Robert Reich Reports

[billy backstay]

What to do about America's "labor shortage?" Easy. Pay people more.

Why the solutions offered by the Fed and by corporate economists are dead wrong

robertreich.substack.com

"Jerome Powell, the Federal Reserve chair, says the United States has a “structural labor shortage” that’s unlikely to be resolved anytime soon. The U.S. Chamber of Commerce claims there are over 10 million job openings in the U.S. for which employers can’t find workers.

Here’s the truth: There is no labor shortage.

There is, however, a shortage of jobs paying sufficient wages to attract workers to fill job openings."

"Meanwhile, the federal minimum wage continues to plummet. It hasn’t been raised in thirteen years – the longest period without a raise in its history. Adjusted for inflation, its real value is the lowest it's been in 66 years.

You don’t have to be a financial wizard to see why some workers might say the hell with it. "

False equivalence

Biden's documents

robertreich.substack.com

 

[billy backstay]

Back to another horrible, hellish, horrendous, totally absurd battle over the debt ceiling

Friends, Treasury Secretary Janet Yellen just announced that the federal government will hit the limit on total federal debt on January 19, just two days from now. After that, the Treasury Department will be forced to take “extraordinary measures” to avoid defaulting on the debt, which would...

robertreich.substack.com

Back to another horrible, hellish, horrendous, totally absurd battle over the debt ceiling​

Robert Reich

Friends,
Treasury Secretary Janet Yellen just announced that the federal government will hit the limit on total federal debt on January 19, just two days from now.

After that, the Treasury Department will be forced to take “extraordinary measures” to avoid defaulting on the debt, which would likely trigger a global financial crisis.

Congress could defuse this bomb by simply raising the debt limit, as it has dozens of times under presidents of both parties for decades. But the MAGA radicals now in control of the House of Representatives are refusing to raise the debt ceiling unless President Biden agrees to devastating cuts to Social Security, Medicare, and other key programs.

I was involved in a similar fight over the debt ceiling fight twenty-eight years ago, which holds some lessons for what happens now.

In November 1995, Republican refused to raise the debt ceiling unless Bill Clinton agreed to a package of sweeping spending cuts, welfare overhaul, restraints on Medicare and Medicaid growth, and a balanced budget within seven years.

I and other Clinton advisers urged him not to negotiate. Even if the public didn’t understand that the debt ceiling had less to do with the nation’s future debt than with obligations the United States had made in the past, we couldn’t allow the Republicans to hold the economy hostage. The full faith and credit of the United States was at stake. It should not be negotiable.

Clinton agreed. “If they send me a budget that says simply, ‘You take our cuts or we’ll let the country go into default,’ I will veto it,” he said. He called the Republican tactics “economic blackmail,” which they were.

When the Republican House then passed a bill increasing the debt ceiling through December, as well as a continuing resolution that included higher Medicare premiums and other spending cuts, Clinton vetoed both bills. “America has never liked pressure tactics, and I would be wrong to permit these kind of pressure tactics to dramatically change the course of American life,” he said. “I cannot do it, and I will not do it.”

What happened next? The government shut down. And as you may recall, the American public was furious — with the Republicans, who paid dearly in the subsequent midterm elections.

The budget standoff was resolved in early January 1996 but the debt ceiling issue remained. When Treasury Secretary Robert Rubin wrote to Speaker of the House Newt Gingrich that Congress had only until March 1 before the Treasury defaulted on its obligations, Moody’s rating agency announced it was considering downgrading the rating on U.S. Treasury bonds.

Republicans quickly folded, offering to raise the debt ceiling in return for a few modest measures.

The debt ceiling fight of 2011 was different. The Obama administration did negotiate with House Republicans, resulting in the Budget Control Act of 2011. When the debt ceiling had to be raised again in 2013, Obama returned to negotiations. During this standoff, the government was partially closed down. Here again, Republicans took the brunt of the blame.

In these fights, some Republicans presented a fallback position: Instead of raising the debt ceiling, the federal government should prioritize which bills to pay — starting with interest payments to lenders to the United States (holders of federal bonds). That way, they argued, there’d be no technical default.

The idea never went anywhere because such prioritization would still spook credit markets. It would also cause the economy to tank and the stock market to plunge because of the sudden elimination of huge amounts of government spending.

