A rift from reality

Originally published at The Benfell Blog. Please leave any comments there.

At least I’m not alone. About a month ago, I wrote about the pervasive deception in this society that certainly includes economic statistics (which is why I no longer publish my own analysis of unemployment statistics). About the same time, Eugene Robinson wrote,

The good news is that unemployment has fallen to "only" 9.5 percent. The bad news is that the jobless rate is down only because so many people have given up hope of finding work. Perversely, the jobless who aren’t actively looking for jobs are not counted as "unemployed." Perhaps there should be a new category: "mired in existential despair." If anyone in Washington wants to know why people in the hinterlands are angry, one simple answer is that our political leaders seem to be so calculating and unmoved about the parlous state of the economy.

Bob Herbert, who has stridently and consistently written about the plight of the unemployed in his Op-Ed columns for the New York Times, argues that the unemployment situation is worse than the statistics reveal because of discouraged workers and because the headline unemployment rate, bad as it is, masks the phenomenon of long-term unemployment. He writes,

At some point we’re going to have to claw our way out of this denial. With 14.6 million people officially jobless, and 5.9 million who have stopped looking but say they want a job, and 8.5 million who are working part time but would like to work full time, you end up with nearly 30 million Americans who cannot find the work they want and desperately need.

But it is even worse, still. Because none of those numbers reflect people who are working part time, but would prefer to work full time, or those who are working low wage jobs that often don’t pay rent but are qualified for and need higher paying jobs. Leo Hindery, Jr., pointing out that we need 22 million jobs to reach “full employment” (meaning 5 percent unemployment), sneers at the idea that boosting small business will create those jobs:

Twenty-two million new jobs is the almost incomprehensible equivalent of having to create 140 new Boeing Companies or 90 new General Motors. And the simple truth is that there is no way on God’s green earth to create them without the massive – and primary – involvement of ‘big business’, especially ‘big manufacturing business’. The administration’s alternative of emphasizing small business has the medium-term potential to create only several million jobs in the medium term.

The other day, the national newspaper of record published an editorial referring to a “rift between policy making and reality.” This rift extends well beyond the unemployment crisis, most notably to Afghanistan–where the Obama administration would like us to settle for a withdrawal from Iraq (never mind the contractors and absolutely, pay no mind to the ongoing insurgency and political instability). And it certainly appears in White House press secretary Robert Gibbs’ hissy fit about the “professional left” that has in fact all too slowly come to recognize the breadth and depth of Obama’s betrayal. But as brutal as Obama’s perpetuation and extension of Bush policies has been, unemployment stands out as an issue important to and affecting large numbers of people inside the United States (and thus, easily covered by mainstream news media). And on this, over the course of the last month, the Obama administration has lost all credibility.

White House officials insist that unemployment would be worse if not for policies adopted late in the Bush administration and early in the Obama administration, as if that excuses the insufficiency of the stimulus and an abject lack of action since. Even this doesn’t cut it. We don’t have an alternative universe available where the Troubled Assets Relief Program (TARP) and the stimulus didn’t happen to show us what would have happened. And Dean Baker points out that the analysis that shows all those “saved” jobs assumes that nothing would have been done if not for the stimulus. I’ll let him explain:

The study found that without the bailout, GDP would have declined by another 6.5 percent and the economy would have lost another 8.5 million jobs. In other words, things might be bad now, but if we didn’t shovel trillions in loans and loan guarantees to Goldman Sachs and the rest of the Wall Street gang, they would be even worse.

Before we start thanking Goldman for taking our money, it is worth taking a closer look at the study. The big story here is the counterfactual. What does the study assume the Fed and Treasury would have done if we had not passed the TARP and the Fed had not come through with its vast array of emergency loan and loan guarantee programs?

The answer is that the study assumes that they would have done nothing. In other words, the question asked by the study is “what would the world look like if the federal government had done absolutely nothing to counter the economic and financial downturn resulting from collapse of the housing bubble?”

This counterfactual seems more than a bit unrealistic. Suppose we had let the market work its magic and put Goldman, Citigroup, Bank of America, and Morgan Stanley into bankruptcy. Suppose that once these firms were in receivership and their bank units were in the hands of the FDIC, the Fed flooded the system with liquidity. How would this situation compare with the situation where trillions of taxpayer dollars were put at the discretion of Goldman and the rest through TARP and the Fed’s special facilities?

The Blinder-Zandi study tells us absolutely nothing about this scenario. In other words, Blinder and Zandi have constructed an absurdly unrealistic counterfactual and told us that the TARP was much better than this absurd scenario.

And yet, the Obama administration and the Democrats expect voters to judge them on unreality. I’m an anarchist. I will hasten to point out a great many pitfalls in our so-called democracy (it’s actually a republic and the difference, as James Madison demonstrated in the Federalist No. 10, is important). After all, voters have largely supported Bush administration policies, being discouraged by wars only when it has become amply evident over a long period of time that the United States cannot prevail. The passage of Proposition 8, banning gay marriage, in California showed yet again that a majority vote cannot be counted on to protect minority rights (except those of the rich).

It is as if Democrats expect the invisibility of the unemployed on Wall Street and inside the Beltway to extend inside voters’ living rooms. If that’s hard to imagine, consider that our national policymaking apparatus seems captive to Israeli chauvinists (which is why we threaten Iran with yet another unwinnable war and support Israel even at the expense of endless war, to Cuban emigrés (which is why we sustain a crippling economic embargo against Cuba even after over fifty years of failure), to the military-industrial complex (which insists on spending inconceivable amounts of money on wars we can’t win), to anti-abortion zealots (who have won a prohibition of abortion coverage in the temporary health-insurance pools that are an intermediate step in the implementation of the health care plan and who also want to ban birth control), and to Wall Street. No significant legislation moves through this apparatus unless it is compatible with their interests. And legislation or regulation that advances their interests can take effect even against popular disapproval.

And against those voices, the unemployed hear only empty platitudes. It is a sad irony that Obama, to whose watch we may attribute the culmination of a transition to a fascist police state, which is increasingly intrusive on privacy, effectively embodies a traditional conservative argument against big government precisely through what blogger Digby calls a Goldilocks triangulation manifest in repeated capitulation to conservatives.

The argument for smaller, more local government is that it will be more responsive to constituents. And if big government means what we now have in Washington, D.C., this is a government which, as seen with unemployment and the failure to get out of Iraq following the 2006 elections, is not merely stupid, but entirely unresponsive to ordinary people.

Though I did not vote for Obama, I certainly share the fury of progressives who did. Though I knew he would betray progressives, I never imagined he would go so far. In The Lucifer Effect (New York: Random House, 2007), Philip Zimbardo makes a powerful case for attributing evil to the power of situations. I can’t help but suspect that the political environment emanating from Washington, D.C., is such a situation that through brute force of sheer numbers overwhelms any individual initiative to do good (which Zimbardo also advocates). And if that’s the case, the only hope for progressives lies in the fall of the empire and, as I have previously advocated, the break-up of the United States.