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  • James Galbraith on the election and the recession


    Galbraith says there are enormous differences between the two parties when it comes to economics Pt1 -   September 10, 2008
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    Bio

    James K. Galbraith teaches at the LBJ School of Public Affairs, The University of Texas at Austin. He is a Senior Scholar of the Levy Economics Institute and the Chair of the Board of Economists for Peace and Security. The son of a renowned economist, the late John Kenneth Galbraith, he writes occasional commentary for many publications, including Mother Jones, The Texas Observer, The American Prospect, and The Nation. He directs the University of Texas Inequality Project, an informal research group based at the LBJ School, and is President this year of the Association for Evolutionary Economics.

    Precis

    NOTE: This is a report from the DNC on the recession and the elections. Part 2 will be published on Thursday.

    Transcript

    James Galbraith on the election and the recessionPAUL JAY, SENIOR EDITOR: Welcome to The Real News Network's coverage of the Democratic National Convention. And Tuesday at the Democratic convention was centered on the economy. The theme of Barack Obama's platform is strengthening the middle class. To discuss Obama, McCain, and their economic platforms, we're joined by Dr. James K. Galbraith, an economist, commentator, and author. Galbraith teaches at the University of Texas. His most recent book: The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. Thank you very much for joining us, Dr. Galbraith.

    DR. JAMES K. GALBRAITH, COMMENTATOR, ECONOMIST, AND AUTHOR: My pleasure.

    JAY: I wanted to start with something I was very struck by, an interview that played on George Stephanopoulos's show on Sunday morning with George Will. And I'm going to just roll the tape for you.

    ~~~

    GEORGE WILL, JOURNALIST AND AUTHOR: Does the name Springwood ring a bell? That is the ancestral home, high on a bluff over the Hudson River, of Franklin Roosevelt, who was born there and buried there, a man of deeply aristocratic background [inaudible] who sympathized as much as anyone, surely, in your mythology of your party, with the common man. Where did we get the idea that owning homes is a disqualification?

    GEORGE STEPHANOPOULOS, HOST, THIS WEEK: I know. It started, I think it was in the last presidential election, when it was used against John Kerry.

    WILL: Exactly. But surely in a democracy it's time for us to quit being sentimental and say the question we settle in an election is not whether elites shall rule, but which elite shall rule.

    ~~~

    JAY: So that, of course, was in relationship to the furor over McCain's owning seven houses and not being aware of how many houses he owned. But, Dr. Galbraith, what do you make of Will's contention that these elections essentially decide which section of the elite will rule?

    GALBRAITH: Well, I don't object to that statement. George Will, of course, wants to quit being sentimental when that will help the Republicans; when it will hurt the Democrats, he's perfectly prepared to be sentimental.

    JAY: There's an implication, partly, in what he says, and to some extent you also hear it in sections of the left, that because it's just different sections of the elite, it really doesn't matter which section gets in. You certainly hear it from, for example, people backing Ralph Nader. What do you make of this? Do these different sections of the elite, if that's what it is, represent significantly different choice for ordinary people and their interests?

    GALBRAITH: I don't think it's terribly constructive to describe this campaign in terms which obscure the differences between the candidates. The differences are just enormous. They are between a candidate who will continue the policies of the Bush administration and a candidate who will change those policies and who's laid out a platform that would change those policies in ways that are specifically designed and clearly would benefit both the middle class and the broader standard of living and competitiveness of our economy.

    JAY: Well, give us some concrete examples comparing McCain and Obama. They both claim their objective is to provide more jobs for the middle class. Both candidates use the rhetoric of strengthening the middle class. Give us some comparisons why you come to the conclusion Obama is more authentic?

