Great speech by the Pres yesterday in Kansas. This NYT editorial provides an excellent summary.
I’ve been inveighing against YOYO economics (“you’re on your own”) for a long time—here’s an excerpt with some background on the concept, but it’s pretty simple. I think the POTUS gets it just right here:
We simply cannot return to this brand of “you’re on your own” economics if we’re serious about rebuilding the middle class in this country. We know that it doesn’t result in a strong economy. It results in an economy that invests too little in its people and in its future. We know it doesn’t result in a prosperity that trickles down. It results in a prosperity that’s enjoyed by fewer and fewer of our citizens.
Here’s how I saw this back in the mid-2000s, in the heart of the GW Bush years, when the YOYOs were riding high (from my book, All Together Now: Common Sense for a Fair Economy):
… One central goal of the YOYO movement is to continue and even accelerate the trend toward shifting economic risks from the government and the nation’s corporations onto individuals and their families. You can see this intention beneath the surface of almost every recent conservative initiative: Social Security privatization, personal accounts for health care (the so-called Health Savings Accounts), attacks on labor market regulations, and the perpetual crusade to slash the government’s revenue through regressive tax cuts — a strategy explicitly tagged as “starving the beast” — and block the government from playing a useful role in our economic lives. …
While this fast-moving reassignment of economic risk would be bad news in any period, it’s particularly harmful today. As the new century unfolds, we face prodigious economic challenges, many of which have helped to generate both greater inequalities and a higher degree of economic insecurity in our lives. But the dominant vision has failed to develop a hopeful, positive narrative about how these challenges can be met in a way as to uplift the majority.
Instead, messages such as “It’s your money” (the mantra of the first George W. Bush campaign in 2000), and frames such as “the ownership society,” stress an ever shrinking role for government and much more individual risk taking. Yet global competition, rising health costs, longer life spans with weaker pensions, less secure employment, and unprecedented inequalities of opportunity and wealth are calling for a much broader, more inclusive approach to helping all of us meet these challenges, one that taps government as well as market solutions.
All of that YOYO stuff should have been discredited with the bursting of the housing bubble, the financial meltdown, and the deepest recession since the Great Depression. It wasn’t, for a lot of reasons, some of which I wrote about here.
You have to realize what we’re up against here. YOYO’ism is a brilliant, self-sustaining system. It lives in no small part due to 1) the concentration of wealth and power that it helps to create, and 2) the self-fulfilling prophecy of government failure. The YOYOs tell everyone government is a feckless waste of your hard-earned money and then when you elect them, they prove it to you.
As I’ve noted on these pages, I’ve been traversing this country lately underscoring all the issues the President hits on in this speech, highlighting the failure of YOYO’ism, its intimate role in our current dysfunctionality, and the urgency of getting this right, and soon.
[Unlike the President, I’ve been crammed in coach, squeezing my elbows together so I can bang stuff out of the laptop and savoring my tiny bag of pretzels (or “jetzels,” as my niece Lisa calls them)–sorry…pardon the rant, but really, if you’re a human of any size, this travelling is really pretty physically intolerable…one simple idea would help: make it so that in coach, you can’t push your seat back…ok, we’re back live:]
And sure, there’s a selection bias in terms of who I’m speaking to, but they have by no means been exclusively liberal audiences. And I’m seeing heads nodding aggressively on these points (that is, nodding with agreement, not falling asleep).
So this is the right message, an essential message at a time when the dominant economic policy model has proven itself to be so wrong, yet not only remains dominant, but is still totally touted and supported by conservatives both in Congress and running for president on the R’s side.
The second half of the President’s speech introduced a new model, much more of a WITT (we’re in this together) approach, with the public sector targeting the deep market failures that rise up in force when YOYO economics is ascendant, a policy approach that in fact creates a much more congenial environment for businesses to flourish, as opposed to the “bubble, bust, repeat” cycle in which we’ve been stuck. More on that later—the YOYO frame is an effective critique of what’s gone wrong and how the opposition remains wedded to it, but you also need to clearly articulate the alternative vision.
