Nothing of him that doth fade, But doth suffer a sea-change, into something rich and strange -William Shakespeare, The Tempest

The essence of my obsession with the concept of The Interregnum is that we are entering a period in which all conventional wisdom is useless--uncharted waters. We would be foolish not to realize the extraordinary import of the passage of the Recovery Act.

As you look at the list of where the money is going, it should dawn on you that in one month President Obama has secured twice the investment in the things progressives care about than Bill Clinton did in eight years.

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This is not directed at the President. He's doing fine. I think he learned his lesson: you cannot deal with people who have no regard for the country. Rush Limbaugh's prayer that Obama (and America) fail is typical of almost all the Republicans in Congress (obviously, not the three who voted for the stimulus package) but every other one of them -- except Ron Paul who is a true conservative ideologue rather than a partisan slug.

My question is why do we have to even pretend to respect these people? I know we don't have the magic 60. But why can't our President go after them with such force that some of these guys just surrender to constituent pressure?

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The reliable Jackson (MS) Clarion-Ledger has just printed the FBI's list of unsolved hate-crime murders in Mississippi before 1970. (This list omits the Chaney-Goodman-Schwerner case of 1964, though there may still be living suspects on the loose.)

Ask yourself if these crimes would have been left unsolved if they had been committed by the Weather Underground rather than a white supremacist terrorist underground. Ask whether, in that case, cable news channels and radio talk show "comedians," as Keith Olbermann nicely calls them, would be sounding the roll:

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Anyone who believes that anti-Semitism is a thing of the past needs to consider the case of Bishop Richard Williamson, the cleric who denies that the Holocaust occurred and insists that the murder of six million Jews is "lies, lies, lies."

Williamson is a Jew-hater, pure and simple. Pope Benedict's support for him demonstrates that the current pontiff, who started out as a Hitler Youth, has a rather different attitude toward Jews than his revered predecessor, John Paul II, who started out in the Polish Resistance.

The whole phenomenon of Holocaust denial, of rejecting proven historical facts, is incredible.

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I feel obliged to address the mostly number-free comment thread to Dr. Baker's timely post.

The most recent report on Social Security says the gap between cash income (mainly payroll taxes) and scheduled benefits rises to as much as 1.44 percent of GDP from 2016 to 2080. It actually peaks in 2035 at 1.32%, goes down a bit, then heads up again. All these numbers are strictly cash, abstracted from Trust Fund accounts. The numbers are here (fourth column, under "OASI," which stands for Old Age Survivors Insurance, a.k.a. "Social Security").

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Rauchway's book is an exceptionally valuable pocket summary of the major actions of the New Deal. It solves a big problem for those with small pockets: how to keep enough facts at close hand to answer, with authority, all the anti-Roosevelt nonsense and disinformation in circulation these days.

But Rauchway is also very good on Hoover. He is especially good on the illusions and self-delusions of the Depression's first years. Chief among these was the optimism, the ritual statements that things would soon get better, that prosperity is "just around the corner." This false optimism we don't hear expressed so much today; President Obama knows to avoid it.

But false optimism is, nevertheless, still present. It has become a mental habit. It is institutionalized and embedded in the professional economic forecasts, notably the official baselines of the Congressional Budget Office. These cannot admit the possibility that we are at the start of a new Depression, because there is no similar experience in the statistical record on which they draw. It will take time, grim experience, and determined argument, before the President and Congress come to grips with this.

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Eric asks a good question:

As the New Deal abetted America's move from the countryside to the city, it also saved memories of the ways of life lost.

Are we truly in a similar transition now -- to a post-suburban world, to a post-paper world? What folkways do we want documented?

I don't think we fully understand or appreciate the social, economic, and political changes the information revolution revolution will bring. I will leave it to the historians to document these changes, and I'll talk briefly instead about how the advance of information and other technology will impact -- has already impacted -- our economic security.

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Word has it that President Obama intends to appoint a task force the week after next which will be charged with "reforming" Social Security. According to inside gossip, the task force will be led entirely by economists who were not able to see the $8 trillion housing bubble, the collapse of which is giving the country its sharpest downturn since the Great Depression.

This effort is bizarre for several reasons. First, the economy is sinking rapidly. While President Obama's stimulus package is a good first step towards counteracting the decline, there is probably not a single economists in the country who believes that is adequate to the task. President Obama would be advised to focus his attention on getting the economy back in order instead of attacking the country's most important social program.

