Category: Politics

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Financial Crisis Politics The Opinionsphere

Culture War: Overclass Edition

[digg-reddit-me]In which I realize that we are now observing a “Culture War” between the haves and the have mores, between the elites and the financial elites, between two opposing sides in the “overclass.”

I’ve been a bit flummoxed by the class warfare rhetoric coming from certain quarters recently – and I don’t mean from the populists. As Daniel Gross observed in Slate:

To hear conservatives tell it, you’d think mobs of shiftless welfare moms were marauding through the streets of Greenwich and Palm Springs, lynching bankers and hedge-fund managers…

All of this overheated rhetoric is about – as Gross points out – Obama proposing to undo some of the changes of the past eight years – the largest change resulting in the wealthiest few paying about $4.10 more per day to benefit the society which has enabled them to become so wealthy. But I suspect that what Gross has gotten wrong here is what I’ve been getting wrong as well – to identify those opponents of Obama’s “Great Wealth Destruction!” as conservatives. Many of them are – and many conservatives are jumping on this meme as it is the only one that seems to have gained any traction against Obama’s agenda. But the meme hasn’t gained traction because conservatives are big proponents of fiscal responsibility. Supporters of the Republican party ceased to be proponents of fiscal responsibility years ago – and the measures they are proposing now (which would create even larger deficits than the stimulus spending) prove that they truly are out-of-touch or are merely posturing for political purposes. At the same time, non-conservatives like Clive Crook, who supports both health care reform and a cap-and-trade system, have begun to join in much of the conservative criticism. The real source of energy behind this line of attack doesn’t come from conservatives – but from a culture war going on between the financial elites and the rest of the elite which has been supercharged by the financial crisis. Everyone is angry about the great destruction of wealth that has resulted from this crisis – and the question has become where to place the blame, where to direct the still largely inchoate anger.

Matt Yglesias has been suggesting something like this type of distinction over at his blog. At one point, commenting on Jon Stewart’s takedown of CNBC, he wrote:

Comedy Central vs CNBC nicely captures the cultural battle inside the American elite between “creative class” types and the business manager types. Both sides think the other side is composed of idiots…

Then yesterday, Yglesias made a related point about how “the growing overclass revolt [is] taking the American right by storm.” Yglesias critically quotes Lisa Schriffen at National Review‘s The Corner:

The doctors, lawyers, engineers, executives, serious small-business owners, top salespeople, and other professionals and entrepreneurs who make this country run work considerably harder than pretty much anyone else (including most of the chattering class, and all politicians). They are not robber barons, or trust-fund babies, or plutocrats, or even celebrities. They are mostly the meritocrats who worked hard in high school and got into the better colleges and grad schools, where they studied while others partied…

[Obama] is demonizing them… [and] is penalizing their success and giving them very clear incentives to ratchet back on productivity.

Yglesias’s response is to point out that not only is no one being demonized, and that:

Guys who move furniture are, of course, working extremely hard. And even your basic retail employee needs to be on her feet for hours and hours at a time while “executives” comfy chairs. And, again, I don’t think the Salvadoran guys who moved my bed found themselves in that line of work because they were too busy partying in college.

On one level, this is an argument about the fundamental fairness of the status quo – which conservatives tend to accept and liberals tend to reject. But on a more superficial level, we’re not talking so much about a “revolt of the overclass” as a culture war among the overclass – in which the argument is less about whether or not society and capitalism has been fair to “the Salvadoran guys” and more about whether or not society and capitalism have been fair to give the super-rich which so many riches. As this is a culture war, your side on it is not based on such petty facts as your income level or total net worth but by who you identify with. 

America has established something resembling a meritocracy among it’s upper and middle classes – as college education is accessible to most – and from there, any range of careers. This is the world Schriffen is referring to. But what Schriffen misses is the growing gap between the “haves” and the “have mores” – as the lawyers, doctors, and businessmen she lionizes realized that their college friends on Wall Street who were partying instead of studying in college were now making ten, twenty, a hundred times what they were – and still partying just as hard. This resentment has now been exacerbated as we realize that these Wall Street bankers – who have been working hard, partying hard, and making obscene amounts of money – lost all of our money but get to keep their bonuses.

