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Rob Johnson is President of the Institute for New Economic Thinking. He was previously Director of the Economic Policy Initiative at the Franklin and Eleanor Roosevelt Institute and is a regular contributor to the Institute's blog NewDeal 2.0. He serves on the UN Commission of Experts on Finance and International Monetary Reform.
Dr. Johnson was also a Managing Director at Soros Fund Management where he managed a global currency, bond and equity portfolio specializing in emerging markets. He was also a Managing Director at the Bankers Trust Company. Dr. Johnson has served as Chief Economist of the US Senate Banking Committee under the leadership of Chairman William Proxmire and was Senior Economist of the US Senate Budget Committee under the leadership of Chairman Pete Domenici. Dr. Johnson was an Executive Producer of Taxi to the Dark Side, an Oscar Winning documentary produced and directed by Alex Gibney.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I'm Paul Jay in Baltimore. We're continuing our coverage of the U.S. presidential elections.Joining us now is Rob Johnson. Rob joins us from New York. (We're going to switch to Rob, are we not? There he is.) Rob is the executive director of the Institute for New Economic Thinking. He's a senior fellow and director of the Global Finance Project for Financial Reform for the Roosevelt Institute. As I said, he joins us from New York. Thanks for joining us, Rob.ROB JOHNSON, EXEC. DIRECTOR, INSTITUTE FOR NEW ECONOMIC THINKING: My pleasure.JAY: And still in the studio with us is Lester Spence. Lester is a contributor to the book We Are Many, and he teaches political science at Johns Hopkins University. Thanks for sticking with us, Lester.And still with us, Marc Steiner of The Marc Steiner Show here in Baltimore. Thanks for sticking in.MARC STEINER, RADIO HOST, RADIO HOST, WEAA 88.9 FM: My pleasure.JAY: So, Rob, where are we now? We're about 11:17, and it's looking like President Obama will continue to be, after January, President Obama.JOHNSON: He's just been projected on all major networks to be a winner. And they've also projected that the Senate will stay Democrat and the House will stay Republican. So everybody dislikes the government and nothing changes.JAY: So $2Â billion and plus later, we are where we were.JOHNSON: I think we're a little worse off, 'cause I think we could have used those $2Â billion to rebuild the power systems and the shorelines before this storm and we'd have been a lot better off.JAY: Yeah, let's talk a little bit about the storm, because we haven't talked about it too much tonight and we really should. Those pictures of Queens and Staten Island, they're more than reminiscent of Katrina, and to some extent some of those pictures look worse than Katrina. What is going to happen to those people? I was saying earlier that if one's a real estate developer in New York, you're probably hoping to put these people in trailers in Colorado and see what you can do with those areas in terms of redevelopment.JOHNSON: Yeah, well, how do I say? When the society builds itself around individual motives and, how you say, might makes right, then you can get all kinds of squirrelly results that don't reflect humanity. And that's been increasingly the story of our country in recent years. I don't know if this will put a stop to it. I don't know ifâhow would I say?âwhat they call the 1Â percent are going to turn it around and reinvest in this country. And I guess tonight they got stopped a little bit, because Romney was probably more their man, but I don't know.I'm not really celebrating tonight. I think we have a broken system. And while we all should cherish our capacity to vote and participate, it feels like we're enduring, people have (what you might call) stolen the currency of votes.I felt like tonightâI went over the polls. It's like I went to a restaurant and I looked at the menu and I didn't want to order anything, but you're kind of afraid that you're hungry, and so you've got to eat something. But it didn't taste good to me to be a voter tonight. And probably the only thing on the menu that I'm enthusiastic about is that Elizabeth Warren won, 'cause I think she represents the kind of values you would want to see going forward.JAY: So what are your expectations of this next four years? You know, some people have argued that President Obama in a second term has nothing to lose and if he really does believe in some of these more progressive values he could actually do it in the second term without being so worried about reelection. And the argument goes the other way: in fact, his agenda is some grand bargain with the Republicans, and he emerges as the greatest chairman of the board of corporate America and in fact does [crosstalk] gutting of Social Security and such.JOHNSON: At the end of the election in 2008, my thought was he's either going to use his tremendous gifts as a persuasive power to inspire people and take on the vested interests of our country, or he's going to use