The Plutocrats and the Placeholder President

*Sigh* Yes, the Democrats suck just as hard ads the Republicans do. Obama will bend over for the Republicans' bullshit 'the sky is falling' austerity and cut deep gouges out of social security and other important programs even though it's unnecessary. (Hint) just let the Bush tax cuts expire, end the wars, bring the troops home, and cut the military budget. A conventional military is outdated and unneeded in this age of warfare. Problem solved.--jef

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Austerity, Obama-Style
by ROB URIE


In Quentin Tarantino’s movie ‘Jackie Brown’ the illegal arms dealer played by Samuel L. Jackson laughs as he recounts the sales slogan used by the manufacturer of the ‘Tech Nine’ semi-automatic weapon—“the most popular gun in American crime, like they proud of that shit.” Mere weeks after Barack Obama was re-elected, farce is added to tragedy with his supporters complaining that while the Republican proposal to cut Federal government spending and social insurance programs is all bluster and misdirection, their guy (Mr. Obama) has a real plan to do so—like they’re proud of that shit. Thanks just the same folks, but I’ll take the fake plan.

The moment when the New Deal as we knew it became history by bi-partisan consensus was a long time coming. A trans-generational core of inherited wealth and right-wing cranks has been trying to undo the New Deal since Social Security became fact in 1935. Ronald Reagan echoed anti-New Deal cries of ‘socialism,’ first as a paid spokesperson of the AMA (American Medical Association) against the implementation of Medicare and Medicaid, and later through his racist caricature of the ‘welfare queen’ living fat on public largesse. Despite the fact that Social Security is an insurance program paid for by its participants, much the same as private insurance but without the executive looting, the charge has always been of an undeserving public sucking on “a milk cow with 310 million tits.”

Democrats first joined the effort in earnest with Bill Clinton’s plan to partially privatize Social Security. The idea was to let our good friends on Wall Street manage a bit of the money for us, for a fee of course. That proposal faltered when Mr. Clinton was impeached. As was the fashion in European Central Bank circles in 2009, Mr. Obama took up the torch of fiscal austerity of his own initiative by creating his very own deficit commission. This should have come as no surprise to anyone paying attention—Mr. Obama publicly stated his intention to ‘fix’ Social Security, Medicare and Medicaid when he allied himself with the Wall Street friendly ‘Hamilton Project’ in 2006.

(In Between Democrats Clinton and Obama came Republican George W. Bush who also tried to partially privatize Social Security. Mr. Bush quickly retreated when he saw the depth of political opposition to the effort. As the saying goes, it takes a Democrat to gut the New Deal).

For the uninitiated, the Hamilton Project is the demon spawn of the Clintonite contingent of the Democratic Party led by former Treasury Secretary and disgraced Citicorp Board member Robert Rubin. The kindest take on the Wall Street lootocracy populating the organization is that they don’t know how money is created (the U.S. has a fiat currency), making them morons. The less kind take is that their greed has no limits. Whichever is more applicable (neither is mutually exclusive), if one group of Wall Street politicos bears responsibility for the economic catastrophe that an unregulated Wall Street has visited upon the world in recent years, the Hamilton Project is it.

Never one to let the wish list of the entrenched plutocracy go unfulfilled, Barack Obama chose Democrat, inheritance baby and Wall Street ‘welfare queen’ Erskine Bowles, to co-head his (Mr. Obama’s) very own ‘deficit commission.’ Of course Mr. Obama knew nothing of Mr. Bowles experience leading the earlier effort to (partially) privatize Social Security when he appointed him to the position. In his speech welcoming the Hamilton Project into existence (link above), Mr. Obama additionally described himself as an enthusiastic ‘free trader’ committed to globalization. And of current relevance, he ascribed fiscal ‘discipline’ as the proximate cause of the Clinton economic ‘boom,’ deftly ignoring the greatest stock market bubble (as measured by price / earnings ratio—twice that of 1929) in human history.

One could be forgiven for believing that Mr. Obama, or any other placeholder Democrat for that matter, has something of a point regarding ‘entitlement’ spending if his words are the only that are listened to. People in the U.S. are living longer and a strapped citizenry simply cannot afford the lavish promises made in an earlier age of plenty goes the toxic bullshit. By leaving out class divisions this formulation simply furthers the shift in social resources upward from poor to rich. As economist Paul Krugman has effectively argued, the rich are living longer and the working class and poor are not. Additionally, unless those in the ‘gap’ years between the old and new eligibility ages for Medicare simply forgo health care, the change will force them to purchase private health insurance under whatever terms the ‘market’ will bear. But of course, private insurance companies always act in the public interest when people’s backs are to the wall.

At the end of the day this charade is a struggle over social resources. The ‘too-big-to-fail’ guarantee of the banks, which is the only reason why insolvent, predatory Wall Street remains in business, is an entitlement program for connected bankers—for which they pay nothing. The bloated, murderous, military industry that lobbies the U.S. into unnecessary wars for their own benefit and that of corporate welfare receiving multi-national corporations is an entitlement program. And the aforementioned corporate welfare that perpetuates the puffy, gray corporate executives behind the ‘Fix the Debt’ campaign for whom official Washington now apparently works is an entitlement program. So if we want to have a public ‘discussion’ of entitlement spending, by all means let’s do so.

And as far as entitlement programs go, government guarantees and redistribution schemes are only a starting point. As economist Dean Baker has argued, America’s professional class retains monopoly pricing power for their labor through trade restrictions while the working class has been thrown to the wolves. The Federal Reserve has spent upwards of four trillion dollars to entitle the fortunes of the investor class since 2008, returning the already rich to their former wealth. And corporate executives have entitled themselves to robber-baron sized paychecks through the combination of trade policies that have so reduced the fortunes of the working class, tax abatements that have bled the public weal for some forty years, and through the financialization of the economy that has favored, along with Federal Reserve policies, the financial wealth that executives pay themselves with. All of these and more are entitlement programs that have redistributed ever more social wealth from the working class and poor up to the Washington establishment’s beloved plutocrats.

But the trillions of dollars in health care expenditures that we deadbeats intend to sponge off of the blessedly deserving rich is the really big money, right? When Erskine Bowles wakes with night terrors, it is my herniated disk and your gall bladder operation that will sink the country, right? The U.S. pays 30% – 50% more per person than other first world nations for health care that is of substantially lower quality because we have a largely private health care system. Were the system totally public—Medicare for all, we would realize some material proportion of these savings and most likely vastly improve the health of the citizenry. Were the monopoly entitlements of doctors and pharmaceutical companies reduced or eliminated, further cost reductions would be realized. So quickly, who are the main beneficiaries of America’s ‘bloated’ entitlement programs?