The second reason why this task force is strange is that Social Security doesn't need reforming. According to the Congressional Budget Office, it can pay all scheduled benefits for the next 40 years with no changes whatsoever.

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I have greatly enjoyed these comments from a newer generation of New Deal historians. As someone who started work on the New Deal forty years ago, I have a lot of sympathy with Eric's lament about 'writing a book in a very different world than the one in which it was published.' It took me a long time to realise how powerful the right-wing critique of the New Deal had become since 1990. In Britain there remains a largely bi-partisan acceptance of the positive aspects of the New Deal. It is difficult here to realise how successful Amity Shlaes has been in the United States at influencing public discussion of the New Deal. What was once the academic argument of economic historians about the lack of recovery in the 1930s has, in recent years, acquired amongst some historians and commentators a moral outrage at the supposed Leviathan state of the New Deal and the way it sapped individual self-reliance.

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Eric and bluemeanie have kicked off a terrific thread, and in so doing have underscored a key question that has resonated throughout this week's discussion: How can the past inform the present?

History rarely repeats. But to borrow the apocryphal Mark Twain line, sometimes it does rhyme.

I would argue that there are a large number of rhymes between the past of the New Deal and our present moment. Indeed, to a great extent the economic downturn we are experiencing today is not a "Black Swan" event, in the mode of Nick Taleb. Rather, in many respects our economic crisis might better be viewed as a White Swan: we've seen a great deal of this before, right?

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After months on the campaign trail, newly inaugurated President Obama may have hoped to work from home, govern from the White House and spend every evening with his kids.  Fuhgetaboudit.  After just a few weeks it is obvious that Obama and associates in the White House and the Cabinet have to keep traveling around the country, with the President himself going out of almost every week like a medieval king in the preabsolutist era making a "progress" from region to region.  The United States is in crisis while DC talking heads remain as irresponsible and out of touch as ever; they are like the aristocrats of Old Regime France well after the revolution had started.  To escape the aristocratic death grip, Obama must do all kinds of outreach -- including to Republicans with real world responsibilities -- in the states and cities across the country that are grappling with the concrete human and business realities of this gathering depression, as well as living out the consequences of the terrible policies of the past several decades.

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We know -- those of us who aren't Austrians -- that the New Deal promoted recovery, even if it didn't get the country all the way back to pre-Crash conditions before the end of FDR's second term; that it laid the foundations for the modernization, at long last, of the South; that it established regulations for banking and securities that proved successful until repealed; that it prevented a nontrivial number of Americans from starving and gave the dignity of work to millions; that its basic provisions for social security -- including not only old age pensions and unemployment insurance but established the principle, as Justice Cardozo wrote, that in dire straits "the ill is all one or at least not greatly different whether men are thrown out of work because there is no longer work to do or because the disabilities of age make them incapable of doing it. Rescue becomes necessary irrespective of the cause."

We also know that in doing these things, New Dealers made some blunders and some devil's bargains -- that by lurching uncertainly into and out of relief they did not do as much to end the Depression as they might have with a committed and full-scale program at the start (are you listening, stimulus-compromisers?); that to keep the South in the Democratic Party they left Jim Crow largely untouched; that to get Social Security established they had at the start to omit coverage for occupations that disproportionately included African Americans.

But the New Deal did more: not only did it build modern America, it created our sense of the old America.

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As far as I'm concerned, good riddance to Judd Gregg. What did he know about the commerce of the 21st Century?

The perfect guy for the job is Eric Schmidt, CEO of Google. He represents the bottom-up innovation of the American Economy and in his 25 years as a technology executive he has traveled to all corners of the world and understands better than most people what it will take for America to regain her competitive mojo.

I know he may not want to leave Google, but the country needs his service.

The energy and environmental portions of the stimulus package are absolutely terrific. It will take a while to see what business plans are ideal, but it appears that the White House and its Congressional friends have done more to support alternative energy than the government has ever imagined possible. It must have been a team effort, but certainly the result supports the wisdom of having our capable, clever Energy Tsarina in the White House.

It's an interesting defense strategy. Steve Rosen, about to go on trial for espionage, keeps writing columns advising the President how best to be pro-Israel.

