Later on I will say more about Summers' recent ideas. But what has to be said now is historical: he was a central player in the Clinton administration, and the Clinton administration presided over the continuation and the acceleration of the economic inequality boom in the United States. It was amazing that Clinton economists like Summers either didn't know or didn't care that wages were absolutely flat for 60-80% of the population while income for the top 1% and top 0.1% doubled or tripled.
Actually, I think the story's worse than that. The Clinton economists did care that inequality was increasing, and they liked it. They agreed with the Reaganomic view that capital belonged in the hands of the rich because they invested and spent more effectively. The Clinton economists made no obvious effort to increase wages or regulate banks and non-bank investors. They are the people that wound up the mechanical bankers and let them decide who to give our money too and then eat the rest of it.
Summers will make sure that investor interests are everlastingly at the table when the government funding cards are being dealt. He may help them to get two or three cards while everyone else gets one. The Wall Street Journal announced Summers' appointment in the same piece that suggested that Obama's plan to raise income taxes a little on the $250,000 plus bracket was going to be delayed to 2011.
So what would be better than Son of Clinton & Summers?
- big big bailout - for society. Social reinvestment on a giant scale. More confirmation that size matters from Bob Kuttner.
- quarantining and disinvesting from speculative finance based on the social value of what it investment supports. Nomi Prins reminds us that backing "consumer-oriented banks" was one of the good parts of the New Deal.
- getting investment capital into the streets. Do this by directing capital to local governments, municipalities, and states that propose specific projects of social development and mass benefit.
- find these funds both through taxpayer-funded government debt, and through a "capital recovery" project that taxes past windfall profits in the financial sector. This would be a version of the "negative bonus" some banks imposed on employees who got huge bonuses in one year by staking out unstable positions that would lose money in the following year.