Despite Middle Finger Mary and a few others, respondents seem more interested in economics than politics, so I'll head back in that direction - more specifically towards inflation and the possibility of a second price revolution. Indeed, perhaps I should say economic history as opposed to economics.

My subject matter in this week guest chair -- "financialization" -- had its genesis when I used that word in my 1993 book Boiling Point: Democrats, Republicans and the Decline of Middle Class Prosperity. I had thought I used it first in a 1994 book, Arrogant Capital: Washington, Wall Street and the Frustration of American Politics. But when I Googled the term, Boiling Point was credited. Some time this month, the financialization sections of Boiling Point, Arrogant Capital and Wealth and Democracy (2002) will be scanned onto the Bad Money website (Bad-Money.com). Those interested can trace the crystallizing perception of the phenomenon and its dangers.

Read more »

I do agree with Paul Krugman's view that the crisis is one of insolvency, not liquidity, also describable as one of impossibility to value assets rather than liquidity. Yes as well to William Black's analysis voiced on Moyers that Obama is continuing the failed approach of the Bush bail-out. Let me add that I agree with the Congressional Oversight group's Tuesday contention that failed banks should be liquidated and some, at least, of the failed bank top executives fired. Lastly, I would agree that Sheila Bair, another hold-over from the Bush-Paulson bailout, is jeopardizing the FDIC by her own rising taste for grandiosity.

Now let me turn to the politics raised by a few respondents. In the new sections added to this post-election edition of Bad Money, I allocated the financialization - or bubble and bail-out -- political blame over the last quarter century as 70% Republican, 30% Democrat. The 30% mostly came from Clinton - from Bob Rubin, Larry Summers, Geithner et al. This allocation was as of of Obama's inauguration in January. As of April 8, I would increase the Democratic party's national culpability quotient to 34% and drop the GOP to 66% based on the first seventy days of the Obama administration and the new president's perpetuation of a failing and miscalculated bail-out.

My own November vote was cast for Obama in considerable measure because of revulsion with the bail-out and the coddling of Wall Street. So I am not a happy watcher. But let me try to put Obama's continuation of this approach in historical and 2010 midterm election context.

Read more »

Thirty to forty years ago, the early fruits of financialization in this country - the first credit cards, retirement accounts , money market funds and ATM machines - struck most Americans as a convenience and boon. The savings and loan implosion and junk bonds of the 1980s switched on some yellow warning lights, and the tech bubble and market mania of the nineties flashed some red ones. But neither Wall Street nor Washington stopped or even slowed down.

In August, 2007, the housing-linked crisis of the credit markets predicted the arriving disaster-stage, the Crash of September-November 2008 confirmed the debacle, and now an angry, fearful citizenry awaits a further unfolding. There is probably no need to fear a second coming of nineteen-thirties Depression economics. This is not the same thing; the day-to-day pain shouldn't be as severe.

Read more »

It's been a great week at TPM. My final post will focus on a few more issues for President Obama and attorney general-designate Eric Holder, as well as some closing words on my 1960s experience in the context of our current moment.

President Obama has enough on his plate that needs urgent attention without adding more. So does attorney general-designate Holder. But there are two areas that cry out for attention even if they do not appear to have the urgency of other issues: political contributions and reform of the criminal justice system. The President need not take substantive positions on these issues right away, but both are ripe for independent bipartisan commissions to examine. Obama can then make his own independent decisions in the light of what an informed bipartisan group concludes.

I think it is obvious that elected officials' dependence on money to run elections makes difficult their independent judgment on policy. Repeated attempts to resolve the problem through legislation have been, at best, watered-down versions of what is necessary. The money that lobbyists earn and contribute is evidence of the importance to business of government laws and regulations, and it is proper that interests be heard. But accompanying argument with money does not improve the chance of rational resolution. Serious conflicts of interest abound, affecting the confidence the general public has in the integrity of both elected and appointed officials.

(Note: Nick Katzenbach is the author of the new book Some of It Was Fun: Working with RFK and LBJ.)

