Wall Street and K Street

“Despite Mr. Obama’s stated commitment to helping all Americans, the recession and the lingering effects of the way it was handled have made matters much, much worse.  While bailout money poured into the banks in 2009, unemployment soared to 10 percent that October.  The rate today (7.8 percent) appears better partly because so many people have dropped out of the labor force, or never entered it, or accepted part-time jobs because there was no full-time job for them.”  (emphasis mine)

Shed a tear for progressive pundits.  They resemble the nerdy 25-year-old who finally loses his virginity and laments, “Is that it?  Is that all there is to it?  Is that what I get after all those years of cold showers?” Ever since 2001 progressives have been blaming Wall Street and the notorious “Bush tax cuts” for wage stagnation and rising inequality.  Now their hero has “spread the wealth” by vastly expanding domestic spending, enacting Obamacare, mummifying Wall Street in miles and miles of Dodd-Frank red tape, and raising taxes on the infamous 2%.

And the result is . . . . . a far worse economy for the poor and middle class than under George W. Bush.  Black unemployment is 14%.  For the second year in a row the poverty rate was 15% in 2011, versus a peak under George W. of 13.2%.  Median household income in 2011 was 6% below the average level under Bush.  Meanwhile the rich are doing fine, with the S&P 500 up 88% since the spring of 2009.  Inequality was higher in 2011 than any year under George W.  There is little reason to expect these metrics to improve quickly, not with the payroll tax cut ending and Obamacare taking effect.

So now progressives are turning on their hero.  Our opening quotation reads like it sprang from the keyboard of a clear-eyed right winger like Paul Ryan, Rand Paul or Jim DeMint, but it was actually written by Joe Stiglitz, who never saw a tax hike he didn’t like.  With the election over, the liberal media can shift from campaigning for Obama to “analysis,” so The New York Times has run several articles attempting to make sense of Obamanomics’ failures.  They miss a lot but stumble onto insights we have been discussing for the last eight months:

• Steven Greenhouse avers that “income tax rates will rise for the wealthiest Americans, and certain tax loopholes might get closed this year.  But these developments…are unlikely to do much to alter one major factor contributing to income inequality: stagnant wages.”  He notes that “the stubbornly high jobless rate” is constraining labor income, without mentioning that a major cause is over-regulation. Liberals castigated George W. for wage stagnation while giving him no credit for robust job growth.  Now we have the worst of both worlds.
• Annie Lowrey, writing on “The Low Politics of Low Growth,” dissects the conundrum identified by Harvard economist Ben Friedman, “We could be stuck in a perverse equilibrium in which our absence of growth is delivering political paralysis, and the political paralysis preserves the absence of growth.”  But in Lowrey’s telling the weak economy is a natural condition, unrelated to Obama’s policies.
• Joe Stiglitz makes the case that “Inequality Is Holding Back the Recovery,” without explaining why it did not hold back economic growth from 1982 to 2007. Even fellow Marx Brother Paul Krugman took him to task for that. But Joe does implicitly admit that Obama’s policies have failed to achieve their avowed purpose of reducing inequality.
• David Brooks posits a race between “meritocracy,” which increases inequality, and Obama’s “government” which supposedly reduces inequality via things like Obamacare.  But he admits that  A) these efforts have little effect on inequality; they’re “like shooting a water gun into a waterfall” and  B) it’s hard to see how inequality is reduced by concentrating political power and “resources” in Washington, which is dominated by rich Ivy Leaguers like Barack and Michelle.
• Tom Friedman says Obama’s policy prescriptions are vacuous; he “won on a platform that had little to do with our core problems and is only a small part of the solution—raising taxes on the wealthy.”  Tom reminds Barack that in a globalized, digitized world “the mantra that if you ‘just work hard and play by the rules’ you should expect a middle class lifestyle is no longer operable.”

Friedman snidely observed that “if the Republican Party had a brain it would give up on its debt-ceiling gambit and announce instead that it wants to open negotiations immediately with President Obama on the basis of his own deficit commission, the Simpson Bowles Plan.”  That is pretty much what Republicans have done by postponing the debt ceiling.  It was a smart move. With Obama and the liberal media no longer able to position conservatives as “crazies” who want America to “default,” attention is focused on the ongoing failure of Obamanomics and the dearth of fresh ideas from the White House to raise the incomes of the poor and middle class.  In last Sunday’s morning shows Bob Woodward wondered whether Obama would finally come up with proposals to reform entitlements, which might improve business confidence and hiring.  The next step for Republicans, after extracting spending cuts from Washington, is to highlight how Obamacare is discouraging job creation by penalizing companies that create too many full-time jobs.

Copyright 2013 Thomas Doerflinger.  All Rights Reserved.