Obama's Real Problem

In the wake of the federal shutdown debacle, the GOP is widely despised and in internally divided. Yet the Obama administration continues to pursue a "Grand Bargain" with the congressional GOP in which it will trade cuts in Social Security for some kind of tax increase. The big lie here is that Social Security benefits are not the cause of the Federal deficit. It's the Bush tax cuts which are the root cause of the deficit, which in real terms is actually decreasing anyway. It seems that Obama is obsessed with going down in history as "The Great Conciliator" that he is going to throw away his last chance to make the historic change he promised. It seems that the Democrats will do in 2014 what they did in 2010: rescue defeat from the jaws of victory.

Something Has Got To Give

Even thought Congress has passed another deal to re-open the government it only lasts for 90 days. When we consider that the GOP, not just the Tea baggers, are the kind of people that never learn anything and never forget anything, we could be facing the same rigmarole in January or February. How long can this continue? One possibility may come from the business interests who are funding the Tea Party. These interests want the low-tax low-wage regime to continue, but do they really want to continue backing fanatics, like the Tea Baggers, who are willing to wreck the economy? Maybe the business interests need to think about that.

Recessionism Defined

Perhaps the best definition of recessionist economics was written by Samuel Gompers President of the AFL 1886-1924. Writing in the January 1919 issue of "The American Federationist" Gompers summed up the recessionist position:

"Then too there is ever present that ill-advised and time refuted old school of political economists who always prescribe their dogma of reduction in wages for industrial ills whenever there arises any great question of industry, trade, commerce or finance. Their ever ready remedy for industrial stagnation is to cut wages and increase the hours of toil. With their philosophy or sophistry they would forestall or meet a condition of shrinkage in the markets of industry by still further reducing wages and lengthening the hours of work. To these false prophets and malpractitioners of economics, the law of supply and demand is the Alpha and Omega of their concept of political economy and sociology. Obviously it has never occurred to these men that by reducing the consuming power of the great masses and causing extended unemployment, privation and suffering of the people, industrial stagnation would not be abated or lessened, but on the contrary would be made more acute." (57)

Still true today as it was then.

The Dogma of Recessionism

The pet economic theory held by GOPers here in the states and by German bankers in Europe has a new label; "expansionary fiscal contraction." It is the theory that cutting public spending is supposed to be good for the economy. This theory, lets call it EFC for short, has come under attack by many economists. The economic data indicates that EFC actually causes economic contraction. In this country EFC has caused widespread unemployment and weak economic growth. In Europe EFC is pushing the poorer countries into economic collapse and possibly political and social breakdown. It would be fair to say that EFC is to economics what colloidal silver is to medicine: a dangerous piece of quackery.