How Democrats lost the working class

[Mikebert]

I wrote a polemic on Democratic neoliberalism. Please discuss.

https://mikebert.neocities.org/Democrats-doghouse.htm

[pbrower2a]

(08-21-2017, 04:00 PM)X_4AD_84 Wrote: One of the keys to the mystery is, how did the American people change from a people who could support austerity to a people who despised austerity?

The Awakening era created (and I hate to use a book title to express an idea) a culture of narcissism. People felt entitled to an economic reality in which life was ever onward and upward due in part to public investment, inexpensive college educations, and ever-more-sophisticated technology. Thus more powerful muscle cars and stereo systems offering more watts per channel, and more people getting to do white-collar jobs that did not create capital and make things. Intelligent, competent people got pulled away from manual labor as a Wave of the Past. Meanwhile the adult population soared as Baby Boomers (extended to include the first wave of Generation X) reached adulthood and started bidding up real-estate values and rentals. Feel-good advertising pushed "lifestyles" instead of thrift, restraint, and toil -- as shown in the "shopping mall" culture in which everyone could play as if they were 'jet-setters' showing their alleged sophistication through their brainwashed purchases of consumer goodies. Going deeply into debt for consumer purchases did make one more dependent upon one's employer, so that was compensation.

America put too little talent in the creation of the real wealth of manufacturing, small business, energy production, and agriculture and too much into paper-shuffling. The fundamentals of the economy weakened while we had a veneer of post-industrial indulgence to be enjoyed even by clerks. Reverting to emphases on manufacturing, small business, energy production, and agriculture may be impossible. Most Big Business farms out manufacturing to other countries. Small business? Big Business doesn't like it because it isn't blindly obedient. Energy production? Here comes the Sun! Agriculture? Maybe our best export sector now. How long will it be before agriculture becomes a bigger share of the economic life of Michigan than is the auto industry?

But although narcissistic types fare extremely well in bureaucratic structures far away from the production of goods and provision of services, those organizations need relatively few narcissists. So prospects get humbled, and those who got into the near-apex of bureaucratic structures set very low glass ceilings. Those narcissists can find enough understudies from among those related to themselves through nepotism and cronyism, so to keep things from falling apart they establish low, rigid glass ceilings in big corporations and then inflict extreme degradation upon the unfortunate subordinates. Those narcissists may be rhetorically sophisticated enough to stop short of saying something like


Suffer for me -- my gain, my power, and my indulgence, you peons/proles! I am the best thing that ever happened to you, and you had better recognize that your poverty and pain are the greatest blessings that I, the all-powerful Boss can confer!

I am reminded of an article in a magazine of history that explained how slave-owning planters saw their relationship with slaves. There was no neurotic guilt and no recognition of the hypocrisy of eloquent praise for freedom while holding their slaves in bondage in one of the most degrading ways of life possible. Those planters saw themselves as benefactors to their slaves, the best thing that could ever happen to a slave being that he would be bought into that master's collection of assets. So there is some precedent. Style may adopt to political and technological realities, but the core personality does not.

...Just think of how Howe and Strauss see the most objectionable of Idealist traits: selfishness, arrogance, and ruthlessness. Although Idealist elites can crush these traits in fellow Idealists unfortunate enough to not be among those elites (Boomers not in those elites might learn humility to the extent of selling out all dreams as a necessity for short-term survival) those elites put themselves in their own versions of Olympus.

Now those elites can make life miserable. having dominance in control of assets and opportunity. They have taken over the political system and 'given' Americans the purest plutocracy on Earth that does not have a royal family that owns the key source of national revenue and expends it either on itself or on the enforcement of official terror. Corporate lobbyists are the real power in the Federal and most state legislatures, and Donald Trump expresses narcissism to so severe a degree that it might be sociopathy.

[pbrower2a]

My exploitation is the purest charity!
My cruelty is the purest kindness!
My despotism is the truest democracy!
Suffering for me is the greatest joy!

That, I am afraid, is how elites think until their world collapses. And when it collapses:





They thought the revolution that toppled them completely wrong. So did Louis XVI of France, Marie-Antoinette, and their hangers-on. So did Nicholas II of Russia and his flunkies. So did Ferdinand and Imelda Marcos (although with less imminent peril to their lives).