As Mr. Obama will offer, his proposals include reducing payments to health care providers and negotiating lower prices for prescription drugs. However, the private health care system in America is the global leader in shifting costs to those with the least social power. Cuts in public payments to private providers have a long history of popping up elsewhere, as health insurer profits will attest. For instance, Mr. Obama’s health care ‘reform’ program, the ACA (Affordable Care Act), requires insurance companies to spend fixed percentages of their revenues providing health care or to rebate the difference to their customers. As corporations constitute the majority of their ‘customers,’ corporations apparently now have an incentive to shop around for health insurers that provide the lowest proportion of health care to their employees to maximize the rebates. (The central business of insurers was already to provide the appearance of coverage without providing actual coverage). And health insurance providers can gain market share, if at lower margins, by doing exactly this. Welcome to America.

Last, any honest discussion of ‘entitlements’ would be to the benefit of America’s poor and working classes. The globetrotting plutocrats behind current ‘discussions’ see working class product as their due. This is the very definition of entitlement. We can either disabuse them of this notion or roll over and play dead. Or better yet, roll over and vote Democrat.

The Jobs Crisis: What Did Roosevelt Do That Obama Should?

by: Martin Bennett and Richard Walker, Truthout | News Analysis

Friday 25 November 2011

The nation is experiencing the most severe economic crisis since the Great Depression. Princeton economist and former Vice Chair of the Federal Reserve, Alan Blinder, calls the current crisis a "national jobs emergency."

The "official" unemployment rate in September was 9.1 percent - nearly twice the rate a decade ago - leaving 14 million people out of work.

It's not just the financial meltdown of 2008 and the Great Recession. The American economy has been underperforming for years. Business Week calls 1999-2009 "The Lost Decade for Jobs" as private-sector employment grew by a paltry net 1.1 percent - the lowest increase for any ten-year period since the 1930s.

The original version of President Obama's increasingly embattled jobs plan aimed to provide a much-needed extension of unemployment benefits and a payroll tax cut for working Americans, but outlined only scarce measures to dent the catastrophic rate of unemployment. What we need today is a massive jobs program like the Works Progress Administration (WPA) launched by President Franklin Roosevelt. The WPA put millions of people back to work in the midst of the Great Depression, restoring their dignity, putting money in their pockets and quite literally saving lives.

The crisis is much worse than most of us think. According to the US Department of Labor, the real unemployment rate is 16.5%, when you count people whose unemployment benefits have run out and still are not working, part-time workers who want full-time jobs, and discouraged workers who have simply stopped looking. The Economic Policy Institute (EPI) reports that the number of long-term unemployed, meaning those unemployed for more than six months, hovers at a postwar record level of 45 percent. All these figures are much higher for black and Latino workers.

No one is insulated. Workers at every educational level have seen their unemployment rates double since 2007 - high school graduates, college graduates and even those with graduate degrees. The severity of the crisis has overturned conventional wisdom that higher education is a cure for joblessness. The unemployed do not need more education - they need work.

What Did Roosevelt Do That Obama Is Not Doing?

In the winter of 1933, with unemployment reaching 25 percent, Roosevelt established the Civil Works Administration, an emergency jobs program that put 4.2 million unemployed to work within six months. He also started the Civilian Conservation Corps to employ a half-million young men with minimal skills in useful work in the nation's parks, forests and rangelands. Meanwhile, Roosevelt launched the Public Works Administration, which funded long-term infrastructure projects such as highways, bridges, dams and public buildings.

The WPA followed in 1935, employing 8.5 million more between 1935 and 1943. It put those men and women to work on projects requested by state and local governments, such as roads, schools, sewers and airports, and operated local arts, educational and media programs.

Once the New Deal was launched in 1933, the US economy began to grow again by leaps and bounds - at a rate of nearly 10 percent per year. By 1937, production had doubled and the unemployment rate had dropped by half. By 1941, before the war began, the economy was back where it would have been had the Depression never happened. With the wartime build-up, mass unemployment became a distant memory.

To tackle our current unemployment crisis, the federal government should spend $500 billion a year over the next three years on emergency jobs programs like those of the New Deal. The first step would be to give every state and local government the funds to restore their budgets. The loss of 680,000 teaching, police, transit, and other public-sector jobs over the last three years has contributed measurably to the downturn.

The second step would be direct programs to create new full-time jobs for the unemployed - at the median wage of $16.27 an hour - in areas where the need is obvious: in schools (e.g., teachers, school maintenance and enrichment programs); human services (e.g., child care, home care and health care); and energy conservation (e.g., retrofitting homes and public buildings).

To this should be added a third step: financing large-scale public works programs to build schools, bridges, a "smart" electrical grid, zero-emission buses, high-speed rail, wind farms and affordable housing. The pathetic state of our national infrastructure has been decried for years by the American Society of Civil Engineers, which gives the country a D grade, and the United States ranks 32nd in the world in infrastructure, according to McKinsey Global Institute.

A substantial increase of government spending for public works will create expanded opportunity for youth, women and minority workers to enter state-certified apprenticeship programs in the construction trades and to earn a middle-class income.

How to Pay for Such a Jobs Program?

First, the federal government can run temporary deficits. While the federal deficit is relatively high at 10 percent of gross domestic product (GDP) in 2010, it is still dramatically lower than the peak of 30 percent of GDP during World War II. Contrary to popular thinking, government spending in a recession can lower the deficit by taking people off the unemployment roles and putting money in the hands of ordinary people to bolster consumer demand, which stimulates business and returns more tax revenues.

But since we are worried about the current federal deficit and the budget woes of state and local governments, we must heed investor Warren Buffett's call to "stop coddling the rich" by raising taxes on millionaires and closing corporate loopholes.

The upper 1 percent's share of national income increased from 9 percent in 1976 to 24 percent in 2007, according to a report by UC Berkeley economist Emmanuel Saez. Nearly half of total income went to the upper 10 percent in 2007, compared to 33 percent 30 years earlier. The top income tax rate on the highest earners was 70 percent between 1940 and 1980 - when the economy was performing much better than it is today - and now it is just 35 percent.

Moreover, corporate profits increased at an annual rate of $1.6 trillion in 2010 - a record for the postwar period. The Tax Policy Center reports that federal revenue from corporate taxes has dropped by half over the last 60 years, while corporations like Verizon, Bank of America and General Electric pay essentially no taxes due to loopholes in the tax code.

The Congressional Budget Office estimates that a 5.6 percent surcharge on incomes exceeding $1 million, as proposed by the Obama administration, will raise $40 billion a year. Ending the Bush-era tax cuts for the upper 2 percent, set to expire in 2012, will generate more than $80 billion a year, according to the Economic Policy Institute. Economists Robert Pollin and Dean Baker estimate that a 0.5 percent transaction tax on the transfer of stocks and securities will yield $175 billion annually from the largest financial institutions and speculators. The Center for Tax Justice calculates that federal tax revenue will increase by $365 billion a year if corporate tax loopholes and subsidies are eliminated.

Republicans oppose taxing the rich, just as they did in the 1930s. It will take popular mobilization by labor, faith, civil rights, women's and youth organizations to overcome such resistance - just as it did then. Occupy Wall Street may be the beginning of a movement for a new New Deal. Collective action worked in the 1930s and it could work again now.

