It was clear that cash was king in the midterm elections, so I spoke with Roosevelt Institute Senior Fellow Thomas Ferguson, the leading authority on money in politics. Our conversation covered what November 2nd said about Democrats, the problems with campaign finance, and where Wall Street's loyalties really lie.

Lynn Parramore: What do you make of the 2010 Election?

Thomas Ferguson: The 2010 election was not like others. It was certainly not simply 2006 in reverse, this time with the Republicans winning by a landslide. There is an obvious cumulative process at work here, with first one party and then the other receiving lopsided votes of no confidence from voters. The U.S. economy is barely moving; millions of Americans are looking for work and struggling to find ways to salvage their life savings and pensions; the international position of the U.S. is sliding; and the government is largely paralyzed on issues that voters care about most. We have clearly been in a political crisis for some years; the meaning of the 2010 election is that this crisis is becoming much deeper, moving into an entirely different stage. The parallels to the Great Depression are eerie: At that time, in many countries, voters seem to have followed an "in-out," "out-in" rule. But that process does not go on forever. As the Depression deepened with no solutions, all kinds of strange creatures started creeping out of the shadows. The U.S. seems to be entering that stage.

Lynn Parramore: You're implying the political system failed in some serious way. How so?

Thomas Ferguson: 2008 had all the earmarks of a classic realigning election, as my old colleague Walter Dean Burnham describes them. In the wake of the financial collapse, it looked for all the world like voters were ready for, even demanding, major reforms. They had elected a Democratic President on a promise of "Change," with both houses of Congress solidly Democratic. That's why many people were thinking that Obama was going give us a modern New Deal. They really believed him when he promised change. Instead, Obama's failure on the economy has discredited the whole idea of the activist state. The dimensions of this failure were spectacular: he didn't move aggressively to combat unemployment, the economic stimulus was half as large as it needed to be, and he didn't deal with the mortgage crisis. So unemployment stayed way up, and many people remain in danger of losing their homes or are underwater on their mortgages, with the whole housing sector stalling out. To make matters worse, the administration lavished aid on the financial sector. The spectacle of the government aiding bankers, who turned around and paid themselves record bonuses, has just been unbearable for millions of people.

What the election really shows is not that the parties can't agree -- Democrats and most of the GOP leadership finally agreed on the bank bailouts, for example -- but that the American people will not accept the policies that leaders in both parties prefer. In 2006 and 2008, the population voted no-confidence in the Republicans on the war and the economy. They have just now presented the Democrats with another resounding a no-confidence vote. What makes the current situation intractable is the fundamental reason for these serial failures. It's obvious: big money dominates both major parties. The Obama campaign's dependence on money and personnel from the financial sector was clear to anyone who looked, even before he won the nomination, promoted Geithner, brought Summers back, and reappointed Bernanke. For years I've promised people that I'll tell you who bought your candidate before you vote for him or her, by simply applying my "investment theory of political parties." When I analyzed the early money in Obama's campaign in March, 2008, it was impossible not to see that many of the people responsible for the financial crisis were major Obama supporters. As I wrote for TPM, serious financial reform would not be on President Obama's agenda.

Lynn Parramore: Lots of people point out that the banks have paid back the bailout funds and that the government actually made money on the deal. Can Obama at least claim that this policy was good for the American people?

Thomas Ferguson: The bailout was originally not Obama's but George Bush's, though Obama supported it during the campaign. The "banks-paid-us-back" story is mostly Treasury propaganda. The claim is really based on a narrow accounting of TARP funds. In fact, a lot of that aid has not been paid back. AIG, for example, is still heavily owned by the government. Secondly, the aid was way, way underpriced -- meaning that the federal government got very little for its money. If you want to see what market-driven terms you could get for aiding banks at the height of the crisis, just look at what Warren Buffett received for buying into Goldman Sachs. Most importantly of all, the banks actually got far more help than the direct TARP monies. They received sweeping FDIC guarantees on their debt and truly gigantic amounts of aid from Freddie Mac, Fannie Mae, and the Federal Reserve. All three of these entities have supported the market for mortgage-backed securities that the banks own. They bought huge amounts of them, taking the risks right out of banks, putting it on taxpayers, and in the process handing handsome profits to banks. Regulators allowed the banks to rip off their depositors and credit and debit card holders, while the Fed handed out virtually free money to banks. To add insult to injury, the regulators have allowed the bankers to use the profits from all these government subsidies to award themselves huge, indeed, record-setting bonuses. Those funds should have been used to strengthen the balance sheets of the banks. And if all this weren't enough, regulators also permitted the banks to hide the true value of their bad loans and they let it be known that the largest ones were Too Big To Fail, which allows them to borrow funds more cheaply than smaller banks. The net result of these big bank-friendly "forbearance" policies is that we have all paid to make these banks fabulously profitable, yet they still remain very weak institutions and are not lending. The resemblance to Japan's "lost decade" is obvious.

