Maybe we were living in the Roaring Twenties and September 2008 was our 1929 – with an absurdly overleveraged economy collapsing, again. We did this once before. Really – Fredrick Lewis Allen’s Only Yesterday is the best popular history of the twenties, and his account of the 1925 Florida real estate bubble sounds frighteningly familiar. And yes, Allen’s detailed explanation of the 1929 crash reads a lot like Andrew Ross Sorkin’s Too Big to Fail from 2009 – same story, different players. The big bankers of the day get together, well out of the public eye, and try to save the day – and they sort of did save the day, or saved what they could. But as Allen says, things would never be the same:
No matter how many soothsayers of high finance proclaimed that all was well, no matter how earnestly the President set to work to repair the damage with soft words and White House conferences, a major depression was inevitably under way.
Nor was that all. Prosperity is more than an economic condition; it is a state of mind. The Big Bull Market had been more than the climax of a business cycle; it had been the climax of a cycle in American mass thinking and mass emotion. There was hardly a man or woman in the country whose attitude toward life had not been affected by it in some degree and was not now affected by the sudden and brutal shattering of hope. With the Big Bull Market gone and prosperity going, Americans were soon to find themselves living in an altered world which called for new adjustments, new ideas, new habits of thought, and a new order of values. The psychological climate was changing; the ever-shifting currents of American life were turning into new channels.
Herbert Hoover was soon gone, replaced by FDR – and George Bush was soon gone, replaced by Barack Obama. But the damage was done, even if of a slightly different sort. Matthew Dowd, out and about, traveling America, considers the current loss of faith:
From this trip, and from looking at things over the last six months, I am beginning to get the feeling that voters are shrugging their shoulders about politicians, no longer believing that they can fix the economic problems. Americans have reset their expectations about how political leaders can change the dynamic. After watching basically no growth in real wages over the past decade, no real growth in private-sector jobs, and a stagnant unemployment rate, people don’t think that a president (or a governor, for that matter) can do much to change the situation…
This “reset” on the country’s economic and leadership outlook of what might be a new normal could actually benefit Obama to a small degree. If Romney tries to make too many grand promises about what he will do as president, he could be viewed as untrustworthy and as a typical politician. At the same time, Obama could be hurt if he tries to make big flowery speeches about the great things he has done and what he’ll do in a second term.
FDR was somehow able to convince people that the government could actually fix things, to convince them that he was on their side, with solutions – the WPA and all the infrastructure spending, and Social Security, so the old didn’t starve, and all the rest. There was work, and demand slowly returned, even if times were still incredibly hard.
That was then. Now not only does no one trust the banks and the financial services wizards – for good reason – no one trusts anyone in office. For decades the Republicans had been saying that the government was always the problem, never the solution, and that somehow became a given, like saying the sky is blue and water is wet. And each time they were in office they went about proving this was so – remember Katrina and New Orleans. But if you cannot put your faith in blissfully unregulated free-market capitalism, where that famous Invisible Hand of cutthroat competition will make everything efficient and wonderful and fair, and you cannot believe any government can do anything useful, you’re stuck. There’s nothing left to believe in and as with what Matthew Arnold said about the Sea of Faith (in anything) – “now we only hear its melancholy, long, withdrawing roar, retreating, to the breath of the night wind, down the vast edges drear and naked shingles of the world,” and so on.
That’s dismal, or it’s not that bad, according to Andrew Sullivan:
We’re entering that blissful period when people not that interested in politics – the sane majority – look up and examine what’s on offer. I suspect they are not as dumb as the Romney campaign seems to assume they are; and not as happy as the Obama campaign would like them to be. Candor and concrete proposals and character are the three things people are looking for. Romney has none of them. Obama has all three but a still-shitty economy obscuring all of it. Hence Romney’s fixation on Obama’s core weakness, and Obama’s constant interruption of a referendum campaign with new proposals and initiatives – this time extending Bush’s tax cuts for those earning under $250,000 for one more year. I suspect this is a pattern that will hold for a while – unless events interrupt them.
Maybe people with no faith in anything anymore – either way – really are the rational ones here, the only ones who can separate the sensible from the self-serving bullshit, and yes, Obama did make that proposal:
President Barack Obama called Monday for Congress to pass an extension of Bush-era tax cuts for household incomes less than $250,000 in the coming weeks, and to leave a debate on whether to extend the cuts to the rich until after the presidential election in November.
“The Republicans say they don’t want to raise taxes on the middle class, and I don’t want to raise taxes on the middle class, so we should all agree to extend the tax cut for the middle class. Let’s agree to do what we agree on,” he said in the East Room of the White House, flanked by people who would benefit from the extension. “Let’s not hold the vast majority of the Americans and the entire economy hostage while we debate the merits of another tax cut for the wealthy.”