How The Oligarchy Gets Politicized

A Short History of Elite Responses To Political-Economic Crisis

by ALAN NASSER

 

The performance of the US economy from the mid-1970s to the present was no match for its relatively robust performance during what  economists call the Golden Age – 1949 to 1973. This was in fact the longest period of sustained growth in US history, when most (white) working people had achieved a degree of material security unknown earlier and unattainable since. But from the late 1960s and through the 1970s economic malaise was increasingly in evidence, signaling worse to come: high rates of both inflation and unemployment  -stagflation- was not supposed to be possible in a Keynesian(1)  world, but there they were, and seemingly intractable. At the same time workers’ productivity declined dramatically. Profit rates fell steadily for more than ten years as revived Japanese and European economic competitors increasingly ate into US manufacturing’s share of both world trade and the domestic market itself.

Corporate and political elites responded with the cold bath treatment. “The standard of living of the average American,” pronounced Fed chairman Paul Volcker on Oct. 17, 1979, “has to decline. I don’t think you can escape that.”  Interest rates went through the roof. Austerity was the order of the day, and it still is.

In 1983 an analysis of US decline and the ensuing rise of Thatcher-Reaganism appeared, in the book Beyond the Waste Land, by three Harvard-based radical economists  - Sam Bowles, David M. Gordon and Thomas Weisskopf. The book received favorable reviews in many mainstream media, including The New York Times and The New York Review of Books. Reviewers included the  distinguished US economists John Kenneth Galbraith, James Tobin and Kenneth Arrow.

The authors argued that a social-political factor of great importance figured crucially in the decline of US hegemony: workers had become more secure and therefore more emboldened by Keynesian New-Deal benefits like Social Security and unemployment insurance, and the labor-friendly social programs of Lyndon Johnson’s Great Society. 

Labor’s uppityness was especially striking in the 1960s and early 1970s. There was a notable increase in labor actions, from strikes to industrial sabotage. With fewer workers worried about where the next mouthful would come from, we saw an increase in goofing off on the job, tardiness, job-switching, pressure for improved workplace safety measures and demands for higher wages and benefits. The result was a decline in productivity (output per unit of labor input) and a wage-push profit squeeze.

Most importantly, the legacy of the New Deal and the Great Society had resulted in a shift in the distribution of national income from capital to labor.

Bowles, Gordon and Weisskopf argued that with effective unions and unprecedented security, labor had achieved a degree of power over capital hitherto unknown. This analysis has been developed more recently by the economists Jonathan Goldstein and David Kotz, who show that every Golden-Age recession was generated by a wage-push profit squeeze in the preceding expansion. According to Bowles, Gordon and Weisskopf, capital did not take this sitting down. Corporate America initiated a counteroffensive which the authors called the Great Repression. Capital’s counterattack, we may say, persists to this day.

Liberal Thinking About the Politics of the Elite
Several of the most prominent liberal reviewers of Beyond the Waste Land were scandalized by the authors’ claim that capital deliberately organized active political resistance to working-class advances. In the New York Times (July 31, 1983) Peter Passell, who at the time wrote about economics for the Times’s editorial page, complained that the book exhibits an “emphasis on conspiracy.” John Kenneth Galbraith was far more insightful and dismissive of mainstream orthodoxy than liberals of a Paul Krugman or Robert Reich kidney. Yet he too could not imagine that the vested interests deliberately muster forces antithetical to working-class interests. In his otherwise generous praise for the book in The New York Review of Books (June 2, 1983) Galbraith registered a “serious complaint about the authors’ position on political power…. They see the present sorry behavior of the economy as the result of a thoughtful and deliberate exercise of corporate power.” Galbraith repudiated the authors’ “conviction that the present disaster is designed – that it reflects in a deliberate way the interest of the corporations. This I do not believe. I would attribute far more to adherence by the corporate world to outdated and irrelevant ideology, and to political leaders, not excluding the president, who do not know what damage they are accomplishing.”

It is as if acknowledging elites’ political activism gives credence to class analysis, which is thought to be too Marxian for our own good. Talk of corporate dominance of the State opens the door to unacceptably subversive reconceptualizations of matters we have been trained to understand in safer, less seditious terms. Seeing a recession as a strike of capital, for example, forces us to make the appropriate readjustments in a range of related economic and political understandings. Indeed, as Galbraith recognized, Beyond the Waste Land requires us to think and to act very differently regarding what political power is all about. It is less unsettling to imagine that “irrelevant ideology” and political ignorance lie at the heart of the current economic debacle, than it is to see the depression as the outcome of a deliberate assault on working people by the oligarchs.

These liberal objections are far less believable now than they were 28 years ago. Elites are not philosophers seeking to be guided by the most intellectually cogent theories. Political power is not about upholding this or that ideology; it is about legislating in this or that group’s interest. Political power is exercised most successfully by those whose interests are most consistently served by the exercise of State power.Cui bono? remains the best test of who matters most to the State managers. The latter govern; the former rule.

By this test only the blind fail to see that Wall Street is now running the show. The blind abound among liberal intellectuals. In his New York Times column on Nov. 23, 2009, Paul Krugman confesses that “It took me a while to puzzle this out. But the concerns Mr. Obama expressed become comprehensible if you suppose that he’s getting his views, directly or indirectly, from Wall Street.” You don’t say.

Krugman’s epiphany was available before Obama was elected. In September 2008, finance capital stepped forward, openly and unabashedly pushed aside its political representatives, and proceeded to dictate policy to the Congress and the White House. Hank Paulson demanded $700 billion for the banksters, with no strings attached: there would be no restrictions on how the handout was spent, no hearings, no Congressional debate, no expert testimony and Paulson was not to be held accountable. Obama suspended his campaign for a day to make phone calls urging Congressional Democrats to obey Paulson’s orders. His top economic advisors, his Treasury Secretary, his Fed chief, turned out to be mostly Wall-Street-linked deregulators. It was more than a year before it dawned on Krugman that Obama might be Charley McCarthy to Wall Street’s Edgar Bergen.

Elite Responses To Crisis
The political activism of the elite is striking in times of crisis, when the latter takes the form either of severe economic contraction or of working-class militancy, or both. Let’s look at the specifics.

The ruling class has attempted directly to address crisis situations in each of the three major economic downturn periods since 1823. I treat  nineteenth century American capitalism (1823-1899) as a single depression period, since over the course of sixty years it featured three steep depressions, 1837-1843, 1873-1878 and 1893-1897. Indeed, the entire period 1823-1898, excluding the Civil War, saw the nation in recession or depression more often than not. The Great Depression of the ‘30s was of course the second such period, and the years from late 2007 to the present constitute the third.

The corporate oligarchy has also responded to the New Deal/Great Society Golden Age as another crisis period, this time of a special kind. In that case the crisis was not perceived by the elite as purely economic, but as political, involving a transfer of both income and power from the wealthiest to the rest. Ruling-class mobilization ensued. The plutocrats openly “put politics in command.” Neoliberalism began to take shape.

