Shock Doctrine: New York

Based on a March 18, 2011, presentation to the Stony Brook University conference “Defining the Future of Public Higher Education”
Around the country, the wealthiest segment of society is exploiting state fiscal crises in order to reduce funding for social services like education and to undermine workers’ little remaining political power. I have three goals here: to illustrate the applicability of Naomi Klein’s “Shock Doctrine” concept to the current fight in New York State (and by extension, many other states), to arm readers with some of the basic information to help them articulate a counter-discourse, and to propose five specific talking points that I think we need to emphasize going forward.
One of my central contentions is that despite the massive bipartisan propaganda campaign against unions and social democracy, the US public is “ready” for a radical message. Public opinion polls in recent months—as well as polls going back many decades—suggest that an educational campaign that frames the debate roughly along the lines outlined in the second section below will meet with a positive response among the general public. In fact, the current political moment is perhaps more opportune for organizing a progressive movement than at any time in recent decades.
The Shock Doctrine Comes to New York
Milton Friedman, that hero of the corporate rich around the world, once said that “only a crisis, real or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” Friedman was the leading pioneer of what Naomi Klein calls “the shock doctrine.” Klein’s 2007 book traces the intellectual history of neoliberal restructuring in the Third World since the 1970s, demonstrating how wealthy nations, international financial institutions like the World Bank and IMF, and Third World elites have exploited economic crises, “real or perceived,” to impose harsh neoliberal “structural adjustment” programs throughout the Third World, starting in Chile in 1975. Those programs have privatized public assets, slashed government social spending, threw local markets open to cheap foreign imports, and deregulated big business and finance. Such measures are quite antithetical to the policies that today’s industrialized nations used in order to develop their own economies, but economic development is not really the goal and occurs only incidentally if at all; the predictable beneficiaries are foreign investors and corporations and a small cap of domestic elites [1].
Many observers have noted a similar trend here in the United States since the late 1970s: while real wages have stagnated or fallen and successive governments at every level have eviscerated the social safety net, military spending and corporate profits have soared, producing a dramatic increase in socioeconomic inequality. The United States has long since joined the proverbial “race to the bottom,” the vicious cycle in which different parts of the world “compete” with one another to offer favorable climates for business investment [2]. Although every administration and Congress since the 1970s has contributed to this trend, moments of perceived fiscal crisis offer particularly good opportunities for those wishing to roll back social democracy even further. Republicans and Democrats have both been enthusiastic shock doctors. After Reaganites racked up the first federal deficit since World War I by giving huge tax breaks to the rich and ramping up Pentagon spending, the Clintonites targeted the welfare system as a key source of the deficit and worked to end “welfare as we know it.” After Clinton- and Bush-era deregulation, militarism, and tax cuts for the rich produced the current crisis, the Obama administration is now joining Congress in blaming “out-of-control” social spending—while seeking to raise the Pentagon budget by 3-5 percent to a new record-high and extending Bush-era tax cuts that will cost hundreds of billions of dollars [3]. That Obama’s fiscal approach is slightly less draconian and reactionary than Republicans’ does not negate the existence of a basic bipartisan consensus.
The implicit strategy is quite simple, and reflects what economists Edward Herman and Robin Hahnel have aptly called the “balanced-budget ploy”: giving lavish tax breaks and subsidies to the wealthiest segment of society and wasting half the federal budget on wars and the military, then blaming the resulting deficit on public education, Medicaid, Medicare, Social Security, public-sector unions, aid to low-income families, and the like, insisting that all of the latter must be “reined in” in the interest of national survival. (This disingenuous argument goes hand-in-hand with another: the notion that reducing the deficit should be an urgent priority. As numerous economists have warned, and as the Great Depression long ago proved, only bold federal stimulus spending—much bolder than Obama’s 2009 stimulus—will help the economy recover. Adding to the deficit in the short term is imperative, and hardly as damaging as many pundits allege given that the US government has access to historically low rates of interest [see next section, point #4] [4].)
State governments around the country are now seeking to implement their own versions of the Shock Doctrine. In a recent op-ed column entitled “Shock Doctrine, U.S.A.,” Nobel laureate economist Paul Krugman observes that Republican actions in Wisconsin are “a power grab—an attempt to exploit the financial crisis to destroy the last major counterweight to the political power of corporations and the wealthy.” Moreover, Krugman notes, “the power grab goes beyond union-busting”: the legislation also allows the Governor and his appointees to unilaterally slash health services for low-income families and privatize public utilities via no-bid contracts [5].
Although critics of the current assault on the public sector often imply that “Republican governors” are the only culprits [6], many Democrats are pursuing the same basic agenda. Nowhere is Democratic collaboration more apparent than in New York, where newly-elected Governor Andrew Cuomo is seeking massive cuts to public education, public health care services, and public-sector union wages while promising to slash taxes for the richest five percent of New Yorkers. Cuomo wants to cut public higher education (SUNY and CUNY) by over $305 million, primary and secondary school aid by $1.5 billion, the Metropolitan Transportation Authority (MTA) by $200 million, and the Medicaid on which 4 of 10 children rely by $7.4 million over two years [7]. And he does so brazenly, with no apologies: in November the New York Times reported that Cuomo “even encouraged business leaders to act as a greater counterweight to unions, encouraging them to, of all things, hire more lobbyists” [8]. New York City Mayor Michael Bloomberg is pursuing a parallel agenda, threatening almost 4,700 teacher layoffs and massive cuts to care for children, the elderly, and the homeless [9]. As informed observers have pointed out, this attack on unions and the public sector reflects a deliberate political choice rather than an economic imperative (see below).
The justifications are also familiar, and closely echo Milton Friedman: diatribes against “special interests” (meaning primarily labor, low-income schoolchildren, Medicaid recipients, etc.), noble talk of “shared sacrifice,” angry complaints about how labor unions are draining the public treasury, and so on—all leading to the lamentable but inescapable conclusion that “there is no alternative” to neoliberal austerity. Overcoming this propaganda and winning the battle of ideas requires a fundamental reframing of the debate by those who wish to stop Cuomo, legislators, and their wealthy sponsors and beneficiaries from driving New York back into a nineteenth-century dystopia.
Reframing the Debate: Five Suggested Counter-Arguments
I want to propose five concrete talking points that I believe should be central in our effort to promote an alternative vision for New York and the country as a whole. This counter-discourse need not be, nor should it be, purely defensive in tone and character; even while defending against immediate attacks on the public sector, we must articulate a concrete normative vision of how things should be.
Following each frame I outline some basic facts and statistics that readers might use to support it.