Has any one up on espionage charges tried this technique? Did my tocayos (Spanish for unrelated people with the same name), Julius and Ethel Rosenberg write articles urging a softer US position toward the Soviets. But Julius (if not Ethel) was guilty and Rosen might not be.

Still, if I were him, I'd keep my mouth shut. On the other hand, I wouldn't be him, not for all the tea in China!

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Listening to the heated arguments from both ends of the political spectrum one might be forgiven for believing that President Obama's $800 billion stimulus package is a giant lemon.

The left claims that Obama's bipartisanship has failed. They argue his "centrist" compromises, as well as the failure to offer a bigger initial package, will fatally weaken the stimulus effort. Republicans see "glimmers of rebirth" through their opposition to the Democrats' plans. But both groups are missing the larger context.

Progressives are in the process of winning a transformative political victory that may be the harbinger of a new era of activist government. For conservatives, their unity might be cause for celebration; but from a policy standpoint they have suffered a decisive defeat.

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Conservative pro-Israel types like to say that it is a giant myth that criticizing the policies of Israel will get you in trouble. They are wrong. I know people who lost their jobs for participating in organizations that are opposed to the occupation. I know one young fellow who lost his job at the State Department when it was discovered that his uncle was an Arab-American activist (and, by the way, in no way hostile to Israel).

Yes, criticizing Israel can cost a person his or her livelihood. That does not happen often but it happens.

But there are other things, almost as unpleasant, that happen all the time: like publicly being called a Nazi.

This is a column written by an Arab-American in the Arizona Republic criticizing, in strong terms, the Gaza war.

This is a response written by a respected and prominent local rabbi, published in the temple bulletin, along with a letter he sent to the Arizona Republic. Note especially the language used in the letter to the newspaper.

Draw your own conclusions (as you guys always do)

The modern bank robber calmly hands a note to the teller, asking for money and making a moderately specific scary threat. The robber, of course, expects the teller to hand over unmarked bills without a fuss.

This morning's "research" note from a major international bank is entitled, "Falling Short: The government needs to buy toxic assets," and the heart of their one page argument is, with the emphasis as in the original,

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The President's top political counselors face the following dilemma. They want to be tough on banks because that makes sense politically and, presumably, because it fits how they - with considerable relevant experience - would like to address the deeper underlying problems in the financial system.

But at least some prominent economic counselors to the President strongly disagree. The Treasury Secretary, in particular, articulates the view that being tough on the banks and top bankers would further worsen credit markets and thus deepen/prolong the recession. Mr Geithner wants to try other routes, and while he does not rule out imposing policies that banks would not like, it is not in his Plan A or likely a feature of his Plan B.

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I'd like to follow up on the discussion about a New New Deal, i.e. the need for
an updated version of the New Deal to fit the modern economy. In the posts so far, there have been discussions of the types of policies Obama may implement (Card check? Health care reform?), and who will actually benefit from those policies relative to who ought to benefit. In particular, there have been cautions against limiting the recovery package to the typical "males in hard hats with families to support" image that many people seem to have in mind when thinking about stimulus policies.

As we think about a Brand New Deal, I think it's important to recognize that the structure of families and households has changed considerably over time. The notion of a family was very different in the 1930s. Men were the bread winners, that was their responsibility to the household, and by and large, it was assumed that there was a spouse at home taking care of household needs and supporting this effort. Men who let down their families by losing a job, or who failed to provide for them adequately in other ways, were not fulfilling their proscribed social function.

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Testifying for a second day before the Senate Budget Committee about the plan he sketched out yesterday to save the banking sector, Tim Geithner promised to inform Congress as quickly as possible if more taxpayer money is needed. He said a supervisory review of banks -- a so-called "stress test" -- would help determine that. It's likely the stress tests will show the banks are in far worse shape than Geithner's plan can deal with. But it seems doubtful Geithner will return to the well any time soon. Neither Republicans, Blue-Dog Democrats, or progressive Democrats like the idea of bailing out Wall Street -- and revelations about Wall Street's malfeasance, misfeasance, and just plain stupidity over the last few years are likely to multiply in the weeks and months ahead.

So far, the Geithner plan requires no new money beyond the remaining $350 billion Congress has already okayed to bail out Wall Street. But in truth, the plan assumes trillions more from the Fed, based on the Fed's seemingly infinite capacity to backstop almost anyone putting up almost any collateral.

