Paul Volcker

Yes, we know we’re tempting fate. But we figure there’s a 50 percent chance Obama will get reelected, and in any case he needs an agenda to campaign on. So we’ve asked a number of TNR writers to explain what they think Obama should focus on for the next four years if he wins in November. Click here to read the collected contributions. If he were to earn a second term, Barack Obama should at least initiate the process of ending the War on Drugs. One reason is that the War on Drugs has been a massive failure by any serious estimation.

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My New Republic colleague Jonathan Cohn's otherwise excellent Sept. 21 post, about congressional Republican leaders' thuggish letter to Ben Bernanke telling the Fed chief not to engage in further economic stimulus, is marred, in its postscript, by an excess of fair-mindedness. Citing the Washington Post's Ezra Klein, Cohn concedes that yes, there was a time when Democrats were equally guilty of trying to interfere with the independent Federal Reserve Board. And so they were.

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It’s hard to interpret the letter that Congressional Republicans sent on Tuesday evening to Ben Bernanke as anything other than an attempt to politically influence the monetary policy set by the Federal Reserve. Democrats have correctly recognized this as a rare breach of the central bank’s independence.

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This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy.' Click here to read other contributions to the series. As the Great Recession drags on and on, it’s natural to wonder if we will ever get back to normal. Why is the recovery from this recession taking so long? Why was the recovery from other severe recessions, for example the 1982 recession where unemployment reached 10.8 percent, so much faster?

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p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: "Times New Roman"; }span.Italic { font-style: italic; }div.Section1 { page: Section1; } As the U.S. economy fails to recover, there is a growing fear that the United States has entered a phase of long-term decline. Conservatives blame “big government” for throttling entrepreneurship; liberals tend to take aim at Wall Street.

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As the U.S. economy fails to recover, there is a growing fear that the United States has entered a phase of long-term decline. Conservatives blame “big government” for throttling entrepreneurship; liberals tend to take aim at Wall Street. Rolling Stone writer Matt Taibbi memorably described Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Among less inventive critics, the term in vogue is “financialization.” According to author Kevin Phillips, who popularized this notion, financialization is “a process whereby financial services, broadly construed, take over the dominant economic, cultural and political role in a national economy.”Elements of this thesis can be found in scores of books, articles, and blog posts on the state of the U.S. economy. Phillips blames financialization not just for the “Great Recession,” but for “excessive debt, great disparity between rich and poor, and unfolding economic decline.” In their book, 13 Bankers, former International Monetary Fund (IMF) chief economist Simon Johnson and James Kwak blame financial factors for the “anemic growth” in the overall economy prior to the crash. And, in an influential essay—titled “WHAT GOOD IS WALL STREET?”—The New Yorker economics writer John Cassidy pointedly contrasts the period when regulators restrained the growth of the finance sector (when wages, investment, and productivity grew, lifting “tens of millions of working Americans into the middle class”) with the period of growth experienced by the finance sector since the early ’80s (when “financial blowups have proliferated and living standards have stagnated”). One thing is clear: Financialization, in some form, has taken place. In 1947, manufacturing accounted for 25.6 percent of GDP, while finance (including insurance and real estate) made up only 10.4 percent. By 2009, manufacturing accounted for 11.2 percent and finance had risen to 21.5 percent—an almost exact reversal, which was reflected in a rise in financial-sector employment and a drop in manufacturing jobs. It is also clear that high-risk speculation and fraud in the financial sector contributed to the depth of the Great Recession. But Phillips, Johnson, and the others go one step further: They claim that financialization is the overriding cause of the recent slump and a deeper economic decline. This notion is as oversimplified, and almost as misleading, as the conservative attack on the evils of big government.

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I’ll admit it: I was worried when the president named Bill Daley as his second chief of staff. True, Daley was a loyal Democrat long before he was a bank executive. But I couldn’t shake the feeling that the White House was giving in to months of mau-mauing from the business community. That was distressing not just because the idea of Obama as anti-business is wrong, but also because Obama had a lot more leverage over the business community than he seemed to realize.    Not quite three weeks later and I feel confident this is not the case.

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[Guest post by Noam Scheiber:] One of the least suspenseful decisions in Washington became official today when President Obama named Austan Goolsbee to be the chairman of his Council of Economic Advisers. Goolsbee, who’s on leave from the University of Chicago, is a longtime Obama adviser currently serving as a member of the three-person Council.

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Louis D. Brandeis: A Life By Melvin I. Urofsky (Pantheon, 955 pp., $40) I. In 1916, Herbert Croly, the founder and editor of The New Republic, wrote to Willard Straight, the owner of the magazine, about the Supreme Court nomination of Louis Brandeis. Croly enclosed a draft editorial called “The Motive of Class Consciousness,” and also a chart prepared by a lawyer in Brandeis’s office showing the overlapping financial interests, social and business connections, and directorships of fifty-two prominent Bostonians who had signed a petition opposing Brandeis’s nomination.

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Look, I wish the Israeli raid on the so-called “Freedom Flotilla” had ended differently. Why, I ask, didn’t Israel’s navy disable the engine of the Mavi Marmara and drag the ship into port? Who knows? The engines of the other boats were apparently disabled—or so reliable sources say. But, frankly, when some 800 men and women, distributed over six boats after weeks and weeks of preparation, are headed towards Gaza on the wings of slogan and hysteria, you don’t take that many chances.

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