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Intro: "Who's an economy for? Voters in France and Greece have made it clear it's not for the bond traders."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

A Question of Timing

By Robert Reich, Robert Reich's Blog

09 May 12


ho's an economy for? Voters in France and Greece have made it clear it's not for the bond traders.

Referring to his own electoral woes, Prime Minister David Cameron wrote Monday in an article in the conservative Daily Telegraph: “When people think about the economy they don't see it through the dry numbers of the deficit figures, trade balances or inflation forecasts - but instead the things that make the difference between a life that's worth living and a daily grind that drags them down.”

Cameron, whose own economic policies have worsened the daily grind dragging down most Brits, may be sobered by what happened over the weekend in France and Greece - as well as his own poll numbers. Britain's conservatives have been taking a beating.

In truth, the choice isn't simply between budget-cutting austerity, on the one hand, and growth and jobs on the other.

It's really a question of timing. And it's the same issue on this side of the pond. If government slices spending too early, when unemployment is high and growth is slowing, it makes the debt situation far worse.

That's because public spending is a critical component of total demand. If demand is already lagging, spending cuts further slow the economy - and thereby increase the size of the public debt relative to the size of the overall economy.

You end up with the worst of both worlds - a growing ratio of debt to the gross domestic product, coupled with high unemployment and a public that's furious about losing safety nets when they're most needed.

The proper sequence is for government to keep spending until jobs and growth are restored, and only then to take out the budget axe.

If Hollande's new government pushes Angela Merkel in this direction, he'll end up saving the euro and, ironically, the jobs of many conservative leaders throughout Europe - including Merkel and Cameron.

But he also has an important audience in the United States, where Republicans are trying to sell a toxic blend of trickle-down supply-side economics (tax cuts on the rich and on corporations) and austerity for everyone else (government spending cuts). That's exactly the opposite of what's needed now.

Yes, America has a long-term budget deficit that's scary. So does Europe. But the first priority in America and in Europe must be growth and jobs. That means rejecting austerity economics for now, while at the same time demanding that corporations and the rich pay their fair share of the cost of keeping everyone else afloat.

President Obama and the Democrats should set a clear trigger - say, 6 percent unemployment and two quarters of growth greater than 3 percent - before whacking the budget deficit.

And they should set that trigger now, during the election, so the public can give them a mandate on Election Day to delay the “sequestration” cuts (now scheduled to begin next year) until that trigger is met.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "Locked in the Cabinet," "Reason," "Supercapitalism," "Aftershock," and his latest e-book, "Beyond Outrage." His 'Marketplace' commentaries can be found on and iTunes. your social media marketing partner


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+43 # Trish42 2012-05-09 09:37
Bravo, bravo!! This is the kind of message that Independents will understand! If we can get the majority of Americans to understand this relationship between revenue and spending in a recession, we will win the economic argument. Then we can focus on the social issues. Let's just hope that the majority of Americans are still rationale enough to see how crazy the fundamentalist positions on religion and reproduction really are---not to speak of their very un-Christian perspective on immigration....
+29 # JCM 2012-05-09 09:49
What we should do for this country is to raise the taxes on the very wealthiest. Trillions of dollars have been collecting by the very wealthiest since the 1980's. Tax rates were lowered that benefited mostly the very wealthy. After thirty years of this our country can no longer sustain the greatness it once was. After WW2 we had very high tax rates targeted at the very wealthy in order to pay off the war time debt crisis. We are in a crisis now and need to look at history and find the most beneficial rates for our nation. We don’t have a spending problem, spending is at an all time low relative to GNP, we have a revenue problem.
Do you want the wealthy to get wealthier or do you want better infrastructure? Do you want the wealthy to get wealthier or do you want the kind of research and development that helped make our country great? Do you want the wealthy to get wealthier or do you want the policeman, the firemen and the teachers to be hired and paid fairly. These are some of the choices you must make for this election. If you want the wealthiest to get wealthier then vote Republican. If you want a healthy society that can maintain all things that make our country great then vote Democrat.
-34 # edge 2012-05-09 10:37
Yep, those "shovel ready" jobs really jump started the economy!
+17 # JCM 2012-05-09 12:23
There's one thing you're not realizing. The economy is growing slowly due in large part from the Republican opposition to do anything about it. Many infrastructure and stimulus bills were introduce only to be turned down time and again by the Republicans.
-5 # edge 2012-05-10 08:44
Why should the Government make the decision of what industries get paid!
Oh, because they are Obamas favorites, then let him support them.