    GALBRAITH: Well, McCain said that he wants to put money into the economy. It is through tax cuts of the same type that we have had in the last eight years. What Obama will do is—. Two things are really quite important here. One is that he will put money to preserve and expand state and local public services, which are deeply under threat in the present slowdown of the economy. States lose tax revenue, they have to cut spending. The only way to fill that gap is with federal money, and Obama's plan would do that. He would put money into capital investment, into public infrastructure, rebuilding the transportation network and the other living systems of the country, which have been in decay for 30 or 40 years. So these are two important steps which feed directly into the living standard of the middle class. In addition to that, of course, his tax proposals are much more weighted toward benefiting middle-class families than McCain's are.

    JAY: And there's only so much money to work with, unless one is willing to consider some kind of tax increase of some significance. And can one please that sector of the economy that makes more money out of the military side than the domestic-economy side and revive the domestic economy, particularly the weakness in consumer purchasing power right now, which is so much based on debt, that it's going to have to be something that one creates jobs with half-decent wages and also does something about the stasis of wages. In other words, to be short about it, does Obama have to be willing to take on the military sector to really accomplish this objective?

    GALBRAITH: The security of the country is not negotiable, and I don't think the Obama platform proposes to negotiate about it inside the federal budget. The question we have to face, though, is: can we use our resources more effectively to provide both national security and economic security? And the answer to that is surely yes. We cannot solve our energy problem, which is a great part of our security problem, we cannot solve our environmental problem, which will become our security problem in the decades ahead if we don't deal with it, without greatly expanding the amount of public investment that we do in this country to change the way we use energy, to change the way we produce energy. The Obama proposal takes some important steps in that direction. And I think that's just very important. And it's not about trading off these two things; it's about achieving the goal of national security and economic security in a way which is more effective, more achievable, more realistic.

    JAY: But is that realistic without some kind of tax increase on some section of society? At the moment, he's talking about tax cuts for the middle class. But to achieve these objectives, does there not need to be some kind of more significant tax increase at the wealthy end of the spectrum, more of an increase than Obama's been talking about?

    GALBRAITH: Well, to begin with, Obama does have proposals to apply the payroll tax high up in the income scale, and one should not underestimate how progressive that measure is. It is a significantly progressive [inaudible].

    JAY: Can you explain that for a minute? Just elaborate exactly what the significance of that is.

    GALBRAITH: The proposal, as I understand it, would be to apply the payroll tax to those making over $250,000 of annual income. You know, payroll tax is very significant. It is the largest tax paid by most working families. For the wealthiest Americans, it's a very unimportant tax because it's capped now at a certain level of income, and above that income you don't pay payroll tax. So this by itself would be an important change in the direction that you're speaking of. As an economist, I am not that concerned at the moment about the need for significant increases in federal tax revenue. We have a weak economy, and in a weak economy it's perfectly appropriate for the government to be borrowing—the government can't avoid borrowing. The question is whether the government borrowing is simply going to provide relief, or whether in fact it's doing that, simply because of falling tax revenues, or whether one has a substantial effort to provide jobs, to improve the standard of living, to fill the gap that's being left, at the moment, by a private sector which is in a slump.

    JAY: But you're not concerned with the current size of the deficit and the fact that Obama's planning in fact probably increased military spending, if I understand it correctly, which would mean something like 90,000 more troops, expanding more troops in Afghanistan. Does that side—forget the political significance or judgment on whether an expanded policy in Afghanistan is good or bad. Purely from economic terms [inaudible]

    GALBRAITH: [inaudible] talk about deficits as an economic matter.

    JAY: Yeah.

    GALBRAITH: The deficit next year is going to be larger than it is this year, whether we're talking about John McCain or Barack Obama, because the economy next year is going to be quite weak. A lot of things that were done this year to keep props under the economy will go away. So that's just the reality. We're going to have to live with that. Some of those numbers are going to come in and were quite surprising. The question is: given that situation, what does policy do to put the economy back on a path of strong and sustainable growth looking forward? And that requires, as I said before, a serious program of public investment and renewal in the energy sector.

    JAY: In the next segment of our interview, let's talk about just how serious might this recession get after the election in the coming year, and drill a little further into just what is a rational policy that will defend ordinary people's interests. Please join us for the second segment of our interview with James Galbraith.

    DISCLAIMER:

    Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.


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