After a brief review of the plutocrats’ responses to the depression periods and the Golden Age, I will look more closely at the stretch of time from the mid-1970s to the end of the twentieth century as a prolonged insurgency of the vested interests against regulated and relatively-worker-friendly American capitalism, and as a buildup to the current mess.

We begin with the corporate class’s first modern historical attempt to coordinate its power as a class. This was an effort initially confined to the economic sphere. Once the elite had established a private regime of market collaboration, it became clear that subsequent threats to its interests would require political mobilization. What we face now is a ruling class politically organized as never before, and with a firm grip on State power.

The Nineteenth Century: Depression Paves The Road To Corporate Organization
Railways and steel epitomized the chronic economic instability of nineteenth-century US capitalism. In each case enterprises repeatedly competed their profits away into bankruptcy or receivership. Finance capital responded by pressuring its industrial counterpart to consolidate in order to avert the perpetuation of what was very close to three quarters of a century of sustained slump.

Keynes famously described a clear instance of irrational competition: “Two masses for the dead, two pyramids are better than one; not so two railroads from London to York.” In fact, in Britain and in the US the railroad magnates had repeatedly built two or more railways from A to B, with the predictable consequences: bankruptcies proliferated. By the end of the nineteenth century the giant railway networks were the largest business enterprises in the world, yet by 1900 half of them had gone into receivership.

The financial magnate J.P. Morgan was attuned to the contribution of fratricidal competition to recurring economic downturns and, not incidentally, to the attending threat to bank profits.  He persuaded the biggest railway barons to organize. He had them form “communities of interest” to reduce destructive competition by fixing rates and/or allocating traffic between competing roads. Most of these efforts failed; invariably at least one of the companies would try to take advantage of the others’ compliance by breaking its promise.

Morgan’s response was, in retrospect, epoch-making. He implored his real-economy counterparts to consolidate as a matter of policy. Consolidation, he urged, was the most effective antidote to cutthroat-competition-induced depression and falling bank profits. Concentration was in capital’s best interests. Practicing what he preached, Morgan took control of one sixth of the nation’s largest railroads.

The steel industry exhibited a similar dynamic. The superinnovator Andrew Carnegie introduced productivity-enhancing technological improvements with uncommon frequency. His high rate of capital replacement lowered his unit costs, raised his competitors’ costs and devalorized their obsolete capital, enabling him to price-compete many of them to bankruptcy.

This left bankers like J.P. Morgan with big debtors unable to service their loans. Cutthroat competition was again rightly perceived by Morgan as contrary to the interests of capital.
Carnegie was a special nuisance to Morgan, who repeatedly implored him to slow down his innovations. When Carnegie resisted, Morgan simply bought him out and consolidated the Carnegie Steel Company with some of its weaker competitors. In 1901 Morgan’s steel behemoth became US Steel. This gave precedent and impetus to the oligopolization of major industries that was to become a hallmark of twentieth century capitalism. Cutthroat price competition was replaced with “corespective” competition, effected mainly through advertising, new products, improved technology, and organizational change.

Morgan had become the nation’s first prominent active critic of cutthroat competition. His effort consciously to limit competition was the first historical attempt of a major ruling-class activist deliberately to intervene in the dynamics of the economy in response to viral bankruptcies and depression.

Morgan’s lessons are implicitly subversive. He instructed his industrial brothers that their individual interests are best realized by action in concert. Morgan understood that the most effective agent of capitalist success is not the individual but the class. The same of course applies to anti-capitalist success. This Morgan did not discuss.

Organized capitalism was strikingly different from its nineteenth-century ancestor, with one exception. In both periods economic liberalism persisted; government regulation was almost entirely absent. The absence of regulation was a major factor in precipitating both the Great Depression and the current severe downturn.

The Great Depression: Coup d’Etat as Response to the New Deal’s Politicization of the State
J.P. Morgan’s response to crisis was to recommend to his class brothers a new form of industrial organization. The resulting reconfiguration of the private economy was accomplished with virtually no overt participation by the State, in accord with the prevailing laissez faire ideology. The notion that the State could respond to economic malfunction by active intervention  had not yet entered official thinking.

During the crisis of the 1930s the dominant orthodoxy was severely challenged. Morgan’s precedent for dealing with economic collapse generated by unbridled competition was that the Big Boys could put their own house in order by teaming up. By contrast, 1930s capital was without private, class-grown strategies adequate to the task of getting the Great Depression under control.

The seeds of the Depression had been planted in the 1920s, when the economic scene was strikingly similar to what precipitated the current downturn. Output, investment, productivity and profits rose much faster than wages. Unions were weak and inequality soared  -1928 was the then-record year for income inequality-  and working people relied heavily on debt to finance their purchase of the avalanche of newly available consumer durables. During the latter half of the decade economic growth was driven largely by credit-fueled consumption expenditures.

The unprecedented inequality that emerged from this setup widened the gap between productive capacity and effective demand and caused, beginning in 1926, a marked slowdown in the purchases of the very consumer durables   -radios, refrigeratots, toasters, automobiles-  on whose growth the health of the productive economy had become dependent. The growth rate of  manufacturing declined dramatically, and investment-seeking capital fled to speculative financial markets, ultimately inducing the crash of 1929. Sound familiar?

Reflecting on these realities, the Keynesians surrounding Roosevelt proposed the notion that the economy had reached “maturity” during the end-stage industrialization of the 1920s. All previous expansions out of downturns had been propelled by investment spending on means of production and workplaces; the nation was still industrializing. This time, and for the first time, it was different. Excess capacity abounded at the end of the decade, but not, as in the nineteenth century, as a result of serial bankruptcies. The triple blights of  inequality, over-investment and underconsumption were the culprits. With the basic industrial infrastructure now in place, and productive facilities glaringly superfluous, if the economy was to recover there had to be a resurrection of consumption demand. But the condition of the private economy ruled this out. This is what Keynes understood. His was a prescription for the economic restoration of a mature industrialized economy in the depths of a severe, sustained and self-perpetuating downturn.

The historical stage was now set for the birth of the Keynesian insight that only an agent outside the sphere of the market, and unmotivated by the quest for private profit, can restore a mature capitalist economy in deep depression. Many of FDR’s early “Brain Trust” were solid Keynesians, and the combination of their tutelage with mounting labor militancy convinced the president to initiate a major break with free-market precedent. He initiated a grand plan of public investment and government-provided jobs which not only brought about a reversal of the downward plunge of 1929-1933, but also generated the longest US cyclical expansion recorded up to that time, 1934-1938.

To the business class this seemed an unconscionably revolutionary turn. FDR’s fierce denunciation of the banksters even as he politicized the State in the name of working-class interests was viewed as an unparalleled and horrific development, a popular assault by the State on the power of Big Wealth. The logical response of the business class was not to attempt to reconfigure the private sector as Morgan had done, but to seek to capture the State, which it perceived as a greater threat to its dominance than the Depression itself. Morgan had attended to matters economic. But the emergence of a mature oligopolized form of economic organization required from the superordinates a distinctly political response.

