“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.

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