In this culture war of the overclass, level of wealth doesn’t cause you necessarily to identify with either side. Warren Buffet for example would clearly be a member of the have mores, but he identifies with the haves and lives a lifestyle more suited to that group. There are those who identify as or who aspire to be “rich” and “wealthy” and who consider their good forture to be of their own making, who see the crisis as hurting them and their chances at achieving obscene wealth even if they do not have it yet. They tend to blame the crisis not on the bankers but on Obama – which is a bit odd considering the timing of his rise. But as early as September, Rush Limbaugh and Sean Hannity were talking about the Obama Recession and by January, the Wall Street Journal was opinining about it as a fact. Jim Cramer, along with some others at CNBC, decided to take on on the White House with “empirical facts”:

When I somewhat obviously and empirically judged that the populist Obama administration is exacerbating the crisis with its budget and policies, as evidenced by the incredible decline in the averages since his inauguration, I was met immediately with condescension and ridicule rather than constructive debate or even just benign dismissal. I said to myself, “What the heck? Are they really that blind to the Great Wealth Destruction they are causing with their decisions to demonize the bankers, raise taxes for the wealthy, advocate draconian cap-and-trade policies and upend the health care system? [my emphasis]

I think we can all understand why Jim Cramer is angry – he’s been telling people the system is fine and cheerleading the market – and now, he looks like a fool. You can see how people who listen to Cramer might be angry – as anyone listening to Cramer’s advice would be rather screwed. On the other hand, Cramer was merely a part of the system of the financial elites – and he wasn’t saying anything that different from what everyone else believe. The question for the financial elities is whether or not they are responsible for their woes as well as the world’s – or if they can lay the blame somewhere else.

On the other hand, there is the rest of the overclass – and much of the rest of America – who, so far, place the blame for this crisis squarely on the bankers, on the financial industry (whose purpose was to protect and make money), and on lax regulation often promoted by Limbaugh and Hannity and Cramer. The many for whom Wall Street is some half-mythical place to which they entrust their savings are certainly angry today – though the rage is still largely unformed and undirected. In spurts and starts, it is directed at lavish expenses indirectly subsidized by taxpayers – but largely, these people are just hoping things get better. The financial elites themselves see the anger – and know they are the logical target, and so seek to deflect it. For the non-financial members of the overclass who know many people on Wall Street – who are the haves to the Wall Street have mores – they know where to direct their anger – at those whose outsized success has made them look foolish for choosing anything other than a Wall Street career. It is part resentment and part righteous indignation.

Either way, this Culture War of the Overclass is more entertaining than that whole abortion/gay marriage culture war.

[Image licensed under Creative Commons courtesy of shyb.]

Categories
China Economics Financial Crisis Politics

Stimulus and Stability

[digg-reddit-me]This Wall Street Journal article by Bob Davis accompanied by this graph to the right illustrates just how far from world opinion the Republican right is in it’s rejection of stimulus spending. This is not necessarily a bad thing – but it should give pause to those who are defending the fiscal austerity Republicans are proposing in the middle of this crisis. This issue is not considered a partisan issue for most of the world – and it is mainly Republicans in power today who see stimulus spending during a sharp downturn as something “liberal” or controversial.

David Brooks’s expressed his fair-minded exasperation this Sunday – as he pronounced the idea of the Republican-proposed government spending freeze “insane.” 

The International Monetary Fund – not normally known as a squishy, leftish organization as it promoted free trade and capitalism around the globe – is in favor of large stimulus packages:

The IMF has been urging nations to increase fiscal stimulus by at least 2% of gross domestic product to boost growth. Of the G-20 nations, only the U.S., Spain, Saudi Arabia, China and Australia are expected to reach that goal in 2009, according to the IMF.

More importantly, and more interesting then discrediting an almost powerless political party, is to notice that there seems to be some sort of inverse relationship between a society’s social safety net and the amount of stimulus spending they are proposing. 

This makes sense on a number of levels. Automatic stabilizers which should take some of the pressure off a need for a stimulus are not included here. On another level, these nations without a strong safety net must rely more heavily on economic growth for societal stability. 