Read more »

When Bobby Kennedy became Attorney General he inherited a sound department with an apolitical law enforcement tradition. His relationship with the president gave the department additional prestige and influence when it came to law. His only management problem was with J. Edgar Hoover's FBI, serious in its right wing obsession with communism and its dislike of Dr. King and black demonstrators. Attorney general-designate Eric Holder has quite different problems, the most serious of which are restoring the constitution and law to government and eliminating any remnants of politicization in the department itself. The latter will take time, but he will have the support of the bulk of the attorneys in the civil service and he can make sure that new appointments are on the merits. Bobby was always concerned that the process of appointing U.S. Attorneys, which involved a recommendation from the Democratic political leadership in the relevant state, exposed the President and the department to local politics. Young politically ambitious prosecutors with an obligation to their Senator could easily begin political investigations into alleged Republican corruption. This was, of course, the opposite of recent problems where such activity was encouraged, but it could have easily looked the same to the public. Bobby brought all potential appointees to Washington and told them in no uncertain terms that he had to be informed and approve any such investigations before they were authorized.

(Note: Nick Katzenbach is the author of the new book Some of It Was Fun: Working with RFK and LBJ.)

Read more »

There are huge differences between the government Kennedy took over in 1961 and that Obama takes over in 2009. Kennedy took over a relatively stable and prosperous government with respect abroad. Obama takes over a failed economy, a badly divided electorate, and distrust of America in many countries. But there are similarities as well. The New Frontier was full of government officials who wanted to get America moving again--a reaction, not entirely justified, to what they saw as passivity under Eisenhower.

Young veterans, in particular, felt this country could do anything when it pulled together, and those of us in government--and beyond it--wanted new initiatives in many areas not unlike Obama's plea for change. The concept of the New Frontier was an expression of America's ability to overcome and resolve problems and to move ahead into uncharted territory with confidence. Taking up the Soviet challenge in space by promising to put a man on the moon was another expression of confidence in the country, a goal that made Americans feel proud of themselves. Most important, young people were excited by the possibilities of a better world then as they are today.

Hope and confidence that a rational pragmatic approach can find better solutions is hugely important. The risk is always that it will crash against the realities of politics. The key to leadership in our democracy is to keep those hopes alive while avoiding the briar patch of political necessity. For any administration, there will be some issues in which the desire for change at times clashes with and at times is advanced by that rational pragmatic approach. In Kennedy's presidency, one of those areas was civil rights.

(Note: Nick Katzenbach is the author of the new book Some of It Was Fun: Working with RFK and LBJ.)

Read more »

It didn't take long to feel comfortable working with Bobby. He listened well and he asked good questions. It couldn't have been easy for him to have surrounded himself with lawyers all slightly his senior and all with professional qualifications far superior to his. He embraced an interesting technique for asserting his leadership: he treated us as a team in which all of us had the same objectives. It was easy to have tension between the criminal division and the tax division, particularly in organized crime matters where the criminal division wanted to see confidential tax returns and the tax division did not see evidence of a criminal tax offense, but Bobby simply assumed that we would work together. Burke Marshall was a superb head of the civil rights division, but that did not mean that the rest of us might not have something useful to contribute. And so forth.

Bobby avoided serious controversy by using his team concept. All of us would be invited to his beautiful estate at Hickory Hill and have candid discussions about our own and others' problems. Differences became mooted and lawyers became teammates, not advocates seeking to protect their own territory. Bobby promoted this further by simply saying "Hey, you guys are all better lawyers than I am but I'm the Attorney General and I have to make the decision. So help me out." We respected each other's views and we genuinely wanted to help Bobby come to the right decision.

(Note: Nick Katzenbach is the author of the new book Some of It Was Fun: Working with RFK and LBJ.)

Read more »

It's good to be at TPMCafe, and I'm looking forward to discussing some of my 1960s experiences as deputy attorney general in Bobby Kennedy's Justice Department and attorney general and undersecretary of state in Lyndon Johnson's Justice and State Departments. (For intrepid readers interested in more, I go into further detail in my new book Some of It Was Fun: Working with RFK and LBJ.) The challenges we faced were difficult and important--civil rights, the Cold War, equal opportunities for women, the potential of the developing world. Today President Obama faces even more difficult problems. Some are similar; many are different. But although Bobby said as early as 1961 that "In the next thirty or forty years a Negro can also achieve the same position that my brother has as President of the United States," I can tell you most people in the 1960s never seriously thought that the problems of the United States in 2009 would be faced and, I think, resolved, by a black president. Certainly, that is progress. Nor do I think that when I confronted George Wallace to get Vivian Malone admitted to the University of Alabama anyone imagined that her brother in law, Eric Holder, would be attorney general of the United States for its first black president.

But I'm getting ahead of myself. I want to describe some of my experiences back then which I think may have some relevance today.

