For whom the bell tolls

To paraphrase Jim Carville: It’s the jobless recovery, stupid. Tell me the unemployment rate on Election Day 2010 and I will tell you the results.

Incumbents of both parties may have a rude awakening in 2010. As the intense demand for change collides with old politics in Washington and old banking on Wall Street, the result could well be a job-starved nation and a political shocker in 2010.

It is a war of the worlds between those who pay for the bailouts in heartland America versus those who benefit from the bailouts from their perch of power, privilege and unshared prosperity.

It is war of the worlds between the companies, entrepreneurs, small businesses and venture capitalists who will finance and create the job waves of the future and the old-world bankers who hoard money while they fight to keep intact the rules of the road that created our crisis.

The bipartisan consensus in Washington is this: Both parties accept the notion of a jobless recovery, and neither party challenges the causes that create it or offers the solutions to end it.

Under Obama, as under Bush: Tent cities rise and foreclosures mount in our Grapes of Wrath-like economy. Banks still refuse to lend. Huge pay packages are revealed every day. Financial practices continue unreformed.

In this job-starved economy the politicians keep talking, the campaign money keeps flowing and the jobless rate keeps rising.

In this old world, Gordon Gekko still rules. Greed without growth is extravagantly rewarded while the past clings to power with an iron fist. Those who promised reform hold fundraisers where lobbyists write checks in adjacent rooms to maintain the pretense of change.

There has been no financial reform. The new road ends in the same destination as the old: endless cycles of boom, bubble, bust and bailout. Those who cause the crisis are rewarded with great largesse. Those who suffer from the crisis are punished with rising joblessness.

The problem with the stimulus was not that it was too large, but that it was too small and distributed too late — a drop in the bucket compared to the magnitude of the problem.

The problem with monetary policy is not that it was too expansive, but that it was given over with no strings attached and nothing received in return.

Trillions of dollars were not given to banks to raise credit card interest rates, to refuse to loan to many millions of good customers, to strangle small business, to obliterate lending to developing nations that would buy our products, to keep foreclosures rising and to virtually declare war against consumers by cutting credit lines to those who pay their bills. This is a dagger in the heart of growth and a major cause of ever-rising joblessness.

On these matters there has been no change. Without changing the causes of our crisis, we will not change the results. The bell will toll with more cycles of boom, bubble, bust, bailout and the inevitable pain of chronic unemployment. The bell will toll in 2010 for politicians who promised to change this, but did not.

The government has dumped trillions of dollars into a financial system that is fundamentally flawed without changing the flaws, while the status quo scratches and claws against even modest change.

We will get some modest short-term recovery, because even trillions of dollars of hoarded money must go somewhere.

We will also have inflation from a massively bloated monetary policy, earthshaking national debt and ballooning budget deficits.

We will also have a long-term state of painful joblessness, because the policies of our Treasury secretary are largely unchanged from the policies of his predecessor.

The president was right during the campaign when he called for a bottom-up recovery. His Treasury secretary is wrong when he continues the policies of the past. For a nation awash in financial crises, a policy that trickles down a little bit more is a formula for chronic joblessness.

With the Fed running out of room to print more money, America in election 2010 could look like California in 2009, which cannot print money to mask the magnitude of the problem.

When our bills must be paid, it will be an ugly spectacle indeed. The sheriff is knocking on our fiscal and monetary door while growth is slow and unemployment is high. Average Americans know they are last in line for the benefits and first in line for the pain.

Therein lies the politically deadly danger, as the bell will toll for our economy, and for incumbents of both parties, in 2010.

Budowsky was an aide to former Sen. Lloyd Bentsen and Bill Alexander, then chief deputy majority whip of the House. He holds an LL.M. degree in international financial law from the London School of Economics. He can be read on The Hill’s Pundits Blog and reached at