The Federal government's jobs report for June shows the country sliding further into an already historic recession. With 467,000 jobs disappearing, bringing the official unemployment rate to 9.5 percent, wages down, and more workers than ever stuck in part-time jobs that don't adequately cover the bills, Americans are hurting. Credit is tight and spending down, leaving little hope that we can borrow and buy our way out of the current economic slump.
The situation calls for a big new round of government stimulus spending. Economists Dean Baker, Paul Krugman, and others are calling on President Obama to try to force a more ambitious stimulus plan through Congress. "Just to be clear, I'm well aware of how difficult it will be to get such a plan enacted," Krugman writes in the The New York Times, anticipating criticism from the Administration insiders like Rahm Emanuel. (In a New Yorker profile earlier this year, Emanuel was quoted as saying that Krugman and other liberal economists are basically right in their criticisms of the too-timid Obama approach to issues like stimulus and tax cuts, but that it's easy to criticize the President when you don't have to get anything past the Republicans in Congress--"How many bills has he passed?" Emanuel asked of Krugman.)
I interviewed another critic of the Obama Administration's centrist economic team for the forthcoming issue of Progressive, William Greider, author of the definitive book on the Federal Reserve Bank, Secrets of the Temple, and, most recently, Come Home America. Greider also has critical things to say about Krugman: "He can’t let go of all the bromides he has absorbed over many years as a professional economist," he says, tarring him with the same brush as Robert Rubin and Alan Blinder.
"I think the Establishment, including people like Robert Rubin and Alan Blinder and others, have come part of the way to reality in which they recognize that globalization as they’ve sold it is not paying off for people, and that portends a growing popular resistance. Combine that with the present financial crisis and that’s going to drive that home even more in popular understanding. But they can’t go that next step," says Greider.
The bigger problem with the U.S. economy, Greider points out--beyond the need for stimulus and worker retraining—is the toll taken by globalization and the hollowing out of our manufacturing base.
"I think we will keep going down in those terms until this country gets a political leadership that says, 'You know what, it is nuts to run huge trade deficits year after
year and pretend that that’s OK. It is nuts to imagine that a large, advanced, industrial economy, can prosper without manufacturing.'" he says. "Nobody else in the
world does that. Why do we imagine that the U.S. can? It is nuts to become indebted to our trading partners so we can buy more of their stuff. You lay all those things on the table and it is not unreasonable to say this is going to end. . . . When that happens, if enough people understand that there are ways to come back—not to be number one again, but to just become a viable, prospering economy that more or less includes everybody. That’s what the goal ought to be."
Interestingly, Greider has spoken with Rubin and others, and recorded their admission that the religion of global trade has its flaws: that workers here and abroad are not reaping the great benefits the prophets of globalization claimed that they would. But their prescription for reform are far too modest, he says. They can't go the extra step and talk about completely renegotiating trade deals and remaking U.S. manufacturing. Instead we continue to pour bailout money into the Wall Street casino economy, and hope for a turnaround. It's time for the Establishment to acknowledge that their whole approach to economics has to change, he says.
"What you can’t get from a lot of those people is a candid acknowledgement of that," he told me. They will say, "'Well, yes, the steelworkers have lost jobs and people have sufferend and that’s too bad.' But—this applies to a lot of Democrats in the Congress—they find it very hard to step back and say, 'But this is not about the steelworkers or the autoworkers or others who have been disparaged and wiped out by globalization. It’s about the U.S. economy. The fact that this economy is gradually losing strength—partly because of globalization.' That’s pretty heavy."
If there is one thing that will start turning things around, it's pressure from Americans who are seeing their jobs dry up.