Read more »

My previous posts this week have focused on the difficulties and injustices faced by millions of American workers--wage stagnation, growing income inequality, managers treating their employees in shockingly callous ways. (It's all part of the systematic squeeze that I describe in my new book, The Big Squeeze: Tough Times for the American Worker. See stevengreenhouse.com)

It's July Fourth--and I'm feeling patriotic--so today I will focus on some of what's good in America. Some corporations do not just a good job, but a great job, in how they treat those workers, and I want to focus on some of these stellar employers because we can all learn from them and because they should serve as models for all of corporate America.

The casino-hotels of Las Vegas sponsor an amazing, no-tuition training program in which a $22,000-a-year busboy can train to become a $50,000 a year waiter and even a $75,000 a year sommelier. Each year Patagonia, the outdoors apparel company, gives 40 employees two-month paid leaves to work for the environmental organization of their choice. With its headquarters 150 yards from the Pacific, Patagonia happily allows its employees to go surfing for two-and-a-half hours at lunch time, so long as they get the job done.

Read more »

During the 2000 campaign, George W. Bush and many conservative commentators attacked Al Gore for engaging in "class warfare" after Gore promised to help the little guy and criticized Bush for favoring the rich. Four years later, the Republicans, using a page from the same playbook, attacked John Kerry and John Edwards for being populist class warriors because of their talk of Two Americas.

In this year's campaign, there's a big difference, at least so far. John Edwards, Hillary Clinton and Barack Obama have all used robustly populist language about the problems facing America's have-nots, but this year the attacks for engaging in class warfare have largely disappeared.

The reason for this may well be that the news media, political commentators and even many Republicans have come to recognize that income inequality has grown far worse and that many Americans are angry about the widening gap between those at the top and everyone else.

Read more »

My 22-year-old daughter graduated from college in May, and I'm worried about her as she enters the workforce--actually I'm worried about her whole generation as it enters the workforce. Many young people don't realize that they face a far less friendly workplace than when my generation entered the workforce in the 1970s.

To tell the truth, when I began researching my book, The Big Squeeze, Tough Times for the American Worker, I wasn't planning a separate chapter on the nation's young workers--by that I mean, workers under age 35, and especially young Americans who have recently entered the workforce. But as I proceeded with my research, I was surprised and chagrined to learn how tough things have grown for young workers--and that was before the current economic downturn. As a result, I added a chapter, "Starting Out Means a Steeper Climb."

Read more »

Soccer moms step aside. In this year's campaign working-class voters have elbowed you aside as the demographic group that candidates covet most.

As Barack Obama and John McCain seek to outmaneuver each other in wooing John and Jane Punchclock, the question that leaps to the fore is, what do working-class voters want?

Some answers to that question became clear to me when I was interviewing hundreds of workers for my new book, The Big Squeeze: Tough Times for the American Worker. (see www.stevengreenhouse.com) In many ways, working-class voters want what Harry Truman was promising: A Fair Deal, or at least a Fairer Deal.

Read more »

What ever happened to the golden rule?

That's what I often asked myself as I was researching my new book, The Big Squeeze: Tough Times for the American Worker. I often felt amazed, even appalled by the way many corporate managers treated their workers. It's understandable that corporate managers have grown tougher in recent decades because foreign competition and Wall Street have placed ever-fiercer pressures on companies to cut costs. But that hardly explains why so many managers seem to have grown downright callous and why so many treat their workers with a shocking lack of dignity.

Unfortunately, I found a disconcertingly large number of real-life examples to draw from as I was writing The Big Squeeze (for more information, see www.stevengreenhouse.com), which seeks to explain the tough times that millions of American workers--white-collar and blue-collar, male and female, twenty-somethings and fifty-somethings--face as wages have stagnated, health and pension benefits have grown worse, job security has shriveled, and many workers have been pressured to work harder and faster.

One company fired a computer engineer on Take Your Daughters to Work Day as his eight-year-old daughter looked on. At Electronic Arts, the video games giant, some employees complained that they were required to work 30 days a month, 80 hours a week.

Read more »

Anyone who has been following my posts in the past few days will have surmised that Unequal Democracy is a rather pessimistic book. But I've saved the most pessimistic finding for last. It concerns the ramifications of economic inequality for the workings of our political system. While Americans have a good deal of tolerance for economic inequality, that tolerance is predicated on the "national myth" that we enjoy "full civic equality despite material differences," as Michael Kinsley once put it. Cynics may doubt that "full civic equality" is a reality - but even they should be dismayed by the extent of inequality in the contemporary American political system.