ROADS / bridges, where the hell did the transportation taxes go?
Corrupt politicians, that's where it went and you want them to be able to spend more of your money and mine.

Get off this ridiculous GOP vs DEM rivalry and think for yourself!

You want more spending then let the individual taxpayers write major expenditures off of their own taxes, and let the taxpayer decide what they want their money to go for!

Why "cash for clunkers"?
What about my 15 year old washer and dryer, I didn't have a junk auto so I get crap?

Wake up and take this stupid power of picking winners and losers away from Washington!
+4 # brux 2012-05-09 21:29
you have a point, but the counter-point to that is that:

1. the shovel-ready projects were too few and too narrowly based to drive the whole economy for long.

2. most of what people (like you) are complaining about when they complain about the stimulus is that it went to the wrong people … which is a complicated subject, but the bottom line is that this country has become politically corrupt, so stimulus or austerity money will be flowing to the rich and powerful whether or not it goes to build economic, infrastastuctur e or investments in human capital.
-4 # edge 2012-05-10 08:46
Quoting brux:
you have a point, but the counter-point to that is that:

1. the shovel-ready projects were too few and too narrowly based to drive the whole economy for long.


OK, so the same people that picked the wrong projects, and how much we should spend were idiots...we agree!

So why double down on these same stupid people and let them waste more of OUR money!
0 # brux 2012-05-11 11:15
I don't think that Reich or Krugman or anyone who get it are those same people or are suggestions that we double-down on the same wrong things - before it was all political, as everything is everywhere, that is the problem. we've forgotten or do not care about being fair anymore - it's all about people in high places getting their tribute.
+15 # bluepilgrim 2012-05-09 10:03
Reich seems to miss this critical issue. We can't spend our way out of this if the money ends up in Walmart, to China. We also need to create jobs here, producing real wealth.


"On the Working Class

In the 1930s, unemployed working people could anticipate that their jobs would come back. If you're a worker in manufacturing today - the current level of unemployment there is approximately like the Depression - and current tendencies persist, those jobs aren't going to come back.

The change took place in the 1970s. There are a lot of reasons for it. One of the underlying factors, discussed mainly by economic historian Robert Brenner, was the falling rate of profit in manufacturing. There were other factors. It led to major changes in the economy - a reversal of several hundred years of progress towards industrializati on and development that turned into a process of de-industrializati on and de-development. Of course, manufacturing production continued overseas very profitably, but it's no good for the work force.

Along with that came a significant shift of the economy from productive enterprise - producing things people need or could use - to financial manipulation. The financializatio n of the economy really took off at that time."
+21 # PGreen 2012-05-09 10:48
Reich, like Klugman, is fundamentally a reformer, and not a radical. He does advocate some good things, and I by and large support him (as I do here), but he often falls short of advocating for the long term extreme changes that may be necessary.
As Chomsky has said, even incremental positive changes can be helpful, though ultimately more is called for.
+1 # brux 2012-05-09 21:34
you should read aftershock, reich's last book … he talks about a whole plan of how to bring the u.s. economy back.

the problem is that we have let the top .001% get away with their crap for so long that they will not easily be convinced to pay more in taxes, and they will hold a grudge for a long time about it.

i really hate to say or think this but I'm wondering if we have not wedged ourselves into a position that has no way out and we have destroyed the arsenal of democracy, and now through bribes and infiltration other powers seek to control the us military.