If this is true, China and America would be more reliant on constant economic growth to relieve social and political pressure and would be more likely to have larger stimulus packages. France and Germany with stronger safety nets would feel more insulated and be less likely to push for large stimulus packages. This is exactly how this matter is playing out on the world stage today – with some exceptions due to political leadership. 

But both states with strong social safety nets and those without them are dependent on growth over time. But those states without strong safety nets feel the economic bumps more strongly – and downturns end up being more disruptive.

Categories
Economics Financial Crisis Politics

Housing in Detroit

The Associated Press:

The average sales prices of [single-family]homes [in Detroit] plunged from $46,702 in 2003 to $8,692 last year. Through the first month of 2009, average sales were $6,035. 

Categories
Foreign Policy Libertarianism Mexico National Security Politics The Opinionsphere War on Drugs

The Unintended Consequences of a War on Drugs

American libertarian Alan Bock at Antiwar.com:

The most efficacious approach [.pdf] to stemming the violence in Mexico is to recognize that just as what most newspapers blithely call “drug-related crime” is actually drug-law-related crime or even drug-law-caused crime, the wave of violence in Mexico is not caused by the inherent viciousness of the Mexican underclass or the physiological properties of drugs deemed illicit, but by the set of perverse incentives that arise when governments treat adults like children and dictate what they can ingest, attempting to prohibit plants and substances that are easily grown and formulated and for which there is a steady demand. The violence in Mexico is not “drug-related” but “drug-law-related” or even caused directly and indirectly by the laws attempting to prohibit the use of some substances.

While I do not agree with the moral aspects of Bock’s approach – which attribute the moral failings of individuals to government policy – and place the moral blame for these actions on the government – his policy analysis here strikes me as fundamentally sound.

Categories
Domestic issues Economics Politics The Web and Technology

Free markets exist not in spite of the government, but because of government.

[digg-reddit-me]One thing many Republicans today do not seem to understand is that the free market is not a natural phenomon. The free market exists not in spite of the government, but because of government.

Reading this white paper by a broadband front group (pdf) which purports to described the “ideology behind net neutrality” which it dubs neutralism and connects it to a lack of respect for private property and an undermining of capitalism, the above sentiment was driven home. As they described the “private property” rights that net neutrality would undermine or take away, it seemed clear to me that they had a fundamental misunderstanding of capitalism – and upon reflection, this fundamental misunderstanding of capitalism seems to have animated a great deal of the perversion of the free market that Republicans ((I use this term although it is a rough one. Some Democrats seem to agree with the Republican points discussed – but they have mainly been associated with the Republican party.)) have promoted for the past thirty years.

The impression one gets from the quasi-libertarian Republican rhetoric of the past two decades is that “government is the problem – not the solution” – and that the free market is the solution. The government and the market are understood to be fundamentally at odds – and so, Republicans have supported a government retreat from any interference in markets. They are in favor of a relaxation of regulations in various areas including from financial industry to the environmental impact of industry; they favor a government that provides as few services as possible – from wanting Social Security privatized to opposing government interference in the health care industry; they want government to allow more mergers and avoid breaking up large companies; they want to reduce taxation; they do not want government to interfere to help labor unions; they oppose rules limiting media ownership; they oppose any laws or regulations enforcing net neutrality.

In short, the Republicans oppose virtually any government “interference” in the free market – and where they cannot plausibly roll back government programs and regulations, they seek to undermine them and to reduce them.

This point of view is often described and justified as a defense of capitalism and free markets – but it truly is an assault on our system of capitalism and free markets in favor of corporate interests. One of the chief roles of the government is the creation of a free market – and many, though not all, of the regulations, programs, and services of the government are designed with this in mind. Sometimes these government interventions do more harm than good – wage and price controls during the New Deal, for example. But the Republican assault on government has not been confined to attacking these harmful programs, but to attacking the role of the government itself.

