The double dip debate is heating up just as it becomes the central question of the 2010 mid-term elections. The two parties will be running on various theories of who is to blame -- the other guy -- for a rising tide of anger. Those who make their way to the polls in a bit more than two months will be angry and voting against the politician proxy of all that is wrong in their lives and the lives around them. The angriest Americans are likely to stay home in November.
This will be the saddeningly popular choice for many. Whichever party gets more of their angry and motivated people to the voting booth will win. Of course, the victors will speak of mandates and referenda on Obama and Congress. The defeated will talk of low turnouts and difficulty communicating message. Scandals and campaign missteps will be slavishly over reported.
Why so mad? Americans are scared and angry by the length and depth of the tough times. This story is older, deeper and more profound than the slump since 2007. Of course the colds and lumps of the last decades have blossomed into whooping cough and malignant tumor over the last 3 years. What it means to middle class has changed. What it means to be American has changed. Our political, economic and cultural leadership don't seem to understand this. We are recycling disappointing ideas from the past in an effort to confront new challenges. It is not working. It will not work.
The American middle class has lost one guarantee and perk after another. The last bulwarks against obvious vulnerability and poverty are all that remain, they are under attack. We have seen our wages and income stagnate for most of the years since Jimmy Carter was in the White House. What wage growth we have had has gone disproportionally to the highest earners.
Our pension system has shifted. Until the mid-1990s most people with pensions had defined benefit plans -- you know what you get when you retire, usually around 70% of your income in your final years at work. Now fewer people are covered and those who are covered have defined contribution pension plans. In these plans you control how much tax deferred income you put in. What you take out depends on how your investments do. For the last 10 years these contributions have bounced up, down and sideways. They value of leading US equity indexes are right about where they were 10 years ago. That money buys less now because of inflation. The security produced by assured pension benefits and rising stock market valuations have been replaced by fear. Health insurance alludes many. Those with insurance face quality of care and co-pay issues. To this has been added confusion and fear about the rules and implications of recent reforms.
Home ownership and access to credit were walls of separation between middle class life and what lies beyond and below it. America's home are places of foreclosure, sinking value and short sale these days. Few see or feel that home ownership is the vehicle for rising wealth and security. Home prices are battered and will likely stay below the highs of 2007 for many years. Home ownership is falling. The average household owns only 38% of their home. It was 60% in 2005. We borrowed too much and credit growth is now negative. Since 2008, the total debt held by American has declined. Soaring debt filled in the growing space between what middle class life costs and what middle class wages pay. Not anymore.
The last protection against poverty and desperation are government programs. Over the years we have made these programs less generous and more temporary. This works relatively better in stronger job markets and relatively worse in weak job markets. You don't need me to tell you what type of job market we have today.
When all else failed Americans have long had a deep sense of the power and prestige of their largest companies and the military. Even these symbolic areas of strength have been battered. The massive costs -- in blood and treasure -- associated with Iraq and Afghanistan have not left most Americans feeling better about the strength of the armed forces. The recent resurgence in corporate profits has come amid scandals, stagnant wages and hiring. Thus, many people have come to feel more suspicious and hostile toward large companies and senior managements.
This is what lies behind the anger that will shape the midterm elections and policy choices after the elections. The first steps forward will not come until these issues are front and center. No decision we make on the location of an Islamic cultural center, illegal/legal immigrants, gay marriage, or any other fleeting scandal will begin to address the rising tide of anger. Time, patience and resources are running down.
I guess it is tempting to overstate one's troubles (which by themselves are enormous), but lets work the actual problem
true, but if the middle class were not suffering they might not be interested in culture wars. Politicians have a hand in this, they would rather talk about minorities than the economy. Arizona governor doesn't want to talk about why the state's broke and taxes are rising. Fannie mae has 4,000 houses for sale in Phoenix.
Who represents the middle class in America? The ones who pay most of the taxes.
Republicans? Democrats? They both pay lip service to the middle class, but they both owe their allegiance and their jobs to the corporations that give them billions in campaign money.
Every election cycle it's the same. Blame the voters for not voting. Why not blame the real culprits, the two major political parties that control the ultimate factor, who gets to run?
Put "None of the above" on every ballot and see who wins then. If NOTA gets the most votes, its a do over, with totally different people running for office. Maybe with enough "do overs" the message might get across.
Every election is a choice of the lesser of two evils. Who is least corrupt. Offer the voters an honest middle class individual who is not beholden to the large corporations, or the party, and see what happens.
I won't be holding my breath. That's not the way the "system" works. The system is broken, and the repairmen in office (The two major parties) are part of the problem, not part of the solution.
The ship of state is leaking and taking on water, while the politicians sit and argue about who has to bail it out. "It's their fault, they should do it", until we all go down from their inability to govern.
On the debate about access to credit, a.k.a., debt.
It would be a far different story if those who were deciding about the issuance of loans for any of these purposes were not the same people with the power to create the money.
Were we to restore the monetary sovereignty that was won on the War for Independence (to have our own money system), then we would have an adequate supply of money to keep the economy in gear, and let the banks decide who is credit-worthy for all those loans.
Having an adequate supply of circulating medium, capable of providing economic stability without either inflation or deflation - the standard of stable buying power - is the primary function of a national monetary system, should be the primary objective of national monetary policy, and is THE MAIN INGREDIENT presently missing from a healthy national economy.
Former U.S. Senator and renowned UChicago economist Paul H. Douglas, also former Chair of the Senate SubCommittee on Monetary, Credit and Fiscal Policies, author there of the Douglas Committee Report, is one of the prominent authors of this long-lost document.
http://www.economicstability.org/history/a-program-for-monetary-reform-the-1939-document
Please have a read.
The Money System Common
Part of the problem is that demand side stimulus no longer works due to it leaking out because of free trade. On the other hand, supply side tax cuts no longer work because the money from the tax cuts is just sent overseas. Same thing with creative destruction. We get the destruction and the new investment goes overseas.
Things won't change until we do something to stop demand and investment from leaking out of the country. However, during the Clinton years, both parties bought into the free trade open markets open labor movement and it will take a while for them to realize that a third way is needed.
Thanks for reading and commenting. I agree that trade is a part of the story. I think trade is only one part of a big puzzle. We have seen a complete lack of new and innovative thinking, programs and policies across the board.
Max
First, thank you for reading and writing in.
You are correct that there are many for whom the details are just flies at a picnic. Obama won with the swing voters and they will be key in the Mid-terms. However, your point is well taken. There are many who see Obama as just the latest, greatest episode in long running culture and identity wars.
Max