there is something to be said for how saudi arabia and the sunnis have benefited from the us intervention in the middle east … was that the plan from the beginning?
+21 # btfeldman 2012-05-09 10:09
I think for too many people, it doesn't sink in that the terms "public spending" or "gov't. spending" often mean spending on PRIVATE companies to do work. It is important that supporters of gov't. spending use terms such as "public spending on private sector jobs" just to mitigate the erroneously negative connotations that currently abound.
+6 # JCM 2012-05-09 12:55
That's right, when our government spends money its spending money that goes, mostly, to Americans. One extra thought on government spending; for government contracts I wish there could be a stipulation on how much of the profits can go to the owner’s vs. the employed. If the government spends money on a project but most of that money goes to a very few then we will continue to spin our wheels. I'm not sure if this is practical fix but it is, I think, a good direction..
+14 # Bodiotoo 2012-05-09 10:29
Now lets take back out government and make it work for the 99%
+12 # SueVan 2012-05-09 10:37
Too bad nobody except Reich seems capable of explaining the economy this way. I would add that a continually growing economy is not a good thing...the planet cannot sustain that. Other ways of looking at GDP that include destruction of natural resources have to be developed.
+1 # brux 2012-05-09 21:36
robert reich's book "aftershock" goes into this vision what more detail. it is a compelling narrative and i think it simply needs to be heard by more people, and whatever is going to play out in the american economy just needs to do what it is going to do before people get really serious about changning things.
+6 # Peace Anonymous 2012-05-09 11:08
Regardless of what Cameron may say about the UK Tony Blair was a Labour Prime Minister who promptly got in line behind George W. It is difficult to know who your friends are these days. But Obama was elected on a program of change and if the people push hard enough he might deliver. We all know what we will get with Romney. But in the end it is your democracy, based on your values. And, ultimately it is your responsibility. Nobody is going to do this for you.
-18 # letsfixit 2012-05-09 11:28
This is such a huge fallacy. Spend money for what? Consumption and jobs for china and Korea? THERE IS NO COMSUMPTION PRODUCTION IN THE USA. no electronics. No Refrigerators. No tractors, - just komatsu, mahindra, and harbor freight tools. Combine (for wheat) production is not consumption. An airliner is not consumer consumption.

The 700,000 jobs in china for Apple are NOT HERE.
SO spend money on what? Section 8 housing?

This is not a strategic plan- it is words without a plan.
+6 # PGreen 2012-05-09 12:10
It's true that manufacturing has been woefully outsourced to the detriment of US labor, but the opportunity for the US government to jumpstart the economy by financing needed services remains. With a 2nd WPA, we could see a re-building of our decaying infrastructure, and even the construction of a network of electronic chargers for the eventual conversion of automotive to electric power.
We could also see money spent on home conversion to sustainable energy, which if implemented on small scales (rather than massive power plants) would result in tens of thousands of construction and maintenance jobs-- far more labor intensive than most current mega utilities and thus likely to be opposed by them-- making a government effort to develop the right policy even more important.
We may lack much native business and manufacturing (of the right sort to help people), but government can spark it, and lead the economy in the right direction. All it takes is will.
+2 # Nell H 2012-05-09 12:54
Yes, we need production in the USA. One place to start is with the production of vitamins and over the counter medicine. LABEL IT WITH COUNTRY OF ORIGIN. A certain big box store is abandoning its American manufacturer in order to buy them from China. Who would buy vitamins labeled "Made in China"? We need country of origin labeling on all our vitamins and canned foods!
+3 # JCM 2012-05-09 14:09
We can spend money to fix our roads, our infrastructure, pay our police, fireman, teachers and the people who work in government that watch out after our society so that no one rips us off or pollutes. We could increase funding for research and development, the space program, medical research, clean energy and restoring our environment (climate change and pollution). If we did this jobs would be created, people would spend their money and the economy gets going. We have starved our nation too long. We don’t have a spending problem, we have a revenue problem.
+1 # brux 2012-05-09 21:37
you have good points … we've pretty much screwed ourself, and we have to start somewhere.
+2 # jlstiles 2012-05-09 13:03
Robert Reich buys the theater of our politics. He is all about tweaking a broken system with no integrity. He is all about "forcing Obama to act". That is such BS. He quotes that same old tired quote from FDR about telling his constituent to "force" him to do it.

Obama is working with the republicans to advance a corporate agenda and has no interest in supporting democracy or the common american. He does not work for us. Every major policy move Obama has done has been in lockstep with the republican party, except for abortion and perhaps gay rights and perhaps another social issue or two. When it comes to important policy, he has actively pursued a corporate agenda and squashed all dissent.

The republicans offer psycho fascist policies and crazy social agendas so we go running back to Obama who is not our friend. If Romney got elected then corporate power is even happier and if Obama gets elected because we run to him out of ommission, corporate power says, "check mate, suckers."

Meanwhile, the difference between what Romney would do and Obama is basically nothing. Enlighten me of the difference, please!