Lynn Parramore: Was there ever a chance that Obama could be a new FDR?

Thomas Ferguson: People who were hailing Obama as a new FDR were viewing American politics through the wrong lens. They were treating public policy as the result of the will of voters. But in fact, American political parties are mostly bank accounts. What you are told is the voice of the people is usually the sound of money talking.

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Much of my research has been devoted to showing how both parties are dominated by blocs of large investors. The policy choices political parties present to the public on Social Security, macroeconomic policy, campaign finance reform, and indeed nearly every other policy area save a handful of hot-button "social issues" are basically dominated by big money. The consequences are disastrous: Neither party can level with the American people in crises. They cannot diagnose problems like the financial crisis with any honesty and they can't make any detailed case for why the policies they do sponsor would actually benefit ordinary Americans. What we get instead are pseudo-explanations, myths, and sometimes, obvious mendacity. Political discussions in the media, where they are not distorted by the plain interests of the concerns themselves, are dominated by denizens of the "think tank" and "policy institute" world. Most of these institutions are heavily driven by, surprise, surprise, big money in the form of donors. As Robert Johnson and I documented in our paper for last year's INET Conference, growing inequality in the United States complicates this dismal picture by converting regulatory agencies into recruiting grounds for would be millionaires via the revolving door, while at the same time permitting the financial sector to substitute virtually untraceable stock tips for direct contributions.

Lynn Parramore: Where do you see politicians making up policy myths right now?

Thomas Ferguson: On the Republican side, you again have people claiming that the problems of the Great Recession can be solved by reapplying the policies of Herbert Hoover. Surely this is amazing; they are plumping for going straight back to the deregulated market economy that brought you the 2008 disaster. It's simply crazy, for example, to even consider leaving financial houses free to decide on their own level of leverage, to sell derivatives on exchanges that are not fully transparent, or to sell junk securities to their own customers without telling them. But the Republicans are threatening to roll back even the anemic Dodd-Frank financial "reform" legislation, though, to be fair, they will have plenty of Democratic support for some of this.

And it's obvious that neither party wants to address the problem of campaign finance reform. Instead, the Democrats spent part of the campaign talking up dangers from "foreign" money. It's not as though the problems of the system of American political financing come from foreign money. The problem is mostly domestic money. And the Supreme Court has made everything worse with its Citizens United decision. But, note well, the tragedy of big money in the Democratic Party was clear long before that Supreme Court ruling or even before Obama started running for president. Just look at the earlier cases I analyzed in my Golden Rule.

Fundamentally, the problem of money and politics is very simple: campaigning is costly, much more costly than classical democratic theory has acknowledged. Some way has to be found to pay for it. We may take it as an axiom that those who pay for the campaign will control it. So the choices boil down to just two: either we all pay a little, through public financing of campaigns, or a relative handful of the super-rich end up controlling the system because they pay for the campaign.

Lynn Parramore: Does the financial sector give more to Democrats or Republicans?

Thomas Ferguson: We've all seen the staggering statistics on lobbying and political contributions by the financial sector over the last couple of years. More recently, we've also heard about how finance is supposed to have turned against the Democrats. There's something to this: bank contributions to the Republicans increased when discussions of a Consumer Financial Protection Bureau started as the House began considering Dodd-Frank. Contributions to the GOP swelled when the White House panicked after Scott Brown won the special election to fill Ted Kennedy's seat in Massachusetts and endorsed the so-called "Volcker Rule", just as public indignation about bank bonuses was at its height. But the size of the shift toward Republicans has been exaggerated. If you look at total political contributions from securities and investment firms over the entire 2009-2010 election cycle, you will see that more money still flowed to the Democrats. Commercial banks, a narrower sub-group of the financial sector, gave more to Republicans, but only by about 60-40.

Lynn Parramore: So where does all this leave the American political system?