But now, so-called “debt prioritization” is back. According to Friday’s Washington Post, it was part of the secret agreement Kevin McCarthy made with his detractors to support him for Speaker. They agreed that when Republicans hold firm on not raising the debt ceiling, they’ll pass a bill instructing the Treasury to prioritize: 1) first, debt service payments, 2) next, Social Security, Medicare and veterans benefits, and 3) third, military funding.

Everything else would be sacrificed — including critical federal expenditures such as Medicaid, food safety inspections, border control and air traffic control. The U.S. would be forced to halt payment for as much as 20 percent of money it already promised to spend.

This could be the most economically irresponsible backroom deal in Republican history (even conservative economists are warning that the consequences could include a stock-market spiral and significant job losses).

It’s also the most politically foolish. It would, in effect, put the interest of bondholders — including Chinese lenders to the United States — over the wellbeing of Americans.

As George W. might say, “bring ‘em on.”

 

[billy backstay]

What will the House Oversight Committee do?

Advance Trump's anti-democracy agenda

robertreich.substack.com

 

[Ishmael]

What will the House Oversight Committee do?

Advance Trump's anti-democracy agenda

robertreich.substack.com

Another one that should be read. It's short...bolding his.

...
The House Oversight and Accountability Committee is the major investigative unit in the House. Yesterday, House Speaker Kevin McCarthy loaded it with people who enabled Donald Trump’s attempted coup in the months after the 2020 election. They have also called for violence against their political enemies, embraced conspiracy theories, and associated with white supremacists.
McCarthy’s move is the most cynical act of political thuggery since Trump left the White House. Not coincidentally, it is designed to advance Trump’s re-election and his anti-democracy agenda.
The people McCarthy put on the committee include Representatives Marjorie Taylor Greene of Georgia, Paul Gosar of Arizona, Lauren Boebert of Colorado, Scott Perry of Pennsylvania, Russell Fry of South Carolina, and Anna Paulina Luna of Florida.
To describe them as “conservative” or “extremist” misses the essence of what they’ve done and believe. They are authoritarians who have deep contempt for American democracy.
In the last Congress, Greene and Gosar were removed from congressional committees for posting messages on the Internet that advocated violence against their political enemies. Both have appeared with Nick Fuentes, the white supremacist and Holocaust denier. Greene recently said that, had she led the Jan. 6 attack, “we would have won” and that people would have been “armed.” Gosar has referred to members of the mob that stormed the Capitol as “peaceful patriots.”
Perry was a key figure in Trump’s attempted coup. During the attack on the Capitol, Boebert posted about Speaker Nancy Pelosi’s location inside the Capitol, and has repeated Trump’s false claim that the election was stolen. Fry has campaigned with election conspiracy theorists including Mike Lindell, the chief executive of MyPillow. Luna has denied the results of the 2020 election and has appeared on a television program that has pushed the QAnon conspiracy theory.
As a result of their committee assignment, for the next 22 months leading up to the 2024 election these members of Congress will be the on front line in Trump’s war against the truth of what occurred between November 3, 2020, and January 6, 2021.
They will head inquiries into the Biden administration. They will push to impeach Biden. They will conjure up false conspiracies. They will try to rewrite the history of the Trump administration. They will seek to expunge the two hearings and House vote to impeach Trump, and negate the work and findings of the January 6 special committee.
They will be the backup band for Trump’s incendiary, grievance-filled scorched-earth campaign for re-election in 2024. They will help Trump lead the fight to advance his own warped, authoritarian vision for America.
Kevin McCarthy put these people on the Oversight Committee because that’s what they wanted, and he needed their votes to become Speaker. But in a larger sense, these people typify what the Republican Party has become – a grotesque shadow of Trump, capable of stirring resentments and lies but utterly incapable of rational governance.

 

[billy backstay]

Psst: You want to know who leaked the Supreme Court's Dobbs opinion?​

Let me tell you​

Robert Reich

The Supreme Court yesterday announced that an internal investigation failed to identify the person who leaked a draft of the Court’s opinion in Dobbs v. Jackson Women's Health Organization — the opinion that overturned Roe v. Wade, the 1973 decision that had established a constitutional right to abortion.

The Court’s marshal, Gail A. Curley, who oversaw the inquiry, said investigators had conducted 126 formal interviews of 97 employees, all of whom had denied being the source of the leak. (In a one-page statement accompanying the report, Michael Chertoff, a former secretary of the Department of Homeland Security, asserted that Curley’s team had conducted a thorough investigation and he could not “identify any additional useful investigative measures” they should have taken.)

