The reality is that, in response the deepest crisis since the Great Depression, the Obama administration rejected any program of public works and refused to create a single government-funded job. Its response, from the multi-trillion-dollar bailout of the banks to the multiple rounds of tax windfalls and incentives to big business, was focused on rescuing the financial elite and making it even richer....
Obama signed into law an $8.7 billion cut in the food stamp program. Earlier this month, tens of thousands of food stamp recipients began losing their benefits due to work requirements enacted under the administration of Bill Clinton.
Under the guise of reforming health care, the administration imposed a huge attack on workers’ medical coverage with the passage of the Affordable Care Act. The measure is a boondoggle for the health insurance industry. It undermines the principle of employer-paid coverage, shifting the burden of health care to individual “consumers,” who must buy overpriced, bare-bones policies or pay a fine.
Sanders argues like a free-market conservative, declaring it isn’t “appropriate” for the government to make decisions about the sell-off of bank assets. And this after repeatedly declaring that “the business model of Wall Street is fraud.” Apparently, the fraudsters can continue their operations unhindered, just on a somewhat smaller scale.
Sanders’s proposal to break up the major Wall Street banks, is not, as the WSWS has explained, a socialist measure. He does not propose placing the banking system under public ownership and democratic control, so that the resources of society can be used for human need and not the accumulation of personal wealth by a financial aristocracy. Instead, he advocates maintaining the private ownership of the banks, only dividing them into smaller units to create what he called in the debate “a competitive financial system.”
His call to downsize the biggest banks is, in fact, the position of a faction within the ruling class and the financial bureaucracy itself. The Minneapolis Federal Reserve Bank and its president, Neel Kashkari, are holding public symposiums promoting the proposal. Kashkari, a former Goldman Sachs banker and Treasury official in the Bush administration, was the administrator of the $700 billion Troubled Asset Relief Program bank bailout.
In his only public address devoted to the question of socialism, last November 19 at Georgetown University, Sanders presented his policies as an extension of Franklin D. Roosevelt’s New Deal and Lyndon Johnson’s Great Society, both efforts at liberal reform to save capitalism, not put an end to it. He declared categorically, “I don’t believe government should own the means of production… I believe in private companies that thrive and invest and grow in America.”
The policies Sanders advocates on jobs, health care, education and the like would not have been out of place in the Democratic Party of the 1960s, and are far less radical than those proposed by the Populists of the 1890s and the Progressive and Farmer-Labor parties of the early 20th century, which called for public ownership of the railroads and utilities, and the breaking up of corporate monopolies.
What Sanders is proposing now for Wall Street—a self-directed breakup—has a noxious historical precedent: the breakup of the telecommunications industry in 1984. Under government prodding, the telephone monopoly AT&T broke itself up into seven component parts, initiating a process of deregulation, asset-stripping and mergers that has produced an unmitigated disaster for the workers of that industry, as demonstrated by the current strike by telecommunications workers at Verizon.
Sanders made an appearance on the Verizon picket line and has been endorsed by the leadership of the Communication Workers of America, the union that has sold out strike after strike and is preparing a similar fate for the current struggle. A socialist would raise the demand that Verizon and the other telecommunications companies be nationalized under the democratic control of the workers. But Sanders is not a socialist.
The underlying problem – which has plagued the global economy since the crisis, but has worsened slightly – is lack of global aggregate demand...in none of the economies attempting the unorthodox experiment of negative interest rates has there been a return to growth and full employment. In some cases, the outcome has been unexpected: Some lending rates have actually increased. ...
They continued to use the old discredited models, perhaps slightly modified. In these models, the interest rate is the key policy tool, to be dialed up and down to ensure good economic performance. If a positive interest rate doesn’t suffice, then a negative interest rate should do the trick.
It hasn’t. In many economies – including Europe and the United States – real (inflation-adjusted) interest rates have been negative, sometimes as much as -2%. And yet, as real interest rates have fallen, business investment has stagnated. According to the OECD, the percentage of GDP invested in a category that is mostly plant and equipment has fallen in both Europe and the US in recent years. (In the US, it fell from 8.4% in 2000 to 6.8% in 2014; in the EU, it fell from 7.5% to 5.7% over the same period.) Other data provide a similar picture. ...
