Transcript: Thom Hartmann & Prof. Richard Wolff: Debt Ceiling Deal Going Forward. 3 August '11

Thom Hartmann: Welcome back, Thom Hartmann here with you. Six minutes past the hour and welcome back to the number one progressive talk radio and TV program in the United States. Maybe in the world, I don’t know. Three years in a row in fact. Anyhow, Professor Richard Wolff is on the line with us. Professor Wolff is an economist, he’s a professor of economics emeritus at the University of Massachusetts, Amherst, he’s currently a visiting professor in the graduate program in international affairs at the New School University in New York City, he’s the author of numerous books, including his most recent, “Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About it." His website is (with two F’s) and his twitter is ProfWolff, as in Professor Wolff. Professor Wolff, welcome.

Richard Wolff: Thank you very much Thom.

Thom Hartmann: Glad to have you with us. First of all, Capitalism Hits The Fan: The Global Economic Meltdown. You did not write this as a consequence of this deal that was just worked out over the weekend, you wrote this book looking at a much larger economic situation. Give us the largest frame.

Richard Wolff: Well I wrote the book when we were relatively early in the so-called economic crisis that started in the autumn of 2007. But to be real honest, I have to tell you that I did not expect things to spin as far down as they have to look as grim as they now do and to produce not only economic down turn but a political dysfunction that exceeds what I thought. I mean I would have to come up with a stronger phrase than ‘hits the fan’ and I thought that was pretty strong…

Thom Hartmann: Yeah.

Richard Wolff: …to capture what is going on. I think we are at a very, very bad point. Here we are in an economic system that’s in deep trouble. A recover that left most people out and is even sputtering for the few it benefited now, and we’re going to say to the largest single buyer in this country, which is the government, that you should cut back what you buy, cut back what you spend, and all that’s going to do is increase the suffering, increase the problems, and provoke in this country a grim recognition that we are heading down and that as we do the gap between the rich and the poor only gets wider and this is a set of circumstances that should trouble anyone who is paying attention.

Thom Hartmann: So what led us to this? Again, this, it seems to me like this all began with a couple of things. Jude Wanniski ‘s memo in the mid ‘70s to the republicans, his two Santa Claus Theory, saying that the democrats had always been Santa Claus, they brought social security in, unemployment benefits, Medicare and everything else, and everybody loved them, and the republicans were always grinches. So they had to flip that upside down whenever a republican president was in office, spend like a drunken sailor, run up the debt as hard and as fast as you can, and then as soon as a democrat comes into office scream about the deficit and use that as a way to force the democrats to cut the programs, their own programs, so that they will no longer be identified as Santa Claus and the republicans will be identified as Santa Claus. They’ve been running that play book, and some will admit it. I mean you know there’s numerous columns about this in the conservative publications, since the election of Ronald Reagan. And it seems like that is what brought us to this, in my mind. I’m curious your take on how we got here?

Richard Wolff: Well I think that’s partly correct. It’s clear that the republicans used this debt ceiling routine as a chance to grandstand. I mean people should be aware. I counted up, just so I would be able to say things like this on radio and television programs. I counted up the number of times a sitting president has asked for the debt ceiling to be raised or lowered, mostly raised, since 1940. total number of times, 90, nine-zero. More than one and a half times per year on average. It’s an absolutely routine thing, presidents on both parties have asked for it. Representatives of whatever party was out of office grumbled and said ‘Gee it shows the president’s not managing things correctly’ and then promptly voted for it until this time when suddenly it became an opportunity to run that game plan that you described with the republicans taking advantage of people’s upset about economic crisis to say look, we’re going to punish the government. That’s this strange American idea that when you’re fired by a private employer, or you’re thrown out of your home by a private bank that goes to court, you shouldn’t get angry at the employer, and you shouldn’t get angry at the bank. Instead you should get angry at the government. They’re the root of all evil and so the republicans play that game, and they promise them not only will they punish and make the government smaller but they will protect you from taxes. And in a time when nobody trusts politicians anyway, maybe they can win some people who at least think that the chances of a tax will be a little less than it otherwise would be. And the democrats come back, I would adjust what you said slightly, they come back and say look, we’re the lesser evil. Vote for us because we won’t savage social security or student loans or all the other things you need as badly as those republicans will. This is a sad commentary on where things are and perhaps the worst part of it, for me, as a professional economist is that we all know what the fundamental problems are in this economy. We have horrible unemployment. We have falling wages. We have benefits being reduced. And that is dragging our economy down.