[Mikebert]

(08-21-2017, 04:00 PM)X_4AD_84 Wrote: One of the keys to the mystery is, how did the American people change from a people who could support austerity to a people who despised austerity?

That's no mystery.  Austerity used to mean fiscal discipline in the form of higher taxes and restrained spending, including that for national security. The costs of the old austerity were shared by rich and poor alike. 

Austerity proposed today is limited to discretionary domestic spending and typically comes as the expense of the poor. Furthermore this is on top of inflation control policy whose cost is already completely borne by working people.  So non-rich people quite rationally do not like the new austerity.

[David Horn]

(08-21-2017, 02:33 PM)Mikebert Wrote: I wrote a polemic on Democratic neoliberalism. Please discuss.

https://mikebert.neocities.org/Democrats-doghouse.htm

I agree with your analysis and conclusions, but I'm at a loss about applying them to today.  We have no chance of raising taxes, when lowering them seems to be the theme.  Rising wages are considered good until they do, then they're suppressed, as you noted.   We're locked into a neoliberal model, and I can't see any escape.  Even the Great Recession didn't dent the model enough to force new policies, and the Dems don't have any to offer, unless the Sanders-Warren wing of the party takes charge.  I don't see that happening unless some external event precipitates the change.

[David Horn]

(08-22-2017, 02:22 PM)Mikebert Wrote:

(08-21-2017, 04:00 PM)X_4AD_84 Wrote: One of the keys to the mystery is, how did the American people change from a people who could support austerity to a people who despised austerity?

That's no mystery.  Austerity used to mean fiscal discipline in the form of higher taxes and restrained spending, including that for national security. The costs of the old austerity were shared by rich and poor alike. 

Austerity proposed today is limited to discretionary domestic spending and typically comes as the expense of the poor. Furthermore this is on top of inflation control policy whose cost is already completely borne by working people.  So non-rich people quite rationally do not like the new austerity.

But is that austerity or just an excuse to cut taxes the easy way?  It's easy to move things through Congress using Reconciliation, but you have to follow the rules.  Cutting benefits to the poor, who neither vote nor contribute to either party, is a easy putt.  Cutting taxes on those who fund politics is easy too. That may be overly cynical, but it matches the rhetoric and actions of today's politicians.

[Mikebert]

David Horn Wrote:I agree with your analysis and conclusions, but I'm at a loss about applying them to today.  We have no chance of raising taxes, when lowering them seems to be the theme.  Rising wages are considered good until they do, then they're suppressed, as you noted.   We're locked into a neoliberal model, and I can't see any escape.  Even the Great Recession didn't dent the model enough to force new policies, and the Dems don't have any to offer, unless the Sanders-Warren wing of the party takes charge.  I don't see that happening unless some external event precipitates the change.

Here my analysis.  This expansion will end someday.  And the stock market will enter a bear market. Here is where we have a test of my hypotheses. The capitalist crisis hypothesis holds that the stock market has a stealth overvaluation so bear market declines will be greater than normal. Using this idea and the Stock Cycle model (which has made successful calls in 2000, 2002 and 2008) I projected that the S&H500 would fall below 1100 without a financial crisis,  or as low as the 600’s with a financial crisis.

Now back in 2015 the forecasted decline w/o crisis was slightly less than 50%, similar to that in 2000, which did not see a financial crisis. But with the S&P over 2400, such a decline would be over 55%.  Declines of this size have occurred only twice in the post-Civil War era, in 1929-32 and 2007-9, both of which saw financial crises. I find it hard to see how equity valuations could fall this far and leveraged investments not run into problems giving rise to financial crisis.  So, let’s assume financial crisis, serious recession, and collapsing markets two years after the stock market decline begins.
 
As the market falls and unemployment starts to move upward, Trumps poll numbers fall. Now imagine this happening with President Trump angrily tweeting about how Wall St short sellers, Democrats, Congressional Republicans, Obama, and Hillary Clinton are responsible for this (but doing nothing about it).  Unless the stock decline begins like right now, the scenario described above won’t arrive until after the November 2018 election. Assume this is the case, and Republicans, after taking losses in 2018, and losing control of half a dozen state legislatures, are still (barely) in control of both Houses of Congress.
 