Obama backed the Republicans into a corner. They have made their position clear – ninety-eight or ninety-nine percent of the Americans don’t get to keep their ongoing tax cuts, not a penny, unless the one percent, the very wealthy, gets to keep their ongoing tax cuts too. There will be no compromise on that. Obama is waging class warfare – he hates anyone who’s successful, and that just un-American.
Actually that’s just FDR – let’s help almost all the people right now, and talk about the rich after the election:
“Pass a bill extending the tax cuts for the middle class, I will sign it tomorrow. Pass it next week, I’ll sign it next week,” Obama said. “Right now, our priority needs to be giving middle-class Americans and small businesses the security they deserve.”
White House press secretary Jay Carney later added that the president would veto a full extension if that is what’s passed by Congress.
Obama set up a fight. If you guys want to defend the rich, using the middle class as hostages until you get your way, fine. Let’s have that fight.
Wonkette put it this way:
President McMuslimbot took to the podium today to introduce his new tax proposal that’s he’s had for about 10 years: extending (for one year) the “middle-class” tax cuts on all but the top two marginal income tax brackets, meaning each dollar of income above $250,000 would be taxed at rates last seen during the oppressive Bill Clinton administration. This is the greatest blow to American liberty since John Roberts & Co. destroyed all American liberty permanently by upholding the constitutionality of a $695 tax penalty two weeks ago.
The Republicans won’t look good here, and BooMan puts it this way:
Do any of you make over $250,000 a year in taxable income? And, if you do, would you mind paying a modest 4-5% additional tax on all the money you make in addition to that first quarter million so that people won’t have their retirement security slashed or their food stamps cut off or their unemployment insurance terminated?
You see, if you make a quarter million dollars a year in taxable income, you are one of the very few people in this country who might legitimately have tax reasons for voting for Mitt Romney. But you don’t really want all the struggling people in this country to have their benefits reduced, their safety net slashed, and their educational opportunities denied just so you can pay a slightly lower tax rate than you did under George W. Bush, do you?
Can we make that deal? Probably not – but timing is everything and this was a Monday announcement after Mitt Romney’s big weekend:
As protesters assembled on a beach in advance of Mitt Romney’s evening event at the home of conservative billionaire David Koch, the candidate slipped to East Hampton for his first of three fundraisers on this tony stretch of Long Island.
The line of Range Rovers, BMWs, Porsche roadsters and one gleaming cherry red Ferrari began queuing outside of Revlon Chairman Ronald Perelman’s estate off Montauk Highway long before Romney arrived, as campaign aides and staffers in white polo shirts emblazoned with the logo of Perelman’s property – the Creeks – checked off names under tight security.
It was Gatsby night on Long Island once again, even if East Hampton isn’t East Egg:
A New York City donor a few cars back, who also would not give her name, said Romney needed to do a better job connecting. “I don’t think the common person is getting it,” she said from the passenger seat of a Range Rover stamped with East Hampton beach permits. “Nobody understands why Obama is hurting them.”
“We’ve got the message,” she added. “But my college kid, the baby sitters, the nails ladies – everybody who’s got the right to vote – they don’t understand what’s going on. I just think if you’re lower income – one, you’re not as educated, two, they don’t understand how it works, they don’t understand how the systems work, they don’t understand the impact.”
One wonders why we gave the stupid peasants the right to vote at all. These folks didn’t go to the right schools. They just don’t get it, and thus Joan Walsh says the obvious:
Barack Obama couldn’t have picked a better day to announce his plan to extend tax cuts for Americans who make less than $250,000 and to let taxes rise for the wealthy. Mitt Romney’s three Hamptons fundraisers on Sunday were like a Priorities USA ad, except the creative directors of the pro-Obama super PAC would have rejected the script as over-the-top.
In a clusterfuck of conspicuous consumption, Bentleys, BMWs, Range Rovers, Porsches, a Rolls Royce and a Ferrari idled in a line 30 cars long. “Is there a V.I.P. entrance?” one woman shouted to the “help,” according to the New York Times. “We are V.I.P.”
It’s catchy: As the Occupy Wall Street folks chant “We are the 99 percent,” Romney voters can shout back “We-are-V-I-P!” Or maybe they can sing it to the tune of “We Are Family.”