Many Republicans these days are calling Democratic efforts “socialism,” “Communism,” and “Marxism” – but in reality the Democratic Party has mainly been trying to defend the American economic system which has been under assault since the second of the twin revolutions of late 20th century America. (First was the sexual/cultural revolution of the 1960s that overturned the social and cultural mores; then came the counterrevolution which masked the financial revolution of the 1980s which overturned political and economic values.) They use these broad brushes to attack the very concept that the government has a proper role in a free market – rather than to merely disagree about the effectiveness of certain measures.

The lie to this rhetoric is demonstrated by those limited instances in which Republicans have encouraged government involvement in the marketplace – to extend copyright far beyond its initial scope; to offer tax cuts to favored corporations; to have an extremely large military development budget, etcetera. Each of this policies follows what George Will described as “the supreme law of the land…the principle of concentrated benefits and dispersed costs.” In other words, each of these benefits big corporations rather than helping to maintain a free market.

A society creates a government to establish a process for making and enforcing group decisions. One group decision is to maintain a free market. A free market is not what happens when a government doesn’t interfere – if it was, then the lawless nation of Somalia would have the freest market on earth. Instead, a free market is a nurtured thing, created and shaped by government and society. The creation of a free marketplace in America meant investing in infrastructure and roads to allow for easy transport of goods and people; it meant the regulation of large corporations to ensure they did not become monopolies; it meant creating an independent judiciary to ensure that business disputes could be legitimately settled; it meant a relatively open and transparent government; it meant regulations concerning consumer safety and protection and environmental impact; it meant regulations regarding the stability of the economic system; it meant providing for the basic needs of citizens, especially the elderly, the disabled, and the young; it meant preventing the concentration of too much power; it meant protecting certain rights for minorities and individuals; and more. 

Today, it means protecting net neutrality. Net neutrality is one of the foundational principles of the internet – and as such must be a principle protected by the government. Imagine how our economy would have changed if there were fees required to travel along any roads – fees which could be waived if you were traveling to certain stores. It would reinforce the dominance of large corporations and serve to continue to concentrate power. Imagine if I would have to pay a fee to travel to my local hardware store, but could go for free if I went to Home Depot. Broadband industry advocates insist that not only should consumers pay broadband companies for access to the “roads”, but that websites should also have to pay broadband companies to get their potential viewers there. They propose to undermine and limit the decentralized market that is the internet to favor big companies. 

It is government’s proper role to protect this market – to enforce the rules that have made it such an effective and innovative force. 

The internet has spurred so much innovation because it is a free marketplace. Large corporate interests seek to control and limit this innovation – to ensure their power and profits are not threatened. The Republican party now seems to be going along with these interests. But they should not be allowed to do so under the pretense of protecting “private property” and “free markets.” In reality, their efforts to stop net neutrality are yet another assault on the freedom of the marketplace, another attempt to undermine the American economic system.

Categories
Barack Obama Humor Politics The Opinionsphere

Jim Cramer Jumps the Shark

[digg-reddit-me]Isn’t that what Jim Cramer does on every show, you might ask? That’s a fair point.

But what if Jim Cramer has now decided that he will dedicate himself to defeating Barack Obama’s agenda, declared himself to be on the “White House enemies list;” and that what he is doing now is what he has done all along – to “fight to help viewers and readers make and preserve capital.” That’s what I call jumping the shark. Bad investment advice is what Cramer does entertainingly. But this sense of self-grandiousity – and his seeming demand to be taken seriously instead of as a ridiculous figure. That’s too much.

The self-puffery is evident as Cramer insists he is on a “White House enemies list” (his source is the noted Democratic party insider Rush Limbaugh). Cramer thinks he is on this “list” because made an outrageous comment about White House policy being designed to destroy wealth and kill kittens, and when questioned about it, the White House press secretary pointed out that Mr. Cramer’s advice on how to create wealth wasn’t what the White House was looking for.

Cramer claims he has spent his career helping viewers and readers “preserve” their capital  – and that his advice now to oppose Obama is just a continuance of that. So for a moment, let’s look at the fate of those who would have followed Cramer’s advice in the past. The Consumerist points out that if one had followed Jim Cramer’s stock-picking advice since 2000, you would have been better served by flipping a coin – as Jim Cramer’s advice is slightly worse than a coin toss.