  1. There is money, and there are alternatives; since the wealthiest New Yorkers have the money, targeting the public sector rather than the rich is a political and moral choice.
  2. Cutting services in order to cut taxes for the rich is a job-killer; taxing the rich to fund public spending is a much more efficient means of job creation and economic stimulus than cutting taxes for the rich.
  3. US militarism severely impedes both economic recovery and the social welfare of the population.
  4. State action alone is not enough; bold federal deficit spending is imperative to facilitate economic recovery.
  5. The assault on the public sector is an assault on democracy and the principle of equal opportunity


There IS money, and there are plenty of alternatives to cutting social spending; targeting workers, students, and the public sector rather than the rich is a political and moral choice

The notions that “New York State is broke” or that “there is simply no money” have no basis in reality. New York is awash in money and capital, but it is concentrated to an extent not seen since the Gilded Age. The wealthiest five percent receives 49 percent of all income, up from 31 percent two decades ago. And even that 49 percent is highly concentrated in the hands of the richest one percent, who receives 35 percent of all income, up from 17 percent in 1990 and 10 percent in 1980. Conversely, the bottom 50 percent receives just 9 percent of income in the state, down from 14 percent in 1990. New York is the most unequal state in the nation, and New York City the most unequal major city [10].
Many of the teachers and other public-sector workers vilified by Shock Doctrine rhetoric fall within that bottom 50 percent; the starting salary of the average teacher in the United States is only $39,000. And in Wisconsin, where the “gold-plated pensions” of public-sector workers are allegedly to blame for the state’s fiscal crisis, the median pension is in fact less than $23,000. Many studies have also shown that the salaries and benefits of public-sector workers are no better than those of private-sector workers [11]. But even if public-sector workers in some cases enjoy advantages or benefits that their non-unionized, private-sector counterparts do not, the solution is not to take money from the former but to unionize and mobilize the latter (money and benefits taken from unionized workers typically accrue back to the wealthy, anyhow).
State government policy has reinforced this trend toward greater concentration of income and wealth. In New York State, as elsewhere, taxation rates and budgetary allocations reflect a consistent pattern whereby the rich and influential receive public hand-outs while government officials slash services to workers, students, and the general population.Taxation in New York is highly regressive, meaning that “the wealthiest 1% of households pay a much smaller share of their income in state and local taxes than do all other New Yorkers, even with the temporary income tax increase” passed in 2009. The top one percent still pay only 8.4 percent of their income, a figure that will drop to 7.2 percent if Cuomo is allowed to let the temporary tax increase expire. Households making between $33,000 and $56,000 pay a larger percentage of their income than anyone else in the state (11.6 percent). Even the very poorest New Yorkers—the bottom two quintiles, those who make less than $33,000—pay a higher share of their income in taxes (9.6 and 10 percent) than the richest one percent [12].
New York State government also provides direct subsidies to corporations and the rich—what some have termed “wealth-fare”—in a variety of ways. One glaring example is the state’s Brownfield Cleanup Program, which according to the Albany Times-Union “has resulted in hundreds of millions of dollars flowing into a relative handful of costly mega-projects with mini-cleanups” in the last three years. The beneficiaries are large private developers, who take advantage of generous state tax credits while spending (as of 2009) only about 20 percent of the subsidy on actual cleanup. In 2008 state Comptroller Tom DiNapoli predicted that the total cost of the program could be well over $3 billion. According to the Fiscal Policy Institute’s conservative estimate, the state could easily save about $300 million by reforming the program; going further, and ensuring that state subsidies are used only for actual cleanup, would save hundreds of millions more [13].
