If You Read Nothing Else Today…

October 9th, 2011 at 8:54 am

Read Ezra Klein’s account of the great recession and the politics, process, and policy response to it.  I’m working on a longer post for later amplifying some of the key points in this deeply incisive piece of journalism.

But first, read this.  It’s the NYT editorial board’s anatomy off the Wall St. protest movement.  There’s a trenchant discussion of the motivation behind the movement, which as I stressed last week, is simply not the head-scratcher that a number of commentators want to make it.

At this point, the commentary has evolved from “OK, I guess they’ve got a point,” to “But what do they want?”

I agree with the NYT on this point:

It is not the job of the protesters to draft legislation. That’s the job of the nation’s leaders, and if they had been doing it all along there might not be a need for these marches and rallies. Because they have not, the public airing of grievances is a legitimate and important end in itself. It is also the first line of defense against a return to the Wall Street ways that plunged the nation into an economic crisis from which it has yet to emerge.

But the editorial also includes a great, tight paragraph of the policies that should flow from the movement:

There are plenty of policy goals to address the grievances of the protesters — including lasting foreclosure relief, a financial transactions tax, greater legal protection for workers’ rights, and more progressive taxation. The country needs a shift in the emphasis of public policy from protecting the banks to fostering full employment, including public spending for job creation and development of a strong, long-term strategy to increase domestic manufacturing.

These two must-reads are related.  As I’ll stress later today (I hope—lots of kids soccer in the offing!), we need to solve the inherent limits of the policy process that Klein describes if we’re going to get to the solutions in the NYT piece.


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8 comments in reply to "If You Read Nothing Else Today…"

  1. Donna says:

    Speaking of ‘lasting foreclosure relief,’ what do you make of Treasury Secretary Geithner’s remarks during House testimony last Thursday. ‘We expect to move forward in the next couple of weeks with FHFA to make it easier for Americans to refinance their homes, even if they are somewhat under water.’

    C-Span Video link. This comment begins at 1 hour, 29 minutes in.


    • Jared Bernstein says:

      Good–without Fan and Fred in the refi game, hard to gain traction, and there’s every reason for them to get in the game. I’ve got a piece on this coming out this week probably in the New Republic.

  2. markg8 says:

    Re: Ezra account. What I want to know is why The Bureau of Economic Analysis got it so wrong. A 8.9% drop in GDP is almost 3 times their initial guess of 3.8%.

    Seems to me extraordinary events should have required extraordinary efforts to define the scope of the crisis. Was the BEA fully staffed? Was it politicized or eviscerated like other agencies under the Bush Administration? Were they not getting straight answers from the private sector or whoever they collect data from? Were they concealing the worst because they simply didn’t believe what the data they were seeing? Did they think a more accurate report would make things worse by bringing the economy to a screeching halt in the last weeks of the holiday shopping season? Their figures weren’t just wrong, they were off by orders of magnitude. That led directly to our response being wholly inadequate. I’m not trying to place blame I just want to know why they were so wrong and find out what we can do to fix it.

  3. Ken M says:

    I made this comment on Ezra’s post, would be interested in your response:
    Contrast two approaches:
    (1) Obama announces that the economy needs a $1.2 trillion stimulus,
    and given that state and local gov’t are going to shrink by $.3
    trillion, that means the fed needs a $1.5 trillion stimulus. He
    explains that this is the amount needed to restore full employment,
    and that once that is restored the demand from all those employed
    people will keep the economy running by itself. He then negotiates
    with the Republicans and ends up at the “politically feasible” $700
    billion, all the while pointing out that this is going to leave the
    economy in bad shape and that as that happens he is going to keep
    demanding the further stimulus the economy needs to recover.
    (2) Obama announces that the economy needs an $800 billion stimulus,
    settles for $700 billion (which is actually $400 billion net) and then
    spends two years announcing that recovery is right around the corner
    and focusing on the need to reduce the deficit rather than the need
    for bigger short-term deficits to provide stimulus.

    Both strategies arrive at the “political reality”, if it is reality,
    that only $700 billion gets funded. But one explains to the American
    people what the real problem is and what solution is needed, so that
    as the economy fails to recover there can be real political pressure
    for more stimulus. The other tells the American people the problem is
    solved, and when the economy fails to recover the very idea that
    stimulus helps has been discredited.