This is also the guy who publicly advised his viewers on October 31, 2008 2007, just before the beginning of this stock market slide:

You should be buying things and accept that they are overvalued, but accept that they’re going to keep going higher. I know that sounds irresponsible, but that’s how you make the money. Right now, up is down, left is right, peace is war. [my emphasis]

Eric Tyson supplements this by describing some of Cramer’s more recent investment advice:

  • Bear Stearns. Cramer recommended buying this stock on 8/17/07 at $118.20 per share. He lost 95 percent on this one – selling at just under $6 per share on 3/20/08.
  • Morgan Stanley. Cramer recommended buying this stock on 9/15/06 at $70.95 per share. Its recently been trading in the mid-teens.
  • Lehman Brothers. Cramer recommended this stock on 10/17/05 at $55.18 per share. On 9/5/08 with the stock trading at $16 per share, on CNBC, Cramer selected Lehman as a “screaming buy” and said things couldn’t get any worse for the company. The stock now trades at less than $1 per share for more than a 99 percent loss for Cramer.
  • Merrill Lynch. Cramer recommended buying this stock on 9/19/05 at $60.17 per share and sold it on 9/12/08 for $17.05 per share for a 72 percent loss…

(And, by the way, Cramer recommended buying financial services giant AIG on 11/7/05 at $66.34 per share and the stock currently trades around $2 per share for a 97 percent loss.)

Given his history, it’s a bit rich of Jim Cramer to claim his career has been about “preserving” anything other than his own entertaining presence. If he meant to dedicate his life to “preserving the wealth of his viewers and readers,” clearly he’s been quite a miserable failure. In terms of sheer lunacy, on the other hand, he’s still got it.

But I, for one, am grateful the White House isn’t following the Jim Cramer guide to wealth creation. And for those of you that are – I might advise you invest in a solid coin to flip, as it would apparently serve you better.

Categories
Barack Obama Criticism Domestic issues Politics The Opinionsphere The Web and Technology

Don’t Be Idiots: Stop Talking About the Fairness Doctrine

[digg-reddit-me]

I didn’t think the Democrats were stupid enough to start talking about reimposing the Fairness Doctrine. But I was wrong.

For those not up-to-date with the Fairness Doctrine controversy, it goes back to the late 1960s when the FCC began to push radio and television stations to air material about controversial matters including some consideration for both sides of the issue. ((The Fairness Doctrine was actually created earlier, but it was not incorporated into FCC guidelines until the late 1960s.)) The justification for this government interference was that with a very limited amount of media channels available, and with the airwaves owned by the public and merely licensed to the media companies profiting from them, this was a reasonable request and a necessary one in order to encourage an informed citizenry. By the late 1960s, the powerful corporate forces in the right-wing movement had begun to bankroll a conservative movement at this point – giving enormous amounts of money to create advocacy groups, think tanks, magazines, and other means of pushing conservative messages. One of their goals was to eliminate the Fairness Doctrine – and in 1987 they succeeded. At right about this time with no more obligation to be fair or present both sides of controversial issues, right-wing talk radio took off. Simon Rosenberg publicized this sequence of events – and Steve Rendall at Commons Dreams gives an overview of the liberal take on this history which is worth a read. Since then, conservative talk radio has mobilized the conservative movement – and perpetuated quite a few lies and distrortions. 

In this context, you can see why some Democrats want to bring back the Fairness Doctrine.  After all, if Steve Marlsburg, nemises of this blog, can use the public airwaves to talk for two hours about how Barack Obama is evil and no good people can support him and go on and on supporting this with one lie after another distortion, wouldn’t everyone benefit from a bit of the other side getting a word in edgewise? And if a handful of media titans control almost all of the media, the concentration of power in their hands ensures that opinions they agree with are aired – and oftentimes, that opinions they disagree strongly with are not aired. 

