In a interesting and lengthy (1850 words) blog, Robert Reich, Bill Clinton’s Secretary of Labor, warns of “deep-seated anxiety and frustration” growing in the population — particularly the middle class. He says anger is caused by the glaring inequalities in the system, and that our democracy is so corrupted by big money at the top that it is not working to fix the problem.

Reich points out, sorrowfully, had badly our democracy has failed to help regular citizens, and makes a big list of actions a democratic government could have taken had it been focused on attacking inequality. He points out that, instead, government’s actions — less regulations, tax cuts for the wealthy, etc. — in fact, has steadily made the problem worse.

Reich says, “Democrats have been almost as reluctant to attack inequality or even to recognize it as the central economic and social problem of our age. (As Bill Clinton’s labor secretary, I should know.) The reason is simple. As money has risen to the top, so has political power. Politicians are more dependent than ever on big money for their campaigns.”

Excerpts from the article:

• The major fault line in American politics is no longer between Democrats and Republicans, liberals and conservatives, but between the “establishment” and an increasingly mad-as-hell populace determined to “take back America” from it.
• Missing from almost all discussion of America’s dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. … June’s decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.
• When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing. America’s median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped.
• In 1928 the richest 1 percent of Americans received 23.9 percent …. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America’s total annual income. … By 2007 the richest 1 percent were back to where they were in 1928 — with 23.5 percent of the total.
• The problem isn’t that typical Americans have spent beyond their means. It’s that their means haven’t kept up with what the growing economy could and should have been able to provide them.
• The puzzle is why so little was done to counteract these forces. Government could have given employees more bargaining power to get higher wages … Safety nets could have been enlarged to compensate for increasing anxieties about job loss …. With the gains from economic growth the nation could have provided Medicare for all, better schools, early childhood education, more affordable public universities, more extensive public transportation. And if more money was needed, taxes could have been raised on the rich.
• Big, profitable companies could have been barred from laying off a large number of workers all at once … Corporations whose research was subsidized by taxpayers could have been required to create jobs in the United States. The minimum wage could have been linked to inflation. And America’s trading partners could have been pushed to establish minimum wages pegged to half their countries’ median wages — thereby ensuring that all citizens shared in gains from trade and creating a new global middle class that would buy more of our exports.
• Democrats have been almost as reluctant to attack inequality or even to recognize it as the central economic and social problem of our age. (As Bill Clinton’s labor secretary, I should know.) The reason is simple. As money has risen to the top, so has political power. Politicians are more dependent than ever on big money for their campaigns.

During the George W Bush administration, Bill Evers was an Assistant Secretary of Education For Policy and he is now a “research fellow” for the Hoover Institution. In a video interview — on reason.tv — Mr. Evers says that efforts of the Obama administration seem to focus on two outcomes — a new test system and a new national curriculum.

He says, sarcastically, that the new testing system will be “touchy, feely, fuzzy …  highly experimental” and that it will be imposed on the entire nation. The new evaluation system, I guess, will include portfolios and projects.

Mr. Evers claims that the Obama administration stopped some free market reforms started by the Bush administration.  But I was surprised that Evers doesn’t dismiss the Obama approach entirely, but instead grades it as a “C+”.

Nobel prize winner Paul Krugman is worried about deflation. (See him here on the Colbert Report.) He writes in the NYT, “The Feckless Fed,” that Bernanke and the Federal Reserve, “aren’t taking the trend toward deflation sufficiently seriously.”

Excerpts :

• We aren’t literally suffering deflation (yet). But inflation is far below the Fed’s preferred rate of 1.7 to 2 percent, and trending steadily lower; it’s a good bet that by some measures we’ll be seeing deflation by sometime next year. Meanwhile, we already have painfully slow growth, very high joblessness, and intractable financial problems. And what is the Fed’s response? It’s debating — with ponderous slowness — whether maybe, possibly, it should consider trying to do something about the situation, one of these days.
• It has been astonishing and infuriating, as the economic crisis has unfolded, to watch America’s political class defining normalcy down. As recently as two years ago, anyone predicting the current state of affairs (not only is unemployment disastrously high, but most forecasts say that it will stay very high for years) would have been dismissed as a crazy alarmist. Now that the nightmare has become reality, however — and yes, it is a nightmare for millions of Americans — Washington seems to feel absolutely no sense of urgency. Are hopes being destroyed, small businesses being driven into bankruptcy, lives being blighted? Never mind, let’s talk about the evils of budget deficits.
• Still, one might have hoped that the Fed would be different. For one thing, the Fed, unlike the Obama administration, retains considerable freedom of action. It doesn’t need 60 votes in the Senate; the outer limits of its policies aren’t determined by the views of senators from Nebraska and Maine. Beyond that, the Fed was supposed to be intellectually prepared for this situation. Mr. Bernanke has thought long and hard about how to avoid a Japanese-style economic trap, and the Fed’s researchers have been obsessed for years with the same question.
• But here we are, visibly sliding toward deflation — and the Fed is standing pat.
• What should the Fed be doing? Conventional monetary policy, in which the Fed drives down short-term interest rates by buying short-term U.S. government debt, has reached its limit: those short-term rates are already near zero, and can’t go significantly lower. (Investors won’t buy bonds that yield negative interest, since they can always hoard cash instead.) But the message of Mr. Bernanke’s 2002 speech was that there are other things the Fed can do. It can buy longer-term government debt. It can buy private-sector debt. It can try to move expectations by announcing that it will keep short-term rates low for a long time. It can raise its long-run inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash a mistake.
• Nobody knows how well any one of these actions would work. The point, however, is that there are things the Fed could and should be doing, but isn’t. Why not?