    Ezra, what you utterly fail to get is that how you politically shape
    the debate as you arrive at whatever “political reality” allegedly
    limits you to can completely change the game and the long-term
    outcome. Saying “that’s all we can realistically get” and so
    announcing that what you can get is exactly what is needed and solves
    the problem is throwing the game. Obama chose course (2) and that is
    what now has us completely screwed. (Given the huge mojo Obama had
    then, (1) might also have moved political reality.)

  4. Ken M says:

    I’d also be interested in your response to this other comment I left on Ezra’s website — I’m no economist, so am genuinely curious what the response to Baker’s arguments would be. Thanks. My comment:

    Also, there are issues with your overall economic analysis. I’m no economist. But Dean Baker argues that the debt overhang is not the problem, as follows. Consumers are saving 5% of income, which is less than the pre-bubble 8%. That is, consumers are spending at normal levels given their income. Businesses have tons of cash they are not spending, so they also are not debt-constrained. The problem, he says, is that during the bubble consumers were saving 0 or negative amounts, and nothing has made up for that lost demand. All that extra demand was used to enable a huge trade deficit. We still have the huge trade deficit sucking up demand. The trade deficit (as a positive number) equals the budget deficit plus the excess of investment over savings, this is an accounting identity. So we have to get the trade deficit down, that is, we have to get a cheaper dollar, otherwise we either have to run huge deficits or, as at present, have inadequate investment. So his prescription is that we have to make the dollar cheaper.

  5. Marc B Adin says:

    Thank you for your thoughtful comments on your blog. There was a reference to the ‘human face’ of the 99% demonstrators, and the notion the real people are suffering for the greed and arrogance of a few. Who are these few? We have seen photos of the mega-rich, but what about the remaining people who make up the 1% who fly under the radar, and are unknown to us?

    Naming Anthony Bologna as the NYC policeman for his cowardly, and brutal macing of peaceful protesters on Wall St., very young women who were penned in by an orange fence, showed the human face of the police to world.

    But yesterday I saw a video that turned my stomach even more. It was the “let them eat cake” moment that should be seen by every American. The video clearly should a group of brokers or bankers, expensively coiffed and dressed, on a balcony looking down on the demonstrators and taunting them. They were drinking champaign, munching on cheese and crackers, arrogantly “toasting” the kids in the street. The video is on youtube. The stand out characters are a blonde women in a purple dress, laughing at the crowd, and mocking
    the kids, and a man in a dark suit taking photos and laughing at the kids just below them. These people should be named, and exposed for who they are, for they are just as cruel and brutal to their fellow citizens as Officer Anthony Bologna.

    Let’s put a human face on those people who revel in the joy of growing despair of millions of Americans.

  6. Robert says:

    Americans now realize that national income is being diverted more and more to capital rather than growth in their real wages despite record growth in their labor productivity. The result has been suppression of real wages and greater growth in corporate profits which has contributed to expanding income inequality. Hopefully, policy initiatives in the workers’ rights arena would address the income inequality issue.

    In the not-too-distant past, corporations realized the necessity of keeping real wages in line with productivity in order to ensure their consumer products were able to be sold. If the capacity to purchase (real wages) would significantly lag productivity, then how could economic growth be sustained?

    Unfortunately, the aggressive marketing of innovative financially-engineered debt products in the late 90’s and 00’s were embraced by the corporate and household sectors as the panacea for maintaining consumer purchasing capacity in the era of declining real wages. This was a win-win for the corporations, the households, and the financial sector until the debt bubble burst.

    So I would add strong consumer financial protection as another important policy goal to your list of grievances.

  7. Phil Perspective says:

    Mr. Bernstein:
    Are you trying to cover for the WH, also, too? Your fellow economist, yes Krugman, points out today that Ezra Klein is full of crap. There were people that knew we were in deep doo-doo and yet they were marginalized. And then we had “Recovery Summer” last year when anyone with a pulse knew that was a lie. How will we ever solve our problems if our “elite” won’t acknowledge just how big of a problem we face?