This shouldn’t end the matter.

A modern Sherlock Holmes might well conclude that the leaker was … Justice Samuel Alito, Jr.

First, it’s unlikely any of the justices was interviewed. The report said all witnesses were told they could be dismissed if they refused to answer questions. That’s a dead giveaway: Supreme Court justices cannot be dismissed from their jobs.

Second, Alito had a motive for leaking. He wrote the draft in Dobbs and got four other justices to tentatively sign on. He presumably wanted to lock them in. Leaking the draft was a way to do so.

Third, Alito is already under suspicion for leaking another draft Court opinion that he authored, which marked another triumph for the religious right.

On November 19, the New York Times quoted Christian minister Rob Schenck as claiming that in 2014 Alito divulged the outcome of a Supreme Court case known as Hobby Lobby, which he authored — weeks before the opinion was released to the public. According to Rev. Schenck, Alito’s leak occurred when he and his wife were dining with a couple who were secretly collaborating with Schenck. Hobby Lobby allowed religious exemptions to the Affordable Care Act’s contraceptive coverage requirement for certain for-profit corporations.

Alito has denied the allegation.

Even if uncontroverted evidence emerges that Alito leaked the Dobbs decision, there’s nothing the Supreme Court could do to discipline him. The Court has no code of conduct or rules of ethics. (Think Clarence Thomas.) Partly for this reason, public trust in the Supreme Court has been plummeting.

The last Congress introduced the Supreme Court Ethics, Recusal, and Transparency Act which would, among other things, require the Court to adopt a binding code of conduct. With Republicans in control of the House, the current Congress is unlikely to do the same.

But the Court need not await Congress. If Chief Justice John Roberts doesn’t want to be remembered as the Chief who allowed the Court to drown in disrepute, he will take the lead in creating clear ethical rules that all Supreme Court justices will swear to abide.

 

[billy backstay]

When Fox entered the hen house​

And tried to make me into a soufflé​

ROBERT REICH JAN 26

Fox News is after me again.

This is nothing new. Former Fox host Bill O’Reilly once accused me of being a communist (this was before O’Reilly was ousted after it was reported that he and Fox News paid five women $13 million to settle various sexual misconduct lawsuits).

Fox’s Lou Dobbs accused me of wanting government to favor women and Black people over white men (this was after Dobbs accused Barack Obama of not being a natural-born U.S. citizen but before Dobbs was named in a multibillion-dollar defamation suit claiming he employed false conspiracy theories to try to overturn the 2020 presidential election).

​

This time, Fox News is throwing eggs.

Headline from Sunday’s Fox news feed, distributed to all Fox News outlets: “Former Labor Secretary mocked for blaming egg prices on corporate greed.” Subhead: “Robert Reich is a former Clinton official and far-left academic who is often critical of capitalism.”

Seems I’m still stirring up the yolks at Fox.

Look, I’m sufficiently hard-boiled not to let any of this fry me. I mention it today only to illustrate the extremes to which Fox and other right-wing outlets (bankrolled by big money) will go to stop any talk of “corporate greed.”

It started last Friday when I tweeted:

“Egg prices are up 60%. That’s absurd. People are paying up upwards of $6 and $7 for a dozen eggs. Why? Corporate greed. Cal-Maine, the largest egg producer in the US, is raking record profits — $198 million in its latest quarter. That’s a 65% increase from a year ago.”

“Corporate greed” are fighting words in the land of Rupert Murdoch.

So Fox tried to throw egg on my face by quoting Nick Freitas, a member of the Virginia House of Delegates, who tweeted: “I’ve noticed for Bob, that ‘corporate greed’ explains everything. And giving people like Bob more power fixes everything.”

As to the facts, there’s no doubt egg prices have soared. As CNN reported last week, the average selling price per dozen eggs from Cal-Maine — which controls about 20 percent of the U.S. egg market and sets egg prices nationally — more than doubled last year.

The question is why.

Fox blames avian flu. Avian flu did kill a lot of hens, but according to Farm Action, a farmer-led advocacy organization, in a letter sent last week to the Federal Trade Commission, avian flu did not reduce egg production.

