Not Stimulated! (Part 1)

The Obama administration has made history. After 30 years of disappearing government and lawless markets, we are witnessing the most dramatic, proactive use of government powers in the economy since the Great Depression. Mr. Obama dropped billions of dollars of public money on the economy. This is a dramatic turn from the practices of Bush, Reagan, and Clinton. And it should signify a definitive victory for us, right? With a black president riding a wave popular demand for change, and with the greatest crisis in global capitalism that we have ever witnessed, it should mean that the economy will finally be just and fair, right?

In fact, things are a-changin', but it does not mean a progressive rearrangement of the economy. In cities throughout the country, the stimulus has not been visible. It's early, but everything in the design of the Recovery Act means that it will make little structural difference for communities of color. Black, Latino, and Asian inner-city communities have been in recession since at least 2004. Whether the national economy can recover any time soon is a big question, but no matter what happens, local urban communities will stay in crisis for much longer. The stimulus was designed to save the existing economy, but not fundamentally restructure it. It will create some new opportunities, for sure; but that money will largely disappear into the sponge of budget deficits and special interests who are looking for stimulus monies to save them.

It is hard to imagine how 1.6 trillion dollars (between the financial bailout and the stimulus) can get lost, but it will. Here's the formula, surprisingly simple actually:

1. A third of it goes to tax rebates, which people use to pay off a small piece of existing debt

2. Another third of it goes to government departments and States in severe crisis, which do the same - use it to reduce budget deficits

3. Lastly, a third of it goes to 'shovel-ready' projects, which means that in most places, it goes to the same people who were ready to use public money to make a profit (developers, titans of industry) before the bailout.

This is the same formula for the financial bailouts, where $750 billion dollars was handed to the greedy people who made the mess, with almost no conditionality. And of course, they did what greedy people do: they hoarded the money and used it to take care of themselves first. Now, nearly a trillion dollars later, it is still impossible to get a small loan from banks. We can't even borrow back the money we gave them while they insist on maintaining their multimillion dollar bonuses.

The bottom line is that most of the stimulus money won't filter down to those at the bottom, or even in the middle. As in the banking disaster, the same cast of characters that got us into the economic mess -- the same ones that benefited from opportunities presented by out-of-control housing markets -- will benefit from the stimulus. Bankers/financiers, developers/builders, all fueled the speculative market. Government structures at the federal, state, and local levels enabled fat cat friends of politicians to take without giving. Together they fueled the financial/real estate bubble and did not put anything away for the public good. They amassed vast and immoral personal wealth when the speculative market was hot, and when it went bust they took the first opportunity to protect themselves above all else.

As much as things seem to change, they actually stay the same. Corrupted corporate interests maintain enormous control over our democracy. Mark my words: This Recovery Act will not address racial and class disparities. It will not take communities of color out of our collective depression.

Comments

[Kevin Oliver]

No doubt this is the largest example of welfare for the rich that history has seen so far. The good news is that it will take a while for big business and their allies in government to start talking their disingenuous "free market" talk again. The bad news is that, although this very corrupt system has been made transparent and we are in a position to hold the powerful individuals that caused these problems at our mercy for once, the men who claim to lead us are bending over backwards to keep the corrupt system afloat at all costs. And with our money, no less.

The stimulus package as it stands now rests almost entirely on the assumption of trickle-down economics. Remember that discredited economic theory we used to associate with Reagan and the Republican party? Well, now apparently it's God's Own Truth for the Democrats as well. The assumption behind the stimulus is that throwing money at the top will create more jobs and and more lending and therefore more assets available at the bottom. We have yet to see the evidence for this claim, but it is seldom challenged. In reality, the folks at the top aren't in a hurry to let the wealth trickle down to us; they would rather lend it to us at usurious interest rates.