In this context, Bill Clinton mused about reimposing the Fairness Doctrine on a liberal radio show; Democratic Senator Stanbow wants hearings on something like a Fairness Standard; Senator Tom Harken was quoted on another liberal talk radio show saying, “We gotta get the Fairness Doctrine back in law again;” and a number of other Senators and Congressman have similarly suggested something be done to restore “fairness” to the radio. ((It’s worth noting that all of these more recent comments were made by politicians on liberal talk radio – and only after being prompted by their hosts.)) Barack Obama though made it clear during his campaign that he did not support this – and reiterated his opposition again after he took office.

And with good reason: reimposing the Fairness Doctrine might sound like a decent idea given the above history. But there are some major reasons not to:

  1. It won’t accomplish much. Cable and broadcast television shows already give alternative views on controversial issues. They might present one side much better than the other (think Hannity and Colmes) but they give the other side a platform as well. Listeners to conservative talk radio today choose to listen to right-wing nutjobs who don’t try to balance their opinion with facts over more serious sources of news. They have other options if they want them.
  2. It would endanger the important goal of net neutrality. Conservatives are already calling net neutrality a “Fairness Doctrine for the internet.” This is a ridiculous claim – but it will gain some credence if those who support net neutrality also support the Fairness Doctrine. The right continues to push this meme [pdf] and has been having some success in polarizing the support for net neutrality, picking off those right-wingers who are most gullible. As I wrote earlier about this campaign to link these two very different policy ideas: 

    3. [T]his propaganda campaign [to link net neutrality and the Fairness Doctrine] does not seem directed to the public at large, but at conservative activists. The Fairness Doctrine is not something that gets the blood of the average American boiling. But it does evoke a Pavlovian response among conservative activists and right-wing radio listeners. And although these groups are not large enough to force their way, they are large enough to derail the political conversation and make it harder to enact this obvious policy.

  3. It would also endanger other goals such as breaking up media monopolies. In terms of other issues, Rush Limbaugh in his recent Wall Street Journal op-ed began to lump in rules about “local content” and “diversity of ownership” as the Fairness Doctrine by other means. Rush Limbaugh here is clearly carrying water for Clear Channel Communications who recently gave him a $400 million contract and who would be threatened by rules regarding local content and diversity of ownership as they already own such a large portion of America’s radio stations. Byron York followed Limbaugh’s lead repeating the same talking points in a recent column.
  4. It will provoke a backlash. Right now, aside from the musings of a few prominent liberals and impassioned editorials from liberal talk radio hosts themselves, there is no serious effort to push this idea forward. Liberal ideas are out there – on newspaper editorial pages, on political opinion shows, and most of all on the web. The people most excited by the revival of the Fairness Doctrine are the conservative talk radio hosts and the right-wing movement they lead. I follow this matter closely – reading most articles published on it – and almost every article I read is from some conservative publication or blog hyping the threat to free speech and all that is good and holy that is the Fairness Doctrine. Which is why the Heritage Foundation has this piece of trash written by Rory Cooper insisting that the White House is “rushing” to the Fairness Doctrine – despite the aforementioned opposition by the White House. (A propaganda outlet such as Heritage has not patience for such “subtlties” as facts.) Which is why Senator Inhofe is promoting the view that the Fairness Doctrine as yet another assault on the Christians. Which is why Bryon York recently penned a column linking the Fairness Doctrine to breaking up media monopolies as assaults on “media freedom.” Which is why the World News Daily has distorted Senator Sherrod Brown’s comments to claim he supports the Fairness Doctrine. Which is why Rush Limbaugh and the rest of the talking heads can’t shut up about it. This is a fight the right wants – and for good reason. It plays into the liberal stereotypes conservatives promote – especially the idea of a nanny-state attempt to control free speech. It makes the right look important; it makes the Democrats look petty; if the right loses, they will be able to claim the mantle of victimhood that conservatives seem to relish as much as any other group. 
Categories
Barack Obama Economics Financial Crisis Politics The Opinionsphere

The 7 Layers of Opposing Obama’s Response to the Financial Crisis

[digg-reddit-me]Opponents of Obama’s response to the financial crisis have taken a number of approaches their disagreement. As with all political opposition, these approaches begin with a seemingly common-sense question or objection – and use it as a lever to attack their opponents. Governor Bobby Jindal for example used a bit of each of the following approaches to go after Obama – though not quite committing to any of them fully. I’ve paired many of these approaches with the most prominent individuals who have become associated with them – and tried to respond to them. What is common among them all is a desire to tap into the inchoate rage that this crisis is engendering among all Americans – and to try to focus that rage on Barack Obama. What is lacking among these approaches is a compelling or plausible alternative.

