In July of 2019 then Georgia Senate candidate Teresa Tomlinson penned a memorable guest post for DWT, Crippling Political Fear in which she said that "It’s fear that cripples the Democratic Party. Fear of our policies, fear of who we are, and fear of the Republicans. Yes, fear is what has politically cost us in the last many election cycles. One cannot lead if one is afraid. The thing about leadership is that people want their leaders to be brave. They care less about what you think on the issues than whether you have the moxie to fight for them and the strength of conviction to tell them what you really think."
The same way an animal can sense-- smell-- fear, so can voters. And it's what distinguishes today's wimpy and pathetic Democraps from the Democratic Party that dominated American politics from 1932-- when the Republicans lost 101 House seats in one day-- until a Republican-lite Democratic president lost to Ronald Reagan who carried 44 states. By Jimmy Carter's presidency, Democrats were playing defense and no longer sure of their own values or confident in their own worth. The voters got it-- dumped Carter and 33 Democratic House members. Republicans never had a house majority while Reagan was president but his conservative agenda dominated American politics for 8 years.
By the time the Democrats elected their next president in 1992, it was a Republican-lite Democrat who believed that Democratic values are losing values and looked for every opportunity to abandon them. Conservative Democrat Bill Clinton's reverse coattails lost House seats when he was originally elected and then the GOP flipped the House in his first midterm, picking up 54 blue seats. When the agenda-apologetic Clinton was reelected in 1996, Democrats won back 2 House seats of those 54 they had lost... as Clinton continued giving ground to the conservative project.
The closest Democrats came to having a president who represented a full-throated embrace of Democratic Party values was... when Bernie nearly won the primaries in 2016 and 2020. Instead, the Democrats wound up with frightened, tepid conservatives who could easily have been mainstream Republicans-- Hillary who was a Republican in her formative years and Biden, who switched to the Democratic Party to get ahead in the law firm he had joined.
I was so proud of Rachel Maddow last night. Unlike the clueless Beltway media hacks who always-- and I mean always-- refer to mainstream conservatives as "moderates" (the most valued partisan term in the American political lexicon), she looked into the camera called Joe Manchin exactly what he is: a conservative. He's not a fascist-- that's something else; he's a conservative. And Manchin-- along with a severely mentally ill Kyrsten Sinema-- has virtually handed control of the Senate over to Mitch McConnell, announcing loudly and clearly that he will not agree to be the 50th vote for anything unless the Republicans sign on. He has no spine... none whatsoever. Joe Manchin the the polar opposite of a profile in courage-- he is the embodiment of the description of what Teresa Tomlinson wrote about in her guest post.
Because of Manchin (and Sinema) the Washington Times was able to happily report this morning that the other West Virginia conservative senator and "her" team of negotiators are about to reject Biden’s pay-for surrender, leaving the GOP tax rate at exactly where Trump and McConnell lowered it to-- 21% down from 35%. Why should the Republicans budge an inch when they have Manchin and Sinema-- each a lesser-of-two-evils politician more frightened by Republican voters in their states than by Democratic voters-- on their team.
This morning, Politico sought to explain the impending collapse of the Democratic position without mentioning much about courage or fear or cowardice. Despite the overwhelming popularity among voters for taxing the rich and taxing corporate profits, Democratic weenies in Congress, whine that raising taxes (even on the rich) is "a bit risky politically... There’s a small but growing list of Democratic lawmakers who’ve expressed reservations. And it’s not just moderates desperately trying to cling to their seats next year who are going public-- it’s also committee chairs and senior lawmakers in no real electoral danger." House Agriculture Chair David Scott (Blue Dog-GA)-- basically a worthless piece of corrupt garbage-- was the most recent to speak out this week, raising some doubts about the administration’s plans to increase taxes on inherited assets. Politicians are always more frightened of their big campaign contributors than they are of the easily-- relatively speaking-- bought-off voters.
One potent weapon the GOP-- and conservative faux-Democrats-- have deployed to frighten Democrats is the false narrative about inflation, one the mass media doesn't comprehend but is always eager to repeat. Yesterday, one of America's foremost economists James Galbraith tried contextualizing and explaining the inflation bugaboo. Alas, it was an essay too long for a bumper sticker. He began by referring to a purposefully deceitful and misleading Washington Post OpEd by angry conservative Lawrence Summers which claimed "the consumer price index rose at a 7.5 percent annual rate," basically double the actual rate. Galbraith noted that the dishonesty wasn't as strange as Summer's rationale for the fake numbers-- mounting inflationary pressures "from the boost in demand created by the $2 trillion-plus in savings that Americans have accumulated during the pandemic; from large-scale Federal Reserve debt purchases, along with Fed forecasts of essentially zero interest rates into 2024; from roughly $3 trillion in fiscal stimulus passed by Congress; and from soaring stock and real estate prices."