Thom Hartmann: These things all drive down demand.

Richard Wolff: That’s right and they drag the economy down. The president has been saying for three years he’s going to stimulate by providing incentives and inducements for the private sector to deal with the unemployment problem. Well it didn’t work under Bush, it has not worked under Obama. Something has to be done. And whatever you may argue, and I have my own preferences for what we ought to do. Cutting government spending while doing absolutely nothing else for the unemployment problem, will actually make it worse. But maybe that’s the republican strategy that no matter how bad it gets, they can win more votes by positioning themselves as the ones who will punish the nasty government for doing it and who will prevent you from having to pay higher taxes and hope that no one notices that the decreasing condition of the American working class and the mass of the middle class, is a direct result of what the republicans are pushing for.

Thom Hartmann: Yeah. I’ve been saying this since the day that Obama was elected, or was sworn in, the day after when Mitch McConnell said his number one job was to make sure that Obama was a one term president. That the only way the republicans could do that would be to obstruct anything that will make the economy better and in fact make the economy worse. Try to get unemployment up to 10 or 12 %, if possible maybe even get inflation up, but I think it’s going to be deflationary, and then run on the campaign of this guy is Herbert Hoover you need to kick him out, and that they’re, that this is a generational play. They’re trying to do what Franklin Roosevelt, capture an entire generation as you know the saviors of the economy. The problem is that their economic policies are insane. Jude Wanniski in addition to coming up with the two Santa Claus Theory was the guy who invented the phrase ‘supply side economics.’ Tell us how well that’s worked out.

Richard Wolff: Yes, it’s an unbelievable thing that you know reasonable mature men and women still believe that sort of thing. But I guess if you repeat it long enough. The basic idea is the economy is not driven by how many people have jobs and incomes enough to buy the goods and services that we work to produce. No, the argument runs it goes the other way. We have to do everything possible to provide good profits for businesses and then if we do that by low taxes, by all kinds of subsidies, by all kinds of deregulation so they can do whatever it occurs to them will be profitable, why then by magic all of this will happen. There is no historical support for this sort of thing. The conditions that make an economy do well are complicated and many. There’s no magic bullet. We do know that if you throw millions of people out of work and if you depress the wages and benefits of vast numbers of people, you’re not going to boost the overall economic situation in most conditions. That’s what we have now, and we’re suffering the consequences.

Thom Hartmann: Right. Professor Richard Wolff, Doctor Richard Wolff is with us. He is an economist, a professor of economics emeritus at the University of Massachusetts, currently visiting professor at the New School University in New York City, the author of numerous books, Capitalism Hits The Fan, his most recent, We’ll be back with your questions for Dr. Wolff.


Thom Hartmann: Welcome back to your need to know headquarters, the news headquarters, the Thom Hartmann Program. Professor Richard Wolff with us. his website, you can check it out. His most recent book, Capitalism Hits The Fan: The Global Economic Meltdown and What to Do About It. Taking your calls, and Professor you’re still here with us?

Richard Wolff: I certainly am.

Thom Hartmann: Great. Collette in Studio City, California, listening on KTLK in Los Angeles, you’re on the air with Professor Wolff. Collette? Oh Collette vanished. Okay. Lisa in Albuquerque, New Mexico. Listing on KABQ, you’re on the air with Professor Wolff.

Lisa: Hello. Professor Wolff, I had a thought that maybe it’s a better idea to focus on our local and state governments, straightening them up. Because quite frankly government, national government is so badly broken and so badly corrupted, all politics is local. And by becoming active within our states and communities we might be able to change things up the line rather than trying to deal with it directly.

Thom Hartmann: Seems politically that’s a brilliant strategy. Is it also a good strategy, economically, professor?