The wealthiest New Yorkers, particularly Wall Street bankers and corporate executives, are enjoying record profits at the expense of ordinary people; they can and should bear the costs of recovery. A wide range of fiscal policy measures is available at the state level. The two most common-sense policies would be 1) the extension of the temporary income tax surcharge (the “Millionaire’s Tax”) passed in 2009 and due to expire at the end of this year (Cuomo has vowed to let it expire), and 2) the implementation of a stock-transfer tax. The first applies to those individuals with incomes over $200,000 and families that make more than $300,000—roughly the wealthiest five percent of New Yorkers. Extending it for just two years would raise $6 billion in extra revenue—about 60 percent of the state budget deficit, and over three times the amount that Cuomo would cut from public education at the primary, secondary, and post-secondary levels [14]. A modest tax on stock transactions and speculation—a solution recommended by Nobel economists like Paul Krugman and many others who hardly qualify as radical leftists—would generate $3.2 billion [15].
Additional alternatives are numerous. Using NY State’s bargaining power to negotiate lower prescription drug prices, closing corporate tax loopholes, ending subsidies to large corporations, reining in luxury and expense accounts for legislators in Albany: such measures would increase state revenue by hundreds of millions of dollars each year [16].

Cutting social spending while cutting taxes for the rich kills jobs; taxing the rich to fund public spending is a much more efficient means of job creation and economic stimulus than cutting taxes for the rich

The Shock Doctor’s response to the argument that we must tax the wealthy is that doing so stifles economic development and job creation; only by cutting taxes for corporations and the super-wealthy, they insist, can we fight unemployment and get the economy back on track. This myth contains a kernel of truth—tax cuts for the rich will lead to the creation of some jobs. But the key question is whether they will create more jobs than alternative measures like increasing unemployment benefits, increasing funding for public schools, or cutting taxes for the working and middle classes by an equivalent amount. The answer to this question, established and confirmed by dozens of economic studies over the years, is a resounding NO. The main reason is that working people channel a greater proportion of their income back into the economy, thus stimulating demand and further job creation to a greater extent than the wealthy, who tend to save or hoard a greater share of their money. Thus the estimated $800 billion that the extension of Bush-era tax cuts will cost the federal government would create many more jobs if spent on social programs; likewise at the state and local levels.
This conclusion has long ceased to be new or controversial among Nobel laureate economists like Joseph Stiglitz and Paul Krugman, who have been unequivocal in voicing what is by now common sense among independent economists: that taxing the wealthy in order to fund social investment is the best means of facilitating overall economy recovery (in addition to being the more moral choice). Stiglitz even wrote a personal letter to New York State officials urging them to support the 2009 tax increase on the wealthiest five percent of New Yorkers as the most “economically preferable” strategy. In December 2008, over 100 New York economists co-signed a letter to former Governor Patterson that expressed the same sentiment: “Raise High-End Income Taxes to Help Close Budget Gaps” [17].
What political economists call “wage-led growth”—raising worker wages to stimulate the economy—is not only more just, but also simply a much more effective means of generating growth than the sort of trickle-down policies that have reigned supreme for the last 35 years [18]. The current continuation of regressive, trickle-down fiscal policy is destined to produce at best only modest economic growth, for just these reasons.