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Thank you Jason for bringing up the issues of gender and race. Feminist historians and economists are now working together in an organization W.E.A.V.E (Women's Equality Adds Value to the Economy) to push for .... well, it's obvious isn't it? Interested readers should take a look at Mimi Abramovitz's recent essay Female Workers Can Jolt Economy; Look at Japan. Two related stories are

Three Steps to Women's Fair Share of the Recovery, and New Deal Slighted Women in Recovery Plans.

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The Israeli elections turned out pretty much as predicted--a victory for the extreme right. Even though Tzipi Livni holds on by a one-vote margin, her centrist Kadima Party is unlikely to be able to create a stable governing coalition.

The victor is not her nemesis Bibi Netanyahu, but rather Avigdor Lieberman, the extreme right wing apparatchik from Moldova who outpaced the Labor Party to score number three in the elections. This bodes poorly for the Obama attempt at a two-state solution, but even more so, it is a dangerous warning to Israel as a nation adhering to democratic values.

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CEOs of the nation's largest banks and financial institutions faced Congress today, defending how they used almost hundreds of billions in taxpayer bailout money. Members of the House Financial Services Committee wanted to know why the executives paid executive bonuses, bought corporate jets, put on parties, arranged employee junkets, and richly rewarded their shareholders with dividends, rather than lend the money to Main Street. Committee Chairman Barney Frank told the bank executives there was "a great deal of anger" across the country.

Anger, yes. Indeed, the hearing was something of a perp walk. But the pertinent question is what Congress will do to make sure Geithner's new plan for using more of the bailout money doesn't allow bank executives to do much the same, through back doors and loopholes.

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For those not held captive by obsolete theories, our current moment presents a chance to draw on some of the best aspects of the New Deal's achievements--bold public investment that stimulates economic recovery, generates jobs, provides socially useful infrastructure, leverages input from local communities, and safeguards taxpayer money through careful oversight.

Julian and Eric have both pointed us to John Kenneth Galbraith's concept of "countervailing power," the idea that the state can, essentially, make a fairer society by helping empower constituencies who have previously been left out of the political system. And Susan has directed our attention to the importance of state action to ensure widespread economic security--"freedom from want," as FDR put it. Picking up on these themes, I want to look at how one of the tensions within the New Deal--how best to spend public monies to construct infrastructure--is playing out with respect to Obama's stimulus plan. In short, who will benefit?

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Despite the fact that military spending is at its highest level since World War II, the arms industry and its allies in the think tank world and the punditocracy are seeking to cash in on the push for a substantial economic stimulus. The Washington Post has hosted two pieces making variations on this argument, one by its monthly contributor Robert Kagan, and one by Tom Donnelly and Gary Schmitt of the American Enterprise Institute. We're going to be hearing the "defense as stimulus" argument long after the current stimulus package has been enacted, as part of the debate over the size and shape of the FY2010 Pentagon budget. So, it's worth debunking some of the myths inherent in this argument.

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In the end, it does not matter all that much that Bibi Netanyahu is going to be Israel's next prime minister. I don't see much (if any) real differences between him and Ehud Barak or Tzipi Livni. In fact, in my opinion, it is Barak more than anyone else who is responsible for demise of the Oslo process. (For the facts on that, see Clayton Swisher's "The Truth About Camp David," a brilliant expose by a young ex-Marine who was there).

I also am taken by an analysis by Yossi Beilin, who was Oslo's architect. He says that it is better to have a pure right wing government than a right wing government covered by a centrist fig leaf. He says that, in the past, the worst Israeli governments have been national unity hybrids. The hybrid goes about its business building new settlements and thwarting the peace process with its moderate component (i.e., Shimon Peres, in his day) putting a pretty face on it. A pure right wing government is not nearly as good at pulling the wool over Washington's eyes.

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When you cut through the technical details and the marketing distractions, sorting out the US banking fiasco comes down to one, and only one, question. How tough are you willing to be on the people who control the country's large banks?

One option is to be gentle with them and adopt only ideas that they pre-approve. This route involves complicated schemes to purchase, lend against, or otherwise "wash" toxic assets out of the banks using taxpayer subsidies. This will be expensive (for the taxpayer), will be messy politically, and - most likely - will not work, in the sense of restoring the banking system to something close to its normal mode of functioning; check with Hank Paulson for details.

