GOOD-based Economics: How to Build the Middle Class

Our political system is not, strictly, a macroeconomic guidance machine; political leaders have a lot of responsibilities that take day-to-day precedence over direct macroeconomic maneuvering. Stewardship of our civic infrastructure can provide direct benefits to citizens, communities, and enterprise, and so our analysis of how well our policy choices work to motivate real macroeconomic health and improvement needs to consider those other values.

We all know, from one perspective or another, how ideological preferences influence what one analyst or another might refer to as “just the numbers”; this is one of the main reasons there is such heated disagreement about whose policy preferences do better at creating value for households, communities, and enterprise. By adding to our value considerations a G.O.O.D. economic analysis, we can better see the generative capacity of a given policy priority, economic trend, or technical innovation.

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Climate Security Threat Matrix Must Be Priority

The climate system is a complex of thermodynamic energy transfers, moving between the Earth’s atmosphere and oceans. Our local experience of weather—hot summers, breezy autumns, monsoon rains, tropical cyclones, droughts, floods, blizzards and mudslides—is an expression of the way climatic forces play out over time.

As more thermodynamic energy gets trapped in the Earth’s atmosphere and oceans, the excess destabilizes patterns of energy transfer that sustain vital ecosystems. Those ecosystems sustain life as we know it. When the global climate system’s dominant patterns are destabilized, vast and complex new security risks emerge.

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Here’s an Idea

Let democracy be democracy.

President Barack Obama was conciliatory with the “responsible Republicans” who found a way to make a deal with Democrats and pass the continuing budget resolution that last night ended the government shutdown and raised the national sovereign debt ceiling. But he was hard on the radicals who not only took the people’s government and national political process hostage, demanding ransom for reopening the government, but who also voted last night to push the nation into default.

A fair-minded independent can sympathize. No president should have to face the threat that a radical minority in Congress will set figurative fire to the edifice of democratic government, unless they can extract the concessions they seek. We sometimes have presidents from the Republican Party, sometimes from the Democratic Party; each of them is the president who leads the government that works for all of us, for all citizens.

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It is Unfathomable that the Congress Not Act Today

Today, October 16, is the last day the United States Congress has to raise the so-called debt ceiling. International financial institutions, both public-sector and for-profit, have warned that failure to raise the debt ceiling would result in a credit downgrade for the most influential “borrower” in the world. Virtually every economy on Earth is tied to US Treasury bonds; failure to meet any debt obligation can have significant destabilizing impact on the global economy.

So far, radicals in the US Congress have held to two very dangerous misimpressions: 1) that whatever they cause to happen, they can undo by making a deal; 2) that there is really nothing to worry about, in terms of widespread economic impact from shutting down the US government or provoking a sovereign debt default. Let’s look at those myths, for a minute:

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We are Citizens; the Time is Now

In the first State of the Union address of his second term as president of the United States, Barack Obama outlined an ambitious agenda, to reform economic and social policy, education, immigration, energy, gun control laws, and laws governing gender equality. He laid down the most direct and explicit challenge to lawmakers on climate policy, saying “If Congress won’t act soon to protect future generations, I will.”

The Congress has a choice on climate policy: comprehensive, market-based bipartisan policy, or an aggressive register of executive actions to tighten regulations and ensure US carbon emissions drop at the necessary rate. He called specifically for a “bipartisan market-based” approach, but left the specifics to lawmakers. Fortunately, thousands of citizens are already building political will for a bipartisan, market-based approach with none of the flaws of cap and trade. (Learn more here.)

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The Flawed Logic of Austerity

What is most impressive about the commitment of some ideologues in Congress to what might be called “fiscal austerity”—a euphemism that usually refers to some combination of massive reductions in spending on social services, including earned benefits programs, and a demand that government function on still narrower ground, with trillions of dollars given away to the already wealthy—is that it presumes we have no viable economic future. The very faction that says we need to “slash spending to spur growth” actually holds the view that our future will not produce the prosperity we need to fund our national democracy.