For now, I think the President is speaking to the American people in a way that is extremely resonant to them. He’s right about this stuff, and people know it.
And the third reason YOYOism continues its zombie-like march is a powerful right-wing noise machine that unceasingly demonizes poor people, Democrats, unions, and government in general.
Hey, it’s candidate Obama – I love that guy! Where’s he been for the last three years anyway?
“YOYO’ism is a brilliant, self-sustaining system.”
You make some great points and its really sad that this is the sentiment. People who think like this are not leaders and should not hold offices of power if they are not willing to use the power.
We will inevitably complain if the power is not used the way we would like (conservatives vs. liberals), but at least we would be doing something to TRY and help the economy.
Laziness is no excuse for ignorance.
The president seems to be contradicting himself on a regular basis. He argues for an extension of the payroll tax cut, but then tells Kansans that tax cuts don’t work.
If tax cuts don’t work, why did Ronald Reagan create nearly twenty million jobs?
If tax cuts don’t work, why did the unemployment rate decline after the Bush tax cuts, and continued to decline until the housing bubble popped?
Finally, if tax cuts don’t work, why did the 2009 stimulus end the Great Recession?
You may have missed this post, Tyler, which shows little or no correlation between broad-based tax increases or decreases, and employment:
When it comes to stimulus, however, not all tax cuts are created equal. Republicans favor supply-side tax cuts that favor “job creators.” Democrats favor demand-side tax cuts that give relief to low and middle class consumers. In a 70% consumption-driven economy that has billions of corporate dollars already sitting on the sidelines, and long-term middle class wage stagnation, isn’t the preferred stimulus obvious?
Democrats don’t maintain that all tax cuts are ineffective the way so many Republicans insist that all tax cuts are beneficial. But I suspect most Ds will assert that the main impact of the Bush tax cuts was to unbalance the nation’s budget while doing little to help the economy in the long run.
The broad-based Bush tax cuts caused unemployment to drop. Unfortunately, the housing bubble popped, causing the current unemployment crisis.
Glad to see this post.
Having spent endless, seemingly wasted and futile hours at local government hearings in the late 90s and early 2000s at which ‘the Free Market’ was exalted as a diety and government was always ‘incompetent’, ‘evil’, ‘inefficient’ blahBlahBlah, it is just a thrill to read the kinds of things that show up on (finance-economics related) blogs these days.
The GOP, and many Dems, do not appear to distinguish between goods markets, capital markets, futures markets, and other kinds of markets. It’s as if Adam Smith simplistic paradigm in the Edinburgh of 1776 is their model for **all** markets, everywhere.
In capital markets, instability comes suddenly — however, you have to understand the concept of phase change (which comes from the field of physics) to understand how instability appears suddenly in capital markets.
It is not surprising to me that Adam Smith’s market ideas originate in 1776, whereas the concept of phase change is a late-20th c idea. So we have a 200-year gap between the economic ideology of YOYO’s ‘free’ markets — in contrast to the actual, observed behavior of things like ‘phase change in tightly coupled capital markets’, which simply can’t be explained by the antiquated notions of 1776, charming and nostalgic though they may be.
This disconnect was apparent in the recent interview with Nick Hanauer at Ratigan’s show. Hanauer summarized a key problem: [dominant, mostly GOP] ideas about how wealth is created and how the economy works are ‘linear, mechanistic’. (This is not to slam the GOP; I think they have good intentions, but I honestly think their mental models are from about 1776, or else 1880s.)
For those like myself, educated in to view economics as a **dynamic** (biological) system, with millions of feedback loops, with constant changes and enormous dynamism, prosperity originates in the health of the ‘economic ecosystem’. Without a healthy system, the feedback loops degrade and vanish, and the system begins to implode. That requires strong government structures, including regulations that are simple, effective, and clear. In other words, not ‘more regulations’, but **smarter** ones.
