This past week Jared Bernstein, who until last month was economic adviser to Vice President Joe Biden, let it be known that no new jobs stimulus, WPA-type programs or mortgage relief is even on the table for discussion among most of the president's advisers, and apparently for the president as well. While left and liberal economists from Paul Krugman to Brad DeLong to Robert Reich have been warning of this for some time, this is the first insider revelation confirming my worst fears. I felt stunned.
No doubt I should have taken the hint when the president's otherwise very fine address on the budget last month made no mention of unemployment, already on the rise again.
No doubt I should have taken note of the now obvious departures of the president's chief economic advisors. Cristina Romer, Austan Goolsbee, Bernstein -- even Lawrence Summers - all of them, it turns out, were advocates of addressing this depression with major structural and demand-side investments in jobs, infrastructure, tax reform. And all of them seem to have been beaten down and alienated by a scarlet alliance of "political realists," like GE chief Jeffrey Immelt who heads Obama's new Jobs and Competitiveness Council and White House Chief of Staff William Daley, and the banking industry, represented by Treasury Secretary Timothy Geithner.
The lesson apparently drawn by these "realists" from the anti-democratic, soak-the-people Republican attacks in the November 2010 elections is that there is no alternative to austerity politics. Debt and deficits are more important than jobs.
This is the same philosophy that is tearing up Europe, and will likely fracture the European Union. It is the same policy that took hold of Congress in 1936-37, beat back Roosevelt reforms, and led to the famous "double-dip" in the Great Depression. That "dip" was only reversed by the massive 110 percent of GDP investments of World War II.
It is the same policy for which Paul Krugman and the best minds in the economics profession have compellingly argued there is absolutely no foundation in the short run.
The truth is, there will be no solution to the debt problem unless people go back to work, AND their incomes rise. You don't really have to be an economist to understand that.
It was one thing for then-Treasury-Secretary Robert Rubin to pursue debt repayment when employment was booming in the tech explosion of the 1990s. To adopt that policy today, with unemployment rising, is just crazy.
But not so crazy if you are a banker, or rich. Deflation and unemployment work fine for them. Low wages for workers works fine for them. They don't care about affordable health care - they can afford it no matter the price. They don't care about public education - they can buy it privately. They don't care about Social Security - they don't need it. You might need a bunch more prisons for the social decay that austerity will engender. But low taxes, gated communities, and long-haired preachers focused on the rapture can soothe that, make it almost disappear.
I am a big believer in dividing the top dogs of finance capital as a key tactic of working class and democratic politics. If they are united against you, their power is simply too great to overcome. But the austerity advocates are dogs you should be very careful about letting into your house! Your best friends, and for sure your spouse, are not going to hang around if you do!
The lessons of Spain and Portugal are fair warning. Despite social democratic leadership, they became hostage to German bankers. The Spanish and Portuguese governments caved to the banks' austerity demands. The result: the voters have thown them out.
Lesson: If you ignore mass unemployment, even if it's not your fault, you will be punished. Voters have limited ways of saying, en masse, "NO NO NO to austerity!" The rise in the polls of both Mitt Romney (a man of absolutely no integrity), and Ron Paul (a front man for militia, tea party and white supremacist groupings) should be a serious warning.