Richard Wolff: Well it would be if the people, like the caller and others, in cities, towns, and states across America began to move in large numbers to demand from the local government what I can do and what it should be doing. But whether or not people do that, which I think is the most important question frankly, what we’re facing now is a situation where cities and towns are suffering because of the economic crisis, because of the failure to do anything really about it. Cities and towns are now suffering revenue loss and that means they have to cut back what they’re doing unless they tax the rich and the corporations which they’re afraid to do. So what they’ve been doing to soften the crisis for them over the last two or three years has been relying on a huge amount of money being given to cities and states by the federal government. And not the least of the tragedies of the deal just struck, is that that money is certainly going to be one of the things that gets cut back so that the pressures on cities and states, this year, the remaining part of this year, next year and so on, will actually be worse for the prospects of them offsetting a dysfunctional federal government. You can see that already in places like Central Falls, Rhode Island, a city that has declared bankruptcy and is telling all of its retired police and fire people that their pensions are going to be half starting next month what they have been.

Thom Hartmann: Wow.

Richard Wolff: You see it in Jefferson County in Alabama, you see it in more and more places that they are in a jam and I am very frightened that this deal is actually going to make those problems greater, not lesser.

Thom Hartmann: Jeff, in Tampa, Florida, listening on WMNF. You’re on the air with Professor Richard Wolff.

Jeff: Hi there professor Wolff. I just was kind of curious if I could get you to elaborate on this. The credit rating agencies that have been, that, it seems like there is question as to their, whether or not they’re corrupt agencies to begin with, considering how they also rated, you know, all these shady…

Thom Hartmann: Mortgages and Enron and everything else? Yeah.

Jeff: Yeah, exactly and all the credit and false swaps and everything. They rated all those AAA, and it seems like they’re legitimacy should be a lot more in question than it is. Are they just trying, are they basically just trying to avoid any sort of investigation on their part by threatening to downgrade the US credit rating?

Thom Hartmann: Professor Wolff?

Richard Wolff: Well I think you put your finger on it when you reminded everybody of how badly they did their job in the great crisis that we’re now in. How they continuously gave high ratings. And remember what a credit agency is supposed to do, it’s supposed to give the investor an unbiased independent evaluation of how risky every kind of debt instrument, every kind of investment is. And they obviously failed, everyone knows they failed. And the reason is not far to search. The big banks who produced most of this debt and these pieces of paper were the ones buying the evaluations and the credit agencies did not want to displease the people they were producing the credit evaluations for, they wanted AAA so the agency provided it. They’re now a little bit in the dog house and trying to show the world that they’re going to be tough minded because they obviously weren’t before. But I think here’s the basic problem. We are a debt-ridden society. Our government is in debt, the mass of our people are in debt, corporations are in debt. And out there are lots of creditors, banks, insurance companies, even rich individuals who are very worried. They don’t know where to lend money because they are nervous abut the risk. Somebody has to help them, somebody has to evaluate the risk. We use private companies, they have done a horrible job, but because of our ideological blockage in not allowing the government to be in there doing its own evaluations so we at least have some competitions from an independent source that isn’t you know getting money from the people it evaluates. As long as we don’t do that, we really have only our ourselves to blame for relying on people who have demonstrated their unreliability.

Thom Hartmann: So you mean somebody like the CBO should be competing with Moodys and Standard and Poor and the International Open Market?

Richard Wolff: That’s right. And you know…

Thom Hartmann: Makes perfect sense.

Richard Wolff: … it’s a little bit funny to hear the speeches about the wonderfulness of competition from the leaders of these credit agencies but the work that they do to prevent any real competition from an independent source, which in this case would have to be the government, is the real truth behind the play-act of being interested in competition.

Thom Hartmann: Remarkable. We just have ten seconds till the break. Iceland just said no to the banksters, is that a good thing or a bad thing?

Richard Wolff: I think that’s a wonderful thing. I think that’s a wonderful thing for Americans to think about. The banks, the government, all the Icelandic people, you have to pay the cost of all the bad things the bank did. And the people voted 90% no we are not.

Thom Hartmann: Twice they voted it.

Richard Wolff: That’s right. It’s an amazing show of what people can do if they get together and they focus on who the problem really is.

Thom Hartmann: There you go. And meanwhile, now Spain and Italy are struggling because they are actually paying back the banksters. Professor Richard Wolff is with us. His book: Capitalism Hits The his website, you can check it out. His most recent book, Capitalism Hits The Fan. Stick around.