The ruling elite proceeded in 1933 to organize a coup intended to topple the Roosevelt administration and replace it with a government modelled on the policies of Adolf Hitler and Benito Mussolini. (A 1934 Congressional committee determined that Prescott Bush, granddad of Dubya, was in communication with Hitler.) The plotters included some of the foremost members of the business class, many of them household names at the time.

Prominent insurgents included Rockefeller, Mellon, Pew, Morgan and Dupont, as well as enterprises like Remington, Anaconda, Bethlehem and Goodyear, and the owners of Bird’s Eye, Maxwell House and Heinz. About twenty four major businessmen and Wall Street financiers planned to assemble a private army of half a million men, composed largely of unemployed veterans. These troops would constitute the armed force behind the coup and defeat any resistance the in-house revolution might generate.

The revolutionaries chose Medal of Honor recipient and Marine Major General Smedley Butler to organize its armed forces. Butler was appalled by the plot and spilled the beans to journalists and to Congress. FDR nipped the thing in the bud.

The attempted coup was a landmark event in US history, baring the soul of America’s standing wealth. (We find no mention of this event in US history textbooks. History unfit to print.) We have no reason to think that these fascist instincts have been expunged from the class character of our rulers. No less important, the scandal alerts us to the elite’s Leninism, its identification of the State as the political prize of prizes, the seat of class power.

Ironically, it was Keynes who put the deliberate capture of the State on postWar capital’s agenda. 1930s Keynesianism saw the State legislating in the interests of working people, and successfully competing in the labor market with private companies. This was an explicitly politicized State functioning, in the eyes of the elite, as the executive committee of the working class.

Big capital learned a lesson of abiding importance: determining State power must be their deliberate and overriding political agenda. Siezing State power by force of arms, they had learned, is easier planned than accomplished. The final years of the Golden Age saw the captains of wealth devising a longer-term political strategy to roll back the New Deal and Great Society, and to set in place arrangements that would preclude their recurrence. This time it was to be a New Deal for capital, a State unabashedly politicized for the class that counts. These were the early formative years of neoliberalism.

The Golden Age Not So Golden For Capital
The Golden Age is distinguished by its remarkable growth rate and the unprecedented material security enjoyed by a good number of workers. But growth rates tell us nothing about how the fruits of growth are distributed. The present moment illustrates this nicely. The economy’s rate of growth has been very slow, while corporate profits and the income of the top .01% have reached record highs. Ring this up to a deliberate, policy-driven transfer of income and wealth from the rest to the richest. Distribution counts a lot for the wealthy. Their political power is a function of their wealth. If wealth and/or income is redistributed to another class, so is power. That goes down badly with rulers.

The New Deal/Great Society period saw increasing redistribution from capital to labor. The share of national income appropriated by the top 1% of households steadily declined during those years. In 1928, the most unequal year to date since 1900, the share of the top 1% stood at more than 23%; by the late 1930s it was down to 16%. It declined to 11-15% in the 1940s, to 9-11% in the 1950s and 1960s, and finally fell to its nadir of 8-9% in the 1970s.

This was the first 50-year redistribution of income from the very richest to the rest in American history. The oligarchs were to take steps to ensure that this would never happen again.

Elites saw redistribution as inherent in any State policy orientation distributing toward working people benefits which the market by itself would not produce. If you give them a little, little by little they’ll want it all. To the boys used to being in charge, Lyndon Johnson seemed to be responding to popular pressure to out-New-Deal the New Deal. The latter had given us Social Security; Johnson expanded the program to include disability payments and more. Johnson and a Democratic Congress passed new or strengthened laws, mainly around consumer and environmental issues, that cut into business profits by forcing corporations to absorb some of the costs they had previously externalized onto the rest of us.

In less than four years Congress enacted the Truth In Lending Act, the Fair Packaging and Labeling Act, the National Traffic and Motor Vehicle Safety Act, the National Gas Pipeline Safety Act, the Federal Hazardous Substances Act, the Flammable Fabrics Act, the federal Meat Inspection Act and the Child Protection Act. Whew.

Business-government relations had never before seen such an avalanche of legislation limiting the freedom of capital in the interests of working people.

Between 1964 and 1968 Congress passed 226 of 252 worker-friendly bills into law. Federal funds transferred to the poor increased from $9.9 billion in 1960 to $30 billion in 1968. One million workers received job training from these bills and 2 million children were enrolled in pre-school Head Start programs by 1968.

What made all this especially unnerving in the eyes of Big Wealth was that even the Republicans seemed to have swallowed the redistributionist line. Richard Nixon announced in 1971 “I am now a Keynesian in economics” (not “We are all Keynesians now”, as the remark is usually misquoted). Nixon was in fact a bigger domestic non-military spender than Johnson. During his first term in office Congress enacted a major tax reform bill, the Environmental Protection Agency along with four major environmental laws, the Occupational Safety and Health Administration and the Consumer Products Safety Commission.

The combination of regulation and redistribution left  the working class as materially secure as it had ever been, and more inclined to feel its oats. When the economy began to approach full employment, toward the peak of a Golden-Age expansion, workers’ slacking off, tardiness, job switching and general militancy increased. The US topped the OECD’s table in strikes per worker in 1954, 1955, 1959, 1960, 1967 and 1970.

This did not go unnoticed by business. Commenting on the causes of the 1970-1971 recession following the long expansion of the 1960s, a front-page Wall Street Journal article (January 26, 1972) noted that:

‘Many manufacturing executives have openly complained in recent years that too much control had passed from management to labor. With sales lagging and competition mounting, they feel safer in attempting to restore what they call “balance”.’

It’s hard to overestimate the impact of  new regulations, redistribution and labor militancy on business. Regulations are a class thing, and we shall see how they inspired the regulated to respond in self-defense as a class. We might begin by contrasting neoliberal anti-Keynesianism with the standard postwar efforts of business to influence government.

To the extent that business sought to mobilize before neoliberalism, its tactics were fragmented and limited in scope. The airline industry would lobby the Civil Aeronautics Board and/or bribe a favorite senator (e.g. Washington state’s Scoop Jackson, the “Senator from Boeing”), steel companies would lean on Congress for protectionist legislation, energy producers got tax breaks from their congressional favorite, and firms would target trade organizations. Much of this was done through personal contacts. Individual firms and specific industries had their own strategies; there was no cross-sectoral means of resistance to threats to business as a whole. But it is the nature of regulations to pose just such threats by affecting many industries at once. It is no surprise, then, that business should respond with a call for a new form of class mobilization, an all-business attempt to secure State power by political means less dramatic, though no less effective, than an out-and-out coup.