I. Do we need to do anything at all? (James K. Glassman)

George Will memorably attacked this point as a strawman on This Week. But it’s not, even if it is unfair to attribute this view to most Republicans. James K. Glassman (hereinafter called “Dow 36,000” after the book he coauthored) wrote a much-talked about piece for Commentary making the argument that nothing need to be done. The article was cited by House Minority Leader John Boehner among others – and was perhaps the first anti-Obama argument to gain traction in the stimulus debate. Mr. Dow 36,000 made the argument that the Austrian business cycle best explained our current mess – and that our best option would be to do nothing and hope things got better, that we trust the market to provide if only we have enough faith in it’s benevolence and restrain our sinful (government) interference.

What Mr. Dow 36,000 failed to account for was that the stability of societies around the world is dependent on economic growth and the opportunity this brings. The opiate of the masses unhappy with their governments is no longer religion – it is the hope that results from economic growth, the miracle and curse of rising expectations.

Mr. Dow 36,000 believes that if our economic heart seems to have stopped beating, the answer is to have faith that our blood will continue to flow. “We don’t need stimulus – we need to calm down,” he says. But the only rational response is to shock the heart back into action, to stimulate it.

II. But do we need to spend all this money?

Yes, if not more. The basic theory of Keynesian stimulus is that when the aggregate market demand for goods and services enters into a decreasing spiral.

Less demand = Lower prices = Less supply = Less jobs = Less demand = Lower Prices = etcetera

When an economy enters this cycle, Keynes believed, the government must step in and increase demand by spending more than it receives in taxes. (If it taxed to make up for it’s increased spending, it would not be adding demand but merely redistributing it.) Projections indicate that the US gross domestic product will fall by $2.1 trillion in the next two years. Which is why some Nobel-prize winning economists were frustrated that Obama’s plan was so small that it will not be able to make up for the drop in demand.

Joe Scarborough pointed out on Meet the Press last Sunday that, as all deficit spending is stimululative, the last eight years of the Bush presidency have been Keynesian stimulus too:

Scarborough uses this point to make out Obama’s stimulus to be more of the same, except with the stimulus directed towards the bottom 95% of Americans instead of the top 2%. He’s not entirely wrong, but to continue the metaphor above – if someone’s lifestyle choices have put enormous pressure on their heart, as they snort cocaine or take speed or otherwise constantly overcharge their heart, the first step to getting them healthy is usually to get them to stop putting so much pressure on their heart. But if their heart beat is dropping rapidly, or their heart has stopped, then the first step is no longer to remove the cocaine from their system but to inject them with someone that will energize their heart. This is a stimulus. And this is the reason Obama’s economic team is increasing our deficit in the short term.

III. What about tax cuts? (Eric Cantor)

The Republicans proposed a $3.1 trillion dollar permanent tax cut as their alternative to Obama’s $780 billion dollar spending/tax cut stimulus. That they continued to criticize Obama for fiscal irresponsibility and accused him of “generational theft” while supporting this bill aptly demonstrates that this was a pure political play. But if nothing else, the sheer size of the Republican alternative stimulus suggests what the reports of the nonpartisan Congressional Research Office concluded: tax cuts work slower and have less stimulative effect than almost any kind of spending measures. This is why more than half of Obama’s bill is spending.

IV. Fine. But even if this works, the deficit will be out of control! (John McCain)

Damn right it will. Hell – after eight years of rapidly decreasing taxes coupled with the largest increase in domestic spending since the War on Poverty and two large and seemingly unending wars, the deficit was already out of control. Even before that, as Bush failed to respect the “lockbox” that Al Gore promised to protect with the extra funds raised by Social Security taxes, we were in trouble. But even if we had saved all of this money paid into the Social Security program which is owed to me and you in a few dozen years (or less) the rapidly escalating cost of health care would leave our government with a deficit of over $60 trillion dollars over the next few decades.