YOYO has almost zero relevance to the kinds of economic models that I was taught to consider, in which **the health of the overall system** is viewed as a key generator of wealth. If you have a corrupt, tax-haven riddled system reliant upon misinformation, mispricing, and externalities, you are doomed to eat up your seed corn and starve. You are also doomed to environmental degradation on a massive scale.
YOYO seems to assume a very mechanistic view of economics.
But economics is more like biology: you have to keep the feedback loops healthy, or you have system collapse.
Personally, I feel as if I have waited over 20 years for this economic conversation to begin. Frankly, I’d given up hope it would ever happen. Finally…!!
Actually, the “conservatives”, libertarians, and Austrians misrepresent what Adam Smith said about markets. Without regulation and supervision, markets are just a tool to rob the general population. Adam Smith did not say that “the market” was the “invisible hand” that produced the general good from individual striving.
It’s a corollary of “privatize gains/socialize losses”.
The economy of the last three decades in which full employment has existed *only* at times of external disinflationary effects (post oil shock energy price falls, mostly) has produced low nominal interest rates (and typically low real interest rates as well). As a result, the search for returns goes into dicier and dicier territory, into places where the “bigger fool” idea looms.
More realistic inflation targets, particularly after a significant period during which they were suppressed, would go a significant way toward fixing this. The rentiers and coupon clippers could do just fine; the need to shed risks onto those who can least afford them would lessen.
And YOYOs could return to being entertaining toys.
…BYOS, the be your own savior approach. The evangelicals have been pitching this crap forever & a day. It is with great pleasure that Lush bin Limbaugh continues to trivialize himself with his current meltdown on the POTUS speech.
Time for the Occupied Earth Movement to heed the call & reclaim their heritage…who owns the world & it’s resources? The air we breath, the water…we vote, they ignore, sad!
As to the Conservative Brotherhood & their yapping about class warfare…what is first class, business & coach all about but class distinction. More bread, less filler.
I’m of the opinion that the tide has finally turned…about to wash out to sea the deserving Teavangelical extortionists of the newly minted House of Reps. Next up for plank treatment would be Grover. Is treason too mild a term?
I was hoping this quotation from Al Franken’s book would go viral. It hasn’t, but I’m going to push it anyway:
“In her book A Distant Mirror: The Calamitous Fourteenth Century, Barbara Tuchman writes about a peasant revolt in 1358 that began in the village of St. Leu and spread throughout the Oise Valley. At one estate, the serfs sacked the manor house, killed the knight, and roasted him on a spit in front of his wife and kids. Then, after ten or twelve peasants violated the lady, with the children still watching, they forced her to eat the roasted flesh of her husband and then killed her.
That is class warfare.
Arguing over the optimum marginal tax rate for the top one percent is not.”
–Lies: and the lying liars who tell them : a fair and balanced look at the Right By Al Franken
Didn’t you invent the term YOYO economics? I seem to remember you talking about it on the Daily Kos.
It was the theme of my book All Together Now: Common Sense for a Fair Economy
Had a reply to this going here, but it quickly became too long to be just a comment, so here’s the link to it. Essentially, I agree: great speech. Not unlike a number of similarly great speeches given by the President on the campaign trail in 2007 and 2008.
But when you compare yourself to TR, I can’t help but remember that TR was, above all else, a man of ACTION. And actions, as everyone knows, speak louder than words. You want to encourage the TR comparisons to get re-elected, Mr. President? Then it’s time to break out TR’s legendary big stick, not just give speeches.
In the United States, the debate always seems to center on the role government rather than of the market. Rather than simply presenting a defense of government, I was pleased that Obama highlighted our failed experiments with a less regulated market and how we again face big questions on society’s relationship to the market. As Karl Polanyi put it: “Ultimately, that is why the control of the economic system by the market is of overwhelming consequence to the whole organisation of society; it means no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system.”
Hmmm…shouldn’t the title of your post be “O goes off on YOYO”? ‘Cause he sure wasn’t saying anything nice about it. (Not that there’s a single thing nice to say about it.)
This is cute, but until Obama prosecutes some bankers, he’s making clear that he’ll throw everything away for more money to light on fire.