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Everyone is saying the problem (the Wall Street sell-off) with the Geithner announcement was that it wasn't specific enough.

Nonsense.

What freaked out Wall Street was Geithner's "stress test". Unlike Paulson, Geithner is unwilling to give a bank money until he knows exactly what the stress tested balance sheet looks like. Unlike Ken Lewis of B of A, he's not going to buy a pig in a poke. There are so many worthless securities in these banks that they aren't confessing.

What Wall Street is waking up to is the fact that a lot of bank stockholders are going to get wiped out, because, if the stress test is good, a lot of banks are currently insolvent.

What Barack and Tim need to do now is to get Warren Buffett and Peter Lewis to say their firms will work with the Aggregator JV to buy paper from banks that pass the stress test with an equity kicker for the fund.

Susan Feiner thinks "Eric misunderestimates the clarity of the New Dealer's vision.... Suggesting that the commitments holding the New Deal together were 'little' makes no sense."

Clearly we read the record differently. I see a New Deal that included, as one of its first priorities, the Economy Act, which balanced the budget; which provided 4m jobs through the Civil Works Administration and then took them away a scant few months later; which went back into the relief business with the Works Progress Administration in 1935, only to shrink WPA in 1937, in Keynes's view causing the 1937-38 recession.

In short, I see a New Deal that looks as wobbly as an immediate post-Prohibitionist who's had a night on the tiles.

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I'm delighted to be joining another TPM book club discussion, especially on such a hot topic. In Maine, in winter, hot is good. I'll add a dash of spice. In my view Eric's characterization of the New Deal and Keynes gets in the way of answering the questions he poses.

Early on, Eric misunderestimates the clarity of the New Dealer's vision. "Beyond Roosevelt's core conviction that '[n]ecessitous men are not free men,' little held the New Deal together." (Rauchway page 4) Suggesting that the commitments holding the New Deal together were "little" makes no sense.

FDR first referred to necessitous men in his 1936 address to the DNC. By 1944, he knew exactly what he meant, "We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence." The Economic Bill of Rights followed.

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Jason Scott Smith's quite right to point out that in a Very Short Introduction some things get less attention than others, and in my book one thing that gets less attention is the role of the New Deal as a political vehicle for the Democratic Party.

But there's a good reason for that! The Democratic Party in the 1930s (perhaps as now) had the luxury of knowing that in response to the economic crisis, good policy was good politics. Roosevelt had been elected to do a job for the country, and if he did it he would be rewarded -- as indeed some research suggests he was in the most basic sense; states with "robust income growth" went proportionately stronger for Roosevelt in 1936. Maybe the voters were simply asking if the New Deal (whatever it was) had, in the crassest sense, been a good deal for them.

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In the end, Bibi Netanyahu will become prime minister. And, unfortunately, he will include neo-fascist Avigdor Lieberman in his government.

Tzipi Livni can take some personal gratification from her showing but, in the end, she can't make it.

Basically, one has to view the Israeli body politic as split into two camps, right and left. No matter that there are a few dozen parties. At the end of the day, every party that gains a seat in Knesset either leans right or left.

Today the rightwing coalition won a clear majority. It is, I believe, inevitable that President Peres will give Netanyahu the first shot at forming a government and that Bibi will succeed.

Everything depends on Obama. It is the President, not the Prime Minister, who will determine what happens now. If Obama has the will -- and I think he does -- he can push Bibi to the peace table, just as Clinton did. And, drawing on Clinton's experiences with both Bibi and Barak, Obama can go all the way.

It is just a matter of will.

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Do the math, given these results (more or less):

I'm sorry, but even as my colleagues parse the Israeli elections, I'm not quite done with Sam Tanenhaus, David Brooks, David Frum, William Kristol, and others who insinuated themselves so brilliantly into public discourse as "conservatives" in the 1990s and did so much damage to the American civil society and republic and therefore, not incidentally, to Israel itself.

Now they're trying to give American conservatism a decent burial as they strive, with unseemly haste and some inexcusable assistance, to get us to think well of them.