Under this scenario, how willing will Congressional Democrats be to vote for a TARP II in order to bail out the financial system and the Trump administration?  I will say not willing, because the base hates Trump and progressives hate Wall Street. Republicans didn’t even support TARP I, so I would argue they won’t support TARP II either.  So there will be no TARP II and no stimulus this time. Now Republicans will say they don’t believe in stimulus, but every Republican president since Eisenhower has employed stimulus, so obviously Republican elites believe in it, even if their base doesn’t. Democrats as a rule and most economists believe in stimulus, as do I.  Based on this I expect that if a financial crisis and equity crash happens that is unopposed by stimulus/bailouts, there is every reason to expect a 1929-like collapse of the economy. This is consistent with the predicts for both Turchin’s secular cycle and the S&H cycle working together.  (If it doesn’t happen it casts evidence against one or both cycles).

If this happens, Republicans are swept from power in 2020 like they were in 1932.  It will NOT be like 2008 because the collapse will happen earlier in Trump’s term and most of the pain will happen on his watch.  Furthermore, Republican leaders did not like Trump in 2015 and they do not like him now.  If his administration is taking water because of a declining economy in 2019, they may decide to throw Trump under the Bus, blame the whole mess on Trump,  impeach and remove him from office--all in an attempt to lessen the loses down ballot.  It will mean the end of Pence’s career, but he made his bed when he signed on with Trump.
 
This would be both the Great Devaluation and the Crisis of 2020 predicted by S&H.  Now it is up to Democrats who will be back in power. The key to the solution is this: the probability of this happening according to the best neoliberal economic science available, according to what all intelligent neoliberals believe is ZERO.  Not low, but zero. The scenario I am presenting here is impossible--not gonna happen.
 
But then the impossible happens, like it did in 1932.  Neoliberal elites (that is, most of them) face a world that their worldview says cannot exist.  So, what are they going to do, ignore the evidence of their senses and carry on, or believe their lying eyes?  If our ruling class were truly delusional, then I would argue they could not retain their wealth and power, someone who is not delusional would have taken it from them.  So, I argue they would believe their lying eyes.  

The fact that the reality they find themselves is totally incomprehensible to their neoliberal eyes, they would be paralyzed by fear and indecision, looking for someone with the vision to lead them out of the abyss they find themselves in.  This is like Wall Street in 1932 who rallied in anticipation of their savior FDR, who in short time they would come to hate.

Democratic elites solved this problem last 4T.  They had a more advantageous starting position since the Republicans of that time did not object to tax increases. But they had the disadvantage of not knowing what to do. I believe Democrats can still do a New Deal type policy if faced with the situation (described above) that makes it politically possible.   This is because FDR is still a Democratic hero, despite the fact that he was head of a racist party.  But I fear the social justice warriors, who may soon make this impossible by making FDR the equivalent of Robert Lee.

[Mikebert]

(08-23-2017, 09:18 AM)David Horn Wrote:

(08-22-2017, 02:22 PM)Mikebert Wrote:

(08-21-2017, 04:00 PM)X_4AD_84 Wrote: One of the keys to the mystery is, how did the American people change from a people who could support austerity to a people who despised austerity?

That's no mystery.  Austerity used to mean fiscal discipline in the form of higher taxes and restrained spending, including that for national security. The costs of the old austerity were shared by rich and poor alike. 

Austerity proposed today is limited to discretionary domestic spending and typically comes as the expense of the poor. Furthermore this is on top of inflation control policy whose cost is already completely borne by working people.  So non-rich people quite rationally do not like the new austerity.

But is that austerity or just an excuse to cut taxes the easy way?  It's easy to move things through Congress using Reconciliation, but you have to follow the rules.  Cutting benefits to the poor, who neither vote nor contribute to either party, is a easy putt.  Cutting taxes on those who fund politics is easy too. That may be overly cynical, but it matches the rhetoric and actions of today's politicians.

It is a form of austerity used as an excuse to cut taxes while mollifying conservatives who still recollect that Republicans used to be fiscal conservatives.  The fact that it is an easy putt is why it is pursued.  Austerity means painful policies (tax increases or spending cuts) enacted to bring budgets into balance.  New-Dealers (Keynesians) believe austerity should rely on higher taxes as well as spending restraint, and should be applied during peacetime expansions when it hurts working people less. 

Gold standard Republicans believed that austerity should involve both taxes and spending restraint and should be applied during peacetime, regardless of business cycle position. Post-Volcker Republicans believe austerity is never necessary, but can still serve as a political tool to justify tax cuts to fiscal conservatives.

