From Robert Reich - his last two articles

The last two columns from Robert Reich. Please follow link to original ---------------------------------------------------------

 How Europe’s Double Dip Could Become America’s Wednesday, April 25, 2012

 Europe is in recession. Britain’s Office for National Statistics confirmed today (Wednesday) that in the first quarter of this year Britain’s economy shrank .2 percent, after having contracted .3 percent in the fourth quarter of 2011. (Officially, two quarters of shrinkage make a recession). On Monday Spain officially fell into recession, for the second time in three years. Portugal, Italy, and Greece are already basket cases. It seems highly likely France and Germany are also contracting. Why should we care? Because a recession in the world’s third-largest economy, combined with the current slowdown in the world’s second-largest (China), spells trouble for the world’s largest. Remember – it’s a global economy. Money moves across borders at the speed of an electronic impulse. Wall Street banks are enmeshed into a global capital network extending from Frankfurt to Beijing. That means that notwithstanding their efforts to dress up balance sheets, the biggest U.S. banks are more fragile than they’ve been at any time since 2007. Meanwhile, goods and services slosh across the globe. If there’s not enough demand for them coming from the second and third-largest economies in the world, demand in the U.S. can’t possibly make up the difference. That could mean higher unemployment here as well as elsewhere. What’s the problem with Europe? Don’t blame it on the so-called “debt crisis.” There was no debt crisis in Britain, for example, which is now experiencing its first double-dip recession since the 1970s. Blame it on austerity economics – the bizarre view that economic slowdowns are the products of excessive debt, so government should cut spending. Germany’s insistence on cutting public budgets has led Europe into a recession swamp. German Chancellor Angela Merkel, who has led the austerity charge, and other European policy makers who have followed her, have forgotten two critical lessons. First, that the real issue isn’t debt per se but the ratio of the debt to the size of the economy. In their haste to cut the public debt, Europeans have overlooked the denominator of the equation. By reducing public budgets they’ve removed a critical source of demand — at a time when consumers and the private sector are still in the gravitational pull of the Great Recession and can’t make up the difference. The obvious result is a massive slowdown that has worsened the ratio of Europe’s debt to its total GDP, and is plunging the continent into recession. A large debt with faster growth is preferable to a smaller debt sitting atop no growth at all. And it’s infinitely better than a smaller debt on top of a contracting economy. The second lesson Merkel and others have overlooked is that the social costs of austerity economics can be huge. It’s one thing to cut a government budget when unemployment is low and wages are rising. But if you cut spending during a time of high unemployment and stagnant or declining wages, you’re not only causing unemployment to rise even further. You’re also removing the public services and safety nets people depend on, especially when times are tough. And with high social costs comes political upheaval. On Monday, Netherlands Prime Minister Mark Rutte was forced to resign. U.K. Prime Minister David Cameron is on the ropes. The upcoming election in France is now a tossup – incumbent Nicolas Sarkozy might well be unseated by Francois Hollande, a Socialist. European fringe parties on the left and the right are gaining ground. Across Europe, record numbers of young people are unemployed – including many recent college graduates – and their anger and frustration is adding to the upheaval. Social and political instability is itself a drag on growth, generating even more uncertainty about the future. What European policy makers should do is set a target for growth and unemployment — and continue to increase government spending until those targets are met. Only then should they adopt austerity. What are the chances that Merkel et al will see the light before Europe plunges into an even deeper recession? Approximately zero. The danger here for the United States is clear, but there’s also a clear lesson. Republicans have become the U.S. party of Angela Merkel, demanding and getting spending cuts at the worst possible time – and ignoring the economic and social consequences. Even if the U.S. economy (as well as President Obama’s reelection campaign) survives the global slowdown, we’re heading for a big dose of austerity economics next January – when drastic spending cuts are scheduled to kick in, as well as tax increases on the middle class. But the U.S. economy isn’t nearly healthy enough to bear this burden. If nothing is done to reverse course in the interim, we’ll be following Europe into a double dip.

Why Anyone Should Care that Bill O’Reilly Calls Me A Communist

 Monday, April 23, 2012 Bill O’Reilly, the tumescent personality of Fox News, said on his Friday show “Robert Reich is a communist who secretly adores Karl Marx.” (This came after Fox News’ Neil Cavoto called me a “sanctimonious twit” for suggesting the rich should pay more in taxes.) O’Reilly’s accusation is odd, to say the least. If we were living in the 1950s, amid Senator Joe McCarthy’s communist witch-hunts, the claim might have some bite and cause me injury. But these days it’s hard to find a full-throated communist anywhere in the world. O’Reilly’s accusation isn’t even logical. How can he know if I secretly adore Karl Marx, if it’s a secret? For the record, I’m not a communist and I don’t secretly adore Karl Marx. Ordinarily I don’t bother repeating anything Bill O’Reilly says. But this particular whopper is significant because it represents what O’Reilly and Fox News, among others, are doing to the national dialogue. They’re burying it in doo-doo. O’Reilly based his claim on an interview I did last week with Jon Stewart on the Daily Show, in which I argued that because America’s big corporations were now global we could no longer rely on them to make necessary investments in human capital or to lobby for public investments in education, infrastructure, and basic R&D. So, logically, government has to step in. Since when does an argument for public investment in education, infrastructure, and basic R&D make someone a communist or a secret adorer of Karl Marx? Obviously, O’Reilly has no interest in arguing anything. Ad hominem attacks are always the last refuges of intellectual boors lacking any logic or argument. (Whoops, I think I just stooped to name-calling. Sorry, Bill.) Yet this is what’s happening to all debate all over America: It’s disappearing. All we’re left with is a nasty residue. In Washington, Democrats and Republicans no longer even talk. They just vent charges and counter-charges. The 2012 election doesn’t seem likely to clarify any issue. At this moment the candidates and their surrogates are debating the treatment of dogs. Across the nation, conservatives right-wingers and liberal or progressive lefties have stopped debating their respective views, or even listening to anyone they disagree with. They just find broadcasters and bloggers who confirm their views. We’re even sorting by belief according to where we live. Today your neighbors are more likely to agree with your politics than disagree. We’ve settled into like-minded enclaves where we don’t need to think because everyone we meet confirms what we assume we already know. It’s not that the nation is more polarized than it’s been in the past. America has been through searing conflicts, some within the living memories of most of us. The communist witch-hunts of the 1950s were followed by the civil rights movement, the Vietnam War, battles over womens’ reproductive rights and gay marriage. What makes America’s current polarization remarkable isn’t the severity of our disagreements but our utter lack of engagement debating them. So many Americans are so angry and frustrated these days – vulnerable to loss of job and healthcare and home, without a shred of economic security – they’re easy prey for demagogues offering simple answers and ready scapegoats. Take, for example, Bill O’Reilly and his colleagues at Fox News. But people can only learn from others who disagree with them — or at least from witnessing debates between people who respectfully and civilly disagree. Without respect and civility, it’s not a debate – it’s just name-calling. A democracy depends on public deliberation and debate. Without it, the members of a society have no means of understanding what they believe or why. The Lincoln-Douglas debates were notable not because they solved anything but because they helped Americans clarify where they agreed and disagreed on the wrenching issue of slavery. Hence the danger today – when deliberation has stopped. This morning I left a message on Bill O’Reilly’s office phone asking him to invite me onto his show to debate whether public investments in education and infrastructure are needed. What are the odds he’ll invite me on?