like social democracy, though not necessarily to socialism. Progressives and social democrats believe that the Democratic Party, at the presidential level, has mistakenly embraced corporate and Wall Street-friendly policies since the Clinton years, if not before. They criticize President Obama for insufficiently breaking with neoliberal modes of political-economic governance, and for supporting domestic political-economic policies that, in their view, are inadequate for resolving the economic crises he inherited. In their view too many Democrats have bought into the discourse of austerity and deficit reduction promoted by corporations and conservatives. Two Nobel Prize in Economics winners, Paul Krugman and Joseph Stiglitz, have in recent years moved from mainstream positions to strongly critical and progressive perspectives, essentially social democratic in nature, on the U.S. political economy, even if they more typically call themselves liberal, progressive or Keynesian. Robert Kuttner characterizes their public roles this way: “As the most prestigious economic dissenters of this era, Joseph Stiglitz and Paul Krugman form a category of two: astonishingly prescient, widely read, and largely ignored by those in power.” After briefly defining social democracy, I will describe Krugman and Stiglitz’s recent critical analyses of the U.S. political economy and show how their views overlap with an emerging body of analysis and proposals by academics, activists, and think tanks about how to move the U.S. in more progressive directions. Finally I will analyze the meaning of President Obama’s reelection in 2012 and ensuing battles over the fiscal cliff and budget sequestration from the standpoint of the social democratic critique of neoliberalism and austerity economics. Social Democracy Twentieth century European social democracy has a complex history and is intimately involved with the creation of modern welfare states after World War II. In general social democracy is a reformist strategy on the left that eschews a systematic break with capitalism. For political
that we have both the knowledge and the tools to end this suffering. In his evaluation of Obama’s first term, Krugman thought the period from 2009 to 2011 was one in which “even as the president bought into deficit obsession and calls for austerity, the whole national discourse shifted away from job creation.” While Krugman saw signs in 2011 that Obama was regaining his focus, the concluded that “the experience of Obama’s first term suggests that not talking about jobs simply because you don’t think you can pass job-creation legislation doesn’t work even as a political strategy.” Joseph Stiglitz In his 1995 book Whither Socialism Joseph Stiglitz more or less proclaimed socialism, even market socialism, to be dead as a viable economic system. At the same time it was possible to find in Stiglitz arguments for systematic alternatives to the dominant form of capitalism that cut across the market-mania of the time. Thus the “analytical Marxist” John Roemer, reviewing Stiglitz in New Left Review, found arguments for systemic alternatives to the dominant form of capitalism: “In sum, Joseph Stiglitz, although posing as a critic of socialism, in fact provides a sharp attack on the neo-Hayekian dogma which has gained such prominence in the past twenty years, and is the real antagonist in the debate concerning the feasibility of more egalitarian societies…. Whether Stiglitz’s choice of anti-socialist vocabulary is, like Marc Antony’s, a clever rhetorical device, or whether he really believes that socialism is dead, does not much matter. For his arguments lay to rest many commonplace false beliefs about the optimality of private property as a social institution, and thus lay the groundwork for fruitful discussion about alternative, and more egalitarian, social and economic organization.”