those gifts to mollify the people on behalf of those vested interests. And I don't think it's always one or the other. I don't think it's a, you know, either-or.But I don't think, given the opportunity, given the crisis that he stepped into, that he had enough experience.I do think he had to raise $1Â billion. I think the problems are not personal as much as structural. But if you're taking the measure of the man, I don't think he stepped up to the challenge like we needed. And on the other hand, many people would say Governor Romney is theâhow you say, that Obama's the lesser of two evils when compared.But I look at the next four years with a lot of dread. Obama's already telegraphing his desire to do these entitlement cuts. If I were going to do entitlement cuts, I'd be taking on the health services industries, I'd be taking on insurance, I'd be taking on pharmaceuticals, I'd be taking on hospitalization monopolies, and drive our medical costs down to the same level you see in all the other industrial countries, which is roughly half, in which case you don't really have a budget problem. And we're not taking that on, we're not taking on the financial sector, and we're probably not taking on the military-industrial complex to any great degree.So we have a country that pretends that Social Security is a problem, or, you know, people are consuming too much health care, even though our system's rated about 37th in the world by the World Health Organization. So what are we left to do when a president thinks that that's prudent or prestige or whatever? I'm a little bit concerned. I think he's got the wrong model, and I think he's representing the fearmongers and, for that matter, the wealthy people who don't want to pay taxes to shore up these systems.JAY: Wasn't that part of the deal he made to be president, I mean, to get that amount of funding from Wall Street as a sort of junior senator from Illinois, to get that speaking gig at the Democratic National Convention those years ago? I mean, you had to already have sort of made a bargain, have you not?JOHNSON: I think that's right. I don't thinkâlike I said briefly a moment ago, I don't think this is about character flaws or, you know, some freelancing personality. I think this is about a gentleman who wanted to win in the system.But it's the system's incentives that drive how everyone behaves. And there's always some what you might call more license in the small. But the large scheme of things, this is a system that people like Paul Street or Der Spiegel or others have been talking about in recent days as a system that doesn't represent people. It represents money.JAY: Right. Lester?LESTER SPENCE, CONTRIBUTOR, WE ARE MANY: Yeah, I think he's right. So once he gets a second term and he's term-limited, the incentive becomes legacy-cementing, right? So part of that legacy-cementing thing is keeping his party in office. Right? And then the other part of that legacy-cementing thing is coming up with this grand narrative that both fits with his values and that moves the country forward.The one thing I think I slightly disagree with the man from the Roosevelt Institute is that I think he's right to look at structure, but Obama's value is consensus. Right? So Obama's value, Obama's highest principle, I believe, is building bipartisanship. So that thingâboth those dynamics, both the structural dynamics of being term-limited and him and the influence of money, and then his desire to carve this consensus, kind of steers him towards a set of policies that at best won't be as good for us as they should be.JAY: Marc?STEINER: Well, first of all, I think that, I mean, Barack Obama showed himself in his first four years what you were just talking about, Lester. But I think it's deeper than that. I think that it's this acquiescence is a real problem. This is notâand I think people areâthat's going to be a part of his legacy that people will be debating about.And what's going to happen in the next few years? A couple of things. We're talking about Obama winning the electoral vote, but at this moment, at this moment, Mitt Romney has 50.6Â percent of the popular vote and Obama has 48.1Â percent. This is going to fuel the right-wing Tea Party to say he's not really your president.You know, they're going to not acceptâlike, Democrats are muchâRepublicans don't roll over. Democrats roll over, and they roll over and show their hindquarters and say, I give up, I give up, when Gore knew he won the election. The Republicans are not going to do that. They're going to say, Romney won. If this holds up, they're going to push it for all they're worth and make himâmake his next four years very difficult. They're going to be having Tea Party demonstrations out in the street. And I think that'sâyou're going to see a lot of that going on in the next four years if this holds up.And the other part of this is what this may expose or may not expose, because the way billionaires push the message in America, the way corporations push the message to the world is that they don't have