The Counterrevolt of Capital: The Legacy of the Powell Memo
Toward the end of the nineteenth century Morgan had urged industrial capital to organize itself within the private sector. During the Great Depression big capital galvanized its energies politically, in a coup attempt to sieze State power. The next major effort by business to coordinate and mobilize itself was also a political action, again aimed at control of the State apparatus, but this time with a strategy of methodical long-term class warfare.
In 1971 future Supreme Court justice Lewis Powell distributed among business circles a memo intended to politicize the captains of industry in resistance to the legacy of the New Deal and Great Society. The memo reads like a neoliberal instruction booklet:

“[the]American economic system is under broad attack. Business must learn the lesson…that political power is necessary; that such power must be assiduously cultivated; and that when necessary, it must be used aggressively and with determination – without embarrassment and without the reluctance which has been so characteristic of American business…. Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”

In their remarkable book Winner-Take-All Politics, political scientists Jacob Hacker and Paul Pierson describe the organizational counterattack of business as “a domestic version of Shock and Awe.” The accomplishments are impressive:

“The number of corporations with public affairs offices in Washington grew from 100 in 1968 to to over 500 in 1978. In 1971, only 175 firms had registered lobbyists in Washington, but by 1982, nearly 2,500 did. The number of corporate PACs increased from under 300 in 1976 to over 1,200 by the middle of 1980. On every dimension of corporate political activity, the numbers reveal a dramatic rapid mobilization of business resources in the mid-1970s.”

This period also saw the birth of militant mega-organizations representing both big and small business. In 1972 the Business Roundtable was formed, its membership restricted to top corporate CEOs. By 1977 the Roundtable’s membership included the CEOs of 113 of the top Fortune 200 companies. The chairman of both the Roundtable and Exxon in the early Reagan years, Clifton Garvin remarked “The Roundtable tries to work with whichever political party is in power… as a group the Roundtable works with every administration to the degree they let us.”

The Conference Board further sharpened capital’s political focus by gathering leading executive especially well positioned to personally contact key legislators. The Board developed an ingenious agenda: to learn the tactics of public interest groups and organized labor in order to subvert the agenda of those very groups.

The Roundtable and the Board lobbied and established ongoing relationships with Congressional staffs. Organizations representing smaller firms also grew rapidly in the 1970s. With higher unit costs and no oligopoly pricing power to offset the administrative costs of regulation, these firms were highly motivated to mobilize. The Chamber of Commerce and the National Federation of Independent Businesses doubled their membership, with the now very effective Chamber tripling its budget.

It was during this period that the corporate presence on the Hill became conspicuously ubiquitous. While business had always been disproportionately represented in DC, never before had the chambers of legislation seen such thoroughgoing corporatization.

Corporate strategy was not merely a matter of bribing top politicos. The biggest organizations had learned their lessons well from their antagonists, the public interest groups pressing the popular demand for regulation, and organized labor. The business counterrevolt mimicked the strategies of those groups. Corporate groups used their ample resources, including sophisticated marketing and communications techniques, to organize mass campaigns composed of a heterogenous grouping of shareholders, local companies, employees and mutually dependent firms like retailers and suppliers. Washington would be deluged with phone calls, petitions and letters pushing business interests.

In short order elites surpassed both public-service organizations and organized labor in what they had done best, bottom-up organizing.

Within ten years the corporate takeover was well established. In the 1980s corporate PACs shelled out five times as much money to congressional campaigners as they had put out in the 1970s.

The agenda of the political infrastructure of rallied capital was to undo those policies and State priorities which had generated the redistribution and labor activism limiting the freedom of capital and enhancing the power of workers for almost three decades. In sum, the legacy of the New Deal and Great Society had to be undone. But these were political-economic projects which required ongoing bolstering by the State if they were to be kept effective. Mobilized capital had to capture the State and render it inoperative for proletarian purposes. The State had to be as explicitly reconstituted as a capitalists’ State as the elite perceived it to have been hitherto rigged for workers and against the Big Boys. This required the functional equivalent of a coup.

And a coup there was. Simon Johnson, former chief economist of the International Monetary Fund, wrote in one of the nation’s major weeklies of the “the reemergence of an American financial oligarchy” in “The Quiet Coup”, The Atlantic (May 2009). Johnson made it clear that his use of “coup” was not intended as a rhetorical flourish or a metaphor. Finance capital had effectively privatized the State. Neoliberalism had succeeded not merely in guaranteeing permanently reactionary governments, it had captured the State itself. Previously, a change in government  -e.g. from the Eisenhower to the Kennedy administration- might mean a significant change in domestic policy within the context of an abiding Keynesian State. Neoliberalism has sought to change the fundamental priorities of the State.

Mission Accomplished: The Privatized Neoliberal State
All of the major developed capitalist countries have deindustrialized over the past thirty years. The industrial capacity of the West is overripe, and widget production has accounted for a declining share of total output, total employment and total profits in these once-democracies. FIRE’s shares have correspondingly risen, and its top dogs now rule the roost and call the global shots. This has gone hand in hand with a string of financial crises.(2) This setup requires much more, not less, State implication in economic life.

To bail out or not to bail out – and who is to be rescued at whose expense? How is manufacturing to thrive in the current climate of intensified competition among deindustrialized developed countries, with the emerging markets poised to enter the fray?

The present answers to these questions are clear. The financial elite get everything while manufacturing is “restructured” as a low wage sector targeting the world’s fastest growing markets, which are not to be found in the imperial metropoles. Unemployment rates are to be kept high until the wage level drops low enough to render the US an effective competitor in global markets. None of this could begin to get off the ground without massive State collusion with corporate interests. The financial bailout and Obama’s restructuring of the auto industry are but the most conspicuous of many examples. The new State is to become  -has become?-  a capitalist State not in the trivial sense of the State of a capitalist country, but as a State unambiguously by and for Big Wealth.

Putting the Class Character of the State on the Political Agenda
The government is not the same as the State. The governmental alternatives -Republican or Democrat- within the context of an anti-Keynesian neoliberal State must be so limited as to count as no alternatives at all. That there is not a dime’s worth of difference between the Parties is what we should expect, given the dismantling of the State’s postwar social functions. If the remnants of the New Deal and Great Society are regarded by the State managers as “the old time religion”, as Obama characterized them in The Audacity of Hope, then the policy alternatives must be, from the perspective of working-class interests, piddling, and the pseudo-squabbles between the Parties inconsequential.

The historical unfolding of American capitalism has put the class character of the State squarely on the political agenda. It has been the plutocracy’s top priority for a long time. It is clearer to more Americans than ever that the entire political establishment is unprepared and unwilling to manage the economy and the State in the interests of working people. The ruling-class concerns of the neoliberal State homogenizes policy options and renders standard Party politics otiose and obsolete. An effective Left political program must make available to its constituency a radically revised conception of what it means to do politics. No less important is the forging of a political practice which compellingly incarnates that radical reconception. An independent OWS is just what such a practice would look like in its embryonic stages. Very much hinges on how that movement develops.

Notes.
(1) References to Keynesian policy require the reminder that Keynes encouraged economic policy far more radical than what the New Deal and Great Society offered. Perhaps the most neglected Keynesian prescription is his insistence that fiscal policy and government employment are not tools confined to recessions. Keynes held that full employment required ongoing targeted government stimulus, even during cyclical upturns.