We ought to vote for those that have shown they share our values or protest the very election itself as a corporate sham, a sham of democracy.
+3 # JCM 2012-05-09 14:30
Check this site out.
Some pretty good, some not so good. In comparison to what the last Republican president did, priceless!
-1 # jlstiles 2012-05-10 22:45
Oh please, everyone's seen that site and it is filled with a bunch of meaningless crap. From War, protecting the banks, torture, detention, military commissions, education, monsanto ass-kissing and even corporatizing healthcare to the hands of the greedy, Obama has been corporate all the way, which makes him no better than the republicans.
+4 # dkonstruction 2012-05-09 13:22
As others have mentioned in critiqueing Reich, it is not just about government spending but at the same time what it is being spent on on where that money is ultimately going. So, as Blue Pilgrim mentioned, if the money is being spent on consumer goods at Walmart that are produced in China this doesn't help. I would add, that if the majority of the consumption are spent in "big box" and chain stores that this also doesn't help develop communities (particularly low-income communities) since the vast majority of the profits do not remain in the communities in which the money is spent. We need to have a critique not just of stimulus vs. austerity but of the entire still dominant modes of "economic development" in this country and demand an alternative "community economic developmwent" model that is truly about developing an economy that works for the vast majority (with high paying skilled jobs with comprehensive "benefits" and pensions) and not simply support economic development models based on more wallmarts and casinos. Unfortunately, Reich (and Krugman) never seem to get to anything beyond a simplistic "stimulus" vs. "austerity" discussion which leads far too many (including too many on this board) to believe that this is the only alternative out there. Well, it isn't, and we are in a lot of trouble if this continues to be presented as the full range of the debate and the options.
+1 # JCM 2012-05-09 17:00
Where the money goes is a great concept that I often overlook. We have traded off low prices on commodities for jobs and industry, eventually lowering our standard of living. Buying cheap shirts from China has cheapened our own lives.
As for Reich and Krugman they might believe its best to keep it simple and say it over and over to make the best effect?
-4 # jimattrell 2012-05-09 14:17
It's hilarious to listen to people who talk about taxing the rich to fix our huge deficit spending. If you look at the facts, even if you took 100% of earnings from the top 1% of American taxpayers we'd never come close to collecting enough cash to keep up with our spending. If we put the 2-3% of the workforce (who have dropped out after maxing out unemployment) back to work, paying taxes, we'd solve a good chunk of the shortfall. The rest of the problem can be solved by eliminating social welfare spending where the cash goes into the pockets of the rich and undeserving; or worse yet, into the re- election campaign funding.
+4 # JCM 2012-05-09 16:50
The idea to raise tax rates to the very wealthy was not to eliminate the deficit or debt entirely. The idea is to have more money to invest in our country and our people that would stimulate the economy. Historically, high interest’s rates after WW2 reduced our debt over many years and created a strong economy and society. It enabled us to build the national highway system; we went to the moon and acquired tremendous technological advances from it. We spent a higher percentage of GDP on research and developed even more technologies. We were a great nation, imperfect in many ways but a society that promoted middle, working class strength that made it possible for so many to proper. In the 1980’s we became a nation for the wealthiest and income inequality began to rise. Higher taxes on the top brackets will help balance it out.
"the problem can be solved by eliminating social welfare spending where the cash goes into the pockets of the rich and undeserving" not really sure what exactly you mean. Social welfare into the pockets of the rich?
+2 # PGreen 2012-05-10 09:30
JCM is correct about the post-war economy. But also, your math is a bit hasty here. You say that putting 2-3% of the unemployed workforce back to work would help more than taking the entire income of the richest 1% of our population. Even by headcount, 1% of the entire population is comparable or larger that 2-3% of the workforce, as not everyone works. The richest 1% of the population, by any estimate, would thus have many times the wealth of 2-3% of poorer folk-- except perhaps the NEXT richest 2-3% (though given the ballooning of wealth at the very top, this isn't certain).
BTW, as Nobel Laureate Joseph Stiglitz points out, (the top) 1% of the population now owns 40% of the total wealth of the nation, so if you took even 90% of their wealth it would indeed go a very long way toward fixing deficit spending. Remember that the top tax rate in the 1950s was 91% and we had the most prosperous middle-class in history.
But I agree that we have waste-- just not in social spending. We could cut our defense spending (currently more than the rest of the world combined) by half and end our ridiculous wars of imperialism. it would save a pretty penny.
+2 # infohiway 2012-05-09 15:04
In virtually every facet of life there is an element of risk. Since when can bond and fund managers defy the very rules (of gravity plus win, lose or stagnate) that bind all else?
Can't lose? Get real. That's not a part this mortal plane.
The historic list of Papal Bulls and Jubilees and, say, the French Revolution prove otherwise.