the answers. Their answer is: how do we control what we have when we know that growth is not the answer? They can't grow their way out of this anymore. Capitalism cannot grow its way out of this mess.And soâbut none of the parties will talk about that. But that's the reality. Nobody has the guts to say that to the American people, that we can't grow our way out of this.And so you haveâthis is a very dangerous world that we're approaching, because they're both going to try to out-right-wing the other. Obama's going to move to the right, not to the left, to appease this 50Â percent and appease the House of Representatives, which you can't do. But that doesn't make a difference. That's not part of the strategy.And the danger is, as you see a government that is increasingly taking away the civil liberties of Americans quietly, no one pays attention to that. The mainstream media doesn't talk about it. So most people aren't even aware of it. If they are, it's not a big deal, 'cause they don't think it affects them, so that you combine that with things like the austerity measures that are strangling people in their lives, trying to survive. You combine that withâI had some Iraq veterans, Iraq-Afghan veterans on my show the other day, and one of the things we were talking about was the fact that we have an all-volunteer army, and they pull from a very conservative base in this all-volunteer army, and that volunteer army ends up going into private armies. That coupled with everything else is a very dangerous scenario, what I think we face. And I think that's a reality we have to be careful of, that we have to kind of expose as much as you can and really push, because that's the danger we face. So I think thatâ.JAY: Right. Rob, I think one of the things that Marc just said isâI mean, several things were quite important, but one particularly I thought was important, which is, both policies of President Obama and if it had been Romney, but certainly the policies of those who are controlling Europe, they aren't going to lead to growth. They're all essentially on the austerity train. And most importantlyâand we've been doing story after story on this on The Real Newsânobody's talking about wages and, you know, the lack of demand, and the stagnation of wages, and even goingâwages are going down now. We're seeing all these two-tier wage agreements in the auto industry and other sections of the American economy. So what do you make of that moment we're in over this next four years? 'Cause I don't see how the recession doesn't get worse.JOHNSON: Well, I think we're in that moment. We've been in that moment, really, in a prolonged sense, since 2008. There was a little burst of inadequate fiscal stimulus to try to dig us out of the hole, or at least stabilize things until the banks could buy time to rebuild their balance sheets, but I don't think we're in a place where things are either going up or down rapidly. But if they go into another bout of austerity, we're going to go down real hard again. And if we don't come up pretty hard, it's going to continue to erode wages, erode benefits, erode labor power. And I think that's devastating for what you might call the last remnants of a middle-class economy, much of which is only remnants in the sense of being a memory now rather than an existing structural condition.JAY: But that meansâsorry. Go ahead, Rob.JOHNSON: I think when you talk about indebtedness, austerity drives you into a deeper hole when you don't invest. As people even like Krugman and others say, [if] you don't invest when your real interest rates are negative, meaning adjusted for inflation, they're paying you to take the money, and your infrastructure's worn out and your construction workers are idle, you're in a system that's dysfunctional. People are making bad decisions, 'cause the reinvestment in growth, in education, in science, and all kinds of things, and in employment, just straight-out employment, so that people's skills and their mental health do not atrophy, those are the dimensions of rebuilding. You know, when they talk about solvency, they talk about the debt-to-GDP ratio. You've got to rebuild the denominator, the base, so that the debt's not so burdensome. Idle resources do not pay taxes. And it seems crazy to narrow the base of your economy and then complain about your debt burden. That's just madness. And that's what we're doing all over the world right now.JAY: So what does the U.S. economy look like in four years? Whoever is the presidential nominee for the Democrats, it seems the plate gets set for a far-right candidate of the Republican Party to say, look, you had eight years and couldn't do it.JOHNSON: It looks like Brazil before Lula. It looks like it's heading in that directionâin other words, favelas. You know, Lula's made some strides in reversingâLula and his successor, excuse me, have made some strides in reversing the inequality and alleviating poverty and invigorating education there. They were in a deep ditch of violent inequality of income and wealth, and they've