(2) Savings and loans (early 1980s), Mexican debt crisis (1982), Mexican peso crash (1994, one year after the passage of NAFTA), Asian Financial Crisis (1997), Russian devaluation and default (1998), Argentina’s eebt crisis (2001), Enron (2001), Worldcom (2002), the hi-tech, dot.com bubbles of the late 1990s and the present turmoil, unparalleled of its kind in the history of capitalism.

One View of the American Crisis

Sunday, April 17, 2011 by Consortium News
by Robert Parry
Some readers tell me that I devote too much time to the historical context of the American political/media crisis. They say I should focus more on its current manifestations, especially when there are so many to address. And these readers have a point.

However, I think that without the context – and without understanding how the various U.S. political/media forces evolved over the past several decades – much of what is happening today doesn’t make sense, nor are the solutions readily apparent.

Only by analyzing how the country got into its current mess can there be any hope of figuring a way out. In that sense, this history is like the thread that the Greek hero Theseus unrolled as he made his way through the Minotaur’s maze and then rewound the thread to guide himself out.

So, from my six-plus decades on this planet and my three-plus decades as a Washington-based journalist, here is my ground-level view of what has happened to the United States:

Generally speaking – and with a number of glaring exceptions – the post-World War II period was a time when the institutions of the Republic functioned along the lines of what we learned in our public school civics classes.

The federal government drew from the lessons of the Great Depression and the New Deal to improve the country’s general welfare by creating conditions that helped expand the middle class.

After World War II, government programs helped veterans buy homes and get educated. Construction projects, like President Dwight Eisenhower’s Interstate Highway System, brought the country together and increased productivity.

President John Kennedy’s space program pushed the scientific frontiers, propelling the United States into the world lead in computer technology. President Lyndon Johnson enacted Medicare for senior citizens whose health needs were being ignored by for-profit insurance companies.

In the 1950s and 1960s, the federal courts also began to address the shameful history of racial segregation, as a violation of the U.S. Constitution and particularly the 14th Amendment’s mandate for equal protection under the law. As the civil rights movement pressed the issue in the streets, the courts began striking down Jim Crow laws and other forms of discrimination.

In the 1960s and well into the 1970s, the U.S. press corps also functioned closer to its ideals of skepticism toward power. Correspondents covering the Vietnam War warned the nation of the folly, and the New York Times and other newspapers braved the wrath of President Richard Nixon by publishing the Pentagon Papers, with the backing of the U.S. Supreme Court.

When Nixon’s anger over the Pentagon Papers spilled into his political paranoia, the White House “plumbers” were soon planting bugs in Democratic headquarters at the Watergate. After Nixon’s burglars were arrested and the President mounted a cover-up, the Washington Post led the way in defying White House power and exposing the scandal.

With Congress conducting serious Watergate investigations and federal prosecutors demanding Nixon’s internal tapes of his own conspiracy, the Supreme Court again sided with the institutions of justice, rejecting Nixon’s arguments of an imperial presidency. Nixon was forced to resign.

Functioning Institutions

So, by the mid-1970s, it could be said that the institutions of the Republic were operating, more or less, as intended. There were real checks and balances. The rights of citizens, especially racial minorities and women, were finally being protected; the press was exposing wrongdoing; accountability was imposed on the Executive for constitutional and legal violations.

Of course, these institutions had been pushed by popular movements, millions of citizens demanding redress of longstanding grievances. There was also a vibrant “underground press” and other outlets for disseminating information when the mainstream media didn’t. It was Dispatch News that exposed the My Lai massacre and Ramparts that revealed CIA penetration of student groups.

Yet, while this progress toward a more perfect union made undeniable headway in the 1950s, 1960s and 1970s, the changes also bred resentment in the South and in many white areas of the North.

The demand for racial justice was viewed as infringing on traditions of white preference and superiority. Many men objected to the women’s movement, too. Meanwhile, social conservatives hated the “counter-culture” and the sexual revolution.

As early as the 1950s, the pushback from the Right was evident in calls for the impeachment of Chief Justice Earl Warren and the physical assaults on blacks seeking to integrate schools, lunch counters and other public institutions. White segregationists denounced the press as “liberal” for its coverage of the civil rights struggle. The federal government was viewed as infringing on states’ rights.

The resistance grew in the 1960s as Alabama Gov. George Wallace and other right-wingers rallied blue-collar whites against “hippies,” feminists, “uppity” blacks, academics, environmentalists and “unpatriotic” journalists. These Americans saw their traditional way of life under siege, and they were backed by wealthy businessmen who worried that their dominance of the economy might be threatened.

Though the Right decried the national press corps as “liberal,” it actually was run by businessmen who were mostly conservative and protective of the establishment. Many top news executives chafed against the era’s progressivism and the anti-establishment tone of reporters as much as other businessmen did.

By the 1970s, the American Great Backlash was gaining strength. Well-placed conservatives, such as Lewis Powell (who later became a Supreme Court justice) and William Simon (who was Nixon’s Treasury Secretary), were calling for massive investments in a right-wing infrastructure of media, think tanks and attack groups to reverse the nation’s progressive trends.

Simultaneously, as the Vietnam War was winding down, the Left largely dismantled its own media infrastructure that had become a powerful grassroots force in the 1960s and early 1970s but was deemed too expensive.

In a short time, the vibrant “underground press” of the Vietnam era disappeared; flagship publications, like Ramparts and Dispatch News, were closed; popular radio outlets, like WBCN in Boston, were bought up by media conglomerates; key liberal outlets, like The New Republic, fell into the hands of neoconservatives.

Much of the Left bought into the notions that media was not essential; that working inside the Washington system was corrupting; and that “local organizing” was the key to the future. Other leftists fell victim to the vanity of perfectionism, putting their own political purity ahead of any practical idea for improving the lives of average citizens.

Competing Trends

So, in the mid-to-late 1970s as the Right was shifting its focus to national battles and investing more and more in getting its messages out to every corner of the country, the Left was dismantling its media, decamping from Washington, and dreaming that somehow “organizing” around local issues would create a grassroots movement for revolutionary change.

These two trends – the rise of the Right’s national propaganda machine and the collapse of the Left’s ability to reach the broad public – consolidated with the election of Ronald Reagan in 1980. Though now viewed through the gauzy mythology that surrounds his legacy, the real Reagan was a rigid right-winger who had opposed many of the social advancements of the era.

Reagan denounced Medicare as socialist tyranny; he cracked down on the anti-war movement while governor of California; he aided and abetted right-wing death squads in Latin America; he opposed environmentalism and other government regulations; he worked to roll back civil rights, especially affirmative action aimed at ameliorating the legacy of discrimination against minorities and women.

Upon taking office in 1981, with the Senate under Republican control, Reagan and his team began systematically deconstructing the institutional safeguards that had defined the New Deal and post-World War II-era.