The vicious wrangling over what became known as “the fiscal cliff” illustrates the point. While building an entrenched national political machinery on the assertion that government spending “kills jobs”, obstructs investment and crushes the American dream, hardline tax fanatics played Chicken Little, raising the siren about the economic Apocalypse that would ensue if the sequestration of hundreds of billions of dollars in Defense appropriations and other government spending were allowed to go forward.

In an amazing, even historic, display of legislative chess, the hardline tax hawks were outwitted by circumstance and by the resolve of principled pragmatists. Suddenly, it became necessary, because of the deal they voted for, to make a choice: fiscal austerity or job-killing cuts to public spending. The near universal concern that the nation would in fact “go over the fiscal cliff” left hardline ideologues between a tock and a hard place: oppose action, validate and empower an already buoyant Obama and shoulder the blame for massive economic havoc, or act to prevent that havoc, reveal the flaws in their ideological narrative, and validate and empower an already buoyant Obama.

It now seems fair to say that the fiscal cliff situation was an overthrow of Rep. Paul Ryan’s guiding philosophy, with the vocabulary of the moment firmly rooted in his way of talking about the budget. Ryan and others will try to use the temporary nature of the solution to sequestration as an opportunity to argue for a rash of painful “deep cuts” to spending on social services; that much can be expected. But the whole charade underlying Ryan’s way of talking about the budget has now been exposed: austerity does not bring prosperity; it brings systematized collapse.

In Europe, we have seen this truth born out time and time again. Greece, Italy and Spain are experiencing massive public discontentment and even political unrest, because austerity measures have pushed youth unemployment above 50 percent. German leaders have adopted the flawed logic of austerity as their tool of choice for carving out rescue packages, but their actions have deepened the economic crisis in Greece, and now Spain’s antipopulist government, in an astonishing show of tone deafness, is deepening the crisis there by imposing austerity measures that are actively failing elsewhere.

The United Kingdom had the inauspicious experience of seeing its Conservative-led coalition government impose unprecedented austerity measures, driving the nation directly back into recession. The arithmetic os simple: in an absence of lending when capital and hiring are not expanding, the public sector, an economy’s single largest source of capital investment, keeps capital moving through an economy; drastic cuts impede the flow of new capital and hinder growth.

Austerity is not a plan for growth or generalized economic prosperity; it is a strategy for wealth transfer, from society at large to powerful, already wealthy interests looking to concentrate power in fewer and fewer hands. That is what fiscal austerity has always been; in fact, its proponents hardly pretend it is anything else. It has only been where a certain strain of self-conscious populism or the pretense to genuine efficacy in economic policy-making interfere with the central aims of austerity that regard for the notion that there is a middle class to protect even gets mentioned by proponents of austerity.

Instead, the prevailing idea seems to be just another rehashing of the so-called “supply-side” economic theory, also known as “trickle-down”, which holds that by giving money to rich people, everyone else will see their quality of life and personal liberty and opportunity improved. This is not an over-simplification of the austerity argument; it is the argument… “The government doesn’t know how to spend money; people who are accustomed to having money know how to spend it.”

An important, and very risky, part of the equation is the assumption that all people with money are automatically equipped to make good investment choices. The problem, beyond the variability of human character, regardless of class or status, is that this is beside the point: if we drain the consumer economy of the wealth public-sector spending generates, consumers will spend less and our 70% consumer-spending economy will suffer.

It’s math. The “fiscal cliff” may or may not equate to economic Armageddon, but it has afforded us a revelation of a kind: there is nothing conservative, libertarian or pro-business about austerity; it is just a short-cut to the transfer of wealth from the majority to an increasingly isolated and preecariouslly situated sliver of the population holding the bulk of the wealth.

What gets lost in the false comparisons between the federal budget and household finances is that a single household does not have major legally instituted spending priorities that orietnt toward the benefit of all of society; the federal govenment does. If the government pays less for basic needs, then each of us pays more. And without a vibrant, liberated and industrious middle class, backed up by robust capital investment from the public and private sectors, that sliver of the population will struggle to make use of its bulk of the wealth.

