ANS -- State-Wrecked: The Corruption of Capitalism in America

Here is the first page of a four-page article.  the rest of it I recommend you read if you can stand it. I don't agree with all of the analysis in the article -- I think he is wrong on causes -- but then, he, himself, was part of the cause (he was Ronald Reagan's budget director).  I just wanted you to see the dire predictions that are going around -- and to note that he is trying to blame the government.  He is completely missing that the government wouldn't have had to spend all that money if the private sector hadn't failed us first.  This is the right-wing spin that is miss-framing the issue so that we all argue about what the government should be doing when it's really the private sector that's to blame.  He thinks the government should get out of the way and let the "free market" correct things -- but that doesn't work because what the free market does if you let it go free is produce feudalism.  Though, actually, his recommendations do include some serious regulations and getting money out of politics.  That's good stuff.  This guy is really a mixed bag -- and that makes the article interesting. Too bad, as he says, his recommendations "can't happen".  He does recommend getting out of the market.  (When? is the question....)
Notice that after all these years of tax cuts to the rich expressly so that they will fulfill their roles as "job creators", they haven't been creating any jobs to speak of.  That shows that cutting their taxes doesn't work to make jobs --it's time to try the opposite tack, and raise the taxes on the rich and see if that creates jobs -- it couldn't do any worse. 
This article was sent to me by one of our readers. 
Find it here:   http://www.nytimes.com/2013/03/31/opinion/sunday/sundown-in-america.html?pagewanted=1&_r=0  
---Kim

Opinion

State-Wrecked: The Corruption of Capitalism in America

 
Mark Pernice

By DAVID A. STOCKMAN


Published: March 30, 2013 378 Comments

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GREENWICH, Conn.

The Dow Jones and Standard & Poor's 500 indexes reached record highs on Thursday, having completely erased the losses since the stock market's last peak, in 2007. But instead of cheering, we should be very afraid.

Multimedia

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Indebtedness Dwarfs the Economy

 

Multimedia Feature: A Gallery of Economic Villains and Heroes

A gallery of "heroes" who championed sound money and fiscal rectitude and "villains" who led the United States down the path of insolvency.

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Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later ­ within a few years, I predict ­ this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.

Since the S.&P. 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the "bottom" 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation's bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today's feeble remnants of economic growth.

THIS dyspeptic prospect results from the fact that we are now state-wrecked. With only brief interruptions, we've had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.

As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another ­ smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones ("clean" energy, biotechnology) and, above all, bailing out Wall Street ­ they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating "demand," even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.

The culprits are bipartisan, though you'd never guess that from the blather that passes for political discourse these days. The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism and capitalist cartels in agriculture and industry.

Under the exigencies of World War II (which did far more to end the Depression than the New Deal did), the state got hugely bloated, but remarkably, the bloat was put into brief remission during a midcentury golden era of sound money and fiscal rectitude with Dwight D. Eisenhower in the White House and William McChesney Martin Jr. at the Fed.

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David A. Stockman is a former Republican congressman from Michigan, President Ronald Reagan's budget director from 1981 to 1985 and the author, most recently, of "The Great Deformation: The Corruption of Capitalism in America."