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Book Review

Editor's analysis finds democracy holding on by a shoestring

Robert Kuttner co-edits The American Prospect magazine. Robert Kuttner co-edits The American Prospect magazine. (Carolina Manero)
Email|Print| Text size + By Chuck Leddy
December 29, 2007

The Squandering of America: How the Failure of Our Politics Undermines Our Prosperity By Robert Kuttner, Knopf, 337 pp., $26.95

Robert Kuttner, co-editor of The American Prospect magazine, views our present political and economic systems as dysfunctional. In "The Squandering of America," based on wide-ranging analysis and compelling research, he bemoans our nation's ever-increasing income inequality, financial speculation, and government by plutocracy. "We have come very close to losing our democracy," he writes, "not just in rigged rules and stolen elections but in the domination of politics by big money, the decline in participation by ordinary people, and the assault on basic constitutional liberties."

None of this is accidental, notes Kuttner, but rather the result of political choices. Working-class people have lost faith in government, and "when democratic counterweights are weak, the power of money prevails." The burgeoning levels of income inequality Kuttner describes, mostly triggered by recent tax cuts that favored the wealthy, are stunning: "By 2004, more income went to the top 1 percent than to the entire bottom 50 percent." Why aren't more Americans clamoring for change?

Kuttner, who is also an occasional Globe contributor, believes that the electorate has internalized the "bootstrapping" philosophy of Republicans: "People conclude that the rising cost of living is their own personal problem, since the economy is said to be doing just fine." Moreover, the present Republican administration has successfully "starved the beast" of government by simultaneously cutting taxes while boosting military expenditures since 9/11. Faced with massive budget deficits, Democrats are now fighting to simply protect mandatory social spending like Social Security and Medicare from Republican attack. The possibility of new federal expenditures to address long-neglected social needs has been shoved off the agenda.

Kuttner's analysis of how government and corporations have shifted the "safety net" of health care and retirement burdens onto the shoulders of individuals seems depressingly accurate. And while government intervention on behalf of working people is increasingly the stuff of fantasy, government has never been more active helping corporate interests. Kuttner describes in detail the "deregulation craze" (i.e., free markets will solve everything) that started in the late 1970s and continues today.

When he examines the fallout from deregulation, he sees industries that have "abused customers as well as workers." Meanwhile, corporate elites have never had it better. The author details numerous insider financial schemes that have proliferated in deregulated financial markets. Corporate CEOs, for example, can take stock options and make a killing through a strategy of "pump and dump": They use insider status to artificially boost their company's financial outlook, pumping up the stock price, and then sell their shares and get out of Dodge before the bubble bursts. Small investors and salaried employees (à la Enron) are left holding the bag.

Kuttner details how the federal government, like the cavalry, has come riding to the rescue whenever hyper-risky business schemes predictably flame out. Whether it's the savings and loan crisis of the 1980s, the hedge-fund crisis of 1998, or today's subprime mortgage crisis, the government has become "a crisis enabler," he contends, rescuing speculators who scream the loudest about the evils of government intervention. "Business hates regulation of risky practices but depends on bailouts after the fact."

Can this dysfunctional system be fixed? Kuttner openly worries that "the docile Democratic Party" is happily genuflecting to "big money" donors. "If Democrats expect to regain a public mandate, repair democracy, and broaden prosperity, they need to be credible as champions of ordinary people." Whether change will happen or not, a first step is recognizing the present wreckage of our politics and economics. Robert Kuttner has diagnosed the sickness in our body politic; we'll have to see about a cure.

Chuck Leddy is a freelance writer who lives in Dorchester.

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