Thomas Ferguson: I think the answer is pretty clear: The political system is disintegrating, probably heading toward a real breakdown of some sort. The striking thing is that if you look beneath the surface of the victorious Republican Party, it is about as contentiously divided as the Democrats. The Tea Party's distrust of the party establishment is apparent, but the divisions within the GOP predated the Tea Party's emergence. They were obvious in 2008. At that time, it was pretty clear that a majority of the party did not want McCain. But there was no consensus on an alternative. 2012 is looking like a repeat of 2008: All kinds of people are eyeing the race, including several would-be candidates who can probably raise large war chests. In the end, somebody is going to win -- my dark horse candidate is Haley Barbour, probably the Republican politician who is most closely connected to big business -- but the whole party is unlikely to unite around him or her. In all probability, the GOP primaries will turn into a demolition derby, tending to discredit everyone involved. I also doubt that the Republican governors who are now promising to cut state budgets will find the public nearly as receptive to deep cuts as they think it will be, as people watch essential social services disappear, prisons empty, and see educational institutions trashed out that are in many cases the only hope of lagging states. Nor do I believe there is any popular majority for cutting Social Security, which is clearly emerging as a major issue just as we speak. And parts of the health care legislation are really popular, so that just saying no is going to look pretty foolish after some months.

The key to the future of American politics is the course of unemployment, though that is linked vitally to housing markets and how you deal with people's lost pensions and savings. If unemployment stays high, I would not be surprised to see some intra-party challenges to President Obama, even though right now everyone dismisses that possibility. The unions went down the line with Obama for the last two years and they have little to show for it; some of them are already scouting other possibilities. It is also interesting to speculate about Jerry Brown -- just watch his star rise if he succeeds in overcoming the California fiscal crisis. Were Brown to defeat Obama in a few primaries, then the temptation for Hillary Clinton to come in would be intense. And right now the United States is mired down in two shooting wars that are not going very well.

Even more interesting are the possibilities of a third party candidacy -- the obvious entrant is Mayor Bloomberg. He's plainly considering it. I notice that he does not appear to have folded the network of organizations that quietly talked up his candidacy in 2008. That tells you plenty.

Lynn Parramore: So is American politics fated to be all doom and gloom?

Thomas Ferguson: If you want a happy ending, you probably shouldn't follow our system too closely in the next few years. Instead, go see a Disney movie, unless perhaps Tim Burton is making it. Bloomberg, Brown, or Hillary Clinton, though, are all known quantities. But the experience of the Great Depression was that as things failed to improve the swamp creatures got their chance. And when the economic situation shook out, the geopolitics became more sinister. It would be a rash person indeed who counted on a happy ending to this mess.

After the crash, the downturn was dubbed a “mancession.” As the meme continues to circulate, we asked leading thinkers to help us sort fact from fiction. Are men suffering more than women in a weak economy? Is Washington doing enough to address female unemployment? How do we ensure a jobs agenda that’s fair and equitable? In the third part of our ongoing series, “The Myth of the Mancession? Women & the Jobs Crisis“, economist Heidi Hartmann describes all the ways the current administration has aided women.

A report released last Thursday by the White House makes an excellent case that women have benefited greatly from the policies and programs advanced by the Obama administration and the Democratic Congress. Also see Speaker Pelosi's report released Friday, highlighting the top 5 gains for women in the 111th Congress and how few Republicans voted for each. By inference, women will suffer if the November elections shift the balance of power between the parties. Unfortunately, many women, leaders included, probably do not know just how much women have benefited from the American Recovery and Reinvestment Act, otherwise known as the economic stimulus, the Affordable Care Act (health care reform), and other policy changes in the past 22 months.

Partly, that's because the story is difficult to piece together -- several laws and government agencies are relevant. Partly, it's because in this economy many people have lost more than they've gained. If you lost your job and then get unemployment insurance benefits, even if they're larger than they would have been without the stimulus (the stimulus provided an additional $25 per week for every worker receiving jobless benefits and encouraged states to cover types of unemployment they didn't before, helping more women qualify), you're mostly focused on what you've lost, since the benefits average only about two thirds of prior earnings. Partly, it's because of incomplete and inaccurate reporting. Many observers, including the various government agencies, have a tendency to look at only one slice of the pie and not see the whole.

Recovery.gov, the government website that tracks spending on the stimulus, reports primarily on the contracts and grants issued by federal agencies for infrastructure and other project spending, showing where the projects are and how many jobs the grant recipients reported that they created. The dollars shown as allocated or spent do not add to the total in the law, because grant and contract spending were less than 1/3 of the total of approximately $800 billion in stimulus spending. If one focuses on this slice of the pie, it's easy to suggest, as Bryce Covert did, that women will be left out because they don't hold a large share of construction jobs.

