In comparing past economic crises to the current one, Judis writes:
In each case, the financial crisis generated an overhang of consumer and business debt that— along with growing unemployment and underemployment, and the failure of real wages to rise— reduced effective demand to the point where the economy, without extensive government intervention, spun into a downward spiral of joblessness. The accumulation of debt also undermined the use of monetary policy to revive the economy. Even zero-percent interest rates could not induce private investment.
Finally, in contrast to the usual post-World War II recession, our current downturn, like the Great Depression, is global in character. Financial disturbances—aggravated by an unstable international monetary system—have spread globally. During the typical recession, a country suffering a downturn might hope to revive itself by cutting its spending. That might temporarily increase unemployment, but it would also depress wages and prices, simultaneously cutting the demand for imports and making a country’s exports more competitive against those of its rivals. But, when the recession is global, you get what John Maynard Keynes called the “paradox of thrift” writ large: As all nations cut their spending and attempt to devalue their currencies (which makes their exports cheaper), global demand shrinks still more, and the recession deepens.
TNR describes the article this way:
Judis argues that President Obama’s new jobs plan is simply too little, too late. In the most comprehensive explanation of our economic quagmire that you’ll read this year, Judis explores the structural forces undergirding the American economy to find out what it would take to restore prosperity. Then, he offers a devastating assessment of the toxic political culture that will almost certainly prevent any constructive measures from being taken.
I'm not as pessimistic as Judis that it's already too late. I have never understood the Republican clamor for spending cuts. Especially at a time when we have so many vulnerable people in need. Obama needs to just keep saying "No."
Obama knows the Republicans won't agree to the plan he laid out today. I'd rather he go down fighting for Democratic principles than continue to seek a compromise. At least today he telegraphed a message about what Democrats care about, reinforcing that there is a difference between us and them. I just hope he carries through and comes to understand that compromise and bi-partisan unity are not the answer when it means turning your back on your core constituents and their values.
