No one Cuomo should have all that power
Over the past couple of years, there’s been many people wondering why it is, exactly, that Washington seems so utterly indifferent towards stimulating the economy. Some people have hypothesized that it’s because DC itself is in a bubble of wealth and comfort. Some think it’s because the Republican party, both consciously and less-than, knows that the worse the economy, the better its chances of reclaiming the White House. And then there are those who think the false “structural unemployment” explanation has been bought by players across the spectrum, as it conveniently absolves everyone of responsibility.
While I think each of these arguments holds at least a kernel of truth, I believe Robert Kuttner was closest to the mark with what he wrote in The American Prospect recently, an essay titled “Debtors’ Prison.” Here’s the nub of his argument:
Creditors—the rentier class in classic usage—are usually the wealthy and the powerful. Debtors, almost by definition, have scant resources or power. The “money issue” of 19th-century America, about whether credit would be cheap or dear, was also a battle between growth and austerity.
The creditor class views anything less than full debt repayment as the collapse of economic civilization. In fact, however, debts are often not paid in full. In the 20th century, speculators lost fortunes as dozens of nations defaulted on debts. Several 19th-century U.S. states and municipalities defaulted. Losers in wars and revolutions seldom pay debts. (Those czarist bonds have no value except on eBay.) The Brady Plan of the late 1980s paid bondholders of defaulting Third World debtors at about 70 cents on the dollar so that economic growth could resume.
Sometimes, debts simply cannot be paid. That’s why debtors’ prison was a ruinous idea (except as a deterrent). The real issue is how to restructure debt when it becomes impossible to repay. This is not just a struggle between haves and have-nots but between the claims of the past and the potential of the future.
Another way to put this is that working towards increasing employment and reducing private debt is not in the rational self-interest of people who, for the time being, find themselves doing quite all right in this poor economy. Kuttner focuses here on those who are against shifting the balance of power between debtors and creditors. But the same dynamic is true regarding fiscal policy.
I’m most certainly not an economist, so I’m inclined to look at these issues largely through a political lens. And that means taking into account the dynamics of power. Doing that, it’s not so curious, the continued apathy on the part of the country’s elites towards reducing unemployment. After all, a market where everyone desperately wants a job is one in which employers have supreme leverage. Provided you’re not a retailer suffering from the lack of demand in the population, maintaining this economic status quo is a great way to control the rise of wages.
On the whole, I doubt many people are thinking along these terms quite so explicitly. No one’s sitting in a dark chamber, petting a cat on their lap and chuckling about having the working and middle classes struggling under their boot heel. But this situation does dovetail rather nicely with the kind of ordering of society many have been advocating for years: governments are shedding jobs at a fast clip, thus shrinking “Big Government,” while public services (“entitlements”) that have long been scorned by some are now, it is agreed by both Republicans and many Democrats, simply too expensive to sustain in this environment.
It’s truly a non-partisan affair, too. Check out New York Governor Andrew Cuomo, current heart-throb of the left for his admirable performance ushering marriage equality through Albany; but on issues of economic equality, Cuomo is not your father’s (or his father’s) Democrat. Check out how Cumo plans on fixing the state’s budget — letting a somewhat minimal (if not insignificant) tax on the state’s wealthiest citizens expire on one hand, while, with the other, putting the squeeze on public employees:
Members of New York’s largest union of state employees, in a begrudging acknowledgment of the increasingly hostile mood toward public workers, have agreed to accept major wage and benefits concessions sought by Gov. Andrew M. Cuomo.
The union, the Civil Service Employees Association, announced late Monday night that its members had voted by about 60 percent to 40 percent to approve the contract agreement that the governor and union leaders struck in June.
The ratification was a critical victory for Mr. Cuomo, a Democrat whose plan to close the state’s budget gap relied in large part on a bet that state employees would be willing to stomach a freeze on wages and an increase in the cost of health benefits in return for safeguarding their jobs.
The union’s president, Danny Donohue, said in a statement: “These are not ordinary times, and C.S.E.A. worked hard to reach an agreement that we believed would be in everyone’s best interest. C.S.E.A. members agree that this contract is reasonable and responsible for the long term and shows that C.S.E.A. members will do what is right for the good of all New Yorkers.”
In and of itself, there’s nothing wrong with public employees taking a bit of a hit during rough economic times for the state. Nothing at all. But I can’t help raising my eyebrows when I see what this juxtaposition says of Cuomo’s priorities. Bringing this back to power, however, it’s not really so surprising. As the article says, people are fearful of losing their jobs right now; Cuomo has jammed the unions between that sliver separating a rock and a hard space, and faced with the prospect of joining the millions of unemployed, there’s likely not much to which they won’t agree.
(x-posted at Flower & Thistle)