Michael Meeropol: "The Wall Streeters and big industry folks who have decided that they can have capitalism without the American welfare state (a major change from 1945-1980)..."
As the dominant or hegemoic fraction of the dominant the hegemonic class, Wall Street is the dominant faction of the DP coalition. Rubin's conclusion is clear. He has concluded that American capitalism cannot live with huge deficits and an entitlement state. Huge deficits will have to be monetized away, given what the growth rate of the private economy is likely to be. Monetization of debts will lead to commodity price inflation and neutralize any stimulus (we are already seeing this consequence of QE2). Monetization of debts will lead to currency and trade wars and bring chaos to international markets. Monetization of debts will eventually put upward pressure on interest rates which would require such a massive cut back of state expenses at the very time the economy was sinking that it would only be possible with forms of political authoritarianism or fascism. The number one priority to prevent international chaos, a Great Depression and fascism is long-term deficit reduction, with cuts over the next two years being minimal. Deficit reduction will require huge spending cuts and some increased taxation. It is clear that Obama's plans were never developed as compromises with the Republicans. He has simply put forth what he thinks has to be done politically. Rubin won the debates within the WH the first time; he has won it again through his proxies. Reich, DeLong, Tyson, Stiglitz have all lost again.
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