Progressives and the Budget Deficit

By Dean Baker, published on Tuesday, September 29, 2009 by Huffington Post

The budget situation today looks hugely worse than it did two years ago. The reason for the deterioration is not that the country has suddenly embarked on a massive new round of social spending, undertaken another major military adventure or even emptied the coffers through tax breaks. The reason that the deficit situation looks hugely worse than it did two years ago is that the $8 trillion housing bubble that had been driving the economy finally collapsed and threw the country into the worst downturn since the Great Depression.

The tragedy in this story is that the collapse of the bubble and its devastating consequences were entirely predictable. Had policymakers recognized the housing bubble and its dangers, they could have easily taken measures to avert this disaster, preventing the surge in unemployment, the flood of foreclosures and the huge budget deficits that characterize this downturn.

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The G20 Fantasy

By Mark Weisbrot, published on Sunday, September 27, 2009 by The Sunday Observer/UK

“The old system of international economic cooperation is over,” announced Gordon Brown at the G20 summit in Pittsburgh. “The new system, as of today, has begun.”

The first part of that statement is partly true. The second is a fantasy.

The G20 is not a system of international economic co-operation, or a board of directors, or a governing council for the global economy, to pick some of the terms that have appeared in the media. It is a forum where the heads of state of 20 economies discuss some important economic issues. It has very little ability to directly implement its decisions.

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The Fiscal Austerity Trap

How Budget Deficit Alarmism Risks Sabotaging Growth and Creating Self-fulfilling Budget Difficulties

By Thomas Palley, New America Foundation September 15, 2009

Fiscal conservatives are opportunistically looking to use the recession induced spike in the budget deficit to revive their crusade for fiscal austerity. The case for fiscal austerity is based on flawed economic analysis and it is not supported by thoughtful budget analysis. It was the wrong agenda before the crisis and it is even more wrong now.

Though there is understanding of the need for budget deficits to provide short-term Keynesian fiscal stimulus, there is little understanding of the medium-term need for budget deficits to facilitate the process of private sector deleveraging and to restore growth.

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Zelaya’s Return to Tegucigalpa Brings Coup Closer to its End

By Laura Carlsen, published on Monday, September 21, 2009 by America’s Program

Calls for face-to-face dialogue, without mediation * Coup “betrayed and made a mockery of” the Arias process * Zelaya building public international support and meeting with resistance leaders * Calls for Hondurans from around the country to gather in Tegucigalpa

At midday today, 86 days since the military coup d’etat in Honduras, President Zelaya returned to join the resistance movement in the final stretch of the long fight to restore constitutional order. As a spy helicopter buzzed the demonstrators and police poured into the area, thousands of supporters gather outside the Brazilian embassy to receive the President. (Telesur has continuous coverage here in Spanish.)

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Can Obama Help Forge A Global Consensus for Deep Economic Change?

By Danny Schechter, published on Tuesday, September 22, 2009 by CommonDreams.org

Welcome World to Pittsburgh: Time For More Than Yak at the G20?

Dear International Leaders and Guests,

From The President’s Welcome:

Michelle and I look forward to welcoming world leaders to the wonderful city of Pittsburgh on September 24th and 25th and we thank the people of Pittsburgh and Pennsylvania for opening their city as a showcase to the world.

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Plunder – Teaser Trailer

The Financial Crisis One Year Later: The More Things Change, the More They Stay the Same

By Robert Weissman

Wall Street’s political power remains intact. No new rules are in place to prevent a recurrence of the crisis. Major questions remain about whether any such rules commensurate with the scale of the crisis will be seriously considered.

One year ago, Lehman Brothers declared bankruptcy, bringing to a head the growing chaos on Wall Street.

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The Economic Crisis and a Sustainable New Deal

By Mary C. King, Professor, Economics Dept., Portland State University, a talk to the Portland City Club, March 13, 2009.

Good Afternoon! Thank you for the opportunity to speak with you today, on the topic of a Sustainable new Deal.

It’s an honor and a pleasure. I appreciate it, and especially the work that Jeanne Crouch and Joe Sixta are doing to organize this series of programs on the econ situation.