Yes, this might have been a bad move:
You’d think the Romney team might have had David Koch and Revlon heir Ron Perelman ask their friends to mute the ostentatiousness for a day, but that wouldn’t be Mitt Romney – the man who took a tax break for his wife’s horse that’s larger ($77K) than the average American wage ($46K) doesn’t get it. It’s why he was stunned when the issue of his hidden tax returns blew up earlier this year, and it’s why he is startled now that voters are recoiling at his accounts in the Cayman Islands and Bermuda and at his $100 million “individual retirement account,” a vehicle created for middle-class people to put away $2,000 or so a year pre-taxes. (The median IRA account balance for a 65-year-old man like Mitt Romney is $38,204, according to the Employee Benefit Research Institute.)
Of course her side can be just as clueless:
In May, we were treated to the sight of Wall Street Democrats, including former President Clinton, getting a little queasy about the Obama team’s attacks on Romney’s Bain Capital career. But, in fact, those attacks have been resonating among swing state voters. As Robert Draper reveals in his New York Times magazine piece on pro-Obama super PAC Priorities USA, early attempts to depict Romney as a flip-flopper or extremist didn’t work – voters wouldn’t even believe Romney supported Paul Ryan’s tax-cutting, program-slashing budget. But they did respond to messages showing how his career in private equity made him “someone who understands how the economy works but cares only about making it work for rich guys like him.”
So this is what the campaign is going to be about. At least that’s settled, and that’s fine with Walsh:
I hope the folks at Priorities USA are getting ready to use Madam Range Rover’s entitled rant against “the common person” in an advertising barrage. If “the nail ladies” figure out who she is, Madam Range Rover better be careful during her next pedicure.
Peter Beinart fills in the rest:
Conservatives are livid. “The Obama campaign has made it clear that they will run this whole election on class warfare,” declared the website The Right Sphere. “Instead of focusing on Obama’s dismal record, they want Americans to resent Mitt Romney for being successful.” Luckily, added Commentary, Obama’s Maoist tactics will fail because America remains “an aspirational society that admires rather than resents success.”
Then Beinart goes on to document how Republicans used class resentment effectively for the last sixty years – from Joseph McCarthy’s rants about fat-cat Democrats to Richard Nixon’s seething resentment of Harvard and Ivy League types out to get him, and beyond, adding this twist:
Republicans don’t use class warfare only against Democrats. They use it against Mitt Romney. “Even the richest man can’t buy back his past,” announced a Rick Perry ad last October. “This is a campaign of people power versus money power,” declared Newt Gingrich this February. “We’re just not going around meeting with CEOs and in the big cities,” added Rick Santorum in March. “This campaign is living off the hard work of average ordinary people across this country who want to see a fundamental change, not on folks who have – well, let’s say a special interest in electing their candidate.”
For his part, Romney responded by calling Gingrich “a wealthy man, a very wealthy man. If you have a half a million dollar purchase from Tiffany’s, you’re not a middle-class American.”
Nothing is new here:
So, yes, America is an “aspirational” country, but it’s also a country where people distrust elites. It’s a country where people with money and pedigree are vastly overrepresented in government yet risk their careers if they can’t connect to ordinary voters. Mitt Romney will be judged by those same rules: Do middle class Americans find him personally appealing? Do they believe his success has benefited the nation as a whole?
For much of the last half-century, Republicans have understood these rules better than Democrats. If Mitt Romney doesn’t, he has no one to blame but himself.
This should be fun – depending on your definition of fun – but it may be a fight over something that’s already lost. That’s what Thomas Edsall discusses in New York Times article on the hollowing-out of the middle class:
The issue of the disappearing middle is not new, but credible economists have added a more threatening twist to the argument: the possibility that a well-functioning, efficient modern market economy, driven by exponential growth in the rate of technological innovation, can simultaneously produce economic growth and eliminate millions of middle-class jobs.
Michael Spence, a professor at N.Y.U.’s Stern School of Business, and David Autor, an economist at M.I.T., have argued that this “hollowing out” process is a result of twin upheavals: globalization and the hyper-acceleration of technological progress.
Maybe in 1929 or in 2008 you lost your faith in unfettered free-market capitalism and the magic of the Invisible Hand of self-serving competition – perhaps greed really isn’t good. And somewhere between Goldwater and Reagan you lost your faith in any government being able to do any good about anything – and watched the second George Bush demonstrate that. Now it seems your faith in technological progress may have been misplaced. It seems like only yesterday that was the answer to our woes.
It’s not. Edsall points out that at the Aspen Ideas Festival, Alan Krueger, Chairman of the Council of Economic Advisers, told us all the truth:
If you look at the decade before the recession, the U.S. economy was not creating enough jobs, particularly not enough middle class jobs, and we were losing manufacturing jobs at an alarming rate even before the recession. And I would also put together, combined with those two problems, the polarization of the U.S. job market, the fact that we are getting more and more people at the very top and the very bottom and the middle has been shrinking.
