These two segments of the Rachel Maddow show discuss the general American feeling that there is no longer a rule of law here in which everyone, from the President, from CEO's and from the wealthiest Americans, are held to the same standards of law as the rest of us are.
As Francis Fukuyama makes very clear in his new book The Origins of Political Order one of the key elements of modern states and nations is the legitimacy that is provided by the assurance that the Rule of Law applies to everyone, not just to the peons. Today the Occupy Wall Street movement is at its core a reaction to the belief that there is one set of laws for the 99% and another for the top 1%.
The core element of legitimacy of the American government has been the belief that the rule of law has applied to Americans. The fact is the financial collapse of 2008 and the lack of any investigation into the collapse and application of blame to the clearly guilty has made it clear that neither the American elites nor the American government actually operate under the rule of law any more. This may well be the most significant reason for the poor ratings currently given to Congress.
Unless the rule of law is brought back and the parties who caused the collapse of the economy are investigated and punished there is a strong likelihood that no party is going to be able to regain and keep control of the American federal government for any period of time. Blame and punishment is going to be more important to the survival of American institutions than the false stability provided by ignoring wrong-doing.
It should also be very clear that the conservative movement and the wealthy elites who created and funded it are directly responsible for the collapse of the American economy.
Addendum 5:04 PM CST Check out this article on Rule of Law.
Americans are ahistorical. They can't even remember what happened three years ago. [The failure of the so-called news media to honestly and accurately cover it doesn't help.] Here's an exception.
Rachel Maddow very clearly lays out the utter collapse of the American economy in the last two quarters of 2008 (the Bush administration) and shows the effects of the stimulus spending from Washington, D.C. in 2009. It's clear and it's short.
The Republicans claim that the stimulus didn't work. It was not big enough to eliminate the Great Recession, but it stopped the collapse into Depression. Even as soon as December 2009 it was clear that more stimulus was needed - and Congress refused. Largely this was through the Republican use of the filibuster and threat of the filibuster in the Senate.
So remember, Obama knew in 2009 that more stimulus was needed and requested it in December 2009. The Republicans were already blocking it and the Republicans were guaranteeing that America would have more and worse recession. This is intentional. The Republicans are the party that is against any government action, and their calculation is that if they can cause the government to fail in dealing with the Great Recession, the Republicans will gain power and replace the Democrats.
Notice the end of the Maddow segment, though. The statistics from the Bush administration showed a half percent GDP decline in the third quarter of 2008 and a 3.8% decline in the fourth quarter. But those were preliminary statistics. When the final numbers came in it became clear that America had been headed for the Second Great Depression. [This starts at minute 4.0 in the clip] Instead of a 1/2 % shrinkage of the economy in the third quarter of 2008 it was actually 3.7% shrinkage. Instead of 3.7% shrinkage in the fourth quarter of 2008 the shrinkage was actually 8.9%. America was headed into the Second Great Depression very rapidly. Only the stimulus (which the lame duck Congress of 2008 failed to act on - no leadership from the vacationing George Bush) passed within a month of Obama's inauguration kept America in the world from falling into the most massive economic Depression the world had ever seen.
One other thing to remember is that both the Great Depression of the 1930's and the almost Second Great Depression which started in 2007 with the mortgage crisis were caused primarily by unregulated, ignorant, and corrupt self-dealing by the massive banks in Wall Street. By 2008 America's GDP consisted of 40% the economically unproductive banking activities. The banks were creating markets with massive risk in them and then selling insurance to investors and borrowers to protect them against that risk the banks had created. Only the unregulated insurance the banks were selling were not capable of protecting the overall banking system from the extreme risk the bankers were creating and taking on.
Banks, through their lending, create the money supply the productive economy requires in order to function. They had by 2008 slipped into what is called the Shadow Banking System (unregulated and unmeasured private banking) which dominated the world financial economy. No one in banking itself knew what was going on overall, and the bankers successfully forced the federal government to remove itself from the regulation business, allowing the creation of the Shadow Banking System.
That unregulated banking system created the economic collapse that everyone became suddenly aware of in September 2008.
America and the world are now struggling to recover from the financial collapse of 2008. Only the conservatives world-wide are using the methods of Herbert Hoover, methods clearly shown in the 1930's to make the economic problems worse.
In the 1930's the bankers did not understand what they were doing when they passed the Smoot-Hawley Tarrif Act. Today the Republican Party knows exactly what it is doing. It is exacerbating the set of American economic problems based on Republican political calculation that the public will blame Obama and the Democrats for the failure to get us out of the economic problems.