After accounting for chicks hatched during 2022, the average size of the egg-laying flock in any given month of 2022 was never more than 7-8 percent lower than in 2021. And due to record-high rates of egg-laying among the remaining hens — between 1-4 percent higher than the average rate observed between 2017 and 2021 — the industry's quarterly egg production experienced no substantial decline in 2022 compared to 2021.

So if the supply of eggs didn’t decline, what accounts for the surge in prices?

Fox then blames inflation. “Prices increased across all product categories last year due to high inflation.”

But Cal-Maine’s production costs didn’t jump nearly as high as its prices (as Cal-Maine told its investors).

What did jump was Cal-Maine’s profits. For the 26-week period ending November 26, 2022, Cal-Maine reported a 10-fold year-over-year increase in gross profits. Max Bowman, the chief financial officer of Cal-Maine, conceded that the firm’s high profits were due to “significantly higher selling prices, our enduring focus on cost control, and our ability to adapt to inflationary market pressures.”

Yet Fox News won’t take greed for an answer. To egg me on, they quote Minnesota State Representative Walter Hudson, who tweeted: “Hey, Bob. Why weren't they greedy last year?” (I assume Hudson means 2021.)

Answer: They didn’t have an excuse to raise prices in 2021. That was before the avian flu outbreak and before inflation really took off. Companies don’t like to openly engage in price gouging. That would be bad for the corporate image.

So what’s caused egg prices to soar?

After sifting through the evidence, Farm Action concludes:

The real culprit behind this 138 percent hike in the price of a carton of eggs appears to be a collusive scheme among industry leaders to turn inflationary conditions and an avian flu outbreak into an opportunity to extract egregious profits reaching as high as 40 percent.
What Cal-Maine Foods and the other large egg producers did last year—and seem to be intent on doing again this year—is extort billions of dollars from the pockets of ordinary Americans through what amounts to a tax on a staple we all need: eggs. They did so without any legitimate business justification. They did so because there is no ‘reasonable substitute’ for a carton of eggs. They did so because they had power and weren't afraid to use it.

Not especially sunny-side up — but at least not scrambled by Fox.

While avian flu and inflation may have contributed to some of the rise in prices, the extraordinary surge certainly smells rotten. The leading egg firms have a long history of cartel-like conspiracies to limit production, split markets, and increase prices for consumers.

Farm Action wants the Federal Trade Commission to investigate. On Tuesday, Senator Jack Reed asked the FTC to investigate whether “fowl play” by egg producers may have harmed consumers.

When it comes to the corporate monopolization of eggs — or of anything else — the American public shouldn’t go over easy.

When Fox entered the hen house

And tried to make me into a soufflé

robertreich.substack.com

 

[Blue Crab]

Re egg prices, a buddy pointed out that chicken prices didn't go up like eggs... ie it wasn't avian flu, it was corporate profits. Another mentioned that the chicken we buy are roosters unless the package says "hen.''

 

[Bus Driver]

Re egg prices, a buddy pointed out that chicken prices didn't go up like eggs... ie it wasn't avian flu, it was corporate profits. Another mentioned that the chicken we buy are roosters unless the package says "hen.''

Your buddy seems to be operating from the belief that egg laying hens and chickens bred for their meet are being affected in the same way by the Avian Flu. It seems they are not.

Chicken (meat) prices have gone up. Just not as much. The Avian flu is the reason.

Pretty sure the story about roosters for meat is a myth.

 

[billy backstay]

Re egg prices, a buddy pointed out that chicken prices didn't go up like eggs... ie it wasn't avian flu, it was corporate profits. Another mentioned that the chicken we buy are roosters unless the package says "hen.''

Professor Reich has been reporting for many months about egregious Corporate profiteering in the USA.

I wonder why the lamestream media never seem to cover this very important storyline???

 

[billy backstay]

JAN 27 • 4M

Should Trump get back his giant megaphones?​

The larger question is whether we — the People — should have a say in whether he gets them back​

Friends,

Weeks after Elon Musk’s decision to reinstate Donald Trump on Twitter, Meta (the parent company of Facebook and Instagram) yesterday announced it will allow Trump back on its platforms, too.

“The public should be able to hear what their politicians are saying — the good, the bad and the ugly — so that they can make informed choices at the ballot box,” wrote Nick Clegg, Meta’s president of global affairs and the U.K.’s former deputy prime minister, in a blog post announcing the decision.