A few hours ago in Open Democracy I wrote that I'm not buying. These men should bury themselves for awhile -- in good books, long walks, quiet conversations, and, above all, public silence. Then I may forgive them for making the mistake of their lives -- and ours. But I doubt that I or, for that matter, honorable conservatives, will think well of them soon. Here's why.

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Here's the exit polls:from Ha'aretz

Channel 1, Channel 2 and Channel 10 polling of voters as they left the ballot box all pointed to victory for Kadima, headed by Tzipi Livni.

The Channel 1 poll gave Kadima 30 seats, Likud 28 seats, and Labor 13 seats. Yisrael Beiteinu is predicted to win 14 seats, according to the poll.

According to the Channel 2 poll, Kadima will hold 29 seats, Likud will take 27 seats and Labor 13 seats. Yisrael Beiteinu will have 15 seats in the new Knesset.

The Channel 10 poll indicated that Likud will take 28 seats, Kadima will hold 30 seats and Labor 13 seats. Yisrael Beiteinu will have 15 seats.

REMEMBER, all that matters is that neo-fascist Lieberman not be in the government. Better a Bibi led government without him than a Livni-led government with him. That's the main thing, although a general loss by the right would be delightful. But it is also why a Livni win is no cause for cheering. She is very likely to invite Lieberman into her government. Less likely that Bibi would (the two rightwingers hate each other).

UP TO THE MINUTE RETURNS HERE

The tab may be close to $2 trillion. But what, exactly is the plan? We still don't know.

Geithner has to raise confidence among two groups: (1) the public, enough to allow the administration to use the second $350 billion Congress has already authorized without too much hollering on Capitol Hill; and (2) investors, sufficiently to get them to buy the banks' toxic assets (with guarantees from the Treasury and loans from the Fed limiting the investors' downside risks), and to buy new securities that will finance future loans to consumers, small businesses, and homeowners (also with some federal guarantees and loans limiting downside risks).

At this stage, (1) will be far easier to accomplish than (2).

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Counting down to the announcement of the Geithner plan, the New York Times has this account of how it came into being (and why it should be called the "Geithner plan," although maybe Larry Summers is hiding behind him):

In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.

Mr. Geithner, who will announce the broad outlines of the plan on Tuesday morning, successfully fought against more severe limits on executive pay for companies receiving government aid.

He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.

I'm not a huge fan of executive compensation caps, as I think they are something of a sideshow. But I think the general approach of playing nice with banks and their shareholders is a mistake, because it leads to intransparent subsidies like the privately-financed bad bank is sure to be. (If the government is guaranteeing assets bought by private investors, as is widely rumored, it's still a subsidy; it's just not as obvious as writing a check.)

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Americans have compared our current political situation to the New Deal from almost every possible angle. There is one component to the New Deal, however, that has been downplayed in public discussion.

That is the theme of countervailing power. Rauchway devotes a chapter to this subject, building on an argument developed by John Kenneth Galbraith in the 1950s. Galbraith and Rauchway argue that one of the most important contributions of New Deal policies was to help empower certain social groups, such as industrial workers, so that they could better compete on the political playing field long after FDR was gone.

The objective was attractive for three reasons.

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The President was great last night. He did everything he had to do and more.

He was a little weak on A-rod. It was just as well that he didn't have to answer an equally critical question about Sean Penn's chances of winning an Oscar for "Milk."

But here is what I didn't like.

The great Helen Thomas (great, and unequaled by anyone in the White House press corps since FDR's day) asked the President about nuclear proliferation. Her question ended with the query: does he know of any Middle Eastern state with nukes?

Why did she ask that? She asked it to see if Obama would refuse to respond as previous Presidents have. The answer is Israel, of course. And everyone knows it. In fact, the State Department has published reams of material about JFK's concern about the Israeli bomb. Israeli politicians talk about it. Every Arab in the world knows about it. And Israel's nukes are its number one deterrent against attack by Iran -- and everyone knows that too.

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At 11am this morning, from the Cash Room at the Treasury, Secretary Geithner will lay out his vision (and hopefully some convincing details) regarding how to get the US financial system back on its feet. What should we listen for as indications that this is heading in the right direction?

1) If there is a "once and for all" audit of the banking system, as President Obama seemed to say yesterday, what do we learn about the toughness of the rules under which this will be conducted? Annoucing an thorough assessment is potentially a positive step, but vagueness spells trouble (for us, not the banks) down the road. We need this audit to force major banks to use market prices to mark down fully their portfolios; anything else is evasion and procrastination.

