Obama goes into campaign mode with a major speech in a Kansas town famous only because Teddy Roosevelt gave a major speech there in 1910. I liked this as a quick analysis of the crash:
Today, we are still home to the world’s most productive workers and innovative companies. But for most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t – and too many families found themselves racking up more and more debt just to keep up.
For many years, credit cards and home equity loans papered over the harsh realities of this new economy. But in 2008, the house of cards collapsed. We all know the story by now: Mortgages sold to people who couldn’t afford them, or sometimes even understand them. Banks and investors allowed to keep packaging the risk and selling it off. Huge bets – and huge bonuses – made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all. . . .
After 2000, incomes stopped rising for most people, but there was a huge pool of capital looking for investment opportunities. Unable to find good business investments, the managers of that capital decided to lend it to people whose incomes were not keeping up with their ambitions. Instead of being invested in new companies or new products and so on, creating economic growth that would raise living standards, capital was just loaned out to people, allowing them to borrow their way to higher status. The investors dreamed up elaborate schemes that were supposed to make their risky investments safe by spreading the risk around huge pools. Alas, when the crunch came it turned out that the bad loans were like the blood on Macbeth's hand; rather than being rendered harmless by inclusion in huge pools, they ruined those pools and rendered even the good loans temporarily worthless. Hence the crisis. What to do about it?
[Discourse on Teddy Roosevelt and progressivism.)
this isn’t just another political debate. This is the defining issue of our time. This is a make or break moment for the middle class, and all those who are fighting to get into the middle class. At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.
Now, in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. After all that’s happened, after the worst economic crisis since the Great Depression, they want to return to the same practices that got us into this mess. In fact, they want to go back to the same policies that have stacked the deck against middle-class Americans for too many years. Their philosophy is simple: we are better off when everyone is left to fend for themselves and play by their own rules.Well, I’m here to say they are wrong. . . .
Now, just as there was in Teddy Roosevelt’s time, there’s been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If only we cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger. Sure, there will be winners and losers. But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else. And even if prosperity doesn’t trickle down, they argue, that’s the price of liberty.I love to see some real empiricism in political discourse. As far as I can see, the nice places to live are the ones with high taxes and lots of regulation. There is no good evidence that low taxes on the rich lead to economic growth; to take an example from the news, Germany has much higher taxes and more regulation than Greece.
It’s a simple theory – one that speaks to our rugged individualism and healthy skepticism of too much government. It fits well on a bumper sticker. Here’s the problem: It doesn’t work. It’s never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible post-war boom of the 50s and 60s. And it didn’t work when we tried it during the last decade.
Remember that in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history, and what did they get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class – things like education and infrastructure; science and technology; Medicare and Social Security.
Let's have a real debate about where to take the country. It looks like Obama is going to lay out the case for higher taxes on the wealthy, more regulation of financial markets, more spending on infrastructure and education. Let Romney or whoever make the case for less of everything. And let's vote on it.