In the years since the collapse of 2008, the existence of mass unemployment has stopped being something the economic powers that be even pretend to regard as a crisis. To those directly impacted, the economic crisis is an emergency, a life-altering disaster the damage from which will endure for years. But most of those in a position to address it simply have not seen it in such terms. History will record that the economic elite has viewed the economic crisis from a perspective of detached complacency.
Two events from the last week have underscored this disturbing reality. The most widely covered was the Federal Reserve’s announcement that, despite a weakening economy, it still would not take steps to stimulate growth. The Fed may not like mass unemployment, but it dislikes inflation even more, and in its calculus, the hypothetical prospect of the latter outweighs the immediate reality of the former.
Here’s a second case, smaller but even more telling. The Obama administration has tried to prevail upon Edward DeMarco, the acting director of the Federal Housing Finance Agency, to offer lower mortgage rates to underwater home owners through Fannie Mae and Freddie Mac, which he controls. What interests me is not the proposal itself, nor even DeMarco’s obstinate refusal, but an editorial in the Washington Post applauding DeMarco for refusing to implement the program.
The Post is the voice of the Washington centrist establishment, and the logic of the editorial is a telling signpost. The Obama administration had argued to DeMarco that the mortgage relief was a pure win-win. Not only would the lower mortgage rates provide relief to Americans desperate to keep their homes, and secondarily to give them more purchasing power for other things that would provide a small economic stimulus, it would save the government money: with lower mortgage rates, fewer would default on their government-owned mortgages. DeMarco replied that he believed the taxpayers would end up spending money on the deal: not much, but some.
The Post’s thumbs-up editorial of DeMarco endorsed the reasoning that only a relief program that could be assured to cost the taxpayers nothing was worthwhile. It concluded, “with signs multiplying that the housing market may be finally bottoming out without this additional stimulus, perpetuating this particular battle does not strike us as the best use of the secretary’s time.”
There are signs we’ve hit bottom. Nothing to worry about here. Why risk the possibility of a small outlay merely to provide relief to hundreds of thousands of desperate people? This is such a perfect statement of the way the American elite has approached the economic crisis. They concede that it is a problem. But there are other problems, you know.
It’s important to respond to arguments on intellectual terms and not merely to analyze their motives. Yet it is impossible to understand these positions without putting them in socioeconomic context. Here are a few salient facts: The political scientist Larry Bartels has found (and measured) that members of Congress respond much more strongly to the preferences of their affluent constituents than their poor ones. And for affluent people, there is essentially no recession. Unemployment for workers with a bachelors degree is 4 percent — boom times. Unemployment is also unusually low in the Washington, D.C., area, owing to our economy’s reliance on federal spending, which has not had to impose the punishing austerity of so many state and local governments.
I live in a Washington neighborhood almost entirely filled with college-educated professionals, and it occurred to me not long ago that, when my children grow up, they’ll have no personal memory of having lived through the greatest economic crisis in eighty years. It is more akin to a famine in Africa. For millions and millions of Americans, the economic crisis is the worst event of their lives. They have lost jobs, homes, health insurance, opportunities for their children, seen their skills deteriorate, and lost their sense of self-worth. But from the perspective of those in a position to alleviate their suffering, the crisis is merely a sad and distant tragedy.
Why mass unemployment is okay with those in the bubble
We recently refinaned under the “streamlined” refinancing program which offered us no closing costs, no re-appraisal costs, and a much lower interest rate, saving us $200.00 per month on our severely underwater mortagage. We’re thankful.
Those who make their living off rents, interest, dividends, etc. hate and fear inflation, because it decreases the value of the money they are paid for not working.
They like high unemployment because it reduces the bargaining power of workers to demand higher wages for their productive work. They call it “pressure on the cost of labor”. A reasonable amount of inflation is good for workers because they are able to pay back their debt with cheaper money.
With high unemployment, the owners are able to force down wages and benefits because they know most workers have no choice to accept their terms. The only impediments to this are the minimum wage laws and union bargaining power, which is why they fight to break the unions and to prevent the minimum wage from going up.
Since our government is controlled by those who live off rents and interest (parasites) while those who labor to produce wealth (producers) policy will always be in favor of low inflation and high unemployment. This is not an accident or miscalculation, it is what they want to happen. This will continue until the parasites have all the money and the producers have none.
If this were a Monopoly game, you would start over in a new game where everybody gets their money back. Since it is real life I am not really sure what is going to happen. But I think a lot of people are going to get hurt.
“That the first step in the revolution by the working class, is to rise the proletariat (worker producers) to the position of ruling class, to win the battle of democracy.” That’s what happens next Pragmatic Realist. We are in the middle of that battle right now. The bourgeoisie (“parasites”) is spending billions of dollars on the next election to try to defeat the workers in this war. They will fail because history is on the side of the proletariat. You can not kill an idea whose time has come.
Pragmatic Realist: Only vote for candidates who promise to print money to sustain the Social Security and Medicare systems the way they deficit finance Defense spending. The inflationary pressure cannot be staved off by the Fed at that level and the wealthy will opt for the certainty of taxation over the depredations of unchecked inflation.
Read somewhere (Think it is at Yves Smith’s) that DeMarco’s position is same as Turbo Tax Timmy’s so asking for Demarco’s head is pointless.
Atrios reminds us of Turbo Tax Timmy’s CEO(Condescending, Elitist, Out-of-touch) op-ed piece “Welcome to the recovery” on its 2nd anniversary. I still remember after 2 years that TT Timmy didn’t mention a single word about underwater mortgages and was subtly blaming the unemployed proles/unwashed/peasants for lacking proper skills . Then came the epic electoral bloodbath few months later.