US militarism severely impedes economic and social recovery here at home, in addition to harming people around the world

US weapons murder foreign peoples on a daily basis—in Iraq, Afghanistan, Palestine, Colombia, Mexico, Egypt, and the dozens of other countries that enjoy major military aid and arms deals with the United States. This fact is the most urgent reason why we must all struggle for an end to US militarism.
But US militarism also impedes economic recovery and social welfare here at home. Nearly half (currently 48 percent) of US annual discretionary spending, or $1.37 trillion, goes toward war and the military [19]. By reallocating that spending to other areas that serve human needs, the government could easily provide for the basic social needs of every person in the United States (and have much left over for foreign humanitarian aid). To put the figure in a more localized perspective, the amount of money that the US government spends on the military each second would cover SUNY tuition for seven students. A mere nineteen hours of military spending could provide all 465,000 SUNY students with free tuition.
Reallocating the money would also solve the unemployment crisis and help set the United States on the path to a sustainable economic future. Like tax cuts for the rich, military spending is a relatively inefficient means of stimulating job creation and economic growth when compared to public investment in infrastructure, public education, and health care. Economists Robert Pollin and Heidi Garrett-Peltier of the Political Economy Research Institute have closely studied the employment effects of various fiscal policy choices, finding that


each billion dollars of government spending allocated to tax cuts for personal consumption generates approximately 15,000 jobs. Investing the same amount in the military creates about 12,000 jobs. Alternatively, investing one billion in health care yields about 18,000 jobs; in education about 25,000 jobs; in mass transit, 27,700 jobs; and in construction for home weatherization and infrastructure, 18,000 jobs. Thus, more than twice the number of jobs are created by equivalent spending on education and mass transit as on the military. [20]

On purely economic grounds, then, the United States simply cannot afford to waste half its annual budget on the military and still provide for the basic needs of its population. This argument by itself runs the risk of implying that economic inefficiency and harm to our own self-interest are the only problems with US militarism, when in fact tens of millions of people around the world are directly harmed by that militarism, and billions more are harmed indirectly. Even if militarization were economically wise, it would still be morally reprehensible. But bringing US militarism into the discussion affords an opportunity to condemn the immorality as well as the inefficiency of US militarism: like regressive fiscal policy, militarism is both immoral and inefficient. Those who are unreceptive to the moral argument should at least be swayed by the self-interest argument—but raising the moral and legal issues will at least force those people to think about them.
The US labor movement, which has historically supported US militarism and imperialism (supporting the “guns” in exchange for the “butter”), has a particularly urgent responsibility to condemn militarism on the grounds of both inefficiency and immorality. Small segments of organized labor—most notably, US Labor Against the War—have long been doing so, but the mainstream labor leadership has thus far failed to join them.

State action alone is not enough; bold federal deficit spending is imperative to facilitate economic recovery

State action alone is insufficient. The federal government has fiscal resources at its disposal that state and local governments do not. Most importantly, it can borrow large amounts of money and is not required to pass a balanced budget each year. In times of recession, it is especially imperative that the federal government engage in bold stimulus spending, including providing financial relief to state governments, in order to get the economy back on track. The current emphasis of politicians and pundits on the need to “cut the deficit”—and the implication that doing so will somehow lead to economic recovery—is sheer illusion at best, and deliberate dishonesty more likely. The 2009 Obama stimulus bill definitely mitigated the effects of the current recession, but as Joseph Stiglitz points out, was far too small to guarantee economic recovery. As Paul Krugman noted recently:

The federal government is having no trouble raising money, and the price of that money—the interest rate on federal borrowing—is very low by historical standards. So there’s no need to scramble to slash spending now now now; we can and should be willing to spend now if it will produce savings in the long run.

Other economists agree. According to Robin Hahnel, “The only way to reduce unemployment right now is for the federal government to unleash a large fiscal stimulus. This means a larger budget deficit over the next two years” (for a concise and accessible explanation of the roots of the current crisis, see Hahnel’s 3-part interview with the New Left Project in 2010) [21]. This basic message—that we must increase the federal deficit in the short term or risk inviting an even deeper depression—must accompany calls for progressive fiscal measures like taxing the rich.


