Flashback: Joseph E. Stiglitz, sees a generation-long struggle to recoup. (2007)

[ProSense]

First, an excerpt from this NYT article on Robert Reich's views: Obama the Centrist Irks a Liberal Lion

Here is the fascinating part of this article:

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“Why won’t he tell the alternative story? For three decades we’ve cut taxes on the wealthy while real wages stood still.”

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Mr. Reich served as labor secretary for President Clinton, and in his latest book “Aftershock: The Next Economy and America’s Future” he applauds Mr. Obama for deft work in preventing the economy from toppling into a Depression.

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The modern Democratic Party, he says, is removed from what he and Mr. Krugman view as a better time: the decades stretching from World War II until about 1970. The typical high-income earner then paid more than 50 percent of income as taxes. The economic bargain was explicit: government encouraged industry, and working Americans shared in the fruits, buying houses and cars, with pensions to tide comfortable retirements.

“We tend to think of the political center as static, but it’s become much more conservative over time,” Mr. Reich says. “What’s happened in the last 30 years is that the private sector worker has taken a shellacking.”

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Most of the economists mentioned in the article were around or in the Clinton administration. Some helped Clinton to create the situation they're now critical of Obama for not correcting fast enough. Still, what's fascinating is that Reich defined the best of times as: "the decades stretching from World War II until about 1970," not the 1990s.

Now, there is no question that the economy fell into the biggest hole since the Great Depression. How did the country arrive here? Stiglitz detailed the making of the crisis and offered solutions in the following 2007 article.

The Economic Consequences of Mr. Bush

The next president will have to deal with yet another crippling legacy of George W. Bush: the economy. A Nobel laureate, Joseph E. Stiglitz, sees a generation-long struggle to recoup.

by Joseph E. Stiglitz
December 2007

When we look back someday at the catastrophe that was the Bush administration, we will think of many things: the tragedy of the Iraq war, the shame of Guantánamo and Abu Ghraib, the erosion of civil liberties. The damage done to the American economy does not make front-page headlines every day, but the repercussions will be felt beyond the lifetime of anyone reading this page.

I can hear an irritated counterthrust already. The president has not driven the United States into a recession during his almost seven years in office. Unemployment stands at a respectable 4.6 percent. Well, fine. But the other side of the ledger groans with distress: a tax code that has become hideously biased in favor of the rich; a national debt that will probably have grown 70 percent by the time this president leaves Washington; a swelling cascade of mortgage defaults; a record near-$850 billion trade deficit; oil prices that are higher than they have ever been; and a dollar so weak that for an American to buy a cup of coffee in London or Paris—or even the Yukon—becomes a venture in high finance.

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The Way Forward

Whoever moves into the White House in January 2009 will face an unenviable set of economic circumstances. Extricating the country from Iraq will be the bloodier task, but putting America’s economic house in order will be wrenching and take years.

The most immediate challenge will be simply to get the economy’s metabolism back into the normal range. That will mean moving from a savings rate of zero (or less) to a more typical savings rate of, say, 4 percent. While such an increase would be good for the long-term health of America’s economy, the short-term consequences would be painful. Money saved is money not spent. If people don’t spend money, the economic engine stalls. If households curtail their spending quickly—as they may be forced to do as a result of the meltdown in the mortgage market—this could mean a recession; if done in a more measured way, it would still mean a protracted slowdown. The problems of foreclosure and bankruptcy posed by excessive household debt are likely to get worse before they get better. And the federal government is in a bind: any quick restoration of fiscal sanity will only aggravate both problems.

And in any case there’s more to be done. What is required is in some ways simple to describe: it amounts to ceasing our current behavior and doing exactly the opposite. It means not spending money that we don’t have, increasing taxes on the rich, reducing corporate welfare, strengthening the safety net for the less well off, and making greater investment in education, technology, and infrastructure.

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Some portion of the damage done by the Bush administration could be rectified quickly. A large portion will take decades to fix—and that’s assuming the political will to do so exists both in the White House and in Congress. Think of the interest we are paying, year after year, on the almost $4 trillion of increased debt burden—even at 5 percent, that’s an annual payment of $200 billion, two Iraq wars a year forever. Think of the taxes that future governments will have to levy to repay even a fraction of the debt we have accumulated. And think of the widening divide between rich and poor in America, a phenomenon that goes beyond economics and speaks to the very future of the American Dream.

more

This is the nature of the crisis President Obama has to address, including as Reich points out (and I agree), problems that have been festering for the last three of four decades. This crisis is about jobs, but it's also about a lot more. Creating jobs was good enough for Clinton and Reagan, but just creating jobs was never the only solution to the current crisis.

Everyone wants President Obama policies to reverse the ills of the last three of four decades, but, as Stiglitz pointed out, it was never going to happen overnight, especially considering that Bush's successor would be facing a free-falling economy that hadn't yet hit bottom.

[paulk]

1. the point of Reich's article is this -

“We have a remarkably anemic recovery; it’s paper-thin,” Mr. Reich says. “In the narrowest, tactical terms, in sheer dollars committed to programs, Obama’s done pretty well, and his favorability ratings are better than those of the Democratic Party.”

Then he sweeps his hands far apart in his sun-filled warren of an office at the University of California, Berkeley.

“If you widen the lens, the public is being sold a big lie — that our problems owe to unions and the size of government and not to fraud and deregulation and vast concentration of wealth. Obama’s failure is that he won’t challenge this Republican narrative, and give people a story that helps them connect the dots and understand where we’re going.”


And that, right there, encapsulates my disappointment with Obama, and I'm sure the disappointment of many others. No one is arguing that Obama didn't and doesn't have a hard job digging out of the Bush disaster - the disappointment comes from his acceptance of the Republican narrative on our economy.

[ProSense]

2. Reich made that point

among others, including the points in the OP.

Reich: “We have a remarkably anemic recovery; it’s paper-thin.”

That is specifically about jobs, and I agree the jobs recovery is weak. The point of the OP is about the crisis, which goes much deeper than jobs.

[paulk]

3. yes, the point of your OP is to obfuscate, if possible,the main

thrust of what Reich is saying...

Which is that the crisis, which is deep and indeed "much deeper than jobs", is not being handled in a way that is going to bring any long term solutions. The American people are not being told - by Obama - what the real problem is. Instead he has accepoted the Republican frame.

[ProSense]

4. Stiglitz was trying to "obfuscate" too?

You can believe what you wnat to. The fact is that jobs alone was not going to address the crisis, and definitely reverse the trends Reich identified.

[ProSense]

5. Should have highlighted this,

Stiglitz:

Some portion of the damage done by the Bush administration could be rectified quickly. A large portion will take decades to fix—and that’s assuming the political will to do so exists both in the White House and in Congress.

This point most likely considers that policies to address the underlying causes of the crisis will take some time to produce significant results (similar to health care reform and its long-term effects.