made some positive strides. We're going in the other direction asâfaster than they turned things around.JAY: So my point is: four more years like the last four years, we're going to be in a far worse situation, and the plate gets set for someone, I don't know whether it's another Romney run or a Rand Paul run, but, you know, they're going to say, okay, you had eight years and you couldn't do it.STEINER: Yeah, butâ.JOHNSON: Yeah, I think that's right. And Iâbut, unfortunately, when we were talking earlier, few moments ago, this money system is not responsive to human suffering. Our calculus, whether it's how we measure our economy or how money transmits into the incentives for governance, like, if you were just simple, like an engineer, we're not getting the feedback from society into the representation and the political responsiveness of this system, and it's what Citibank calls a plutonomy, not a democracy. And you're not going to come out of that tailspin without profound change in incentives for elected officials.And right now, the media doesn't want thatâthe mainstream media, I'm referring to, that theyâbasically, their lifeblood of cable television are these crazy election rituals. You've got large corporate interests that don't want that. Finance doesn't want that. The military-industrial complex doesn't want that. The medical-industrial complex doesn't want that. I've just rattled off about 70Â percent of our economy right there, as measured.JAY: Okay. Marc Steiner's going to jump in here.STEINER: I think there's a couple of things here that looking at these resultsâand I'm going to comment on what was just saidâbut if this proceeds, it means also that Obama's base shrivelled, and shrivelled because people wereâbecame hopeless instead of filled with the hope that he, that people envisioned would happen. So a lot of people who voted for Obama did not vote this time and didn't vote for him or just didn't vote. And they didn't vote Green. They just didn't vote. That says a great deal.And I think that what we'reâand the social issues in America galvanized some people to vote. Like, in Maryland and Maine, it looks as if marriage equality will pass, which is interesting.But the larger thing here is we have to be realistic about what this future looks like. And the future's very dangerous ahead of us, because this, the capitalist system, the transnational capitalist system cannot figure out how to plug the holes in its dyke. And there's no alternative, other than repression, to keep a lid on things. That's the fear that we have to face, and that's what we have to be ready to fight for over the next few years. I think that anybody who believes in democracy, believes in an equitable society, has to be now prepared to really fight for the survival of [incompr.] our nation and this planet. And then that's what we're facing, and we have to deal with that in reality.SPENCE: Three quick points. So, again, going back to the black mayor comparison, what the research suggests is that after a black mayor gets elected in cities, turnout always dampens. It increases slightly if the black mayor is faced with a white challenger, but it very rarely rises to the level that it did. So it's not so much thatâyou know, and this isn't because once people get in office, once the black mayor gets in office, all of a sudden people have to deal with governance or theâ. And then people's expectations come in line with reality. So that's kind of a naturalâa quote-unquote natural occurrence, first.Second is: I don't think, although the response may very well be dangerous, it will likely not occur at the presidential level, because the racial demographics have been shifting so much that it's very unlikely that the Republicansâgiven their history, given their modern history of race-baiting to garner votes, it's very unlikely that they'll be able to be competitive again after this election. This electionâ.STEINER: Unless you suppressâunless what's happening now is that folks who are in communities of color and working people and poor people and young people are so disillusioned that they're not part of that process. Then the Republicans do win.SPENCE: Well, but this is the third point. So the third point is: what those state ballot initiatives suggest is another way out, that the state ballot initiativeâand I never ever thought I'd be a guy to actually argue that states' rights are a good thing for progressives, but these state ballot initiatives are a way to increase turnout. Now, in the Maryland case, that doesn't matter at the presidential level, because Maryland's going to be blue anyway. But you can use state ballot initiatives in order to both create this alternative (and state constitutions are far more progressive than the national constitution is) and to increase turnout and to decrease the possibility of the danger coming from the presidential level.Now, the challenge, though, is that if the danger doesn't come from the presidential level, then it's going to come from something extra-institutional. Right? So it's