Stagflation is one of those words which makes the non-economically inclined slip off into a stupor. But, as Ian laid out on Saturday, the Bush Administration’s economic policy hasn’t changed for years, and we are all living the results.

…for the last 6 odd years, nothing has changed. The basic pattern of the Bush years was set in stone after 9/11, the policies of the Presidency, the Fed and Congress haven’t changed. So the events unfolding now are just the logical consequences of decisions made years ago such as:

* to invade Iraq;
* to make tax cuts for the rich in order to bail them out from the dotcom crash;
* to drop interest rates through the floor;
* to allow a telecom oligopoly to form;
* to condone Chinese mercantilist policies which subsidized Chinese exports with a low Yuan;
* to tolerate the Yen carry trade, and
* to refuse to regulate the creation of money in the form of securitization and exotic derivatives.

In 2002 and 2004 the American people voted to continue these policies, including the war in Iraq. In 2006 they voted to end at least some of these policies, but Congress and the President decided to kick the ball down the field, pass some pork bills and wait till 2009 to do anything about any of it. Their bet was they could hold the meltdown off till after the election. They were wrong….

I read this on Saturday, and went off searching for something hopeful. Some sign that there was really a silver lining. What I found was not promising:

– Krugman highlights a speech from the head of the NY Fed, wherein he talks about credit markets worsening faster than the Fed can cut rates, which spells meltdown. Ugly. And getting uglier still.

– Calculated Risk asks whether we are, indeed, in recession.

– There are reports that the Fed could step in with another emergency rate cut, due to the looming recessionary pressures. But is that only going to increase inflationary pressure? Guess we’ll see. In short, if you have plenty of money, can diversify your investments, and wait out the downturn, you should be okay, at least in the short term.

Which is to say, most people are worried sick.

What can be done? There are a couple of thoughtful articles on that subject that I wanted to bring to everyone’s attention and get your thoughts on them.

– Stanley Kutler has a piece in the Washington Independent on the contrasts between FDR’s directed relief, reform measures and public works projects for economic stimulation and correction, versus the Hoover/Bush "wait and see" approaches. Anyone noticing a trend with results from Democratic-led governments and Republican ones?

…The New Deal launched vast public works projects, expanding and improving the nation’s infrastructure. The Works Progress Administration and Public Works Administration built roads, parks and airports. It employed people on cultural and historical projects, including the collection of slave narratives, public art and various records’ collections.

President Franklin D. Roosevelt (public domain)Now-forgotten conservatives railed against the public works program as a boondoggle but it is a historical marker for an imaginative and successful governmental effort to provide for the general welfare. More than eight million people, working on more than one million projects, benefited from the programs. We can recognize the physical achievements easily enough, but the intangible of providing gainful employment and instilling self-respect for productive work is beyond measure.

Public works essentially provided recovery and relief. But the Roosevelt administration’s enduring legacy came from its reform measures, most notably the Social Security Act. The administration also laid down numerous reform programs, including legislation and regulatory commissions for banking, securities, communications and labor practices….

Imagine a government and a people who worked hand in hand to get themselves out of this mess together — recognizing that each had a job to do well, and then did it.

Given the choices made by the Bush Administration to pour money into the five-year-long failure in Iraq rather than spending it on crumbling schools, roads and bridges in the US, among many other problems, Americans have a right to ask why Republicans should be allowed to run a lemonade stand let alone the federal government — because what they are doing is the opposite of good government. (That sound you just heard? Grover Norquist’s head exploding…)

– The Grameen Bank has begun a micro-lending project in Queens, NY. When we had Muhammed Yunus on for his book salon a few weeks ago, he talked about some of the work they have been doing around the world and were starting to do in parts of the US. I love the thought of giving the people who need the help the most the power to change their own lives — not under an onerous burden of hiked interest rates and hat in hand begging for financing, but a loan given in the spirit of helping them to help themselves…with the promise of their success paying forward to the next person who needs a hand. That is a true community model that I would love to see replicated across many communities here where loans and hope have been in altogether too short supply for far too long.