The assault on the public sector is an assault on democracy and the principle of equal opportunity

Various commentators have rightly pointed out that the current, full-bore assault on unions, social spending, and workers’ rights is an assault on democracy itself [22]. If democracy means more than simply being allowed to vote every four years, if it means that people have the opportunity to fulfill their basic needs and to have a say in the decisions that affect their work and their daily lives, then the battle for the public sector is most certainly a battle for democracy. People from Egypt to Wisconsin seem to understand this connection, evident from the remarkable expressions of solidarity for Wisconsin workers coming from Egypt, Afghanistan, and elsewhere in recent weeks [23].
The notion that all hard-working individuals enjoy equal opportunities to live comfortable and prosperous lives is central to our national mythology, though statistics on inequality and class mobility (and in fact, market logic itself) easily refute it. Since the 1960s or 1970s inequality has been steadily rising, while intergenerational class mobility has been declining [24]. Moreover, statistics on both income and overall wealth continue to show dramatic differences along lines of race and gender. For instance, a 2010 report by the Insight Center for Community Economic Development found that “median wealth for single black women is only $100; for single Hispanic women, $120. This compares to just over $41,000 for single white women” [25].
But there is nonetheless a strong consensus among the public that there should be “equal opportunity” for everyone in a liberal democracy. Demonstrating how our current system of government policy and corporate domination systematically fails to fulfill this fundamental promise of national mythology may be an effective way to appeal to ordinary people of all political stripes who still cling to the “American Dream” idea. Government slashing of public services like education and health care not only channels more wealth to the richest sector of society, but further undercuts the promise of equal opportunity.
(For a 2-page summary of the above talking points that can be distributed as a hand-out, see http://www.zcomm.org/fighting-back-and-looking-forward-by-organization-for-a-free-society).

A Receptive Public
In order to win the battle of legitimacy, we must articulate these messages clearly and repeatedly until they become a steady heartbeat in public discourse, to the point where they become common sense among the general public. Luckily, we have the enormous advantage of a public that is generally social democratic and believes that things like education, health care, nutrition, and housing are all human rights and should receive priority in government policy.
First, the public does not share the hysteria over the deficit that consumes most politicians at the federal and state levels. This past October, after analyzing a wide range of polls, Christopher Howard and Rick Valelly found “that the public is concerned primarily with economic recovery and jobs. Curbing the deficit actually ranks low among its concerns.” The pattern holds true through the latest CBS/New York Times poll conducted in mid-January, where respondents overwhelmingly favored Congress focusing on job creation rather than reducing the deficit [26]. This sentiment holds even among most of those who identify with the Tea Party. For example, Howard and Valelly point out that a CBS/Times poll from last April “found that even among Tea Party supporters, focusing on the economy/jobs (44 percent) was far more important than focusing on the deficit or debt (10 percent)” [27].
Another recent poll by the respected WorldPublicOpinion.org suggests that those who sympathize with the Tea Party—roughly half the US population—do so not because they fear “big government,” but because they feel that government is “not following the will of the people” (an astronomical 81 percent of the US public thinks their government “is pretty much run by a few big interests”) [28].Past polls have demonstrated that most people fear “big government” only when that government works against their interests. For instance, people support strong regulations on big business when necessary to avert environmental destruction or to safeguard workers’ rights, and think that the government should ensure universal access to basic needs like health care, food, and education [29].
In stark contrast, people think that corporations and the rich should have much less influence over government. They oppose “big government” that favors the top-income sectors at the expense of everyone else. Two of the most important mechanisms by which the US government subsidizes the rich—massive Pentagon spending and low tax rates—have drawn public outrage despite receiving very little condemnation (and often praise) from the corporate-funded press and punditry [30].
Evidence of public resistance occasionally appears, however, even in the corporate press. When a recent poll by 60 Minutes and Vanity Fair gave respondents a list of options for reducing the deficit, the overwhelming majority said they would first “increase taxes on the wealthy” (61 percent) or “cut defense spending” (20 percent) as a first step; just 4 percent would cut Medicare, and 3 percent would cut Social Security [31]. Numerous other, more detailed polls have confirmed this basic sentiment: a poll by the Program for Public Consultation and Knowledge Networks released this past February found that respondents would cut annual spending on wars and “defense” by an average of $122 billion. By contrast, the top programs for which respondents would increase spending were job training, higher education, conservation and renewable energy, and primary and secondary school funding [32].
Recent polls focusing on state budget deficits and public-sector unions have found similar results. A New York Times/CBS News poll last month found that “those polled preferred tax increases over benefit cuts for state workers by nearly two to one.” When given a list of options for cutting state budget deficits, “40 percent said they would increase taxes” (the most popular choice), while just “3 percent said they would cut financing for education.” And “61 percent of those polled—including just over half of Republicans—said they thought the salaries and benefits of most public employees were either ‘about right’ or ‘too low’ for the work they do” [33]. Nationwide respondents support Wisconsin unions over Governor Walker, and Walker’s approval rating within Wisconsin has dropped significantly in the past month, to 43 percent [34]. New Yorkers’ attitudes tend to reflect similar priorities. Respondents in statewide polls strongly supported the Millionaire’s Tax when it was passed in 2009, and about two-thirds support its renewal this year [35].
All of these findings are truly remarkable given the constant barrage of anti-union, anti-public-sector, Shock-Doctrine propaganda to which poll respondents who read the papers or watch television are subjected on a daily basis. Public opinion in New York, like that more generally, is not without contradiction, and contains a variety of problematic attitudes that the progressive movement must actively combat (e.g., racism, sexism, nationalism, and general sympathy toward Governor Cuomo despite sharp disagreement with his fiscal policy choices [36]). Nevertheless, there appears to be a very solid base of values upon which to build.



