The Divides are smaller than you think

Bob Rubin is known as a free trading Wall Street deficit fighter, Jared Bernstein is an economist at the EPI, and known for his work on the wage squeeze, aka the stagnation tax. They’ve authored an Op-Ed together, which is clearly aimed, not only at the incoming administration, but at the Democratic movement, not just party, as a whole. The message is in favor of a genuine centrism, rather than false choices and false capitulationism.

What is the summary? We need stimulus now, real wages need to rise in line with productivity, the benefits of trade must be used to offset the costs of trade – particularly to workers. But most importantly, and something that should have been obvious earlier: that the Wall Street and Main Street wings of the Democratic Party have the same interests. Wall Street provides liquidity and scale to Main Street, but ultimately Wall Street exists only if Main Street is better off with it than without it.

They close with

Public policy in all these areas ”” and a host of others ”” has been seriously deficient in recent years. It has led to a great increase in federal debt, inadequate regulatory protection against systemic risk and underinvestment in our people and infrastructure. Regressive tax policies have increased market-driven inequalities that could have been offset through progressive taxation.

False choices, grounded in ideology, have kept us from effectively addressing all these issues. The next president must do his utmost to avoid being drawn into these Potemkin battles. At this critical juncture, we face both the most significant economic upheaval since the Depression and the long-term challenge of successfully competing in the global economy. We have no choice but to move beyond such false dichotomies and toward a balanced pragmatism whose goal is broadly shared prosperity and increased economic security.

Many of the false choices we have been given have come from a time when there was a relentless Republican squeeze on government and the economy. People took stances that protected their interests first, as is often the case when it seems when they are being ground down. However, there is a short moment of nearly infinite possibility, that will close very shortly. The pressure from some will be to do little to nothing, however, the window to act will close quickly, and will not soon come again.

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Stirling Newberry


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  • though perhaps Wal-Mart will be unionized during Barack’s reign. But my 91 year old grandmother tells me that the cost of overthing she buys is going up so it will be based on robbing peter to pay paul.

  • I think/hope that one of the most profound outcomes of this election will be knocking the GOP down not a few pegs. If the predictions are true, there won’t be nearly so many Republicans in Congress. But i agree with Dan Bartlett (and others) that such a scenario should bring about the Dems pushing through a partisan wish list.

    For the most part, the Republicans left will be of the moderate, intelligent variety (not wholly, of course). An Obama administration needs to bring them into the fold and really work with them. One because that window needs to be gone through in a bi-partisan fashion. And two – and more importantly – if the Republicans who are left can be successful working with an Obama administration, it may allow/help them to take their party back from the nutjobs who currently control it.

    We need that more than just about anything. If we’re going to be stuck with two parties, we absolutely need them to be dominated by rationality, intelligence, and the ability to understand the concept of “loyal opposition”.

    Besides, Obama will need Republican support to not get out flanked by what’s in store for him…which i imagine will make the Clinton hunting look mild and friendly.

  • are going to be nice guys?? “the Republicans left will be of the moderate, intelligent variety (not wholly, of course)”, nice caveat, but FAIL. These Senate locks below are not moderates in any way.

    Well do the names below give you any idea about moderate and intelligence, Cornyn & Roberts especially??? WTF???

    Alabama (Sessions),
    Kansas (Roberts),
    Maine (Collins),
    Mississippi-A (Cochran),
    Oklahoma (Inhofe),
    South Carolina (Graham),
    Tennessee (Alexander),
    Texas (Cornyn),
    Wyoming-A (Barrasso),
    Wyoming-B (Enzi)

    These GOP folk are all Republican Locks in the Senate, and if you think that any of these are intelligent & moderate, well, you have got to be kidding me…

  • Will be the worst. They have basically gutted their moderate wing to hold on to their extremes. In order to solidify Kentucky, Mississippi, Texas and possibly Georgia, they have basically written off Alaska, Oregon, New Mexico, Colorado, New Hampshire. The only Republican Moderate who looks safe is Collins of Maine, and Coleman may yet pull out Minnesota if Barkley can siphon off enough votes.