What central banks should be doing is focusing on the flow of credit, which means restoring and maintaining local banks’ ability and willingness to lend to SMEs. Instead, throughout the world, central banks have focused on the systemically significant banks, the financial institutions whose excessive risk taking and abusive practices caused the 2008 crisis. But a large number of small banks in the aggregate are systemically significant – especially if one is concerned about restoring investment, employment, and growth
Tens of thousands of impoverished, unemployed adults were cut off food stamps Friday, the first wave of a social catastrophe that could affect more than one million people this year.
Some 22 states began terminating benefits for “Able-Bodied Adults Without Dependents,” or ABAWDs, in the jargon of the US Department of Agriculture, which administers the federally funded food stamp program, or Supplementary Nutrition Assistance Program (SNAP), as it is formally known.
These adults, aged 18 to 49 years and without children, are generally the poorest section of the working class, earning only 17 percent of the official poverty rate, an average of barely $150-170 per month in income. But they are eligible for only 90 days of food stamp benefits unless they have paid employment or job training for at least 80 hours in a month. The 90-day clock began running January 1, so adults who no longer qualify under this rule began being terminated in state after state April 1....
It is particularly noticeable that none of the presidential candidates of either capitalist party, including the self-proclaimed “democratic socialist” Bernie Sanders, has made an issue of the food stamp cutoff that is plunging hundreds of thousands overnight into hunger and destitution...
Nor has Sanders, in general, made an issue of the cuts in vital social programs, particularly those implemented with the collaboration of the Obama administration, like the $8.7 billion cut in food stamp benefits pushed through in 2014 as part of a bipartisan deal with congressional Republicans, or this year’s drastic cutback in food stamp eligibility for childless adults....
Hillary Clinton gloried in the “welfare reform” legislation in her 2003 memoir Living History (for which she was paid $8 million). She wrote that Aid to Families with Dependent Children, the program the bill abolished, “had helped to create generations of welfare-dependent Americans … I strongly argued that we had to change the system, although my endorsement of welfare reform came at some personal cost.” The “cost,” of course, was to her political credibility as a supposed advocate of the poor.
Clinton claimed that the legislation her husband signed “was a critical first step to reforming our nation’s welfare system. I agreed that he should sign it and worked hard to round up votes for its passage—though he and the legislation were roundly criticized by some liberals, advocacy groups for immigrants and most people who worked with the welfare system.”
"Growth-friendly fiscal policy is needed in all countries," it said, adding that accommodative monetary policies should continue in several advanced economies and structural reforms should be implemented with other policies to support demand.
We use the term “Keynesian” loosely to stand for economic interventionists of all schools. The followers of JM Keynes and Milton Friedman alike fit that category. So do some of the more rabid supply siders who claim the power to stimulate ultra-high economic growth with the tools of tax policy alone.
The common denominator is economic statism. That is, the assumption that the state, including its central banking branch, is indispensable to economic progress and prosperity.
As the various denominations of the Keynesian economic church have it, capitalism is always veering toward the ditch of under-performance and recession when left to its own devices and natural tendencies; and, if neglected by the wise policy-makers of the central state too long, it lapses toward outright depression and collapse.
Our purpose here is not to correct the particular philosophical and analytic errors associated with each of these Keynesian or statist variants. On any given day we make it pretty clear the central banking based mutation of modern Keynesianism is predicated on two cardinal errors. Namely, the myth of demand deficiency and the false presumption that central bank pegging of interest rates, yield curves and other financial prices will enhance macro-economic performance while not harming the efficiency, stability and efficacy of money and capital markets.
That’s completely wrong. The very worst thing the state can do is meddle with and falsify financial market prices. Sooner or later cheap debt, repressed volatility, stock market “puts” and artificially inflated asset prices drain the genius of markets out of capitalism. What remains in the financial system is raw speculation for the purpose of rent gathering and leverage for the purpose of supercharged gambling.
On the other hand, what gets lost is true capital formation, honest price discovery and allocative efficiency. These are the building blocks of true macroeconomic expansion and rising wealth.