DEBTORS' PRISON

American Prospect co-founder and -editor Kuttner (A Presidency In Peril: The Inside Story of Obama's Promise, Wall Street's Power and the Struggle to Control Our Economic Future, 2010, etc.) critiques the Obama administration's embrace of debt-driven austerity policies and calls for the resumption of postponed financial reforms.

“Only the Republican refusal to entertain any tax increases under any circumstances saved the Democrats from even worse policies—at least so far,” writes the author, who insists that austerity is no match for a deflationary depression in progress. Historical background provides him precedents for such ideas as writing down unpayable debts, like mortgages, and reorganizing insolvent issuing institutions. These approaches were part of America's legacy in the past but are not included in today's policy discussions and are “far outside the political mainstream.” Kuttner believes that public policy must find ways to give relief to private debts that are “depressing demand and holding back recovery.” He asserts that the Federal Reserve has the power to play a direct role in this effort, and he also provides a discussion of the European financial crisis. Framed by intriguing discussions of the development of bankruptcy law from 18th-century English precedents and 19th-century political conflicts between independent farmers and corporate middlemen over credit and money creation, the author's focus on Obama is unsparing: “on the issue of spending cuts, Obama had already given away the game... it was all to clear that the eventual bargain would be fiscally conservative with cuts in Medicare and Social Security.”

Illuminating economic history and sometimes eye-opening about the current situation—however, this version of leftist economics will likely be taken as an ideological counterpoint to rightist free market doctrines, rather than a political solution capable of bringing representatives of different interests together in common purpose.