of both the rich and the poor was secured through government policies that broadened participation of the weak and less wealthy in the economy. The Great Depression taught us that balancing the interests of the middle and lower classes against business and the rich is in the long-term interest of both. It is not about class war. It serves the practical long-term interests of everyone.

I have repeatedly argued that those of us on this side of the political debate are trying to save capitalism from the laissez-faire capitalists. The “weak and less wealthy” need to be a part of robust economic growth; they need, as President Obama said today, to have “ladders“—real ones—that allow them to climb into the middle class. As Turbeville suggests, this is a practical argument, not an attempt at class warfare, and folks out there need to know what his happening:

…conservative ideology encourages the wealthy to churn passive investments designed to squeeze out the last drops of value from existing assets through financial “innovations.”

The public needs reminding of the pragmatic connection between progressive principles and a healthy economy, in which businesses are profitable year after year and families have bread on the table. It turns out that the connection is real and has never been more relevant than today.

The former Goldman Sachs executive squarely places the burden of “reminding the public” on progressives themselves, urging them to turn Ronald Reagan’s famous phrase inside out: “Government is not the problem. Government is the only way to fix the problem.”

Here is a summary of the problem, according to Mr. Turbeville:

  • Income disparity has “reached levels that mirror income disparity in 1929” and is “comparable to several Latin American countries.”
  • In contrast to post-WWII recession history, periods of post-recessionary unemployment are increasing with each successive recession since 1990.  “In the 1990/91 recession, the recovery period was 23 months, and in 2001 the period was 38 months. The recovery period for the recent recession is unknown, but prospects are grim.”  Prior to 1990, “employment rates recovered fully within eight months of the trough of each recession.”
  • U. S. consumers are borrowing money and buying foreign goods from many countries who are also supplying the credit to buy those goods. Simultaneously, the export of American goods is far below the imports.
  • Asset price bubbles and bursts appear to be more frequent and extreme.”  This includes the residential and commercial real estate markets, as well as “‘dot-com stocks,’ oil and agricultural products. Deregulation of financial and commodities markets facilitated the bubbles, but an increasing investor preference for short-term financial profits drove them.”
  • The graduation rates of high schools and colleges have “stagnated,” which represents “an historic departure from longstanding American leadership in educating its young people.”  This is part of the unemployment problem referred to by Bill Clinton on Meet The Press on Sunday:

…the biggest problem, is there’s a skills mismatch.  The jobs that are being opened don’t have qualified people applying for them.  We need a system to immediately train them to move into that job…There are five million people who could go to work tomorrow if they were trained to do the jobs that are open, and the unemployment rate in America would immediately drop from 9.6 to about 7 percent or 6.9. 

As Mr. Turbeville suggests, Democrats need to quit playing defense and let the American people know what is going on and make the case that what Republicans are offering this November to solve our problems is what caused the problems we need to solve.

As I said, this is serious stuff. Stay tuned for Part 2.



  1. Duane,

    This all sounds like truth. But economics is not called dismal for nothing. I think we are seeing the age-old conflict of the haves versus the have-nots playing out. There has never been an effective governor on the economic engine. In the contest between labor and management, too much strength on either side causes it to over speed, breeding corruption and excess. Currently I see excessive executive salaries as symptomatic, and this jibes with Turbeville’s examples.

    It occurs to me that certain excesses, notably the housing fiasco, are prominent in our current problems, and that the swings of the economic pendulum can be dampened. Some fixes were made to the rules of the game and I hope they were the right ones. I’m not expert enough to assess that. But at the core of the problem I think is the problem of credit and debt. You may recall my post on immorality and debt:


    I think those arguments are germane here. It will take a culture shift to fix it, but I see some hope on the horizon in that regard. The new office of Consumer Affairs and Elizabeth Warren are much needed, IMO (despite my feelings about government size).

    Clinton, cerebral as always, is surely right about education. We have blogged about it in the same way, haven’t we? This means to me that the problem is not easily fixed, no matter which party is in power. There is no knob for controlling the economy on the White House desk, nor in the Capitol building either. The best that I hope for is a stand-off between the two competing interests.

    As for education, sometimes I fantasize that the country’s schools will return to some kind of grass-roots movement, motivated by the principle of learning and free of all government and religious influence. While that may sound impossible, at the same time I think of the institution of public libraries, which ironically were given such a tremendous boost by Carnegie, the industrial baron.