[David Horn]

I agree with your comments, so I'll just respond to one small point.

(08-23-2017, 05:40 PM)Mikebert Wrote: ... Democratic elites solved this problem last 4T. They had a more advantageous starting position since the Republicans of that time did not object to tax increases. But they had the disadvantage of not knowing what to do. I believe Democrats can still do a New Deal type policy if faced with the situation (described above) that makes it politically possible. This is because FDR is still a Democratic hero, despite the fact that he was head of a racist party. But I fear the social justice warriors, who may soon make this impossible by making FDR the equivalent of Robert Lee.

This is my greatest concern. The economic elite are fully invested in neoliberalism, and the cultural elite in social justice. The two are not completely compatible but they aren't antagonistic either, so the economic elites, caring solely about economic matters, have accepted the social justice model. Trump has pulled that scab off the body politic, and set the SJW types in direct opposition to the white nationalists. Note how little this impacts the economic model.

[Mikebert]

David Horn Wrote:The economic elite are fully invested in neoliberalism, and the cultural elite in social justice. The two are not completely compatible but they aren't antagonistic either, so the economic elites, caring solely about economic matters, have accepted the social justice model. Trump has pulled that scab off the body politic, and set the SJW types in direct opposition to the white nationalists. Note how little this impacts the economic model.

True.  But here's the rub.  Neoliberal elites owe their existence to the truth of the neoliberal model.  If the capitalist crisis hypothesis is valid, then the neoliberal model is not always and everywhere valid.  Occasionally (during modern secular cycle crises/4Ts) its not valid. Things happen that are not expected from a neoliberal paradigm, and elites feel unsure and panicky. Political elites capitalize on this opportunity to make fundamental change.  If their initial change is perceived as successful they gain a chance to enact more substantial change.

If the capitalist crisis and the concept of a 4T are both valid, then this opportunity will come in the next few years. It will manifest as a financial crisis and deep recession.  If this fails to happen, then one or both have to be discarded.  It will take something like 15 years for this issue to be resolved. If after 15 years, there is no change and we still are in a period much as we have been over the last decade, then both theories can be tossed.

[David Horn]

(08-25-2017, 12:06 PM)Mikebert Wrote:

David Horn Wrote:The economic elite are fully invested in neoliberalism, and the cultural elite in social justice. The two are not completely compatible but they aren't antagonistic either, so the economic elites, caring solely about economic matters, have accepted the social justice model. Trump has pulled that scab off the body politic, and set the SJW types in direct opposition to the white nationalists. Note how little this impacts the economic model.

True.  But here's the rub.  Neoliberal elites owe their existence to the truth of the neoliberal model.  If the capitalist crisis hypothesis is valid, then the neoliberal model is not always and everywhere valid.  Occasionally (during modern secular cycle crises/4Ts) its not valid. Things happen that are not expected from a neoliberal paradigm, and elites feel unsure and panicky. Political elites capitalize on this opportunity to make fundamental change.  If their initial change is perceived as successful they gain a chance to enact more substantial change.

True, but insufficient I think.  The previous 4T saw both progressive and fascist options being exercised to "fix" the broken economies in Europe and the US.  We have both factions at play today, and the gloves have yet to come off.  

Mikebert Wrote:If the capitalist crisis and the concept of a 4T are both valid, then this opportunity will come in the next few years. It will manifest as a financial crisis and deep recession.  If this fails to happen, then one or both have to be discarded.  It will take something like 15 years for this issue to be resolved. If after 15 years, there is no change and we still are in a period much as we have been over the last decade, then both theories can be tossed.

It's not fully resolved which of the two contending models will prevail, so a crash could trigger the fascist backlash here we saw last cycle in Europe.  It's even possible that some form of balkanization creates a state of "two nations, one soil".  We already have an urban/rural divide to support it.  If that occurs, and some sort of uneasy truce supports this unstable structure, the inevitable collapse will be messy, to say the least. 

In either case, whether we resolve the politics or not the economic model will have to change.

[Eric the Green]

(08-25-2017, 09:59 AM)David Horn Wrote: I agree with your comments, so I'll just respond to one small point.

