Do the Democrats Really Want to Bear the Blame for a Crash that Wall Street Will Cause?
This post by Lynn Parramore makes the point that the next crash is coming and probably will be blamed on the Democrats. It's a great point, but it needs to be pursued further.
What if we have another Republican sweep in 2014, like 2010, but worse? Then we're going to have more policies that increase inequality. Even less regulation, causing even more domination of our politics by corporations and the financial sector.
We'll have more military spending and more wars, along with more shredding and privatization of the social safety net. We'll have even less environmental regulation, and even more global warming; more drill baby drill, and less and less of public education. At the State level, we'll have more of the war on women, blacks, seniors, and hispanics; more corruption from corporations and the rich giving "gifts" to officeholders; more voter suppression, even more police brutality and denial of first amendment rights, more religion in our schools accompanied by more guns everywhere, and more Scalias, Alitos, Thomases, and Robertses subjugating everyone to corporations.
And what's frightening about all this is that the people who want to see this kind of America, also are the people with the power to gamble irresponsibly in the international financial innovation products gambling casino, and to bring about the very crash that will be laid at the door of the Democrats. Of course, the Democrats deserve this because when they had the power in early 2009, all through 2010, they cared more about the filibuster in the Senate, and their campaign contributions, and their possibilities of lucrative work after Congress, then they did about economic recovery with full employment, taking the big banks and Wall Street down, and getting truly universal health care through passing an enhanced Medicare for All program.
But whether they deserve it, or not, doesn't change the likely result of a Republican sweep. It will be a disaster for most of us, even worse than the sweep of 2010, because now the Republicans are starting from a stronger position in the State and Federal Governments, and afterward they are likely to be even more unobstructed in working their will than in the past.
The only way to avoid another crash that would be blamed on the Democrats, is to act decisively to get the financial sector under very tight regulatory control, as soon as possible. But, in turn, to do that, we must hope that there is no crash before the election of 2014 and also, if we can get there without a crash happening first, to then manage a sound Republican defeat in that election, so that the Democrats can get back the House and keep the Senate. But how can that be done?
In only one way. The Democrats must bring about a radical change in the American political climate that places the burden of the Federal Government's continued failure to ease the declining economic state, and anxiety about the future, of most of us, squarely on the shoulders of the Republicans, while leaving no rationalizations, or excuses the Republicans can use to place blame for those failures on the Democrats. The way to change that climate lies with the President and the Democrats in Congress.
The President must put an end to the normative standard of mandating fiscal neutrality for domestic programs and non-emergency domestic legislation having fiscal implications. When every fiscal policy initiative is evaluated first for its fiscal neutrality, rather than for the balance between its anticipated real costs and benefits relative to public purpose, then green eye shade private sector accounting norms replace the public purpose as the goal of government policy. The President can and should make fiscal neutrality an obsolete standard, by ordering the Secretary of the Treasury to have the US Mint produce a $60 Trillion platinum coin, and then deposit it in its Public Enterprise Fund (PEF) account at the New York Fed, where the Treasury can fill the Treasury General Account (TGA), the public purse, by sweeping the seigniorage from the PEF.
The President should then announce his action and explain its implications including:
-- The seigniorage from the $60 T coin (nearly all of the $60 T) would be used to pay off all Federal debt subject to the limit as it falls due, so that eventually all such “national debt” will be paid down to zero.
-- The seigniorage can also be used for 15 – 25 years to remove the need to issue any new debt instruments when the Executive wants to spend Congressional deficit appropriations.
-- The US Treasury now has plenty of money to repay all previous Treasury debt and to perform all deficit spending Congress is likely to appropriate for a very long time to come.
-- The President's action in minting the coin will not cause inflation because first, the $60 Trillion in Net Financial Assets (NFA) now in the public purse will only enter the economy in the form of reserves as the national debt is gradually repaid, and as deficits appropriated by Congress are spent. In itself this gradual injection of reserves into the economy can only cause inflation if Congress appropriates too much deficit spending. So, as long as Congress doesn't deficit spend beyond full employment there will be no demand-pull inflation.
Once the President has the coin minted and deposited, the key factor in the present political climate, the fight over debts, deficits, and “fiscal responsibility,” the rationalization for not deficit spending what's needed to end “the long depression,” won't be relevant anymore. The key fiscal policy issues then will be the need for full employment vs. the possibility of inflation, strengthening the social safety net, reinventing energy foundations to get rid of fossil fuels and stop global warming, fixing our declining system of public education, and reinventing our infrastructure. So, political fights will be over these things, not over debt ceilings and deficit reduction to slow the growth of the national debt or begin to pay it down.
The Democrats' role in Congress at this point should be to try to pass a legislative agenda that is clearly about “justice for all” beginning with tighter and tougher laws regulating banks, Wall Street, and the financial sector, and continuing with legislation providing for economic and social justice, including a Federal job guarantee program that will, create full employment at a living wage averaging with good fringe benefits, a Medicare for All program that will stop all the fighting over the Affordable Care Act, and also provide truly universal and accessible health care, a substantial increase in Social Security payments of at least 50%, an infrastructure program spending $400 Billion per year over five years, and a Manhattan project to replace fossil fuels over 10 years using solar, wind, geothermal, and hydroelectric power, and electric cars at $400 Billion per year.
Of course, none of this will pass; but the purpose of trying to produce this legislation is not to pass it immediately, but to make it clear that the Democratic Party is going back to its roots of legislating for the “have-nots,” and achieving a greater measure of economic and social justice and equality, and that it has a program that will do things for most people rather than for Wall Street, and that it is promising to enact that program, come what may, if it gets majorities in both Houses of Congress.
The Democrats did not produce legislation enacting such a bottom-up legislative program when they last had full control of Congress in the period 2007 – 2010. So, to be credible to the public this time around, they will have to offer some pretty strong guarantees, including a guarantee to end the filibuster and restore majority rule to the Senate. But that is as it should be, since in buying off on neoliberal ideology during the Carter Administration, they have done little but practice the trickle-down theory of public well-being since then.
If they do these things, however, then the Democrats will have a good chance to regain political power in 2015, and will have the opportunity to both avert the coming crash by bringing the financial sector under control and also bring an end to the long depression. So, there is a way out for them and for us. They need not get blamed for the crimes of Wall Street and the next crash and the hardships thereafter. If the President will cooperate they can avert their fate, save themselves from another “wave” defeat, and win a victory large enough to pass the program they promised.
Or, alternatively, as I expect them to do, they can just hang on, playing small ball until the next crash. But the odds are that if they do that, and either this President or his likely Democratic successor still have the presidency, then the Democrats will take the blame for that crash, and that the rest of us, in a paroxysm of frustration and resentment, will deliver ourselves into the hands of those who will whip us with scorpions.
(Cross-posted from New Economic Perspectives.)