Getting more women into construction jobs would be great, of course, because they often pay reasonably well without requiring a college degree and women are woefully underrepresented in the industry, consistent with decades of neglect by (and underfunding of) government enforcement agencies. During President Obama's transition and the legislative debate over the stimulus in January and February 2009, the women's movement tried hard to get a goal set for the share of these jobs that should go to women. That didn't happen, but the Recovery Act does include $20 million for grants designated for transportation and technology training and for supportive services for women, minorities and disadvantaged populations underrepresented in infrastructure-related employment. And Secretaries Solis (Labor) and LaHood (Transportation) and others have been touring the country emphasizing the need to hire women and minorities in federally funded contracts and to make sure women- and minority-owned businesses get a fair share of contacts and subcontracts. This is just the type of public education and training Covert says women need in order to participate equally in the newly funded jobs -- too bad she didn't indicate the Obama administration is working hard on this.

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But what about the other 2/3 of the stimulus spending pie? Who got that?

Much of the non-infrastructure spending in the stimulus went to women because much of it was designed to help those in financial trouble, those with lower incomes, those with dependents, and older Americans, all of whom are disproportionately women. Approximately 60 percent of older Americans are women, women make up 95 percent of parents who raise children without a partner, women are lower earners than men, and they have lower average family incomes than do men. More than $14 billion went to one-time cash grants to older Americans. Twenty billion went to working and nonworking parents in the form of expanded tax credits that were refundable (cash grants) to those with such low income that they don't owe any taxes. Another $116 billion went to the Making Work Pay Tax Credits, which reached all middle- and working-class taxpayers. Nearly $21 billion went to food stamp increases and $41 billion to unemployment benefit increases (both of these amounts were subsequently increased further) and $25 billion to enable those who lost jobs to retain health insurance at only 35 percent of its cost. The states got more than $4 billion to modernize their unemployment systems to cover more women and low-wage workers. The stimulus included nearly $11 billion in expanded Pell grants that help low- and moderate-income students attend college. All this adds to $248 billion that went directly to mostly low- and moderate-income individuals and their families.

In addition, $141 billion went to the states to help them pay their share of Medicaid costs and for aid to education, creating jobs for teachers, teaching assistants, nurses, home health care aides, etc. These are the very jobs that Bryce Covert argues in her piece didn't get as much funding as they should have. I would have liked to see them get more, too. But blame Congress, not President Obama, as Congress insisted on cutting proposed aid to the states substantially. While Covert is probably right that some hospitals have shut down, employment in health care has not fallen. In fact, health employment grew every month throughout the entire recession and continues to grow in the slow-job-growth-recovery we are in now, the only industry to do so (see an IWPR paper on the Great Recession). And it's worth noting that much of Medicaid spending goes to care for poor elderly patients, another area of care Covert claims was neglected. Moreover, the stimulus includes nearly $4 billion for job training, plus $500 million specifically for training in health care jobs and $680 million for training and services to the disabled.

Employment in education also held up fairly well throughout the recession, but finally lost jobs in September as state and local government budgets continued to be pinched by the recession and slow recovery. President Obama requested supplemental funding for the states, but the Senate dawdled over and then reduced the amount, preventing sufficient aid from getting to the states and to school systems in time for the start of fall semester. (Similarly, the Senate has failed to extend a $2.7 billion block grant to the states that was included in the stimulus bill to increase TANF, or welfare, funding in this time of need and was used by the state to fund 250,000 jobs for low income parents and youth.)

In her piece, Covert notes that eminent historians Linda Gordon and Eileen Boris emphasize the need to fund and upgrade low-paid women's jobs in such fields as health and elder care and child care. Once again, just as with health care and elder care, Covert overlooked the opportunity to point out that the stimulus provides funding both for care of children and for training and wage improvements for child care workers. The stimulus included $4 billion in new funding for child care and Head Start, doubling the usual federal funding. More than $1 billion was earmarked for cost of living increases and staff training and other measures that would increase the quality of child care and of child care jobs.

Covert helpfully makes the point that women's earnings are more important than ever to their families because so many are co-earners or support families on their own, especially since more men have lost jobs than women since December 2007, when the Great Recession began. It would have been nice if Covert had acknowledged all the ways in which the stimulus and other federal spending helps women and their families, rather than focusing on assumed gaps for women that she failed to investigate thoroughly. The Congressional Budget Office estimated in August that the stimulus will have increased employment by 1.3 to 3.3 million Americans on average in 2010, the peak year of its impact. Given that the number of unemployed grew by nearly 8 million, many of us wish our government were doing even more to help people and boost the economy (see a statement from the Campaign for America's Future).