The Reagan administration took special aim at the federal appeals courts, especially the most influential one in the District of Columbia, installing right-wing and neocon ideologues as judges, the likes of Laurence Silberman. Reagan also appointed environmental “regulators” who detested regulations and civil rights attorneys who opposed efforts to improve the lot of blacks and other minorities.

Reagan emphasized, too, expanding the Right’s propaganda capabilities, coordinating with the growing network of right-wing media and attack groups that went after troublesome journalists and intimidated political critics.

Meanwhile, without the competitive pressure from the “underground press,” the mainstream media charted its own rightward course following the prevailing winds, often with a conservative or neoconservative at the helm.

At the Associated Press, where I worked, the top executive, general manager Keith Fuller, hailed Reagan’s election in 1980 as a worthy repudiation of the excesses of the 1960s:

“As we look back on the turbulent Sixties, we shudder with the memory of a time that seemed to tear at the very sinews of this country,” Fuller said during a 1982 speech in Worcester, Massachusetts, adding that Reagan’s election had represented a nation “crying, ‘Enough.’ …

“We don’t believe that the union of Adam and Bruce is really the same as Adam and Eve in the eyes of Creation. We don’t believe that people should cash welfare checks and spend them on booze and narcotics. We don’t really believe that a simple prayer or a pledge of allegiance is against the national interest in the classroom.

“We’re sick of your social engineering. We’re fed up with your tolerance of crime, drugs and pornography. But most of all, we’re sick of your self-perpetuating, burdening bureaucracy weighing ever more heavily on our backs.”

Fuller’s sentiments were common in the executive suites of major news organizations, where Reagan’s reassertion of an aggressive U.S. foreign policy also was widely welcomed.

At the New York Times, executive editor Abe Rosenthal, an early neocon, vowed to steer his newspaper back “to the center,” by which he meant to the right. At the Washington Post, neocons also began asserting control over the editorial policies of that newspaper.

Losing the Thread

In short order, the institutions of the Republic, which had checked Nixon’s crimes, ceased to function in that way. Instead, the institutions reversed roles, becoming cheerleaders – and enforcers – for the powerful.

The “professionals” of Official Washington quickly sniffed the change in the air. Many learned to survive by honing their senses on where the safe boundaries were. Those who didn’t or wouldn’t go along – ethical journalists, diligent civil servants and some independent-minded members of Congress – soon found themselves on the outs.

Yet, even as the nation’s institutions stopped providing meaningful checks and balances in the 1980s, some individuals continued to do their jobs.

During much of the decade, the failure of the Republic’s institutions was masked somewhat by the fact that some individuals stepped into the breach. There were still a few courageous investigators on Capitol Hill; a handful of journalists who would risk their careers to get out important stories; and some civil servants who believed in doing their jobs honestly.

Perhaps the most striking case of this was the work of Iran-Contra special prosecutor Lawrence Walsh, a traditional Republican conservative who nevertheless took seriously his responsibility to investigate the Reagan administration’s worst scandal, the secret sale of weapons to Iran and the diversion of profits to the Nicaraguan Contra rebels.

Despite Walsh’s establishment pedigree, Official Washington turned on him en masse. Especially after he broke through the Iran-Contra cover-up in 1991, he was subjected to withering attack – from leading Republicans, such as Sen. Bob Dole, and from the right-wing news media led by Rev. Sun Myung Moon’s Washington Times.

But Walsh also faced ridicule from the mainstream news media, such as the Washington Post where he was mocked as some crazed Ahab pursuing a white whale or as some out-of-control weirdo who would leave Washington a “perceived loser.”

Indeed, by the early-to-mid-1990s, there was little distinction between the mainstream news media and the right-wing press. Even when documented evidence emerged shedding light on the criminality of Reagan and his team, there were no institutions – and by then few individuals left within those institutions – daring to take note.

First the institutions failed; then the individuals who had dared to fight on disappeared.

Planting a Flag

It became clear to me that trying to get the mainstream news media to publish important information was a losing battle if that information went against the grain of right-wing orthodoxy or mainstream conventional wisdom.

In fact, I had grown tired of trying to convince editors and producers who feared losing their jobs that they had a responsibility to take on such stories and such risks. Beyond exhaustion, I felt guilt when I looked into their eyes and saw how scared they had become, a fear that would sometimes translate into anger at even the suggestion.

My reaction to this grim reality was to look for a place where the flag of honest journalism could be planted and defended. I thought I might have found such a spot with the emergence of the Internet and our creation of the Consortiumnews.com Web site in 1995.

Of course, the downside was that the journalism would not have the large audiences that my work did when I was at the AP or Newsweek or PBS “Frontline.” But I thought readership might grow significantly if I were able to raise the necessary money to ensure that our stories got more attention.

That, however, proved more difficult than I had expected. Wealthy progressives remained locked into the thinking of the late 1970s, which held that expenditures on information were wasteful; that reporting the news was somebody else’s job. Maybe they believed – or wanted to believe – the Right’s propaganda about the “liberal” media that, in reality, didn’t exist.

Instead, they favored either direct giving (such as helping the poor or buying up endangered wetlands) or support for "organizing" efforts (such as seeking some regulatory change, like curbing money in politics).

I argued instead that the scarce money available should be invested in creating honest content and courageous outlets.

While direct giving was surely noble, it ignored the power of the Right’s propaganda machine to undermine any worthy cause. By destroying the New Deal and Great Society, right-wing legislators could create more poor people than any well-intentioned liberal benefactor could feed and house.

Regulation, like restricting money in politics, also might sound good but was either impractical or easily reversible by right-wing judges and politicians. All the money that progressive foundations invested in campaign finance reform was negated in 2010 by one 5-4 decision of a Supreme Court dominated by appointees of Ronald Reagan, George H.W. Bush and George W. Bush.


The hard truth is that there are no shortcuts to correcting the imbalance that now exists in the U.S. political/media system. It will take money, time and energy to build an infrastructure that can successfully challenge the propaganda from the Right. It will also require many on the Left to admit that their judgments over the past three decades have been faulty.

But the consequences of the Right’s strategy – and the Left’s miscalculations – are apparent in the audacity of today’s congressional and statehouse Republicans in proposing the virtual repeal of Lyndon Johnson’s Great Society, Franklin Roosevelt’s New Deal and even Teddy Roosevelt’s progressive era.

The Right feels it is strong enough to impose its Ayn Rand vision of a winner-take-all society and deploy its vast resources to prevail on Election Day.

It is possible that the Republicans have overreached this time, with their ambitious agenda of slashing domestic spending, replacing Medicare with a voucher system, and lavishing more tax reductions on the rich.

But the fact that the Republicans and the Right would even dare undertake such a radical approach is itself proof of how far they believe they have come in controlling government institutions and media outlets, how successfully they have negated the Republic's checks and balances.

To find a route out of this political/media maze, the Democrats and the Left may have to start rewinding the string of history and retracing the steps that got them so lost in the first place.