Never Mind the Dow, Here’s the Economy!

By Tony Karon

"......The mantra that the collapse of the serial-bubble economy centered on Wall Street for the past two decades is simply a crisis of confidence is as widespread as it is flawed. It is confidence — groundless pollyannaish optimism in greed-driven denial of the iron laws of economic gravity — that got us into this mess. Confidence is what got those poor Capetonians buying “aeroplane game” tickets even though the law of geometric progression dictated that the vast majority would lose their money; and confidence, driven by falsehoods peddled by the barons of the “ownership society”, is what got tens of millions of Americans spending money they never had based on an assumption that the value of their homes and of their investments on the stock exchange would keep on expanding exponentially.....

The current bailout is going to subject generations of Americans to expanded public debt and domestic austerity — the U.S. is going to spend trillions of dollars it doesn’t have simply repairing the mess made on Wall Street; and that doesn’t even begin to address the crisis in the real economy. Where are the jobs going to come from to replace the millions that have been lost over the past two decades, and which will now hemorrage at a perilous rate? How will America fund the massive overhaul urgently required in its basic infrastructure? How will it educate a new generation of Americans to compete in a global economy when the option of debt-leveraged college tuition moves rapidly beyond the reach of much of the middle class?.....

To put this more bluntly, fixing America’s economy will require not only jettisoning the Reagan dogma of deregulation, shrinking government, and tax cuts as the cornucopia of economic growth, but also the Clinton legacy that turned the Democratic Party into as much of a friend to Wall Street as the Republicans had traditionally been. Wall Street is not the economy, and the last two decades have shown that the stock market can be hale and hearty even when the economy is being steadily denuded. It’s on fixing the real economy that voters should be forcing politicians to focus."