Gee. The newscasters are touting the improved unemployment figures and claiming that the Great Recession is over. Economic happy talk fills the media again. Want to know why? They all desperately want you to buy whatever they are selling and you won't if you have guessed that the economy will shortly turn around and head down again.
Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It's weaker today on average than at the lowest point of the Great Recession.
The Reuters/University of Michigan survey shows a 10 point decline in March -- the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board's index of consumer confidence, just released, shows consumer confidence at a five-month low -- and a large part is due to expectations of fewer jobs and lower wages in the months ahead.
[...]
...isn't the economy growing again -- by an estimated 2.5 to 2.9 percent this year? Yes, but that's even less than peanuts. The deeper the economic hole, the faster the growth needed to get back on track. By this point in the so-called recovery we'd expect growth of 4 to 6 percent.
Consider that back in 1934, when it was emerging from the deepest hole of the Great Depression, the economy grew 7.7 percent. The next year it grew over 8 percent. In 1936 it grew a whopping 14.1 percent.
Add two other ominous signs: Real hourly wages continue to fall, and housing prices continue to drop. Hourly wages are falling because with unemployment so high, most people have no bargaining power and will take whatever they can get. Housing is dropping because of the ever-larger number of homes people have walked away from because they can't pay their mortgages. But because homes the biggest asset most Americans own, as home prices drop most Americans feel even poorer.
There's no possibility government will make up for the coming shortfall in consumer spending. To the contrary, government is worsening the situation. State and local governments are slashing their budgets by roughly $110 billion this year. The federal stimulus is ending, and the federal government will end up cutting some $30 billion from this year's budget.
So what about the reported improvement in the economy?
Wall Street is buoyant -- and most financial news you hear comes from the Street. Wall Street profits soared to $426.5 billion last quarter, according to the Commerce Department. (That gain more than offset a drop in the profits of non-financial domestic companies.) Anyone who believes the Dodd-Frank financial reform bill put a stop to the Street's creativity hasn't been watching.
To the extent non-financial companies are doing well, they're making most of their money abroad. Since 1992, for example, G.E.'s offshore profits have risen $92 billion, from $15 billion (which is one reason it pays no U.S. taxes). In fact, the only group that's optimistic about the future are CEOs of big American companies. The Business Roundtable's economic outlook index, which surveys 142 CEOs, is now at its highest point since it began in 2002.
So this is the story. The economy is too weak to continue to improve, state and local governments are right now in the process of laying off thousands of people and consumers are feeling too threatened to spend anything.
Then the stated improvement in the economy is largely by big firms that are operating outside the U.S. where profits are possible.
The top 1000 American firms have had $2 trillion in cash on their books since early 2008 and they haven't spent it. They see what Bob Reich sees, and they do not see any reason to think that the consumers (who make up 70% of the American economy) are going to increase spending. The fact is that with the second downturn, spending will drop even more. There is no profit for a large company to make by investing right now. (The exceptions are miniscule and can change nothing.)
T%he only thing that could keep the economy out of the second dip of a double-dip recession would be increased government spending (there's no other source) and our idiots in Washington, D.C are currently fighting to see how much they can cut out of the government budget.
So don't buy a new house or new car right now. Do not borrow to buy any big ticket items unless bankruptcy is an option when your income disappears. Don't put your savings all in one place. Make your plans based on a second major decline in the economy occurring soon.
Is the bailout of Wall Street bankers really grating your progressive soul? Is the tame rhetoric and failure to support progressive causes really irritating to you? It sure is to me. There are many things the Obama White House has done that I don't like, but it really irritates me that they bailed out the Wall Street bankers who caused this current Great Depression and are not doing a damned thing to reign them in now that they appear to be back in control of the economy. But I really don't begrudge the White House their actions to bail out the Wall Street banks in 2008.
If the Wall Street bankers had not gotten the bailout we would currently be deep into Great Depression II. The Wall Street bankers are assholes who deserve nothing better than to choose which will they line up in front of as they face firing squads, but the money they move keeps our world-wide economies working. If they had not started moving money again the entire world would have been in deep shit. So they got a bailout, got protected, got richer, and the rest of us are only in mildly deep shit. Hell of a trade-off, but it was done in the right direction.
And yep. The working class - as well as most of the middle class - got the shaft. Just not as badly as it could have been.
No, I am not a salesman trying to sell someone a product. I just think that anyone who tells you that things would have worked better if the Wall Street bankers had gotten what they deserve is lying to you. The salesmen want the Wall Street Bailout to go away and for the Wall Street banker to get what they deserve. Sorry! It ain't going to happen. There was no better outcome than we got, and it is amazing that we got as good as we did get.
The Obama White House is getting what it can realistically get. They are not shooting for the fences because the price of losing is too damned high. They are not perfect, though.