With due respect to Nick Clegg, this is rubbish. Trump is far worse than an ugly politician. He’s a dangerous traitor to American democracy.

You know this, of course. You and I have lived it. We were there when Trump refused to concede the 2020 presidential election, based on no evidence. We saw how he used Facebook and Twitter to mount an attempted coup, which included an attack on the U.S. Capitol that left five dead.

We’ve watched him continue to push his big lie. We’ve witnessed the ongoing violence his big lie provokes, even without the giant megaphones of Twitter and Facebook.

Facebook says it has a “policy” of not fact-checking political candidates. This means it will make no effort to correct Trump’s future lies on its platform, because Trump has declared himself a candidate for president in 2024.

So, the most dangerous traitor in recent American history gets back his giant megaphones because a corporate behemoth decides it’s time to have him back?

This doesn’t seem right to me.

America is still struggling with the damage Trump did to our democracy. We must not normalize it by calling it “free speech” or characterizing additional access to him as “hearing what our politicians are saying.”

The deeper question is how the issue of whether Trump should get back his giant megaphones — a question with such important consequences for our democracy — should be decided.

Meta’s and Twitter’s size and reach make them major players in our system of self-government. Trump’s “Truth Social” reaches only 4.8 million followers. That’s peanuts compared to his 34 million followers on Facebook when the attack on the Capitol occurred, his 23 million on Instagram, and his 88.9 million on Twitter.

These platforms had significant political power by the time Trump attempted his coup — power they are now exercising in allowing him back. But how can such private power be reconciled with their lack of public accountability?

It cannot. Even though Meta has made a former deputy prime minister its president of global affairs and calls its decisions “policies” (such as Facebook’s “policy” of not fact-checking political candidates), it is not publicly accountable. Its policies are not public policies. They don’t emerge from our democratic process. They are private, arbitrary, corporate.

America has been shut out of the decisions to give back to Trump the loudest megaphones in the land and to let him to spout his lies unchecked — although we witnessed the public havoc he created just over two years ago when he used these same megaphones, unchecked.

Call me old-fashioned, but I don’t believe our democracy should depend on the decisions of capricious billionaires or a former U.K. official to allow a traitorous demagogue back on their giant platforms. And I don’t see why Twitter and Facebook should be allowed to exercise such extraordinary power over our democracy.

What’s the alternative?

Antitrust laws were enacted more than a century ago to protect our democracy from being undermined by giant corporations. Yet this what Twitter and Meta are now doing. In my view, we should reduce the size and reach of these huge corporate megaphones by using antitrust laws to break them up.

What do you think?

Should Trump get back his giant megaphones?

Listen now (4 min) | The larger question is whether we — the People — should have a say in whether he gets them back

robertreich.substack.com

 

[Steam Flyer]

It's like street drugs. When there is such a huge market, when there are tens of millions of people eager to buy, there is no way to shut off the sellers.

With such a huge eager audience, there is no way to shut down the pipeline of hate-spew and damaging lies.

 

[billy backstay]

"Antitrust laws were enacted more than a century ago to protect our democracy from being undermined by giant corporations. Yet this what Twitter and Meta are now doing. In my view, we should reduce the size and reach of these huge corporate megaphones by using antitrust laws to break them up.

What do you think?"

Antitrust laws have been ignored for far too long, and are a root cause of the Corporate price gouging which has caused much of our inflation; time to break them up now!!

 

[Ishmael]

"Antitrust laws were enacted more than a century ago to protect our democracy from being undermined by giant corporations. Yet this what Twitter and Meta are now doing. In my view, we should reduce the size and reach of these huge corporate megaphones by using antitrust laws to break them up.

What do you think?"

Antitrust laws have been ignored for far too long, and are a root cause of the Corporate price gouging which has caused much of our inflation; time to break them up now!!

Twitter's doing a great job breaking themselves up, thanks to Elmo. Now we just need another idiot to buy Facebook and drill it into the ground.

 

[billy backstay]

Twitter's doing a great job breaking themselves up, thanks to Elmo. Now we just need another idiot to buy Facebook and drill it into the ground.

Nice wish, but I don't think Zuck is for sale; and he may destroy it on his own ala Musk, with his Meta universe playground?

 

[billy backstay]

My mother was wrong​

The problem with “everything works out in the end” reassurance​

Robert Reich

When I was young and frustrated about one thing or another, my mother reassured me that “everything works out in the end.”