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Eric Rauchway, in his introductory post, asks "What kind of government did the New Deal leave us, and why?"

I'd like to take some liberty with this question, and reframe it just a bit: "What was the essence of the New Deal, and why have historians argued about its nature and significance for so long?"

To begin thinking through this question, it makes great sense to begin with Eric's book, The Great Depression and the New Deal: A Very Short Introduction. It's an elegant, concise, and analytically sharp account of the 1930s and the many implications that this period holds for what comes afterwards. But perhaps more interestingly, the points of emphasis in his narrative point to how historians, generally, have wrestled with defining the New Deal. And, I would suggest, what we include and what we leave out shapes the understandings of the past that we are able to bring to our present moment.

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You can maintain that Obama can't guarantee that his stimulus can create 4 million jobs. That he is too gracious to Republicans. That he doesn't "make news" with his national audience. What you can't argue is that he disrespects the American people. Or that he thinks his job is to entertain them. Or that he's going to let his audience forget that Republican policies were the prologue to economic catastrophe.

I want to come back to Eric's first question in a later post, the question of how depressions come about, and turn to his second question, "what happened to the principle of countervailing power after the New Deal? Did it remain a core concept of American politics, and if so, for how long?"

The idea that countervailing power is needed to balance labor markets has faded over time, and I think the movement toward deregulation in the 1970s is part of the reason for this, and that economists were one of the driving forces behind this change. We hear a lot about the role that Nixon and the Republicans played in bringing about a push for deregulation, a push that found success, but we hear less about the role that the economics profession played in setting the stage for the deregulatory phase that began in the 1970s, a phase that continued for decades and has only recently been muted - perhaps - by the recent crisis in the US and world economies. Thus, I'd like to focus on changes within economics that set the stage for the anti-union movement and gave intellectual credence to this movement.

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Why are Senate Republicans (all, that is, except the lonely moderates Collins, Snowe, and Specter) nixing the stimulus package, as House Republicans did? Not because Obama failed to compromise -- he gave them the tax breaks they wanted, included a whopper for business. Not because Senate Democrats failed to bend -- they agreed to trim more than $100 billion out of a previous version of the bill. Not because Senate Republicans are doctrinally opposed to deficit spending -- many of them happily voted for Bush spending and tax cuts that doubled the federal debt.

The reason has to do with the timing of the economic recovery. If everything goes as well as possible and the stimulus and next round of bank bailouts work perfectly, a turnaround could begin as early as mid-2010. But even under this rosy scenario, employers wouldn't start rehiring until late 2010 because they'll want to be sure the upturn is for real (employment typically lags in a recovery). This means that under the best of circumstances -- assuming the stimulus is big enough to jump-start the economy and the next bank bailout big enough to get credit moving -- most Americans won't feel much better than they do now by November, 2010. Unemployment could easily be hovering close to 8 percent; underemployment, close to 14 percent; and many other indicators, still in the doldrums.

That's if all goes extremely well.

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Good morning (from the West Coast, anyway), this is Eric Rauchway and I'm delighted to be asked to talk about my book, The Great Depression and the New Deal: A Very Short Introduction.  I'll use this post as an even shorter introduction.

If TPM readers have heard of me in connection with the New Deal before (which I don't assume you have) it might be because Paul Krugman or maybe Tim Fernholz sent you my way in connection with the series of "New Deal Denialist" posts on The Edge of the American West.

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This week at Cafe, Eric Rauchway is joining us for a book club discussion on his latest, The Great Depression and the New Deal: A Very Short Introduction. This is a great series, and I think this book in particular does an excellent job of laying out the details of the Great Depression and The New Deal in a timely, readable, and highly relevant way.

Eric Rauchway is a History Professor at UC Davis and he specializes in US political, cultural, and intellectual history. His previous works include Murdering McKinley: The Making of Theodore Roosevelt's America (2003) and The Refuge of Affections: Family and American Reform Politics, 1900-1920 (2001).