I want to take the chance to talk with you about a few things today

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Reflection on the U.S. Economy, September 2009

By Peter Bohmer

In the short-run, it is very likely that a total financial collapse has been averted and that the free fall in the United States of Gross Domestic Production (GDP) and employment has come to an end. There will probably be an increase in GDP for the third quarter, 2009 and most mainstream economists and the media will say that the recession is over. This will be true in the way that recession is officially defined. However, in the more important sense of people’s economic lives, employment is likely to continue falling or increase at a rate lower than the increase in population meaning that unemployment, measured and unmeasured, is likely to continue growing. Given the high rates of unemployment and underemployment and the lack of bargaining power of workers, real wages are likely to continue to fall as are employee benefits. Given the continued budget deficits of most States and cities, public employees are also facing a future in the short run of no wage increases. Public services will continue to deteriorate. Housing foreclosures are likely to continue at a high rate. Poverty and unemployment will remain high. As Barbara Ehrenreich and Dedrick Muhammad, pointed out in the New York Times, Sunday, September 13th, 2009, an economic depression has been created in the Black community in the last two years and is likely to persist. In communities based on manufacturing and construction there has also been an economic depression with no relief in sight.

The 2009 stimulus package of the Obama Administration although smaller than desirable and somewhat misdirected has had a positive effect in stimulating output and employment and in averting a full-scale economic depression. The other part of economic policy that began under Bush and has been continued by Obama has been the injection of huge infusions of money into failing banks, and financial institutions such as AIG and Fannie Mae. Without these infusions, these institutions would have gone bankrupt. However, much cheaper and more fair policies such as direct mortgage relief to homeowners, and nationalizing financial institutions with the purpose of providing credit to support people in need and desirable investment by businesses and cooperatives were not considered. This is because of the power of Wall Street and the extreme capitalist ideology of the Democrats and Republicans.

A generalized economic depression has been averted in the short run. However Wall Street has stymied meaningful financial reform and sustainable sources of sufficient aggregate demand have not been established. This means another financial collapse is quite possible and a weak and jobless recovery may take another downward turn in the not too distant future. Necessary structural changes in the economy and significant financial regulation that would provide some economic stability and reduced financial speculation are increasingly remote.

There are different social structures of accumulation that shape capitalist development. For the past 30 years both the US and global economy have been dominated by the neoliberal model, marked by growing inequality of income and wealth, privatization, deregulation of corporations and finance within and between borders, and the dominance of financial capital. The financial bubble and near collapse were no surprise to critics of neoliberal policies. A new social structure of accumulation has been promoted by liberal economists such as Robert Reich, Jamie Galbraith and Paul Krugman. It would incorporate much tighter regulation of finance, universal health care, massive public investment in rail, mass transit, green technology, public subsidies for the develop of alternatives to oil based energy systems, some increases in taxes on the wealthy and restrictions on executive income, and increased public spending for education and for reducing poverty. It is what Van Jones in his book, Green Collar Economy, has called Green Keynesianism. This would still be capitalism and would not end exploitation and poverty, militarism and imperialism, nor environmental destruction and alienation. We would still need to replace an unjust and unsustainable economic system. It would not end economic depression and the business cycle. However, Green Keynesianism would reduce the probability of another even worse financial collapse and severe economic recession/depression in the next few years. It would even be in the interests of non-financial corporations. While clearly being insufficient for economic and social and environmental justice, it would provide a social structure of accumulation for reducing unemployment and increasing somewhat, economic equality.

The conditions for a future financial bubble and collapse have not been altered. Wall Street has not been restrained. It is highly unlikely that even in the midst of the worst recession/depression since the 1930’s that financial derivatives and the casino economy will be meaningfully regulated. The economic system is still very fragile and highly leveraged with debt. Although unlikely in the immediate future, the financial system could quickly unravel if the market for securities in commercial mortgages or another type of securitized asset (bond) collapses. The top 10% of the population now have an income equal to the bottom 90% of the population; the 13,000 households with the highest incomes have an income equal to the 40 million with the lowest incomes. (Left Business Observer, #120). Besides being obscene, growing inequality means that the majority will go farther into debt to buy what they need.

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Rolling the Dice Again

By Ralph Nader, published on Saturday, September 12, 2009 by CommonDreams.org.

The Wall Street gang is at it again! It’s been one year since Wall Street’s collapse and bailout took trillions from taxpayers and the sinking economy. The speculative instruments that pulled down the economy were those super-risky sub-prime mortgages, credit default swaps, collaterized debt obligations-you know-Las Vegas East, using other peoples’ savings.

As if to elaborate their gigantic con job, the investment banks, guaranteed by you the taxpayers, are now packaging life insurances policies in what sane, on the ground businesses would consider deranged exotic money plays.

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