The saying drove me nuts. “When is the end?” I’d ask her. “Next week? Next year? In a century? Do we just wait?”

Optimistic forecasts about anything often overlook damage that can occur in the meantime.

The famed British economist John Maynard Keynes once wrote, “in the long run, we’re all dead.” His point was that most people don’t care that the economy eventually will correct itself because people live today and often can’t afford to wait.

This morning I heard a pundit on the radio declare with utter certainty that George Santos will resign.

That’s an easy call. After all, 78 percent of Santos’ constituents say he should go. Even two-thirds of those who voted for him last November say they wouldn’t have if they’d known what they do now. His favorable rating in the district is a whopping 6 percent.

But when will he resign? It makes a huge difference if an elected member of Congress who’s revealed to be an utter charlatan — who has lied to voters about almost every aspect of his background — resigns tomorrow or remains in office for another year or more. Every day that goes by with Santos still in Congress brings more disgrace upon our governing institutions, at a time when they’re already near rock bottom.

I have the same concern with other upbeat predictions.

“Inflation is slowing,” they say. That’s nice, but it avoids the big underlying question: Will inflation slow quickly enough to stop the Fed from pushing America into a recession with ever higher interest rates?

“Ukraine is winning,” they say. I’m glad. But the war is moving into its second year, and the real questions are how much of Ukraine and its people will be destroyed before Putin ends his attacks, and how close will we come to nuclear armageddon?

“Trump will be prosecuted,” they say. Good. But when? I fear Special Counsel Jack Smith and his boss, Attorney General Merrick Garland, will wait until after the 2024 presidential election, which raises the horrific possibility that we might have to go through another four-year Trump presidency.

And what about police violence and institutional racism? “The arc of the moral universe is long, but it bends toward justice,” the Rev. Martin Luther King Jr. once assured us.

But how long before it bends? How much more violence until then? How much more racism, xenophobia, misogyny, and homophobia?

And there are the climate crisis, widening inequality, attacks on democracy, and so much more.

Look, I’m a cup-half-full kind of guy. I always hope for the best.

The problem with my mother’s “everything works out in the end” optimism isn’t just that a lot can go wrong along the way.

It also invites a naive fatalism, as if no action is necessary now because everything will be fine eventually.

But rosy scenarios are dangerous bunk if they lead to passivity.

So: Demand Trump be prosecuted. Take on the climate crisis. Support Ukraine. Don’t let the Fed push us into a recession. Fight for social justice. Get Santos way the hell out of Congress.

And in all other respects, be an activist. You are needed.

My mother was right about a lot of things. But she was wrong about this. Nothing important works out in the end unless we work hard for it now.

My mother was wrong

The problem with “everything works out in the end” reassurance

robertreich.substack.com

 

[Swimsailor]

If TFG isn't charged in '23 there is no point to incessant investigating. He and his crime family will continue to fuck up America until he dies and then even beyond. I for one have lost all hope that justice will be served.

 

[billy backstay]

If TFG isn't charged in '23 there is no point to incessant investigating. He and his crime family will continue to fuck up America until he dies and then even beyond. I for one have lost all hope that justice will be served.

I am fairly close behind you in that line, and what a shining legacy and example for our children it is!!!!

 

[billy backstay]

Why America forgot about economic power​

We adopted Keynesianism — which worked for a time.​

Robert Reich

Friends,
Several of you have asked me why America went so quietly from democratic capitalism — the economic organization that dominated American life from 1933 through the late 1970s — to the corporate capitalism that has dominated it since the Reagan administration and that Joe Biden is starting to reverse.

The answer has a lot to do with Keynesianism. It removed the issue of economic power from American politics, along with the struggle between capital and labor.

How? Let me start by telling you a bit about John Maynard Keynes himself.

A Cambridge University don with a flair for making money, a graduate of England’s exclusive Eton prep school, a collector of modern art, the darling of Virginia Woolf and her intellectually avant-garde Bloomsbury Group, the chairman of a life insurance company, later a director of the Bank of England, married to a ballerina, Keynes — tall, charming, and self-confident — nonetheless transformed the dismal science into an engine of social progress.
https://substackcdn.com/image/fetch...e7a-e8bf-4843-abb7-bec3417d60db_1634x2524.png
Born in 1883 to John Neville Keynes (a noted Cambridge economist) and Florence Ada Keynes (who became mayor of Cambridge), young John Maynard was a brilliant student but didn’t immediately aspire to either academic or public life. He wanted to run a railroad. “It is so easy … and fascinating to master the principles of these things,” he told a friend, with his typical immodesty. But no railway came along, and

Keynes ended up taking the civil service exam. His lowest mark was in economics. “I evidently knew more about Economics than my examiners,” he later explained.