[1] Klein, The Shock Doctrine: The Rise of Disaster Capitalism (New York: Metropolitan, 2007), 6 (Friedman quote); on Chile, see pp. 70-87, plus Greg Grandin, Empire’s Workshop: Latin America, the United States, and the Rise of the New Imperialism (New York: Metropolitan, 2006), 163-75. On the historical reliance of industrialized nations on state intervention, see Ha-Joon Chang, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (London: Bloomsbury Press, 2008), and Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem Press, 2002), and Noam Chomsky, Year 501: The Conquest Continues (Boston: South End Press, 1993), 99-117.
[2] Jack Rasmus, The War at Home: The Corporate Offensive from Ronald Reagan to George W. Bush (San Ramon, CA: Kyklos, 2006); James Parrott, “As Incomes Gap Widens, New York Grows Apart,” Gotham Gazette (January 2011).
[3] The United States spends 48 percent of all federal funds on wars and the military, roughly as much as the rest of the world combined: see the invaluable “Pie Chart” produced annually by the War Resisters League, at www.warresisters.org/federalpiechart. The latest version, released in February 2011, is based on Obama’s FY 2012 budget proposal. Mainstream commentators’ denunciations of “big government” are always highly selective; only when government intervention helps average people does it elicit condemnation. Extensive state intervention on behalf of the rich and powerful in the form of tax breaks, subsidies, preferential foreign trade agreements, migration controls, and a host of other measures passes virtually without comment.
[4] As Hahnel notes, “Budget balancing politicians from both the Republican and Democratic Parties now wrap themselves in the patriotic banner of deficit reduction.” Hahnel, The ABCs of Political Economy: A Modern Approach (London: Pluto, 2002), 155, referencing Edward S. Herman’s February 1996 article in Z Magazine; cf. Herman, “The Economics of the Rich,” Z Magazine (July 1997).
            Blaming the current crisis on social spending and public-sector unions is particularly disingenuous because the immediate roots of the crisis are well-known: aided by a frenzy of bipartisan government deregulation in the 1980s and 1990s, banks made millions of risky loans in pursuit of short-term profits—most notably in the housing sector, leading to a “bubble” of artificially-high home prices that burst in 2008, sending home values plummeting. When the banks faced collapse, most were bailed out with taxpayer money (while foreclosed-upon homeowners were not so lucky).
The longer-term roots of the crisis include the dramatic rise in inequality, which has led to a drop in consumer demand in recent decades (see Robin Hahnel interviewed by Alex Dougherty, “A Guide Through the Economic Crisis” (Part 1), New Left Project, February 16, 2010). As Hahnel says, “The principal causes of the ‘perfect economic storm’ that broke in the fall of 2008 were (1) the dramatic increases in economic inequality which made the system less stable as well as less fair, and (2) the reckless deregulation of the financial sector. Both trends began in earnest with President Reagan in 1980, continued under Bush I and Clinton, and accelerated during Bush II. These trends were the result of a steady increase in corporate power, and the power of mega financial corporations in particular, and a dramatic decrease in the countervailing power of workers, consumers, and governments.” Cf. parts 2 and 3 of the Hahnel interview, “The Economic Crisis and the Failure of Obama” (February 23, 2010) and “The Economic Crisis and the Left” (March 1, 2010).
[5] New York Times, February 25, 2011, A27.


[6] See the (otherwise good) analysis by John Nichols in “Wisconsin Governor Launches Attack on Public Sector Employees and Unions; Threatens to Deploy National Guard to Quell Labor Protests,”Democracy Now!, February 15, 2011, or Krugman, “Shock Doctrine, U.S.A.”


