Det danske Fredsakademi
Kronologi over fredssagen og international politik 22. Mars
2010 / Time Line March 22, 2010
Version 3.5
21. Mars 2010, 23. Mars 2010
03/22/2010
Are We on the Way to Economic Recovery?
By Don Monkerud
Feel upbeat about the economy? You should be. The economy is
getting worse more slowly.
That's the learned conclusion of two economic experts who debated
paths to recovery at the 2010 Panetta Institute Lecture Series in
Monterey in March 2010.
Harvey Pitt, former Securities and Exchange Commission Chairman,
and Robert Reich, former Secretary of Labor, find troubling signs
in the economy, including high unemployment, risky long-term debt,
frozen credit markets, overvalued bank assets, and a failed
regulatory system.
Neither addressed why they call the economic downturn a
"recession," when it's a depression that Sylvia Panetta said could
"end up rivaling the Great Depression."
In the past, both men supported the reconfiguration of the American
economy through cheap credit, monopoly control of markets, rising
concentrations of political power, the dominance of banks in the
economy, and shipping American's jobs overseas. By the end of their
discussion, it became evident that both men continue to support the
boom and bust cycles of neo-liberal capitalism. They would like to
reduce the risk to the overall economy but not restrict growth.
Nevertheless, their sobering assessments find long-term problems
and a fractious political system that makes any positive
Congressional solutions almost impossible. Beneath the surface ran
very different assumptions about the development of the
economy.
A Bush appointee, Harvey Pitt pushed deregulation, whitewashed the
SEC investigation of Cheney's Halliburton illegalities, and refused
to release the SEC report on Bush's insider trading scheme. He
recently founded the Kalorama Partners, which advises corporations
on avoiding problems with regulators, and was forced to resign as
SEC chairman due to his cozy ties to the Big Five Accounting firms
during the Enron scandal. One Congressman described the SEC under
Pitt as "a total shambles," and the GAO found Pitt's leadership
dysfunctional and chaotic. Yet, now he's a recognized expert on the
economy.
During the debate Pitt said, "the regulatory system totally
failed," even though the New York Times reported him "watering down
corporate governance reforms mandated by Congress" when he headed
the SEC. Pitt criticized the stimulus package for giving money to
companies "whose conduct created the problem in the first place."
We could have "gotten more bang for the buck" by putting money into
the hands of voters.
Reich agreed with Pitt, although he quickly pointed out that no one
fully grasped the problem at the time or "knew how bad things would
get." The $800 billion stimulus "was not large enough," and
although it preserved two million jobs, Reich would like to have
seen more of it invested in infrastructure instead of shoring up
failed banks.
The men reserved a great amount of criticism for Capital Hill
gridlock, although their views of the causes were at odds. "I've
been in Washington 42 years, and in my view it's the worst it's
been," said Pitt. He mused that a Democratic majority was "a
prescription for disaster," because they could pass "pet projects"
with no need to compromise.
Reich pointed out that bipartisanship "changed dramatically with
Newt Gingrich" in 1994, which led to "incredible polarization."
Obama's tendency to compromise cannot overcome Republicans
hostility. By compromising on healthcare, and environmental and
regulatory reform,
Barack Obama is losing his followers and undermining his
electoral mandate.
Reich asserted that Obama should keep his campaign promises and
push through his agenda. Without reform, healthcare costs are "on
the way to 20 percent of GDP," which will "eat up the economy." The
financial sector is becoming "so complicated, no one understands
it," and the anti-government, anti-spending public won't allow us
to spend our way out of the recession.
Both men decried political animosity and gridlock, with Pitt
reminiscing about the days after 9/11 when everyone pulled
together. Reich asserted that the middle class cannot pull together
because they are demoralized by the wage stagnation of the past 30
years. Meanwhile, the 400 wealthiest households increased their
income 31 percent in 2007. "How can people pull together when the
rich are taking the lion's share?" Reich asked.
In 2001, the wealthy averaged $131 million per household, but by
2007, they increased their incomes to $345 million per household.
Thanks to the Bush tax cuts, they paid 17 percent in taxes, less
than many middle class families pay. "It cannot work if the middle
class isn't sharing in the wealth," said Reich.
Like an out-of-touch grandfather, Pitt claimed such talk leads to
"class warfare" and suggested that "everyone must pull together."
He wants leadership that "gets people working together toward
common goals" and warns against oversimplifying issues.
The back-and-forth exemplified larger issues in the on-going
economic debate. Unfortunately, the exchange didn't provide any new
light on the subject. Much more interesting is the radical
restructuring of the economy that is going on behind the scenes.
Reich pointed out that people who lost their jobs were pushed into
lower-paying jobs and that full employment is years away.
Meanwhile, the banks are getting richer, the gap between rich and
poor is widening, corporations are consolidating power, and
property is being redistributed upward. After Bush's mismanagement,
the economy may never recover its health from before the
downturn.
03/22/2010
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