They have a real tin ear for how what they say and do will be portrayed by the media and they are unwilling to (swinging for the fences) support the progressive causes. Nor are they willing to try to change the public perceptions. I don't think they believe they have that level of bully pulpit. They may be right, but again it goes back to the fact that the guy who has it all to lose is not ready to risk it all to win.
That's where I think those of us who supported Obama's election are sitting right now.
Paul Krugman provided a very quick and accurate description of what caused the 2008 Financial Collapse and set off the Great Recession.
First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to “shadow banks,” which weren’t covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks.
Then the bubble burst, with hugely disruptive consequences. It turned out that Wall Street had created a web of interconnection nobody understood, so that the failure of Lehman Brothers, a medium-size investment bank, could threaten to take down the whole world financial system.
Paul Krugman points at the financial idiocy going on in Ireland. The bankers borrowed money from European bankers for financial and real estate speculation during the recent speculative bubble, and as they did it they bought the Irish politicians. Then the speculative financial bubble created by the bankers and the politicians burst.
Instead of making the lenders who made idiotic loans in the first place take the financial pain of the losses they thoroughly deserved, the paid politicians bailed the banks out with public money and put the taxpayers on the hook to cover the losses. The pain was to be borne by the public, not by the idiot bankers who created the problem. The bought politicians explained this by saying that it was required "to restore confidence" in the Irish economy.
But since the spending cuts have caused a severe recession, the fabled "confidence" is not turning the economy around for some strange reason. Krugman's last line tells the story quite beautifully.
Ireland is now in its third year of austerity, and confidence just keeps draining away. And you have to wonder what it will take for serious people to realize that punishing the populace for the bankers’ sins is worse than a crime; it’s a mistake.
America is under attack by an internal enemy as great as the slave-supporting antebellum South. The enemy is the conservative-run Republican Party. How bad are they?
Six decades ago America fought and defeated a great external enemy, the German Nazi empire. The Nazi Party had fielded it's own Party army, the Waffen SS. This is an organization that committed major war crimes intended to destroy those the party declared its enemies. This year in America the Republican Congressional leadership has been running a man for Congress from the Ohio 9th Congressional District, Rich Iott, who celebrates the exploits of the Nazi Waffen SS.
It should be recalled that after WW II the German SS was declared a criminal organization. That means that anyone who was a member of that organization was declared a criminal. The evidence of their crime was membership in the SS. That precedent should be applied to the conservative Republican Party. Anyone who is a member should automatically be declared a criminal and a threat to America. They are directly involved in a conspiracy to destroy or take over America.
Does the evidence from one Republican Congressional candidate apply to the entire Republican party? He was actively recruited and strongly supported by the Republican Congressional leadership. On a broader front, though, consider how the party itself is attacking America directly. This is from Steven Benen at Washington Monthly:
Every measure that's come up over the last 21 months that could help create jobs has been fought, watered down, and sometimes killed by Republicans ... who in turn believe the weak job landscape, which they created in the first place, is Democrats' fault. And Americans, feeling pain and anxiety, actually seem inclined to believe them.
The Republican Party and its financiers on Wall Street created the current Great Recession which, had Bush's Treasury Secretary Henry Paulson not panicked and instituted a recovery plan at the last minute, nearly threw the world into the Second Great Depression. The threatened Great Depression would have been at least as bad as that of the 1930's. As it is the Great Recession we did get is the worst since the 1930's.
And what has the Republican Party done to help America recover from the economic depredations of the Bush administration? They have actively fought every effort to reduce the damage of the economic conditions and have tried to intensify them. The purpose of their destructive efforts is to induce the voters to vote them back into office where they can continue to steal from government the way Jack Abramoff and his buddies did.
The modern Republican Party has become a criminal enterprise which dwarfs the Mafia in both scope and the damage it has caused. When do Americans deal properly with the criminal threat which is the modern Republican Party?
This is a short but very informative video by Robert Reich. If all the income from increased productivity in the U.S. goes to the highest 20% of individuals, but 70% of the economy is based on the consumption of the middle class, how does our economy grow? Answer - it doesn't.
The Media Consortium has posted an excellent post at OpenLeft. Consider this:
...take a look at Friday's jobs report. As Tim Fernholz notes for The American Prospect, this report was the most disappointing piece of economic news in months. While the economy gained 431,000 new jobs during the month, 411,000 of them were temporary hires by the U.S. Census, meaning the private sector is not able to support much new hiring.
There's a critical lesson there: The only serious engine of job growth in the month of May was the federal government. Absent government hiring, the economy is not improving at all. There is an almost bottomless supply of critical social needs that require work right now, but no private-sector momentum to meet those needs.