Nonetheless the banksters and government lackeys (plus their ex-spurts) seem to think that the PIIGS, America and other nations will all be happy little debt slaves forever because of the (bankster's and government's that don't know when to quit) orgies, largess and thievery.

Write it off you cretins and, unlike Lot's wife, don't look back. Are you so self-loathing and suicidal to really want some 100 million armed Americans to lead Her out of Babylon the hard way?

Sooner or later, one way or another, you will have to write it off.
+1 # infohiway 2012-05-09 15:31
The 'minimum wage' just creates more debt slavery in the inflationary credit-bubble-f iat Ponzi model.

National HOUSEHOLD Dividend (C.H. Douglas' social credit - WITH SMALL 's' and 'c'.) creates a stable base on the 'full faith and credit' of the nation and Her people.

In fact, if you think about it, that MAKES/FOSTERS/E NCOURAGES healthy competition by forcing the banksters to behave and be competitive.
+2 # MindDoc 2012-05-09 15:46
Breaking the backs of those still struggling to get by, by making working people and wanting-to-work people subsidize tax breaks and obscene profiteering for the wealthy and 'corporate people', is, as Reich nicely sums up, "exactly the opposite of what's needed now". By all measures: historical, economic, and moral. This isn't 'class war', it is the Ryan/GOP centerpiece, paid for by their generous sponsors, the uber-rich and corporate 'people'. And their solution is what? With what immediate and long-term impact on the vast majority of 'human people'?

Would that this could be framed as the central decision We the (real) People must make choices as a society, and prioritize: fairness or unrestrained gluttony, focus on We the People, or absolute 'certainty' of obscene perpetual wealth-streams for the super-well-off? Let Ryan et al re-tell the fable of how the Clinton era (huge surpluses WITH high profits and growth) was in fact "tried and failed", as the spin from Fox, GOP, & Tea-drinkers claims.

Compare the change from the Clinton-years economy (*surplus*) with the Bush ruination of our economy, with ripples still around the globe ... When will we ever learn?

We need to trumpet reality in history and economics. Reich is right. Clearly. One needs only to look at Europe today, or compare the Clinton surplus years vs. the 8 years and beyond of Bush. How'd that work out?
+2 # cordleycoit 2012-05-09 17:00
Why are we being asked to pay for someone's night of fun rigging the stock market the bond markets and the commodity markets? The Bankers must do the austerity not the people.Lets hand a rope to the bankers an see how talented they really are.
+2 # infohiway 2012-05-09 22:35
Exactly! Get out the pitchforks!

Why pay them 'interest' for 'creating' and 'handling' our money whilst manipulating everything else as a direct result of being entrusted with it - ultimately leading to wars of aggression with forced income tax, conscription, debt slavery and oppression?

Be gone!
0 # infohiway 2012-05-09 22:55
So (aside from being the preferred communist method of redistribution of wealth) why an Income Tax is Not Necessary to Fund the U.S. Government.
+2 # infohiway 2012-05-10 01:22
Stop blaming others according to your prejudices and get America out of this shite by pulling together.

If you don't you are doomed.
0 # letsfixit 2012-05-10 08:04
It's interesting to read about "the infrastructure" spending. What is a fallacy about that is there are not enough metal workers, welders or heavy equipment operators to do the work. This is why California hired a Chinese company to do the bridge work. All of ours are working the fracking infrastructure at $120 per hour. yes understand the highest bidder but it also shows us how our education system is not responding to true needs. Instead of spending $250,000 per troop in deployment annually or $50,000 annually for profit oriented incarceration - how about recognizing we need a dual track education system ?
+2 # PGreen 2012-05-10 09:58
Chinese metal workers earn $12.00/day (NYTs), so this is is simply another example of outsourcing American jobs in the face of ridiculous competition. There is no win for the US worker in this scenario. And though the bridge contract will save the state 400 million of a 7.2 billion dollar contract, US steel workers are certainly present in sufficient numbers in this country to do the job-- should the state have chosen to accept their bid. California and the country will pay a steeper price later for the loss of worker income (hence taxes), the destruction of Union jobs and the reduction of middle-class wages. It is a short-sighted decision, and probably owes much to the current attempts to undercut unions-- even more short-sighted, unless your goal is neo-feudalism.
0 # letsfixit 2012-05-12 06:31
Superb answer. Although was referring to welders mostly the Chinese award does bring up a no tax scenario - which is the same as our contractors deploying to middle east and first $93,300 is tax free.
Another example of missed revenues. There are so many loopholes in the tax code that need cleaning up.

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