Daily Archives: January 25, 2014

The New Populism Needs to Get This Straight

By Joe Firestone

Let’s look again at the new populism through the lens provided by Robert Borosage in his recent attempt to tell us what it is about. He says:

The apostles of the new inequality have unrelenting sought to starve the public sector. President Reagan opened the offensive against domestic investments. Perhaps the hinge moment was in the final years of the Clinton administration when the budget went into surplus, and Clinton, the finest public educator of his time, pushed for paying down the national debt rather than making the case for public investment. He left the field open for George W. Bush to give the projected surpluses away in tax cuts skewed to the top end.

The hinge moment wasn’t then. It was when he decided, either early in his first term, or even before he took office, to rely on deficit reduction coupled with low interest rates from Alan Greenspan, on the advice of Robert Rubin and Larry Summers, rather than on deficit spending on human capital investments as advocated by Robert Eisner and Robert Reich. Rubin’s victory in the internal debates within the Administration was well-known at the time (1993), and set the deficit reduction course that played along with the Fed’s bubbles to create the private sector debt-fueled “goldilocks” prosperity, and surpluses of his second term. By the time Clinton faced the choice Borosage refers to, the die had already been cast. It was very unlikely that Clinton would turn away from further Government austerity policy, and turn instead toward investments in infrastructure, public facilities and “human capital.”

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Spain Rains on Rehn’s Austerity Victory Parade: Unemployment Rises to 26%

By William K. Black

Two articles that should be read by anyone interested in the global financial crisis have just been published.  They address Spain.  Spain tends to get far less coverage in the U.S. than Ireland and Greece, but it is a far larger country and economy.  Its real estate bubble, relative to GDP, was the second worst among economically developed nations.  Spain is so large and its unemployment is so severe that “Almost a quarter of all the unemployed in the 28-country European Union live in Spain….”  Spain’s housing bubble was funded by an out of control banking sector and the bad loans are causing increasing damage to the banks.  “[B]anks’ assets continue to deteriorate with an increase in the number of loans not being paid back.”

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