The BP oil catastrophe should underscore how important new, green energy is to the U.S. economy-yet U.S. efforts to develop green energy solutions have fallen far behind those of China and other industrial powerhouse nations. Major federal investment into the research and implementation of green energy would be good for our environment and good for our economy."
The only strength in the American economy is federal spending. It is maintaining some employment where the private economy simply cannot.
Why does this matter? The Great Depression II was limited to merely the Great Recession in 2009 by this federal deficit spending. Right now is too damned soon to stop deficit spending that maintains jobs!!
Is deficit spending inherently bad?
Should a family ever borrow money to buy a house? If they can't, then available housing drops throughout the economy and so do jobs. but housing itself builds and protects families so that the children can grow up to join and expand the economy. It's investment spending both for the families and for the economy.
That contrasts with families that gamble away their income and have nothing to show for it, or economies that borrow money to go to war and have nothing to show for it. Some deficits are good, some are bad. Spending to protect jobs is inherently good spending, because ultimately the borrowed money can be repaid from the increased work performed by the economy overall.
What's wrong with the current government approach to holding off the Great Depression II? Digby quotes Krugman at length, then goes on to add further information provided by a financially knowledgeable friend of hers.
Here is a really important point made by Digby's friend. The Obama administration is aiming the rescue actions of government wrong. Instead of spending to create new jobs, they are spending to prop up already inflated asset prices.
Her friend discusses the article by Paul Krugman and Robin Wells:
They make an important point -- as just stated -- that its key to get jobs back and that deficits don't matter if they are producing jobs. But, Krugman/Wells simply gloss over this in their larger commentary about govt deficits.... they fail to note that 80 to 90% or more of govt commitments in this crisis have been to prop up assets, not produce jobs. The Fed has basically engaged in the same high leverage act as the financial sector --- and the price tag for that is that we're a hair trigger away from collapse while simultaneously have so over committed the govt -- all to prop up asset prices because we said "no" to the Swedish model (which was short, not long) -- that, in effect, we've shot our wad at asset prices and when folks say, jobs, jobs, jobs, the oligarchs cry: too much govt debt.
Krugman/Wells simply do not explain this -- and the article would have been far superior if they had.
My short take on these articles is that Krugman/Wells explain that financial collapses occur because of excessive borrowing - bank and government leverage to build financial assets.
Borrowing is not inherently wrong. Borrowing to create jobs builds the economy. It's borrowing to prop up asset prices, especially financial assets which do almost nothing for the real economy of goods and services that is dangerous. But the oligarchs who currently run American society depend on financial prices for the wealth that guarantees their position in society. This is because Wall Street has expanded in recent years to create over 40% of the profits in the American economy at the expense of outsourcing real jobs to third world countries.
The different point of view that Digby adds also makes many very important points. Read both the Digby article and the Krugman/Wells article.
I have doubted that the current so-called good news about the American economy have meant much more than that the inadequate stimulus funds supported by the feds lowered interest rates and expanded money supply was working. The trouble is, there has not been any real expansion of the consumer market. There won't be until somehow the number of jobs starts increasing.
During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.
What’s left? A boom in business investment would be really helpful right now. But it’s hard to see where such a boom would come from: industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space.
Can exports come to the rescue? For a while, a falling U.S. trade deficit helped cushion the economic slump. But the deficit is widening again, in part because China and other surplus countries are refusing to let their currencies adjust.
So the odds are that any good economic news you hear in the near future will be a blip, not an indication that we’re on our way to sustained recovery. But will policy makers misinterpret the news and repeat the mistakes of 1937? Actually, they already are.
The Obama fiscal stimulus plan is expected to have its peak effect on G.D.P. and jobs around the middle of this year, then start fading out. That’s far too early: why withdraw support in the face of continuing mass unemployment? Congress should have enacted a second round of stimulus months ago, when it became clear that the slump was going to be deeper and longer than originally expected. But nothing was done — and the illusory good numbers we’re about to see will probably head off any further possibility of action.
Meanwhile, all the talk at the Fed is about the need for an “exit strategy” from its efforts to support the economy. One of those efforts, purchases of long-term U.S. government debt, has already come to an end. It’s widely expected that another, purchases of mortgage-backed securities, will end in a few months. This amounts to a monetary tightening, even if the Fed doesn’t raise interest rates directly — and there’s a lot of pressure on Mr. Bernanke to do that too.
Will the Fed realize, before it’s too late, that the job of fighting the slump isn’t finished? Will Congress do the same? If they don’t, 2010 will be a year that began in false economic hope and ended in grief.
That's not good news. I hope Krugman is wrong, but if he is I don't see where it comes from.