[7] “Statement from the Fiscal Policy Institute on the Proposed Executive Budget: Budget Austerity Will Not Put New Yorkers Back to Work,” February 1, 2011; Teri Weaver, “First Look at Cuomo’s Proposed Budget Shows Cuts, Consolidation,” Post-Standard (Syracuse), February 1, 2011; Michael Gormley, “Cuomo Budget Proposes Painful Cuts, 10,000 Layoffs,” Huffington Post, February 1, 2011; AP, “For SUNY Colleges, No Tuition Hike, Some Pain,” February 2, 2011; “Medicaid and the N.Y. Budget: Sensible Cuts, and Little Political Flak” (editorial), New York Times, March 13, 2011, WK9; Frank Mauro and James Parrott, “Cuomo’s Austerity Budget Will Kill N.Y. Jobs: Why Not Tax the Top 5% Instead of Slashing Services?” Daily News (New York), February 24, 2011.

[8] Michael Barbaro, “Cuomo on a Collision Course with Unions,” November 3, 2010, P10.
[9] Javier C. Hernández, “Bloomberg’s Budget to Include Teacher Layoffs,” NYT, February 17, 2011, A26; Hernández, “Bloomberg Offers ‘Good News’ on New York’s Budget,” NYT, February 18, 2011, A1.
[10] James Parrott and Frank Mauro, “FPI Responds to the Partnership for New York City: Can New York Depend on a ‘Millionaire’s Tax’ to Solve the Budget Crisis?” (Fiscal Policy Institute, document updated February 14, 2011), 3. Current income figures are from 2007; tax figures below are from 2009, and reflect the impact of the temporary income-tax surcharge (the “Millionaire’s Tax”) passed in 2009. For 1980 figure and the comparison of New York to the rest of the nation see Parrott, “As Incomes Gap Widens, New York Grows Apart.”
[11] Many public-sector salaries are technically higher, but when the comparison controls for educational level there is rough equivalence: see Tom Juravich, “U.S. Recovery Might Need Public-Sector Unions,” Business Week, February 27, 2011. Teacher salary figure quoted in Nicholas D. Kristof, “Pay Teachers More,” NYT, March 12, 2011, WK10.
[12] Parrott and Mauro, “FPI Responds,” 4. In Wisconsin, just before Governor Scott Walker issued his anti-union proposal, he pushed through $117 million in corporate tax cuts—illustrating just how sincere Walker and his ilk are about fiscal solvency. See Juravich, “U.S. Recovery Might Need Public-Sector Unions.”
[13] Brian Nearing, “State ‘Fix’ Losing Credit,” Times-Union, February 7, 2011; Fiscal Policy Institute, “Revenue-Raising and Cost-Saving Options,” February 22, 2010, p. 1.
[14] Parrott and Mauro, “FPI Responds,” 2.
[15] Krugman, “Taxing the Speculators,” NYT, November 26, 2009. The stock-transfer tax has been on the books since the early 1900s, but since 1981 has been nullified by a 100-percent direct rebate to its payers. The figure of $3.2 billion is based on a (very modest) reduction of the rebate to 80 percent (FPI, “Revenue-Raising and Cost-Saving Options,” 2).
[16] For a long list of alternatives compiled last year see FPI, “Revenue-Raising and Cost-Saving Options.”
[17] Stiglitz to Gov. David Patterson, Senate Majority Leader Joseph Bruno, and Assembly Speaker Sheldon Silver, March 27, 2008. Collective letter from December 13, 2008. Cf. Peter Orszag and Nobel-Prize-winner Joseph Stiglitz, “Budget Cuts Versus Tax Increases at the State Level: Is One More Counter-Productive Than the Other during a Recession?” Center on Budget and Policy Priorities, November 6, 2001. See also virtually any of Krugman’s recent New York Times columns: e.g., “Leaving Children Behind,” February 27, 2011; “How to Kill a Recovery,” March 3, 2011; and “Dumbing Deficits Down,” March 10, 2011.
[18] See Hahnel, The ABCs of Political Economy, 142-47, 152-59, 231-41.
[19] See note 3 above.
[20] “The Employment Impact of U.S. Military and Domestic Spending Choices,” Security Spending Primer Fact Sheet #10 (2009), based on their paper “The U.S. Employment Effects of Military and Domestic Spending Priorities,” International Journal of Health Services 39, no. 3 (2009): 443-60.