Joining him are James K. Galbraith, economist and professor at the Lyndon B. Johnson School of Public Affairs and University of Texas at Austin; Brad DeLong, professor of economics at UC Berkeley; Susan Feiner, professor of economics and Women's and Gender Studies at the University of Southern Maine; Mark Thoma, associate professor of economics at the University of Oregon; Anthony Badger, professor of history at Cambridge University; Jason Scott Smith, assistant professor of history at the University of New Mexico; and Julian Zelizer, professor at Princeton University.

Jeff Faux, my former boss at the Economic Policy Institute, tells a story from his days as a foot soldier in President Johnson's War on Poverty. Johnson was asked by a delegation from Alaska if he had an anti-poverty program for their state. Johnson assured the delegation that he had a "great big program" for Alaska. As soon as the delegation left, Johnson rushed into Jeff's office and told them that they needed to come up with a program for Alaska.

Unfortunately, many liberals have not moved beyond Lyndon Johnson's thinking on the role of the government in the economy. They still tie progressive outcomes - the guarantee of good quality health care, education, childcare, housing and a secure retirement - directly to big government. While the government must play a role in ensuring these outcomes, the point should be to have good government, not big government, as we usually conceive it.

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Two provocative columns in Ha;aretz today.

In the first, political scientist Shlomo Avineri writes about the founder of Zionism, Theodor Herzl's, fear that the Jewish state he envisioned would ultimately turn to anti-Palestinian racism.

In his novel, Old New Land, published in 1902, which purported to describe Israel in 1923, Herzl described a critical election in which an Avigdor Lieberman type runs for prime minister.

"In the book, not only do the country's Arabs have the right to vote, some of them serve in key posts. Among them is one of the novel's heroes, an Arab engineer from Haifa named Rashid Bey. To use a term from our day, Herzl envisioned a state that would be both Jewish and democratic, both a Jewish nation state and a state of all its citizens.

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If all one means by center is a vague desire to contain Palestinian terrorism yet distance oneself from settlers' excesses--to do the former without alienating Washington, and the latter without splitting the Jewish people--then a stable majority has been centrist since 1967. But this is a free-floating desire, not the basis of a political identity. You can see how much good vague desire is when others create facts.  

ISRAELIS ANGUISH OVER five issues, actually. First, there is the question of whether to rely primarily on military power when dealing with the troubled Middle East. Second, there is the collateral but more ideologically charged question of whether to withdraw from occupied territory, historic Eretz Yisrael, in order to advance to a "two-state solution" with Palestinians. Third, there is the question we have examined thus far, whether a democracy can accord exclusive privileges to legally defined Jews--a question linked to the first two, but not limited by them. Next there is the question, tucked into the last one, of whether to privilege orthodox religious practice. Finally, there is the question of economic privilege, even class: who wins and who loses in a global market economy?

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There comes a time in every economic crisis or, more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that - they say - will deliver you back to growth. The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains.

Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble? The form of these vested interests, of course, varies substantially across situations, but they are always still strong, despite the downward spiral which they did so much to bring about. And fully escaping the grip of crisis really means breaking their power.

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Senator Collins -- who is a not so much a moderate as a negotiator for the extreme conservative faction of American politics -- says that money spent to stop a global pandemic flu doesn't belong in the stimulus bill.That crystallizes the critical question for Congress as it goes into conference to decide the shape and size of the legislation that will determine, in all likelihood, the fate of the country for the next two or three years.

I agree that "stimulus" is not a well-chosen word for the critical legislation that Congress simply must pass. The critical bill at issue now is all about the long neglected investment in the public goods needed by our country now and in the future.

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Holy Kafka.

This is the story of a frequent TPM poster who, after 70 visits to Israel, decided to pick up and move there (make "aliya').

I won't describe what happens but it's pretty bizarre.

The only good news in it is that Israel does pay attention to what appears at Talking Points Memo, a little too much attention.

Excerpt from a letter in the NYTBR from Donna Wiesner Keene, "a senior fellow at the Independent Women's Forum" (pardon my italics) :

Conservatives believe spending is out of hand and never use "investment" as a synonym for tax and spend. [The notion] that "there really is no example of small government among rich nations," is unsupported nonsense. Think Dubai, free and rich.

For only this, I miss the Evil Empire as a living example of big government. What is apparent is that our spendthrift policies are bringing the United States the empty store shelves of Communism....

There's the slogan conservatives have been looking for: Emigrate to the Emirate, Don't Go Back to Russia!