In an atmosphere in which too few people enjoy the “power of the purse”, in the most local sense, the wealth of those who do have it is actually less valuable, even where they have more. Viable, resilient, resonant wealth is bolstered by the dynamics that make a society viable, resilient and resonant in its prioorities and its activities. We are designing the future we will inherit, and austerity is a dangerous illusion, promising the impossible while working against the practical and the proven.

Beyond the Perverse Politics of Partisan Sabotage

A desperate situation has overtaken the national organizing structure of the Republican Party: the party’s primary electorate is heavily skewed by radical anti-government fringe politics, while the national culture has shifted—demographically and ideologically—away from right-wing jingoism and militancy. The party’s leadership no longer has adequate friendly political affiliation throughout the base and the rank-and-file.

Consequently, some observers now believe the party has been rendered functionally irrelevant. It talks of austerity, fiscal responsibility, small government and tax cuts, but its actions show a pathological disregard for the actual wellbeing of the American people and the security of the national economy. It may be possible to show that the tug-of-war between a pseudo-populist fringe base and top-level billionaire funding interests is doing this to the party.

The perverse politics that requires the party to adopt a hapless “burn-it-down” attitude toward nearly every issue of major structural relevance to the future of our economy—healthcare reform, tax policy, immigration, assault weapons, the debt ceiling, the funding of earned entitlements and the fiscal cliff negotiations—may seem irrevocable. But there are some easy things Republican leaders can do to pull their party back from the brink.

First of all, it became clear to most astute observers that despite the wild inspirational quality of the 2008 election environment, both Pres. Obama’s governing style and the mood of the country, confronted with such pervasive and long-running economic and security perils, were nudging the political apparatus of the country toward a focus on pragmatic problem solving. In 2010, the Republican Party misunderstood that mood change, instead retrenching into a deep ideological groove, and in 2012, the election clearly showed support for Pres. Obama as the leader in this pragmatic problem-solving mission.

So, to abandon ideology and adopt an approach to principle pragmatic problem-solving, committing to work with anyone willing to do the hard work of governing and serving, is a necessary first step toward regaining relevance and taking part in important national achievements. The president has consistently made the case that he is doing this, and the public has supported him in that effort. The top-level Republican leadership needs to steer its next-level legislative leadership into this mode, to help organize a party-wide transformation that will allow for more reasoned, more rational negotiating on issues like the negotiations about the Bush tax cut expiration and budget sequestration—the twin perils that have become known as “the fiscal cliff”.

Here’s how that can happen:

  • Walk away from lame duck Grover Norquist, whose zero taxes ever pledge is now seen by most Americans as a direct threat to the nation;
  • Reimagine the meaning of the word “entitlement”—to most Americans, and as a matter of law, entitlements are “earned benefits”;
  • Commit to acting with profound respect toward those earned benefits and basic services (like quality education) that no citizen is willing to give up;
  • Walk the walk on Constitutional liberties and immigration: small government and family values are incompatible with an effort to round up 15 million people, throw them in camps, then send them out of the country;
  • Get with the Dreamers: people view the DREAM Act concept as integral to the American Dream and conducive to a more prosperous and democratic future;
  • Be rational about Defense: from 2001 to 2012, the Pentagon budget expanded nearly four-fold, due to two ongoing wars, which are now ending;
  • Make a deal with Obama that shows genuine willingness to compromise: that means give without crippling the nation;

Most Americans believe Pres. Obama has consistently shown willingness to bend, to find the compromise necessary to serve the interests of the American people. Polls show most Americans will blame Congressional Republicans if a deal is not reached. Pres. Obama has rightly said the nation “cannot afford a politically self-inflicted wound” to the economy.

The Fiscal Cliff negotiations are an incomparable opportunity for the Republican leadership to eschew the logic of partisan sabotage as an organizing principle, and act in service of the American people.

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