I have measured the responsiveness of U.S. senators to the views of constituents with different incomes - distinguishing people in the bottom, middle, and top thirds of the national income distribution. The results show that senators' roll call votes are moderately strongly related to the views of middle-class constituents, and somewhat more strongly related to the views of affluent constituents. (The relative weight of affluent constituents is noticeably stronger for Republican senators than for Democratic senators.) What is most striking, however, is that there is no evidence of any discernible responsiveness to the preferences of constituents in the bottom third of the income distribution. The views of tens of millions of people with nothing in common but their low incomes seem to be utterly ignored by their elected representatives. Insofar as they get what they want with respect to policy, it is only because their views happen to correspond with those of affluent and middle-class people - or, even more importantly, with the partisan and ideological impulses of the senators themselves.

Read more »

They certainly sound egalitarian. For example, as I noted the other day, more than 85% of Americans say they agree that "Our society should do whatever is necessary to make sure that everyone has an equal opportunity to succeed." That sentiment, if taken seriously, implies a quite radical policy agenda with respect to education, health care, and other forms of social support. It also seems very hard to square with tax-free inheritances for the children of multi-millionaires.

Perhaps survey respondents answering very general questions of this sort are simply paying lip service to egalitarian values. However, it is easy enough to find much less abstract expressions of egalitarian sympathies. For example, Americans asked to rate various social groups on a 100-point "feeling thermometer" report warmer feelings toward working class people than toward middle class people, warmer feelings toward poor people than toward rich people, and warmer feelings toward labor unions than toward big business. If these feelings were translated into policies, those policies would be quite egalitarian. But the connection between sympathies and policies is remarkably loose. In some cases - perhaps most strikingly, with respect to the minimum wage - public opinion is strongly and consistently egalitarian, but consistently ignored by policy-makers. (Thus, the real value of the federal minimum wage has eroded by more than 40% over the past 40 years.) More commonly, however, the public's own policy views fail to reflect their egalitarian-sounding impulses.

Read more »

Political scientists have shown that the state of the national economy has a substantial impact on voting behavior and election outcomes. Pioneers in this line of scholarship viewed their work as a bracing antidote to pessimistic concerns that the unsophisticated masses would be swayed by slick campaign ads or demagogic appeals. For example, Gerald Kramer characterized his findings as demonstrating "that election outcomes are in substantial party responsive to objective changes occurring under the incumbent party; they are not 'irrational,' or random, or solely the product of past loyalties and habits, or of campaign rhetoric and merchandising." In the same vein, V. O. Key Jr. interpreted retrospective voting as evidence for his "perverse and unorthodox argument" that "voters are not fools."

This optimistic interpretation of economic voting seems to me to be misconceived. While it is certainly true that American voters respond to "objective changes occurring under the incumbent party," they do so in ways that produce an immensely consequential partisan bias in economic accountability. While they may not be fools, they are short-sighted, and their myopia often leads them to cast votes that are damaging to their economic interests.

Read more »

One of the most controversial findings in Unequal Democracy is that the incomes of middle-class and working poor families have grown much less robustly under Republican presidents than when Democrats are in the White House. The Census Bureau's Historical Income Tables show that, since 1948, middle-class incomes have grown more than twice as fast under Democrats, while the incomes of working poor families (at the 20th percentile of the income distribution) have grown six times as fast under Democrats as they have under Republicans. Only families near the top of the income distribution have done about equally well under both parties. Skeptics have suggested a variety of reasons to doubt these figures. Here are a few - and the reasons why they are not compelling.

1. The pattern simply reflects the fact that Democrats held the White House for most of the high-growth period before the mid-1970s, while Republicans have mostly been in charge in the more recent slow-growth era. While it is true that income growth has slowed considerably, especially for middle- and low-income families, the partisan differences in income growth appear in both periods considered separately. Allowing for shifts in income growth patterns unrelated to partisan control, oil price shocks, changing levels of labor force participation, and other potentially important economic and social conditions leaves the partisan differences in income growth patterns virtually unchanged.

Read more »

I'm delighted to be at TPMCafe and I'm looking forward to this week's discussion of Unequal Democracy. The book focuses on escalating economic inequality in contemporary America and the ways in which partisan politics and public policy have contributed to it. However, my aim in writing it was broader - to use the politics of economic inequality as a starting point for a more general examination of how American democracy really works. Here are some of the things I think I've learned.

1. Ordinary citizens' policy preferences are often only loosely connected to their beliefs and values. For example, upward of 85% of Americans agree that "our society should do whatever is necessary to make sure that everyone has an equal opportunity to succeed," but support for specific policies that would promote equal opportunity is much more modest. One problem is that many people are too inattentive to grasp connections between values and policies. Among people with strongly egalitarian values, those who were highly informed about politics opposed the highly inegalitarian Bush tax cuts by a four- to-one margin, but those who were least informed were more likely to support the tax cuts than to oppose them.