    Libraries fiercely and successfully defend the public’s right to read any book they want, no matter the content. This is a powerful and continuing societal meme. If libraries can be guided by principle and free of influence, why can’t education? Hope lives, if only faintly.



    • Jim,

      You said that the best you can hope for is sort of a stalemate between competing interests. That would be wonderful, but in the meantime, one side—the haves—is beating the daylights out of the other. Although there will never be perfect equilibrium, surely we can agree that attempts to use the government (as in your Consumer Financial Protection Agency example) to achieve some semblance of balance is in order? And while you wouldn’t go this far, I would include education as part of those attempts. Government, “the people,” can ensure that children are being taught our secular, civil values, while also ensuring that they are learning about, say, science, without regard to theological considerations.

      I give a brief example of what a force for good government schools can be: Most kids today aren’t hung up on the color of one’s skin or one’s sexual orientation. They see such things as part of the culture, part of the secular culture, no matter whether they may have private opinions, possibly religious based, to the contrary. Certainly one can argue that widespread dissemination of the idea that these groups deserve equal rights under the law was due in part to our school system (even though I know that disturbs conservatives greatly).



  2. Good points, Duane. Given the power of religion in American life I will concede that government, at least for now, offers the only apparent counterbalance. I won’t live to see it, but someday . . .


  3. ansonburlingame

     /  September 21, 2010

    To both,

    I believe the article really does lay it on the line so to speak, Finding a way for the great American ENGINE, the economy to fulfill the American Dream, not just hang out a dream and tell folks to “go for it” is the correct course of action.

    The author also points out the historical trend over the last 50 or so years where, little by little, with now a big “BANG” in the GR how our economy has done less and less to fulfill the dream. No disagreement from me on that point at all. I whole heartedly agree.

    Now for the solution. AH, the specifics of what must be done and how to do it. Well I think we the people through elections of governments and the quest for leadership over those 50 years don’t have a clue, at least specifically.

    Many may THINK they have the solution, the current President included, but no proof even in the short term is clear to me. I could say the same about Republicans.

    NOW I take real exception to the authors conclusion that Government (Dem or Rep) is the best or God Forbid the ONLY way to get us back to something we once had or more important forward to something we want, like health care for all as just a brief example.

    MAYBE a dictatorial govenment with a very wise dictator could, but not the governments we have seen over those 50 years, a democratic government subject to ever changing “whims” or needs expressed by we the people.

    Sometimes they are majority whims, sometimes from very loud minorities (Tea Parties, Acorn, etc) making the demands. Sometimes they are landslide elections (Reagan) and sometimes squeakers like in 2000. Sometimes we THINK they are “clear referendums” a la 2008 and probably a repeat in the opposite direction in 2010. At least most of the media will cast them as such.

    Now read Greenbergs column today chastizing politicians (and pundits such as myself) thinking they KNOW what we the people want. Can’t be done, such knowledge or deep insight into the “American” psychic. There is NO American psychic, left right or in between. It is only some combination of 300 million minds and mouths clamoring as anyone will do in a democracy. As Churchill wisely said, that is messy.

    Now that loud clamoring sometimes, usually bad times, unites and screams THIS IS BAD. “It’s the economy, stupid” is a great political insight, back when the economy was a helluva lot better than today. That did not require psychoanalzying 300 million people and Clinton won his presidency with such insight.

    But we the people hardly ever come together to say THAT IS THE RIGHT THING. Some do but they of course are countered loudly in some case by others. Reagan, Clinton and the now despised Bush II got their second term, Bush I and perhaps Obama did not or will not get that chance. And I left out the beloved JIMMY.

    BUT I will guarantee you that we the people, however defined, don’t have a clue to how to really fix what the author clearly identifies as THE big problem, the American economy today. Nor in any other form of government will “they the people” have a clue. They certainly know what they don’t like, but how to fix it, not a clue.

    That my friends requires leadership, wise, careful leadership to LEAD the way in doing the RIGHT things to fix REAL problems. The author does a great job pointing out the problems.

    We must await part II to hear HIS solutions. But if he thinks government will be the engine that can change all of that, I will wonder about HIS ability to become elected and succeed as a President.

    I doubt that a Washington, Lincoln or even Tony Blair will come to us from Golden Sachs of all places.



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