The Bush Legacy: An Economic Crisis So Deep

What’s better than reading Krugman twice a week or his blog, how about an open letter to President-Elect Obama with Krugman’s ideas on how to fix the economy, What Obama Must Do.

But before you go and read Krugman’s letter, chew on this for a moment.

The Center on Budget and Policy Priorities, a nonpartisan research group that analyzes government programs, recently estimated the effects of a rise in the unemployment rate to nine percent — a worst-case scenario that now seems all too likely. So what will happen if unemployment rises to nine percent or more? As many as 10 million middle-class Americans would be pushed into poverty, and another 6 million would be pushed into “deep poverty,” the severe deprivation that happens when your income is less than half the poverty level.

You read that right, 10 million middle-class Americans would be pushed into poverty. This is the Bush Legacy. Now, go read the article and come back.

Daunting, yes?

Krugman breaks his letter into four parts:

• The Economic Crisis
• Rescuing The Economy
• Beyond The Crisis
• Truth & Reconciliation

But let me start at the end first. Krugman concludes:

. . . the future is what matters most. This month we celebrate your arrival in the White House; at a time of great national crisis, you bring the hope of a better future. It’s now up to you to deliver on that hope. By enacting a recovery plan even bolder and more comprehensive than the New Deal, you can not only turn the economy around — you can put America on a path toward greater equality for generations to come.

Though we need to look back and see what got us here, the future is ours to take. Through much hard work and sacrifice from the American people (remember Bush’s version of sacrifice, “Go spend”), America can once again be the nation it was.

Krugman paints a dire, but realistic picture of the economy. He writes that it  is “worse than almost anyone imagined.” To make matters worse — if that is at all possible –, Krugman writes that “the Fed has lost its mojo” and that it is up to Obama “to pull this plane out of its nose dive [himself].”

A quick diversion here as Krugman reminds us of how the “Reagan” economic boom was created.

Remember the economic boom of 1984, which let Ronald Reagan run on the slogan “It’s morning again in America”? Well, Reagan had absolutely nothing to do with that boom. It was, instead, the work of Paul Volcker, whom Jimmy Carter appointed as chairman of the Federal Reserve Board in 1979 (and who’s now the head of your economic advisory panel). First Volcker broke the back of inflation, at the cost of a recession that probably doomed Carter’s re-election chances in 1980. Then Volcker engineered an economic bounce-back. In effect, Reagan dressed up in a flight suit and pretended to be a hotshot economic pilot, but Volcker was the guy who actually flew the plane and landed it safely.

 And how does he believe the new president will be able to fix it? First, no more blank checks to financial institutions. We, the government of the people of the United States, require a say in what the banks do.

Conservatives will accuse you of nationalizing the financial system, and some will call you a Marxist. (It happens to me all the time.) And the truth is that you will, in a way, be engaging in temporary nationalization. But that’s OK: In the long run we don’t want the government running financial institutions, but for now we need to do whatever it takes to get credit flowing again.

And then there is the needed job creation which Krugman points out will be difficult to find shovel-ready jobs. He also recommends that Obama spend our money “on things of lasting value.”

In the section “Beyond The Crisis”, Krugman asks (maybe demands):

The biggest, most important legacy you can leave to the nation will be to give us, finally, what every other advanced nation already has: guaranteed health care for all our citizens.

In the final section “Truth & Reconciliation”, Krugman writes about environmental policy and more importantly cleaning up the foreign policy debacles of the Bush Administration.

. . . we need a full accounting. Not a witch hunt, maybe not even prosecutions, but something like the Truth and Reconciliation Commission that helped South Africa come to terms with what happened under apartheid. We need to know how America ended up fighting a war to eliminate nonexistent weapons, how torture became a routine instrument of U.S. policy, how the Justice Department became an instrument of political persecution, how brazen corruption flourished not only in Iraq, but throughout Congress and the administration. We know that these evils were not, whatever the apologists say, the result of honest error or a few bad apples: The White House created a climate in which abuse became commonplace, and in many cases probably took the lead in instigating these abuses. But it’s not enough to leave this reality in the realm of things “everybody knows” — because soon enough they’ll be denied or forgotten, and the cycle of abuse will begin again. The whole sordid tale needs to be brought out into the sunlight.

Okay, this was a long article, and, goodness, this post almost 900 words long. So, what do you think about what Krugman wrote?