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June 15, 2017



Powell was a lawyer from Richmond, Virginia, who represented Big Tobacco (long after the Surgeon General’s finding that smoking causes cancer). His infamous memo of 1971 to his friend and a vice president of the U.S. Chamber of Commerce outlined a means of having big business take over the American political process (which, of course, would sound the death knell of the New Deal). The memo was kept secret for two months so that Nixon could appoint him to the Supreme Court and the memo did not become known to the Senate prior to his confirmation. He was confirmed and the rich and corporate class took his memo to heart and have indeed taken over America’s politics in a near if not fatal blow to FDR’s New Deal policies. The record speaks for itself: we have had little real economic growth since compared with the enormous growth we experienced under the New Deal and we have had numerous recessions as wage inequality has stifled aggregate demand, but, the Dow has exploded as a greedy Wall Street consumes the economy’s income and worker productivity gains while millions of Americans made and are continuing to make the transit downward from the middle to the poverty class and the resulting lack of demand is giving us an economy almost always on the edge of recession. Thanks, Justice Powell. Just what we needed. We appreciate your help.

Ronald Reagan came to office under the auspices of free-market capitalism. His loud backers cast his trickledown economic plans as those of “liberty” and “freedom” when they were neither; they instead represented the end of New Deal policies, policies that had operated to fairly distribute the wealth and income of the economy for the preceding some forty years to all and not just the few. Trickledown economics basically says that if you give money to the rich and corporate class that the trickledown effect will be that they will open new factories and in general stimulate the economy and thus everyone will prosper.

Sounds good, but guess what? It doesn’t work out that way. The gifted few put the money in their pockets or send it to Switzerland under some bank number protected from detection by the IRS via layers of trustees. No new factories are opened because there is tepid demand for their goods and services due to wage inequality, and why should those so gifted produce more goods to sit on warehouse shelves in Omaha or Dallas?

Obviously little demand for corporate goods and services is going to call for contraction rather than expansion in the marketplace and, as I have blogged before, why should corporate America risk investment in expansion in the marketplace when their profit picture doesn’t depend upon the efficient and competitive production of goods and services but rather in large part on how much they can milk out of the American economy via tax cuts, underpaying their workforce and escaping regulatory control? Trickledown economics doesn’t work, never has and never will, being oblivious to reality.

Elisabeth Warren in her new book This Fight is our Fight rightly notes that “The Reagan administration proudly embraced the idea of ‘deregulation,’ as if financial and corporate regulations were the biggest problems faced by Americans – rather than the wrongs those regulations were designed to prevent.” Apparently then as now under the Republican perspective, it was and is more important to protect a corporate giant from government than is was and is to protect a customer, investor, or small competitor from the actions of a corporate giant, but that requires an understanding of what the congressional intent was in passing anti-trust laws, consumer protection laws and the Dodd-Frank Act and what such laws were designed to do. The design of these and other such laws was and is good but their enforcement or even continuing exististence under Republican administrations has been scuttled by rich campaign contributors via their congressional friends eager for funding in the next election.

So is the New Deal dead due to the machinations of the rich and corporate class and their front men such as Powell and Reagan? Almost. The Wagner Act and the Fair Labor Standards Act are still on the books, for instance, though unenforced.

Can the New Deal be resurrected? Yes, but only as a new New Deal. Much has changed since the time FDR came into power in 1933, and a new New Deal should reflect that reality with different policy responses given our interim experiences, but, and this is an important but, even new policy responses should be made with the fundamental ideas of FDR in his now old New Deal, to wit: that the economy should work for all of us with a fair apportionment of its wealth and income to both corporate moguls and investors and the workforce.

All of us, as FDR proved in saving market capitalism, can prosper, unlike (thanks to such as Powell and Reagan and others) the present arrangement where the rich are getting richer and the middle class is being hollowed out as millions are falling from that class into an expanding poverty class, a recipe for failure at some point down the road. Count me as a New Dealer open to change but not the fundamental ideas that spawned the changes we so desperately needed in 1933 and, increasingly, today.     GERALD      E


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