This is odd logic, beginning with the conjecture that savings cause inflation. John Maynard Keynes argued the reverse: excess savings are withheld from demand, causing unemployment. And Summers’s own neoclassical school normally holds that high savings are a good thing, because they sustain low interest rates and lead to more business investment. So far as I know, no economist has ever before suggested that savings, as such, cause inflation.
Likewise, while it’s true that when the Fed buys up unwanted private debts, mostly from banks, the sellers get cash, shielding them from losses they might otherwise have suffered, this protection has no direct connection to their lending habits. As the economist Hyman Minsky pointed out, banks make loans when they have creditworthy customers. They neither lend their reserves, nor do they need reserves in order to lend.
Next is the claim that the Fed’s forecasts of future low interest rates are inflationary. Actually, the Fed’s interest-rate forecast is contingent on its inflation forecast, and its current position is that it expects price pressures to be transitory, and will react by raising rates if that turns out to be wrong. If the Fed agreed with Summers about future inflation, it would have said so in its inflation forecast; the interest-rate forecast has no independent role.
Summers then points to the $3 trillion of fiscal stimulus already enacted. But some $2 trillion of this is stored in private savings for now, so this point is redundant with the first one. Finally, he mentions “soaring stock and real estate prices.” Yet we heard no such warnings from him in the late 1990s, when he was Treasury secretary during a massive stock boom. And rightly so: the boom did not cause an increase in inflation.
What is really at work here? Summers may simply be attempting to revive the old Phillips curve concept, which states that, as unemployment falls, wages-- and therefore prices-- rise. But if this pattern ever existed, it disappeared 50 years ago, and even the slowest-thinking economists largely abandoned the Phillips curve by the mid-1990s. Since then, almost all new US jobs have been created in the services sectors, where “tight” labor markets have little effect on wages and none on consumer prices.
Moreover, today’s US labor markets aren’t even close to tight. The ratio of employment to population is still at least four percentage points below where it was a year ago, and it seems to be flattening after a sharp rebound. That means there are still about five million people who were working in 2019 but are not working today. The reasons are unknown. Perhaps employers haven’t wanted them back, or the jobs on offer aren’t very good. Maybe they will return later-- this year or beyond-- when the buffer provided by all those savings runs low.
What, then, is driving Summers’s inflation fear? When an economist of his stature makes such specious claims, one can only wonder if there isn’t something else on his mind.
To be sure, there are some actual price risks. A big one is financial speculation – in oil, metals, timber for home construction, and so forth. It is not uncommon for financial players to bid up prices by taking these goods off the market early in a boom. (The Chinese know this and are duly cracking down on the hoarding of copper and other metals.)
Another risk would emerge if the Fed took the advice of inflation hawks. For most businesses, interest is a cost like any other, and an increase in that cost would be passed through, in part, to consumer prices. It is interesting that Summers doesn’t mention either of these, which could be mitigated with tough financial-sector regulation-- and, of course, by not raising interest rates.
But deeper worries may be lurking beneath the surface of Summers’s essay. One concerns that $2 trillion in savings. Through direct payments and expanded unemployment insurance, a fair amount of that sum went to working-class households-- the first big chunk of change for many such families in decades. Having some cash could make them less likely to borrow-- and thus less dependent on banks. Workers might even hold out for higher wages, creating the “labor shortage” of which Summers speaks (at least temporarily). More generally, when people have a bit of a financial cushion, they are harder to boss around.
A second source of anxiety may be spotted in Summers’s call for “clear statements that the United States desires a strong dollar.” This is the secret angst of the hard-money men, an insecure lot who fret that their position on the global totem pole might not be entirely secure. Perhaps they are right. Today’s dollar-centered world reflects the power alignments of the period between the end of World War II and the end of the Cold War in 1989. US power has since eroded, opening the possibility that the world’s monetary system could one day flip.
That may not happen anytime soon. But if and when the moment comes, it will follow from decades of decline, from better strategies pursued elsewhere, from the self-inflicted wounds of the Reagan, Clinton, and Bush eras, from the sacrifice of America’s industrial base in the 1980s, from the fragility of the global order that emerged in the 1990s, and from the military overreach of the 2000s. Against all that, a few “clear statements” won’t mean much.