not going to beâour fear is not going to be electing some right-wing Republican candidate like Paul or somebody; our fear is going to be that there's going to be some segmentâand if you look at that map, it'll come from theâyou know, what we're looking at is blue here, blue here, and red all in the middleâthat something happens in that middle that's extra-institutional, that's extra-political, that ends up sending usâ.JAY: You mean some kind of a right-wing movement that's outside of just the political process, electorial process [crosstalk]SPENCE: Yes. Yes.STEINER: But that's what's happening. I mean, what's happening is youâsince the left in America, for want of a better term at the momentâI'm not even sure what left-right means anymoreâbut that has no organized base. In other words, in the 1930s there was a vision called socialism that pushed people towards unionism, and they were fighting for certain things they believed in. So Roosevelt and the rest had to kind of take from that and kind of plug their own dyke with it, had World WarÂ II, and saved capitalism from itself. You hadâthe movements of the '50s and the '60s grew up because theyâ'cause racism was just cut to a point where segregation had to end. They had to end it. So that became the galvanizing core of a movement that changed America.But nothing like that exists at the moment, and there's no organized way to do it. And what you do have, though, is you have these billionaires who are fuelling a right-wing movement that does believe in something. What they believe in is their idea that this is no longer America. And we haveâand that'sâ.SPENCE: And they have to take it back.STEINER: And they have to take it back. And they have to take it back from you. They have to take it back from me. They have to take it back from anything that doesn't look like them. And this isâthat's what you're looking at.And I think that this, combined with a dropping economy, is dangerous. I'm not saying this to be negative. I'm saying this to be realistic, to think about what we have to do to face what we have to face.JAY: Rob, what's your take? Last comment from you for now.JOHNSON: [snip] been having difficulty being able to absorb what you've been talking about, so you have to give me just a touch of a lead-in so I canâ.JAY: Oh, the sound wasn't good for you. I think just the short of it is is that you could say those on the left have not been able to develop some kind of a mass movement, and on the right, the Tea Party types, if you're talking about a sort of extra-electoral process movement, has big money behind it. And as we head into a kind of deeper economic crisis, the possibility of this kind of movement emerging out of the areas that were, you know, strongly to the right, strongly voted Romney, you could haveâyou want to use the wordâsome kind of a right, militant mass movement develop rather than a progressive movement in this situation and given the kind of policies we're going to see from Obama over the next four years.JOHNSON: Well, I think all the indications are thatâboth historically and in this context, that when people lose faith in the regime, they yearn for order; they kind of dispense with their principles and they want to see order restored. And that often takes a right-wing, authoritarian direction. I think that was featured very vividly in the business writer Peter Drucker's first book, The End of Economic Man, which was written in the 1930s in Germany. And while things don't need to be as ominous there, Hans-Joachim Voth's work on Latin America in the '80s, when they were going through the grinder, or his recent work on Europe, and particularly on Spain in the present context and on Greece, suggests that downturns and disillusionment do produce a rightward shift. And whether it takes the form of violence or not, it's not clear.On the other hand, people on the left seemed quite disappointed in the lack of vitality and the lack of what you might call disruptiveness that emanates from the left right now. So I guess at one level we all have to be careful what we wish for and be fearful of what may arise from continued dysfunction and the numbness that emanates from the top, where they think the response to a real estate collapse and a Wall Street mess is to allow bailouts and bonuses, leave housing overhangs, and then cut the entitlements and the health care and the retirement security of the large body of American people.The reason we can't afford anything that people say we can't affordâand I don't even agree with thatâis 'cause the people at the top made a mess of things. That burst in 2008, they overspent on wars, they cut taxes, and they pandered to the medical-industrial complex.JAY: Right. Alright. Thanks very much for joining us, Rob, and thank you, Lester and Marc.JOHNSON: My pleasure.JAY: And we're going to continue our coverage for a little bit longer. I think we know who's going to win this election, but we'll come back after a short break on The Real News Network.
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