Have women, men, and families been hurt by this massive recession? Unquestionably, yes. Have women been hurt more than men? Possibly, despite less job loss, because they started the recession with lower earnings and incomes and, as the primary family caregivers, they are likely doing even more care work at home as family budgets fall. Poverty has increased for nearly all demographic groups, and especially for single mothers and their children, who in good times and bad are always the most vulnerable. Our social safety net was largely shredded long before this recession began; it badly needs repair (please see a recent IWPR fact sheet on this point). The federal stimulus program has strengthened the safety net and prevented millions more from falling into poverty and unemployment. Has the federal stimulus program done less for women than men? I doubt that very much.

Heidi Hartmann is the President of the Institute for Women's Policy Research.

After the crash, the downturn was dubbed a “mancession.” As the meme continues to circulate, we asked leading thinkers to help us sort fact from fiction. Are men suffering more than women in a weak economy? Is Washington doing enough to address female unemployment? How do we ensure a jobs agenda that’s fair and equitable? In the second part of our ongoing series, “The Myth of the Mancession? Women & the Jobs Crisis", June Carbone and Naomi Cahn explain the challenges women face in the wake of new job cuts and changing family dynamics.

It's time we faced up to the consequences of growing income inequality. In the Great Recession, the top income earners have recovered, while the poor have gotten poorer. And the disparities in family life make things even worse. The average family requires two incomes to get by. In a recession, two incomes may cushion the effects of a layoff. Yet, increasingly, the ability to manage marriage and wage-earning has become a marker of class.

First, let's look at the employment numbers. The Great Recession disproportionately affected construction and manufacturing, and therefore it disproportionately affected men. Between December 2007 and October 2009, non-farm jobs dropped by 5.8 million for men, but only 2.5 million for women. The result produced the largest unemployment gap between men and women in the post-war era.

Second, think about what may happen next. In September of this year, local governments laid off workers at the fastest rate in thirty almost years. The layoffs disproportionately affected those involved in education, a field that includes more women than men.  Economists predict that without renewal of stimulus spending or greater assistance to the states, more cuts in government employment should be expected next year. It's clear that a family with two incomes is in a better position to keep some income coming in; a family with one wage-earner is more vulnerable to downturns that affect some sectors more than others.

Third, examine the distribution of two-income families. It used to be that the more education a woman had, the less likely she was to marry, and women's workforce participation did not vary much with the husband's income. Today, marriage rates have fallen most dramatically for the least educated, while the most educated have become much less likely to divorce. As a result, the likelihood of raising a child in a two-parent family has become more closely associated with education and class. College grads enjoy divorce and non-marital birth rates that approximate those in the mid-sixties; for those who don't graduate from college, marriage rates have fallen while divorce and non-marital birth rates continue to rise. In part because of the changes in marriage, poor women's family income has decreased by almost a third over the past 30 years (28.8%), while professional women's family income has increased (7.4%).

So what should we do about it? The answers require long term changes.

First, college for everyone is not a panacea, but increased educational and training opportunities should be part of any solution. A larger percentage of the next generation will be raised by single parents and escalating tuition will place higher education beyond the reach of a larger segment of students. Employers should seek ways to work with high schools, colleges and universities to train workers for more specialized skills.

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Second, the erosion of the wage structure for less educated men and the increase in family instability for the bottom half of the American population make the least-educated men less attached to the labor market and less attractive as husbands. Comprehensive services that provide job-related skills, beginning with interviewing through maintaining a job, should be addressed to them as well as to women.

Third, dual parent workforce participation requires more family friendly workplaces. While the Family and Medical Leave Act of 1993 allows eligible workers to take unpaid, job-protected leave to care for a new child or a family member with a serious medical condition, only slightly more than half of all employees work in businesses covered by the law, according to an estimate that the Labor Department published in 2000. Moreover, while federal law protects workers from discrimination based on sex or pregnancy status, it doesn't explicitly protect against discrimination based on caregiving responsibilities -- so some state and local governments have begun to pass laws that do. Researchers at the Center for WorkLife Law at the University of California's Hastings College of the Law report that the number of lawsuits claiming discrimination based on caregiving responsibilities has increased by almost 400 percent during the past ten years.