(08-23-2017, 05:40 PM)Mikebert Wrote: ... Democratic elites solved this problem last 4T.  They had a more advantageous starting position since the Republicans of that time did not object to tax increases. But they had the disadvantage of not knowing what to do. I believe Democrats can still do a New Deal type policy if faced with the situation (described above) that makes it politically possible.  This is because FDR is still a Democratic hero, despite the fact that he was head of a racist party.  But I fear the social justice warriors, who may soon make this impossible by making FDR the equivalent of Robert Lee.

This is my greatest concern.  The economic elite are fully invested in neoliberalism, and the cultural elite in social justice.  The two are not completely compatible but they aren't antagonistic either, so the economic elites, caring solely about economic matters, have accepted the social justice model.  Trump has pulled that scab off the body politic, and set the SJW types in direct opposition to the white nationalists.  Note how little this impacts the economic model.

Maybe among the elites this is true, but among the voters who actually determine elections, it's not fully true. Racism and neo-liberalism are closely connected in the minds of less-educated white male voters and others who share their mindset, because their main motivation for voting Republican is their resentment against their taxes going for welfare and social programs to help "those lazy people" who are generally considered to be non-white. This sentiment is expressed by virtually every libertarian conservative or Christian/social conservative out there, including those on this site. This sentiment neatly combines neo-liberal trickle-down theory ("government is the problem") with the racist dog whistle and has elected our government today and for the last 50 years.

The excesses of a few leftist social justice warriors who think racism is behind everything that has been done, or something like that, are naturally resented and over-played by the conservatives. So antifa breaks a few windows to stop a racist speaker at Cal, or some angry SJWs tear down a confederate statue. Not a smart tactic, although I sympathize. It is a concern, since the over-play works and gains support for the conservative reactionaries and Nazis, but it doesn't reflect the actual left, because it is merely a convenient scapegoating tactic.

[David Horn]

(08-26-2017, 12:50 AM)Eric the Green Wrote:

(08-25-2017, 09:59 AM)David Horn Wrote: I agree with your comments, so I'll just respond to one small point.

(08-23-2017, 05:40 PM)Mikebert Wrote: ... Democratic elites solved this problem last 4T.  They had a more advantageous starting position since the Republicans of that time did not object to tax increases. But they had the disadvantage of not knowing what to do. I believe Democrats can still do a New Deal type policy if faced with the situation (described above) that makes it politically possible.  This is because FDR is still a Democratic hero, despite the fact that he was head of a racist party.  But I fear the social justice warriors, who may soon make this impossible by making FDR the equivalent of Robert Lee.

This is my greatest concern.  The economic elite are fully invested in neoliberalism, and the cultural elite in social justice.  The two are not completely compatible but they aren't antagonistic either, so the economic elites, caring solely about economic matters, have accepted the social justice model.  Trump has pulled that scab off the body politic, and set the SJW types in direct opposition to the white nationalists.  Note how little this impacts the economic model.

Maybe among the elites this is true, but among the voters who actually determine elections, it's not fully true. Racism and neo-liberalism are closely connected in the minds of less-educated white male voters and others who share their mindset, because their main motivation for voting Republican is their resentment against their taxes going for welfare and social programs to help "those lazy people" who are generally considered to be non-white. This sentiment is expressed by virtually every libertarian conservative or Christian/social conservative out there, including those on this site. This sentiment neatly combines neo-liberal trickle-down theory ("government is the problem") with the racist dog whistle and has elected our government today and for the last 50 years.

The excesses of a few leftist social justice warriors who think racism is behind everything that has been done, or something like that, are naturally resented and over-played by the conservatives. So antifa breaks a few windows to stop a racist speaker at Cal, or some angry SJWs tear down a confederate statue. Not a smart tactic, although I sympathize. It is a concern, since the over-play works and gains support for the conservative reactionaries and Nazis, but it doesn't reflect the actual left, because it is merely a convenient scapegoating tactic.

WHOA!  I've been reading many Op-Ed pieces in my local paper from conservatives or Trumpists that purport to tell liberals what we think, and what conservatives believe by progressives.  My experience is quite different.  Typically, both sides have blinders on that make objectivity impossible, but they have the effect of enraging the side being picture-framed.  The net result is more polarization and an easier case for "fake news".  In short, it's stupid.

Right now, we have no real leaders on either side.  We'll know we have them when the conversation changes to  policy.  For example, Nick Hanauer makes one of the best cases for changing the economy I've seen, because he's a billionaire that understands that fairness benefits him too.  We need more voices like his.