Keynes was posted to the India Office but the civil service proved deadly dull, and he soon left. He lectured at Cambridge, edited an influential journal, socialized with his Bloomsbury friends, surrounded himself with artists and writers, and led an altogether dilettantish life until Archduke Francis Ferdinand of Austria was assassinated in Sarajevo and Europe was plunged into World War I. Keynes was called to Britain’s Treasury to work on overseas finances, where he quickly shined. Even his artistic tastes came in handy. He figured a way to balance the French accounts by having Britain’s National Gallery buy paintings by Manet, Corot, and Delacroix at bargain prices.

His first brush with fame came soon after the war, when he was selected to be a delegate to the Paris Peace Conference of 1919-20. The young Keynes held his tongue as Woodrow Wilson, David Lloyd George, and Georges Clemenceau imposed vindictive war reparations on Germany. But he let out a roar when he returned to England, writing a short book, The Economic Consequences of the Peace. The Germans, he wrote acerbically, could not possibly pay what the victors were demanding. Calling Wilson a “blind, deaf Don Quixote” and Clemenceau a xenophobe with “one illusion — France, and one disillusion — mankind” (and only at the last moment scratching the purple prose he had reserved for Lloyd George: “this goat-footed bard, this half-human visitor to our age from the hag-ridden magic and enchanted woods of Celtic antiquity”), an outraged Keynes prophesied that the reparations would keep Germany impoverished and ultimately threaten all Europe with another war.

His little book sold 84,000 copies, caused a huge stir, and made Keynes an instant celebrity. But its real import was to be felt decades later, after the end of World War II. Instead of repeating the mistake made almost three decades before, the U.S. and Britain bore in mind Keynes’ earlier admonition. The surest pathway to a lasting peace, they then understood, was to help Germany and Japan rebuild. Public investing on a grand scale would create trading partners that could turn buy the victors’ exports and also build solid middle-class democracies.

Yet Keynes’ largest influence came from a convoluted, badly organized, and in places nearly incomprehensible tome published in 1936, during the depths of the Great Depression. It was called The General Theory of Employment, Interest and Money.

Keynes’ basic idea was simple. In order to keep people fully employed, governments needed to spend when the economy slows. The private sector won’t spend or invest enough. As economic activity declines, businesses naturally reduce spending and investing, setting in motion a vicious cycle: less investment, fewer jobs, less consumption, and then even less business spending and investing. Governments must pick up the slack through deficit spending.

Keynes had a hard sell, even in the depths of the Depression. Most economists of the era rejected his idea and favored balanced budgets. Most progressive politicians, meanwhile, focused their attention on the evils of concentrated economic power — and opted either to break up big corporations through antitrust laws or to regulate corporations. But neither neoclassical economics nor progressive politics seemed up to the task of pulling the nation and the world out of the deep economic hole. “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist,” Keynes wrote.

Keynes’ visit to the White House in 1934 to urge Franklin Roosevelt to do more deficit spending was not a blazing success. “He left a whole rigmarole of figures,” a bewildered FDR complained to Labor Secretary Frances Perkins. “He must be a mathematician rather than a political economist.” Keynes was equally underwhelmed, telling Perkins that he had “supposed the President was more literate, economically speaking.”

But by 1938, FDR embraced the only new idea he hadn’t yet tried, that of the bewildering British “mathematician.” As he explained in a fireside chat, “We suffer primarily from a failure of consumer demand because of a lack of buying power.” It was therefore up to the government to “create an economic upturn” by making “additions to the purchasing power of the nation.”

Not until the U.S. entered World War II did FDR try Keynes’ idea on a scale necessary to pull the nation out of the doldrums — and Roosevelt, of course, had little choice. The big surprise was just how productive America could be when given the chance. Between 1939 and 1944 (the peak of wartime production), the nation’s output almost doubled. And unemployment plummeted — from more than 17% to just over 1%.