Finally, young marriages have become riskier and greater preparation for family responsibilities helps. But delay involves a greater commitment to the widespread availability of contraception than we have today. In the late nineties, unintended pregnancies were falling for college grads while they rose for less educated women. There is every reason to believe those trends have gotten worse. The 2008 teen birth rates in Arkansas, Mississippi, New Mexico, Oklahoma and Texas were the highest in the country, with more than 60 births per 1,000 teens. Yet, each of these states emphasizes abstinence be stressed over more effective programs.

American policies that fail to invest in the human capital of the next generation, pointlessly encourage early marriage and childbearing, and perpetuate workplaces ill-equipped to adjust to family needs make workers more vulnerable during recessions.

June Carbone is the Edward A. Smith/Missouri Chair of Law, the Constitution and Society at the University of Missouri-Kansas City.

Naomi Cahn is the John Theodore Fey Research Professor of Law at George Washington University Law School. She is the author of numerous books and law review articles on gender and family law.

Cahn and Carbone are the co-authors of Red Families v. Blue Families.

Don't hold your breath for consumer spending to lead the recovery.

Noam Scheiber has a fantastic piece this morning, Handoff, or Fumble?, which is about the handoff "between temporary boosts to growth, like government stimulus, and more lasting drivers, like spending by consumers and businesses." This is a handoff that needs to occur in order for even feeble growth to take off.

Administration economists believe such a handoff, weak as it may be, will work because consumer spending will eventually increase. They base this analysis on well-modeled historical data. But the other side in this argument is the idea of a "balance-sheet recession", which is primarily associated with Richard Koo. In this side's mind, historical data won't be of much use to us because the nature of this recession is different. This article by Noam is a great introduction to Koo's thinking:

The question -- really more like a nagging terror -- is whether something has happened since the recent financial crisis to fundamentally change the way consumers behave, rendering the administration’s model moot. As it happens, there’s a school of wonks that worries this is the case.

The godfather of this group is a Japanese economist named Richard Koo, whose framework for thinking about this appears in a book he modestly titled The Holy Grail of Macroeconomics. (Paul Krugman, among others, has identified himself with some of Koo’s ideas.)

Koo’s view is that consumers and businesses who take on enormous debt during a bubble abruptly shift gears once the bubble bursts, spending very little while they pay off loans. Moreover, this stinginess continues until the process of debt-repayment (economists call it “deleveraging”) is complete, creating a huge drain on the economy. In the case of Japan, whose real estate and stock markets collapsed in the early ’90s, this took over a decade. During that time, Koo argues, the only force propping up the economy was massive amounts of government stimulus. He tells a similar story about the Great Depression.

Whereas Carroll assumes people base their saving decisions on the same factors both before and after the crisis, Koo says the way they make decisions beforehand tells you little about their behavior afterward. The crash doesn’t just pummel the value of their assets (like housing). It creates a kind of psychological trauma that preoccupies them with paying down debt before they can think about borrowing again. If you accept Koo’s premise, the data of the last 40 years is of little help in guiding us through the current situation. The episodes we’re talking about -- Koo calls them “balance-sheet recessions” -- simply didn’t happen at any point in that time-frame.

Noam then goes on to explain how we'll know who was right in about a year.

A few extra points on Koo's thinking: Here's Richard Koo presenting his argument at the kick-off INET conference:

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When we think of household balance sheets being underwater, it's important to remember that the middle-class is the most underwater. As we discussed here, the middle-class, normally the engine that drives consumer spending out of a recession, is so underwater that they need some life preservers thrown their way:

It's tough to see them leading a consumer spending-driven recovery.

We talked about how Koo compares and contrasts the early 1980s here. Here's a graph from his book:

As we mentioned back then, Japanese interest rates are at 0%, yet the corporate bond market is shrinking. Repeat that again: interest rates are at 0%, so debt is essentially free, yet corporations are choosing to net pay off debt.

If you go to every business school's textbooks and case studies, you won’t find good answers for this. This means that corporations can’t find a good use for their money. If a firm has no profitable opportunities, it should close and return its money to businesses. It has no reason to exist, given that its reason for existing is that it knows what to do with shareholder’s money better than the shareholders, which in this case it does not.

How does that look for the United States' market? From the Fed Flow of Funds:

This was updated in September, and we see yet another quarter of households paying off debt and deleveraging, and it doesn't seem to be trending upwards anytime soon. Meanwhile, businesses are hovering, uncertain whether there will be demand for their products. This points to Koo's argument. We'll be watching the data as it comes in to see which side's argument is winning and what kind of policy mechanisms can be put into place one way or the other.

Mike Konczal is a Fellow at the Roosevelt Institute.  You can follow him on twitter.