[vaino]

Perera says: "Government structures at the federal, state, and local levels enabled fat cat friends of politicians to take without giving."
OK, this is critical. In order not to repeat the current disaster, we need to identify those government structures and change them and their linkages. So what are they? In the Congress they certainly include committee power structures and regressive rules like seniority---e.g., Baucus intransigence on health care options: setting the agenda and picking those who testify. Also Congress at large---failure to limit corporate lobby access, and failure to encourage citizen access. Then there's the Treasury Dept and how Senate committees narrow the possibilities of who can be nominated for secretary. And on and on.
Government needs to be re-engineered---by truly citizen bodies: suggested by citizen commissions, thoroughly debated with public radio and tv under truly fair rules, and put to referendum. First possibly at municipal and state levels, and later at the national. Adjoining states sharing concerns and solutions might continue to collaborate as regions.

[timetolead]

It's time to spread the word broadly and loudly. The "stimulus" offers very little to people who were catching hell before the recession hit, and given the way the "stimulus" was designed, they will continue to catch hell unless people of good will come together and use this moment to offer plan for something better. All sensible action starts with a plan. Add to the plan, the will to execute, and we can work to create a better future for those who have been consistently left behind. This is the 45th anniversary of the Econonmic Opportunity Act - a program that was designed to lift up people where they were. The stimulus is a poor response to the needs of the dispossessed, the disenfranchised, and the disempowered. Add your voice! Spread the word!

[steveschnapp]

Great article! It is a shame that a President who promised "change" kept in place nearly all the same characters who drove the economy off a cliff. Even mainstream media (Simon Johnson in The Atlantic, Mike Taibbi in Rolling Stone, and Bill Moyers on PBS) have documented the death grip that finance capital has on the economy. And readers of Gihan's brilliant piece might also want to take a look at United for Fair Economy's 2009 State of the Dream report: The Silent Depression which offers up plenty of evidence about the devastating impact the economic crisis has had and is having on communities of color.

[somanystylz]

I definitely agree with Gihan's sentiments... it can only be business as usual when you make deals with lobbyists and members of the corporate oligarchy. Although Obama is an improvement the Bush regime, he still represents corporate interests first... If the government really wanted to stimulate the economy, it would have given a $500 monthly stimulus checks over 20 months ($10,000) to the 100,000, 000 tax payers instead of the banks who now get to charge us interest on our own money... worse still, they aren't even lending the money, but instead using it to acquire banks (assets such as real estate, stocks etc.) at rock bottom prices knowing full well that they will enjoy ridiculous margins.

The fact is the stimulus opportunities are being presented to usual suspects instead of where it is actually needed most. It could be a chance to equalize things because we know that control of the money supply is the key to wealth in America... thus we have a 'financial industry', even though bankers and stock brokers produce absolutely nothing of value... I feel that I have been vicitimized on so many levels... not only did these miscreants create the financial crisis, but I now must deal with a barrage of phone calls from credit card companies and Sallie Mae... Of course, the main factor in my going over balance were the fees and increased rates I have been hit with... The changes we have seen are, unfortunately, pretty much cosmetic...

[juliamiami]

HuffPost's Pick

Finally, someone who can give us the bottom line on what this economic mess, and especially this "economic recovery" means for those whose voices are rarely heard. Obama is riding a wave of approval and hope that our govenment can, and will, help everyone - but especially those who need it the most. We need to pay attention if that's not what's happening! Economics is a tough subject for most of us to understand, especially when so much of what makes a difference is in the control of a few and out of the view (and control) of the many. This author helped shed some light. Thank you.

[JakeintheSouth]

Yup, it does sound familiar. Even in Florida, people were excited that maybe the recession and Obama's election would provide some space to squeeze in a real dialogue about public investment and equity in our public structures. But, there were almost no progressive changes in our budget, only more regressive cuts. We are just plugging the holes that really were already in our budget with short term stimulus money.

Until other organizations - and unions in particular- start talking in terms of power within the social justice movements, we're going to see this kind of stuff again and again and again.

[GihanPerera]

You are right. We need to ground ourselves in an analysis of power. The ARRA should be in relation to the long standing demands of existing, and even emerging, social justice movements.

[alixg1]

Great article! Without addressing the root of the problem, primarily the existence of financial corporate entities considered 'to big to fail', we are doomed to not only not achieve the lifting of all boats, but will probably end up repeating current failures.

[GihanPerera]

This is right. When distribution of federal dollars doesn't address long standing inequalities we are just exasperating the problem.