[21] Joseph Stiglitz interviewed in “Nobel Economist Joseph Stiglitz on Obama’s Stimulus Plan, Debt, Climate Change, and ‘Freefall: America, Free Markets, and the Sinking of the World Economy,’”Democracy Now! February 18, 2010; Krugman, “Dumbing Deficits Down”; Hahnel, “Election Redux: Learning From The 2010 Midterm Elections, Part 2: Lessons For The Left,” ZNet, November 8, 2010; cf. Mark Weisbrot, “Failure to Enact Bigger Stimulus Was Fatal Mistake,” Sacramento Bee, November 4, 2010. See the 3-part Hahnel interview referenced above, note 4.

[22] For example, Noam Chomsky, “The Cairo-Madison Connection,” Truthout, March 9, 2011.


[23] “‘We Stand With You as You Stood With Us’: Statement to Workers of Wisconsin by Kamal Abbas of Egypt’s Centre for Trade Unions and Workers Services,” February 20, 2011;Afghan Youth Peace Volunteers, “We Afghans Are All Bouazizi,” February 24, 2011.


[24] Wojciech Kopczuk, Emmanuel Saez, and Jae Song, “Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data since 1937,” September 15, 2007 (posted on Columbia University website); “Obstacles to Social Mobility Weaken Equal Opportunities and Economic Growth, Says OECD Study,”Organisation for Economic Cooperation and Development, February 10, 2010; 2005 New York Times series “Class Matters,” coordinated by David Leonhardt; Congressional Budget Office, “Trends in Earnings Variability over the Past 25 Years,” April 17, 2007; G. William Domhoff, “Who Rules America? Wealth, Income, and Power” (Sociology Dept., UC-Santa Cruz, September 2005 [updated January 2011]); Rasmus, The War at Home. On why market logic usually leads to inequality see Hahnel, The ABCs of Political Economy, 45-70.


[25] Quoted from the introduction to the interview with Mariko Lin Chang and C. Nicole Mason, “Study: Median Wealth for Single Black Women: $100, Single Hispanic Women: $120, Single White Women: $41,000,” Democracy Now!March 12, 2010.


[26] Megan Thee Brenan, “Poll: Congress’s Top Focus Should Be Job Creation,” NYT (blog), January 20, 2011.
[27] “Deficit-Attention Disorder: What Voters Really Think About Deficits, Debts, and Economic Recovery,” American Prospect (October 11, 2010).
[28] Stephen Kull, “Big Government Is Not the Issue,” WorldPublicOpinion.org, August 19, 2010.
[29] See the collection of poll results cited in my “‘Nurturing the ‘Healthy Nucleus’: Thoughts on How to Engage with the White Working Class,” Z blog, January 22, 2010.
[30] Ibid.

[31] Stephanie Condon, “Poll: To Reduce Deficit, Most Americans Say Tax the Rich More,” CBS News (online), January 3, 2011.


[32] Steven Kull, Clay Ramsay, Evan Lewis, and Stefan Subias, How the American Public Would Deal with the Budget Deficit, February 3, 2011, pp. 7-8. For useful discussion of how the wording and context of recent polls affects results, see Carl Conetta and Charles Knight, “Are We Ready to Cut Defense Spending? What the Polls Say,” Huffington Post, February 8, 2011. Of particular importance is whether or not respondents are informed of how much money the US government actually spends on the military before they respond (most dramatically underestimate the real figure). Cf. Rasmussen Reports, “Voters Underestimate How Much U.S. Spends on Defense,” February 1, 2011.

[33] Michael Cooper and Megan Thee-Brenan, “Majority in Poll Back Employees in Public Sector Unions,” NYT, March 1, 2011, A1.


[34] Pew Research Center, “More Side with Wisconsin Unions than Governor,” February 28, 2011; Rasmussen Reports, “Wisconsin Governor Walker: 43% Approval Rating,” March 4, 2011.


[35] Quinnipiac University Polling Institute, “New York Gov. Paterson Rides High On Budget Crisis, Quinnipiac University Poll Finds; Voters Back Millionaire’s Tax 4-1,” August 6, 2008; Bobby Cuza, “Poll Finds Most New Yorkers Support ‘Millionaire's Tax,’ Governor,” NY1, February 1, 2011 [based on NY1/Marist poll].


[36] See Cuza, “Poll Finds Most New Yorkers Support ‘Millionaire’s Tax,’ Governor.” The disparity may be partly attributable to a lack of public knowledge about the Governor’s actual agenda or the alternative options available to him, especially since the poll was conducted prior to the February 1 release of his budget proposal.


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