Never before had an economic theory been so dramatically tested. Even granted the special circumstances of war mobilization, it seemed to work exactly as Keynes predicted. The grand experiment even won over many Republicans. America’s Employment Act of 1946 — the year Keynes died — codified the new wisdom, making it “the continuing policy and responsibility of the Federal Government … to promote maximum employment, production, and purchasing power.”

And so the federal government did. Within a few years it was accepted wisdom that government could “fine-tune” the economy, pushing the twin accelerators of fiscal and monetary policy (lowering taxes and interest rates) to avoid slowdowns, and applying the brakes (raising taxes and interest rates) to avoid overheating. All questions of power, and the appropriate balance between capital and labor, were smoothed over (and swept under the rug) by Keynesian demand management. In 1964, Lyndon Johnson cut taxes to expand purchasing power and boost employment. In 1971, Richard Nixon famously proclaimed, “we are all Keynesians now.”

With Keynesianism seemingly smoothing out the business cycle and bringing on an era of growth and widespread prosperity, Ronald Reagan’s shift from democratic capitalism to corporate capitalism did not seem nearly as jarring as it later proved to be.

Yet over the next four decades, the steadily increasing concentration of corporate power combined with widening inequalities of income and wealth — the central concerns of progressive reformers from Teddy Roosevelt to his fifth cousin, Franklin — finally overwhelmed the capacities of Keynesianism to balance the economy.

Fiscal and monetary policies have proven no match for corporate monopolies and oligopolies able to keep prices high while depriving workers (who are also consumers) of the incomes needed to buy what is produced.

Deficit spending on the scale necessary to avoid recession has caused the national debt to explode. Interest rate reductions necessary to avoid recession — essentially pushed down to zero — have proven unsustainable. Inflation has eroded wages, robbing workers of purchasing power. Interest rate hikes to counteract inflation are punishing workers by making it expensive to borrow and are risking another recession.

Keynesian “demand management” of the economy is still necessary, but inadequate. It is once again necessary to address economic power, as Teddy Roosevelt and Woodrow Wilson did at the start of the last century. Antitrust laws must be used to break up giant corporations and stop the wave of mergers and acquisitions. Labor laws must be utilized to strengthen labor unions. Other laws and regulations should encourage worker cooperatives, collectives, worker ownership, and other sources of countervailing power.

As FDR described the economic challenge during the presidential campaign of 1932, it is the task “of distributing wealth and production more equitably, of adapting existing economic organizations to the service of the people.”

 

[billy backstay]

The last paragraphs are most important....

"Fiscal and monetary policies have proven no match for corporate monopolies and oligopolies able to keep prices high while depriving workers (who are also consumers) of the incomes needed to buy what is produced.

Deficit spending on the scale necessary to avoid recession has caused the national debt to explode. Interest rate reductions necessary to avoid recession — essentially pushed down to zero — have proven unsustainable. Inflation has eroded wages, robbing workers of purchasing power. Interest rate hikes to counteract inflation are punishing workers by making it expensive to borrow and are risking another recession.

Keynesian “demand management” of the economy is still necessary, but inadequate. It is once again necessary to address economic power, as Teddy Roosevelt and Woodrow Wilson did at the start of the last century. Antitrust laws must be used to break up giant corporations and stop the wave of mergers and acquisitions. Labor laws must be utilized to strengthen labor unions. Other laws and regulations should encourage worker cooperatives, collectives, worker ownership, and other sources of countervailing power.

As FDR described the economic challenge during the presidential campaign of 1932, it is the task “of distributing wealth and production more equitably, of adapting existing economic organizations to the service of the people.”"

 

[Steam Flyer]

Good column, but he forgot to explain why US guiding policy shifted.

Here's my take on it:

1- it takes some self-discipline to consistently follow a given set of formulae.

2- the Keynesian policies were such a huge success that everybody took prosperity for granted.

3- the new generation sincerely believed (as all new generations do) that they were -MUCH- smarter than those old fuddy-duddies.

4- in the past market capitalism raised up big conglomerate corporations that swallowed other businesses, and then the market changed and they didn't adept, so the conglomerates broke up or faded away. The 1970s corporate conglomerates invested heavily in lobbying to influence the government to control markets so that would never happen to them. Those same corporations are funneling money to the 0.1%ers today.

Good column, as usual. Apologies for the slight hijack.