Monday, April 26, 2010

“Republicans are Betting on Continued Hard Times” Revisited

While cleaning out computer files, I found a piece that was submitted last year. It was entitled “Republicans are Betting on Continued Hard Times.” It was clear then that the GOP would do whatever was necessary to block recovery efforts because there was a great political advantage in doing so. At the time, it as hard to imagine how badly the Democrats would fritter away their political advantages or how inept their Congressional leadership would prove to be. On the other hand, it was recognized then that the GOP remained strong and possessed far superior communications and strategic skills.

In three important respects, the piece needs to be amended and improved.

1. “This recession promises to last a number of years and will certainly extend well beyond 2012, in part because the problems of repairing a collapsed financial system are nothing short of enormous. Everyone in Washington must grasp this, and it offers the GOP a good shot of regaining power in 2012.”

Sherm is happy to have been partly wrong here. The Obama administration did a phenomenal job of pulling the country away from the brink of depression and out of a recession. The financial system has been repaired with bailing wire and duct tape and it is possible that the Dodd Bill is being excessively weakened. Yes, there are too many carve outs for some classes of derivatives, and the majority leader has insisted on a provision that weakens it still more to save some banking jobs in Nevada. Still, the measure is better than nothing, and one must remember Dick Durbin’s comment that the banks own the Congress.

In the sense that the jobs will not come back anytime soon, the earlier article was all too accurate.

2. “ Limbaugh was probably wrong in seeing 2010 as the comeback year, but it could be if the party is successful in delaying and trimming stimulus and bailout legislation.”

Clearly 2010 will be a big comeback year for the Republicans. They intimidated the Democrats into offering a weak stimulus bill with too much in tax cuts—to appeal to conservatives—and too little in New Deal—Great Society style stimulus. Then, during the legislative process, they weakened it still more in return for a few Senate votes.

“ Some savvy Republicans may realize that recessions are good for their wealthiest and most powerful constituents. When unemployment is low, labor expenses are high. Hard times present excuses to cut hours, vacations, sick days and other benefits.”

The accuracy of this is reflected in declining union membership in the public sector, improved earnings statements, and the willingness of unions to provide give-backs in return for jobs.

What I missed was that a deep recession gave big manufacturing firms the cover to plow vast amounts of cash into the derivatives and hedge fund casinos. That is why so many lobbyists attending the hearings on derivatives were representing manufacturers.

I year ago, this writer had no idea that the manufacturers were gambling in that casino nor was the size of the derivatives market known. Now many estimate it at between $250 and $650 trillion, and one respected sources places it at twice the latter figure. now I know it could be twice the former figure.

3. “Over the course of the New Deal, FDR invested about 25% of the GDP in stimulus and was not able to completely rescue the economy. The present stimulus package is a little less that 6% of the GDP. It is only the first installment of many similar steps if we are to escape a “lost decade” similar to that experienced in Japan.

It terms of restoring jobs, it will be a tough decade. It has proven politically impossible for the Democrats to muster enough support to pass significant follow-on stimulus packages. Republicans have convinced increasing numbers of voters that somehow President Barack Obama and free-spending Democrats are responsible the lost jobs and the fact that the jobs are not coming back very quickly. Obama and the Democrats get no credit for ending the recession or finally stemming job.

Over the last three decades, beginning with Ronald Reagan, Republicans have moved the nation to the right. Now the nation is paying the price because it is impossible to do the things needed to partially restore the manufacturing sector, which would include high speed rails, stimulation of much more R and D, improved education, especially in the technical sector, repeal of legislation rewarding the exporting of jobs, and making it harder to hide money abroad.

Another reason for the Democrats’ problems is the matter of race. We forgot how many Reagan Democrats left their party because they thought too much was being done for blacks. The fact that, during the primaries, Obama did not spend or campaign in West Virginia was recognition of the problem, and the 41 point spread between Clinton and Obama there confirmed it. After the North Carolina and Indiana primaries, the polls showed that Obama was not popular among what Mrs. Clinton called “hard working whites.” Now recent polling evidence confirms that racial antagonism is a major motivating factor for the Republicans and independents who joined the Tea Bagger movement. The November election result itself may have been a fluke— with the recession prompting many independents to select the Democrat rather than trust Mc Cain with the economy. The independents, ever impatient and usually not well informed, soon turned against Obama when the worst of the crisis passed.

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