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The Pyrates, reloaded

By Owen Paine on Thursday January 13, 2011 03:37 PM

Here's Dean Baker making a sober rerun of the high 90's Rubinite-Clintonite macro con, now that we got two more of Bobby's Rangers running the dashboard at the White House:

"Both Daley and Sperling were major actors in the Clinton administration. At the center of the Clinton administration's economic policy was the idea that reducing the budget deficit was the key to boosting the economy."
From day one in '93 this was mean Mr Rubin's brainchild. According to Baker the scamalogue ran like this:
"If the deficit fell, then the private sector could be counted on to provide the demand to fill the gap created by less demand from the public sector."
And did it work? Dean:
"While the private sector did fill the gap in the late '90s, it did so from growth that was driven by a stock bubble. The stock bubble primarily fueled consumption, which hit a record high as a share of the GDP. It also led to somewhat higher investment, although much of this was in hare-brained, Internet start-ups of little or no value.

The stock bubble burst over the years 2000-2002. The resulting recession featured what was at the time the longest period without job growth in the post-World War II era....

Clintonite-era policy made the recovery from the last recession more difficult.... Robert Rubin's high dollar policy led to a massive trade deficit. An overvalued dollar provides a huge subsidy to imports, and effectively imposes a tariff on exports."

And why this royal road?
"Banks... like a high dollar because it makes them more powerful in an international context; however, it is about the worst imaginable policy from the standpoint of manufacturing workers. The high dollar is the main factor behind the loss of six million manufacturing jobs over the last 13 years. The basic story is simple: it is very hard to compete when your currency gives your competitors a 30 percent cost advantage."
And that's just the Eurocomp. The East Asian bloc has us by more then 30%.

Then there's "the NAFTA-type trade deals", and of course China into the WTO,

"that further depressed the wages of manufacturing workers by... placing them in direct competition with low-paid workers in the developing world..."
Call it an endgame, eh?

BTW here's a tic-like sore point with blue-collar tribune Dean: this was pulled off "while leaving highly paid professionals like doctors and lawyers largely protected..."!

Let us note, the system is coming for the docs, too, Dean. Plausible "final solutions" are mobilizing on the international skill-head front even as i type this.

Of course there's MORE!

"The Clinton economic agenda was.. about setting Wall Street loose... This meant..taking enormous risks with creditors, knowing that the government will come to the rescue if necessary.... This growth path... laid the seeds for the economic wreckage that engulfed the country when the housing bubble finally burst in 2007."
I'd prefer to say, when the hyper-leveraged toxic nut-gathering frenzy by these same hi-fi outfits self detonated in the fall of '08. But then again... lot bubbles, default swaps, 33% leverage on house accounts -- hey, it's all connected at the hip, no?

Our man's sum-up:

".. If progressives had devised policies that caused 25 million people to be unemployed or underemployed, cost the economy $4 trillion in lost output and caused millions of people to lose their homes, they and their children and their grandchildren would be exiled from policy circles for the next century.However, for the Clinton crew, it's just a matter of putting on a "pro-growth" hat and going back to work."
True enough, Mr Baker.

Comments (3)


"33%" should read 33 to 1


Deaner holdin it down for the working man. I love how he has to bash the doctors and lawyers at least once per article


Darn, this kinda takes the spotlight off of "Bush-era tax cuts", my own favorite explanation for the budget deficit. However, my favorite explanation for everything else is that behind every reprehensible, vile, stupid, self-serving Republican initiative is a devious, cringing, smiley-faced Democratic long-term policy.

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