Economics of the Elite

When the rich are in charge, they worry about issues that the rich worry about. Here's Dean Baker pointing out that having the rich worry about deficits is insane in the middle of a depression:

The most painful aspect of the economic crisis is that the pain is unnecessary. Ordinarily we think of the economy being limited by the supply of available resources, land, labor, and capital. We can't all have huge houses with servants. In a world where the economy is limited by supply, pain is understandable, even if not acceptable. To give one person more means taking something away from someone else.

But, that is not the situation the U.S. or world economy faces today. We don't have 15 million unemployed because of scarcity. We have 15 million people unemployed because of a lack of demand. This is exactly the same problem that the country faced in the depression. All we had to do then to get people employed was to spend money, which we eventually did in very large amounts to fight World War II.

That is what we need to do now to end the enormous pain caused by this downturn. Unfortunately, there is a lack of political will to undertake the necessary spending in part because of political hacks running around complaining about deficits.

I call this the Marie Antoinette syndrome. If you are rich and insulated from reality, then unemployment stats are meaningless. Your only concern is that your pile of goodies goes unmolested and your greatest fear is that inflation might secretly eat away at your wealth. So rather than grow the pie, you stomp down on anything and everything that moves to prevent change. You certainly want to prevent government spending to alleviate the suffering of the poor because that will feed inflation and what's more important? Your enjoyment of your wealth or the ability of the poor to feed their families? Right, it is your need to have a robust bank account!

As Dean Baker points out, now is a classic time to "grow the pie" by substituting government demand for the missing private sector demand. A bigger pie means everybody gets more! But the rich aren't interested in absolutes. They are only interested in relatives. They want to stay relatively more wealthy than you or me. So they are willing to strangle the economy to make sure they stay top dog. If they have 1000 and you and I have 1, then government spending means we now have 2 and the rich "only" have 1100, they are devastated. We are "twice" as wealthy as we were and they are only 10% wealthier. They can't spend the 100 but they sure as hell don't want you to have the "extra" 1. They would rather see you homeless and hungry. Then they can rest assured that their position of relative wealth is well assured.

Here's another example from Dean Baker:

The People Who Could Not See an $8 Trillion Housing Bubble Warn of Public Debt Levels

The Post, which published zero news articles anywhere warning of the collapse of the housing bubble, published yet another front page piece warning about budget deficit problems, this time in Greece. This one most expressed the concerns of unnamed "analysts," (people who didn't know enough about the economy to see an $8 trillion housing bubble). The piece does include an explicit reference to Moody's, the bond-rating agency best known for giving investment grade rating to near worthless collaterized debt obligations.

The point of this article is that the Washington Post wants to cut Social Security and Medicare and it will use its news pages to shamelessly push this agenda.