  • Interesting that Robert Rubin (Wall Streeter extraordinaire) and Jared Bernstein (moderate progressive economist) are getting together.

    Rubin was, of course, Bill Clinton’s brilliant treasury secretary that engineered dollar hegemony, and helped facilitate the “economic miracle” of the Clinton administration by convincing Clinton to triangulate and gain the support of Wall Street by paying close attention to its darling, the bond market by reducing deficits and keeping interest rates in line. In the dialectic between Rubin and Reich, Rubin won, thereby setting the stage for the economically Reaganite Clinton years and, it could be argued, preparing the way for Bush’s extreme version of Reaganism that has led the US into crisis by exploiting temporary advantages, ignoring abuses, and using the levers of power to favor cronies.

    Rubin’s association with Bernstein is sending a signal that the centrist Wall Street elite is throwing in the towel on Reaganism and is ready to move toward a more progressive economic vision for America that recognizes the central role of the US worker in creating aggregate demand, which has been the goose that lays the golden egg for the US and the world economies. None too soon.

    It’s kind of like a lifelong atheist getting religion at the last moment.

  • I think something Lex said is important. It is that for Liberal Republicans (odd as that may sound) to be brought back into political discourse, they have to be given a position of influence and leadership and nobody is better situated to that than Obama, the opposition. The reaction of Krugman’s Rump Republicans will either be to become further isolated, or to launch another factionalist war among Republicans in a struggle for dominance. Either works for me, because I think the Republicans deserve all the turmoil they can get. But a rise in little Gingriches can be prevented to a great degree if Obama legitimizes his liberal Republican opposition over the conservative incompetents that have too long held sway.

  • After this crisis, and the tsunami hasn’t really hit equities yet, the argument to privatize Social Security by giving it to Wall Street will be moot for a couple of generations, until the hurt not only heals but is largely forgotten.

    Rubin’s getting together with Bernstein should be seen as a grudging compromise, and even a ruse to some degree, not a capitulation. These guys will never give up.

    I do think that SS must be “reviewed,” however. Putting the money for which the government has fiduciary responsibility in the general fund and writing IOU’s rather than in a trust fund is irresponsible. A good portion of this money goes to military spending, which is inflationary, undermining the future value of the currency and hurting retirees.

  • It’s not a clawback, that is the non-starter, but a parallel system. Rubin’s Hamilton Project has been pushing this for some time; see the link in the Guardian to James Galbraith.

  • I don’t see it as “a new frame” as much as a new proposal to change the concept of SS from being a trust fund with a fiduciary responsibility that requires low risk, like annuities, in order to permit discretionary accounts put at higher risk. The supposed “advantage” of individualized accounts as a parallel system is that they are designed to take advantage of higher risk in the expectation of greater reward. Of course, the idea of SS as trust fund was thrown overboard long ago, and SS collections now go to the general fund.

    That’s not what SS is about. We see what happens when pension funds, etc, attempt to increase returns by taking on more risk. Now a lot of them are stuck with toxic waste that requiring a taxpayer bailout. And W just laughed at SS as being a bunch of (worthless) IOU’s in a government file cabinet somewhere.

    The downside is that when the program is changed, the underlying philosophy is changed also, creating a wedge for peeling off pieces. Wall Street is dying to get its hot mitts on the SS funds to drive equities up by increasing demand, and giving the Street a windfall in fees. Robert Rubin is being very disingenuous.

    This guy has no retirement worries and he doesn’t personally need an individualized account to back him up. So we have to ask what he is really up to. Given the role he played in the Clinton administration as the shill for the Street, we don’t have to look for an answer.

    SS funds held in trust should be parked in governments, and the Fed given the sole mandate to preserve monetary stability, instead of the dual mandate it now has to also manage employment. The Fed has, of course, expropriated the third mandate of attempting to (micro)manage the business cycle as well.

  • than a moderate. If the Repugs don’t hold 40 Senate seats come January, they will become spectators to whatever the (hopefully emboldened) Democrats have in mind. The fact that those Rs who remain will be the most loathsome among them can only expedite the process.

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