Thom Hartmann: Welcome back, Thom Hartmann here with you. 34 minutes past the hour. Professor Richard Wolff is our guest, and for most of this hour, the very last little bit is going to be the Talk Radio News Service with our daily news report. His website,, he’s the author of Capitalism Hits The Fan (among other books): The Global Economic Meltdown and what you can do about it. Professor of economics at the University of Massachusetts and currently professor, visiting professor in the graduate program in international affairs at the New School University in New York City. And Professor Wolff, you’re still here?

Richard Wolff: I certainly am.

Thom Hartmann: Okay, let’s pick up some more calls for you. Actually, before we do, point of privilege if I may ask you a question. This morning on Joe Scarborough’s show. Do you have this clip, Jacob? I want to play a, just a little bit of audio for you. This is, this was on MSNBC this morning, so it’s like the whole country was getting this meme. And this is the meme that I think that the republicans are really going to be pushing. Here is Joe Scarborough, this morning:

Joe Scarborough: “I would argue, because tax cuts are Keynesian. I would argue nobody, since FDR, or maybe LBJ, has been as pro-Keynesian as Bush. Think about it, two wars. Massive domestic spending. Massive tax cuts. A seven trillion dollar medicare drug benefit plan. You know, this is not supply side economics. Bush, George W. Bush was the most reckless Keynesian spender, at least since LBJ, I would argue you can go back, take reckless out, since FDR. Look we’ve got a decade of Keynesian economics and it has led us here."

Thom Hartmann: Now, Professor Wolff, I have read the writings of John Maynard Keynes and I don’t recall him saying that tax cuts was a stimulus and I do recall his writing or perhaps peripheral writing suggesting that war is the least efficient way to stimulate an economy. Because when you build a bomb, yes you do put some people to work but that bomb gets dropped and doesn’t produce any enduring value. Is Joe Scarborough right or is he nuts?

Richard Wolff: No, he’s just basically trying to attack what has been going on in the interest of a kind of tea party logic. So for example it is not Keynesian economics to cut taxes on the rich and corporations. First of all on the rich. What rich people do when you cut their taxes, they don’t spend that money because they already spend what they need. So they tend to save it, which is a terrible thing for the economy. You can see it now, corporations and wealthy people have huge amounts of money, but they’re not investing it, they’re not creating jobs. The irony is they’re lending it to the government because the government has to borrow since it didn’t tax the corporations and the rich.

Thom Hartmann: Right. So the bottom line here is that the economic policies practiced by George W. Bush were in, virtually, no way Keynesian and these guys are trying to smear the idea of Keynesian economics so that there will never again be a stimulus from the federal government. And they’re trying to do this politically and I’m just astounded. There was an economist on the show this morning, who let Joe Scarborough get away with this.

Richard Wolff: Well you know in the hysteria there is now no limit to what people will say. Somehow a government that deregulates is doing a wonderful thing even though we know that the crisis we’re in now is in major way a result of all that deregulation. So it’s extraordinary to hear this kind of logic.

Thom Hartmann: Yeah. It absolutely is. Okay, let’s pick up our callers. We’ve got a solid board here. Frank in Cambridge, Mass, you’re on the air with Professor Wolff.

Frank: Oh thank you very much for taking the call and thank you Professor Wolff, it’s a privilege talking to you. But I saw your presentation at ?? College in 2008, November 2008, and in the 5th section you talked about a new idea of capitalism. And then a few days ago I saw you on an interview and you talked about this, you sort of referred to this new approach to capitalism. That this type of, this, and it’s like FDR in effect save capitalism from the capitalists. And I think I’d like to know further what you were talking about in part 5 of your presentation which you used the model of the Silicon Valley and what you see then as a future. How can we get out of this mess?

Thom Hartmann: Thank you Frank. Professor?

Richard Wolff: I think you have to go to the root of the problem, which is something, you know, you really can’t avoid anymore when the problems are as severe and as long-lasting as the ones we’re in. the root of the problem for me is the way we organize business. The vast majority of us come to work, Monday through Friday, 8 o’clock, stay till 5, do a lot of work, then we leave and go home. All the decisions about what happens on the job, what we produce, how we produce, what’s done with the profits our work produces, is all decided by a tiny group of people called a board of directors who are in their position because of another tiny group of people, the major shareholders. They use those profits to shape our politics, see what we have, they use those profits to move production abroad, if they can make even more profits that way, they use that position they have in society to produce the results we have. Bad results if the government regulates them, bad results if the government doesn’t. And I think we have to understand that if we don’t change that, if we don’t democratize our enterprises, all the rest of our programs, all the rest of our hopes, will be as smashed as our economy now is.