And Edsall cites Erik Brynjolfsson, a professor at the MIT Sloan School of Management, and Andrew McAfee, a research scientist at the Center for Digital Business there, and what they raised in Race Against the Machine – an eBook, not a real one, as that’s how things are these days. McAfee is just depressing:
Since the Great Recession officially ended in June of 2009, GDP, equipment investment, and total corporate profits have rebounded, and are now at their all-time highs. The employment ratio, meanwhile, has only shrunk and is now at its lowest level since the early 1980s when women had not yet entered the workforce in significant numbers. So current labor force woes are not because the economy isn’t growing, and they’re not because companies aren’t making money or spending money on equipment. They’re because these trends have become increasingly decoupled from hiring – from needing more human workers. As computers race ahead, acquiring more and more skills in pattern matching, communication, perception, and so on, I expect that this decoupling will continue, and maybe even accelerate.
In other words, the downward employment and jobs spiral will keep going, driven by structural forces. Policies to ameliorate the process – a shorter work week, a massive investment in education (for example, at the community college level), the disaggregation of complex tasks into simple functions that could be executed by mid-skill workers – may only slow the decline, not stop it. This is a deeply pessimistic vision.
And that means that McAfee was asked these questions at a recent seminar for young researchers and prospective entrepreneurs:
How much can wealth accumulate for a small slice of the population at the top, while large numbers of people are forced to work for ever lower pay or to drop out of the workforce altogether? For such a future society to function, would wealth need to be (coercively) redistributed from the top to those below, in order for the mass of the jobless population to survive? Who would have power and how would tax and spending policies be determined in such a radically bifurcated, automated, workless society?
That is a problem. Brynjolfsson and McAfee have a list of nineteen proposals that might help – massive investment in education and in infrastructure and in basic research, lower barriers to business creation, changing copyright and patent law to encourage new innovations and easing up on protecting the really old stuff, and so on – but there may be no hope:
Any effort to ameliorate the damaging consequences to the employment marketplace stemming from technological innovation, according to Brynjolfsson, requires substantial government action at a time when “the political system is the most dysfunctional part of our society.”
That happened in the twenties too – Calvin Coolidge stepped back and did little, and Herbert Hoover, when everything was falling apart, decided it was best to say everything would be fine. There really was no political system, and that was only yesterday – or so it seems.
Still, in the twenties, there were Gatsby’s parties out on Long Island:
There was music from my neighbor’s house through the summer nights. In his blue gardens men and girls came and went like moths among the whisperings and the champagne and the stars. At high tide in the afternoon I watched his guests diving from the tower of his raft, or taking the sun on the hot sand of his beach while his two motor-boats slit the waters of the Sound, drawing aquaplanes over cataracts of foam. On week-ends his Rolls-Royce became an omnibus, bearing parties to and from the city between nine in the morning and long past midnight, while his station wagon scampered like a brisk yellow bug to meet all trains. And on Mondays eight servants, including an extra gardener, toiled all day with mops and scrubbing-brushes and hammers and garden-shears, repairing the ravages of the night before. …
At least once a fortnight a corps of caterers came down with several hundred feet of canvas and enough colored lights to make a Christmas tree of Gatsby’s enormous garden. On buffet tables, garnished with glistening hors d’oeuvres, spiced baked hams crowded against salads of harlequin designs and pastry pigs and turkeys bewitched to a dark gold. In the main hall a bar with a real brass rail was set up, and stocked with gins and liquors and with cordials so long forgotten that most of his female guests were too young to know one from another.
By seven o’clock the orchestra has arrived, no thin five-piece affair, but a whole pitful of oboes and trombones and saxophones and viols and cornets and piccolos, and low and high drums. The last swimmers have come in from the beach now and are dressing upstairs; the cars from New York are parked five deep in the drive, and already the halls and salons and verandas are gaudy with primary colors, and hair shorn in strange new ways, and shawls beyond the dreams of Castile. The bar is in full swing, and floating rounds of cocktails permeate the garden outside, until the air is alive with chatter and laughter, and casual innuendo and introductions forgotten on the spot, and enthusiastic meetings between women who never knew each other’s names.
The lights grow brighter as the earth lurches away from the sun, and now the orchestra is playing yellow cocktail music, and the opera of voices pitches a key higher. Laughter is easier minute by minute, spilled with prodigality, tipped out at a cheerful word.
It seems like only yesterday. No wait – that was only yesterday. We’re in a loop here.