Read more »

I’ve said a few times that the culture wars have distorted the real story of how we ended up with religious freedom. But except in very broad terms, I haven’t stated what I think did happen. Obviously, that’s what the whole book is about so I can only provide an absurdly truncated history of religious freedom in America. Here goes:

America was settled to be a Christian land. To be more precise, it was settled to be Protestant nation. Inhabitants of most colonies prior to the revolution were not interested in religious pluralism or tolerance. They wanted society based on Protestant principles, with a strong mingling of church and state and vigilant antagonism towards Catholicism. Almost all of the colonies tried some variant of state-supported religion and everyone one of those experiments failed. Perhaps the most important flair-ups of persecution came in a few Virginia counties, as they were witnessed by a thoroughly disgusted young James Madison. He and the other Founders looked at the wreckage of these experiments and concluded that official state religions led to oppression of minority religions and lethargy among the majority religions.

Read more »

Many of you commented that the Founders’ religious beliefs did not determine their approach to separation of church and state. I agree. So let’s turn now to the big question: what DID the Founders believe about separation of church and state?

First, there’s no such thing as “the Founders.” They disagreed with each other on a number of key points. John Adams and George Washington supported more church-state mingling than did Jefferson and Madison. Crucially, while some folks back then seemed to use the term “establishment” to refer to official state religions, Madison for one thought it meant something much broader. During the fight in Virginia over state support of churches, he referred to tax subsidies for religion as being “an establishment,” just as dangerous ultimately as an official church.

Second, though it’s certainly interesting and important what the Founders believed on this – hell, a lot of my book is about that topic – that alone doesn’t determine what the law is on separation of church and state.

Read more »

“But you are a sneaky bastard, just the same. You tweaked the passions with your first installment and enraged them in your second, all without comment to the fire spitting from the belly of our collective beast of burden, the search for truth.”

Guilty as charged. I did start off with two provocative fallacies without shedding all that much light on why this has anything to do with the birth of religious freedom. The main reason I did that (besides hoping to get your attention) was this: the culture wars have distorted the birth of religious freedom and also the Founders’ beliefs.

There’s a common script we see all the time. Conservatives tend to argue that a) the Founders were orthodox Christians and b) that they therefore opposed real separation of church and state. That’s a non-sequitor, and one that would be rather confusing to the Founders. In the 18th century, some of the biggest advocates FOR separation of church and state were the evangelical Christians, especially the Baptists of Virginia and Massachusetts.

Read more »

In my last post, I mentioned the number one "liberal fallacy." Here is one of the common conservative myths: "Most Founding Fathers were serious Christians."

Of course it depends on how one defines the term, but if we use the definition of Christianity offered by those who make this claim – i.e. conservative Christians – then the Founders studied in this book were not Christians. Adams became an active Unitarian, rejecting much Christian doctrine. And Franklin, Jefferson and Adams abhored the Calvinist idea that salvation was determined by divine preference rather than good works. Madison and Washington remained the most silent on matters of personal theology and continued to attend Christian churches but in their voluminous writings never seemed to speak of Jesus as divine. If they must wear labels, the closest fit would be “Unitarian.”

Jefferson & Franklin overtly rejected the divinity of Jesus. Jefferson loathed the entire clerical class and what had become of Christianity. It's really quite amazing to read Jefferson spew venom toward religious leaders. Imagine a president saying some of these things today:

On the Apostles: "ignorant, unlettered men" who laid "a groundwork of vulgar ignorance, of things impossible, of superstitions, fanaticisms, and fabrications."

Read more »

The idea for this book came a few years back after I'd gotten a blizzard of e-mails of culture warriors on the left of right, each quoting a Founding Father to prove whatever point the activist was making. One day it would be a conservative using a quote to prove that this was a Christian nation. The next it would be a progressive highlighting a different quote proving the Founder's commitment to separation of church and state.

It felt a bit like a custody battle for the Founding Fathers, and prompted me to get curious what really happened. So, the meta-premise of my book, Founding Faith, is that the culture wars have utterly distorted the history of how we ended up with religious freedom in America. Though the book is written mostly has a historical narrative – starting with the settling of the New World and ending with the Founders in retirement – along the way it argues that several of the most common assumption about the Founders and religion are wrong. In each post this week, I'll address a different myth.

Liberal Fallacy #1: Most founding fathers were Deists or secular.

Read more »