To say it in the simplest language, we believe in democracy and it shouldn’t stop this democracy in our communities. It should extend when we cross the threshold into where we work. A democracy at work where the people themselves decide what to produce, how to produce and what to do with the profits, gives us a much better hope for a reasonable economic system that works for all of us, rather than the economic system that is showing us that if you leave businesses organized the way they are now, the economy will serve them, the shareholders, the boards of directors, the top executives. And if that means at the expense of everybody else, so be it. And I don’t think we’ll change that if we are not willing to ask the question, does this capitalist arrangement we’ve been in now need to be questioned? You know we should have been debating this for the last 50 years.

Thom Hartmann: Laissez Faire capitalism.

Richard Wolff: Yeah. But can we do better than capitalism? It’s a question we should ask about all of our institutions. Not just the government but our economic system, if it produces economic crisis after crisis, if it produces a dysfunctional government, these are hints, let us say, that we ought to stop being afraid of debating this question and begin to do what we should have done for 50 years and see whether we can do better because our people need it and the danger of not doing it is becoming unbearable.

Thom Hartmann: Dave in Ohio, you’re on the air with Professor Wolff.

Dave: Yeah, Thom, thank you and Thank you Professor. Remember Alan Greenspan kept saying don’t worry about the deficit, it’s very manageable. I think it was 2006 or 7, he was in Europe and he was caught on mic saying that’s our biggest problem. Well then he comes back and says oh don’t worry about it. Now a few months ago he was on and said my ideology was wrong, and I think that was just telling them you can’t arrest me. My ideology was wrong? You know there’s nothing legal you can do. But Greenspan was a major part of this problem.

Thom Hartmann: So, Professor Wolff, your thoughts?

Richard Wolff: Yes. You know, Greenspan certainly was, he engineered an enormous increase in the money supply in the United States, he was the guy who brought down the interest rates fast and dramatically after the economic downturn early in the year 2000, that lower interest rate produced the boom in real estate and in all of those transactions that we now know were shady and blew up in our faces in 2006 and 7. But we do not punish people like that. We punish some abstraction called the big bad government. But we don’t punish the people who actually do it.

And you know, to be fair to Mr. Greenspan, he at least has had the minimum decency of saying that he was wrong. Mr. Scarborough and folks like that, they never learn anything. They keep believing what they need to believe to make their political points no matter what happens. Mr. Greenspan at least has been saying that they were wrong, they made mistakes. And by the way, we should pay attention to one particular thing he said. He said that he counted on the private sector, private capitalist enterprise and finance, to be an efficient organization for progress and he said that was wrong. Now that’s a lesson the American people ought to listen to.

The culprit in this situation is not the government, although lord knows they make lots of mistakes. But you can trace most of the mistakes they made to the very influence of the private sector they’re supposed to regulate. They look the other way because that’s what pays their bills. And if we don’t change that at the base, we are simply fiddling while Rome burns and it’s a very dangerous thing to do.

Thom Hartmann: Just a very quick question, we’ve got 20 or 30 seconds before the next break. Is it possible, is there an alternative to growing our way out of this?

Richard Wolff: Yeah growth is not available for us. You know, that hope that somehow we can blow every problem out of the water by growing so fast…

Thom Hartmann: The way Eisenhower did.

Richard Wolff: Right, even though we give more and more to the rich at the expense of the poor, the standard of living of the poor in the middle will rise because the whole ocean is rising, the whole output is rising. Our output isn’t rising, our output is going absolutely nowhere. We have moved production out of the United States, we have moved white collar work now out of the United States. Growth isn’t available and that’s why the prospects, if you don’t change fundamentally, look as bad as they now do.

Thom Hartmann: Yeah. Professor Richard Wolff is with us. his website, check it out. He’s the author of numerous books, including Capitalism Hits The Fan.

Transcribed by Suzanne Roberts, Portland Psychology Clinic.

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