Which is why Obama has been talking about dealing with America’s long-term fiscal problems since he was on the campaign trail – and especially since he was elected. In the weeks before his election, Washington was taken with his idea of a “Grand Bargain.”

But none of this will matter if the economy doesn’t begin growing again. If the first step to recovery is deficit spending to get the economy going again – continuing the above metaphor, using paddles, injections, whatever to get our economic heart functioning again – the next step is to clean up our act and take a fiscally responsible approach to governing and entitlement spending – in other to stop the irresponsible behaviors that helped create the crisis. If our economy is still stagnant, we will need to dismantle a good portion of our federal and state governments. But if the stimulus works, and the economy begins to grow again, adjustments can be made. Another point that Obama and his Director of the Office of Management and Budget Peter Orzag have made clear is that the first step to solving America’s long-term fiscal problems is tackling the problem of our rapidly escalating health care costs – which thanks to their rapid growth make up an ungodly percentage of our unmet future commitments. This is why Obama sees health care reform as one of the first steps that needs to be taken – to stop the rapidly escalating costs of health care.

V. Do we really need to help all these losers? (Rick Santelli)

Yes, we do. Obama has described his economic team as a bunch of mechanics who are trying to fix the machine that is our economy. When a mechanic sees that a spring or a lever or a cog isn’t functioning properly – and this piece is preventing the machine from working – the mechanic knows the problem will not be fixed by lecturing the piece or letting it fail for not properly doing it’s job. The correct thing to do is to replace it or glue it or do whatever is necessary to make the piece function as it must. Yes, the bankers whose job it was to properly calculate risk and make money instead spectacularly failed to understand the risks they were taking and lost money; and yes, the liars and idiots who took our mortgages they couldn’t afford should be punished too. But while one bank failing is just, a failure of our banking system could paralyze the economy. And while an idiot who took out a loan he couldn’t afford should get his house foreclosed upon, too many foreclosures will take down a neighborhood. Both of these are part of systemic problems which has resulted in downward spirals.

Obama, in taking this approach, seems to be combining some elements of Hayek’s warnings about the limits of the discipline of economics and the failure of the best-laid plans with Keynes’s fierce urgency of now – a kind of trial-and-error, scientific approach to financial crisis management as opposed to a more ideological, morality-driven approach associated with partisans of the left and right.

VI. Obama’s plan sucks. It isn’t working yet!

The stimulus money hasn’t begun to be spent. And the banking and mortgage fixes have yet to be fully implemented – so  of course it’s not working yet. Obama recently explained that the ups and downs of the stock market are a flawed indicator – just as the ups and downs of campaign polling is often flawed. Obama bet his campaign on a strategy of ignoring the day to day and conceding the daily media wars and never trying to boost his daily poll numbers. Instead, he focused on the fundamentals. And he won. His economic team’s approach to the financial crisis is similar. The falling stock market is merely a symptom of the crisis. It is a waste of time to treat a symptom when the root cause is not being addressed – but if one is able to treat the root cause, the symptom will be cured as well.

Obama has elected to do what needs to be done to fix the economy as a whole – and this means helping people whose decisions were poor, people who were greedy, people who were stupid, and yes, losers too. No matter how distasteful, the situation bankers and mortgagees must be helped in order to fix the economy.

To reiterate, the Obama plan has several steps:

  1. Fixing the mortgage and banking mess.
  2. Arresting the downward economic spiral touched off by these messes with government spending to stimulate demand.
  3. Put our government on a fiscally sane path by tackling the enormous gap between our spending promises and revenue generation in the area of entitlements – and at the same time, reigning in deficit spending as soon as this crisis has passed. (These steps are necessary to prevent those who we currently owe from panicking.)

VII. I hope he fails! Socialist! Communist! Marxist! Terrorist! Black Hitler! The Antichrist! Nobama! (Rush Limbaugh)

In fairness to Rush, he’s only publicly expressed a few of these sentiments. I’m not sure that he’s called Obama a black Hitler yet – but I’m sure he’s joked about it. This approach presumes that Obama has a quasi-secret agenda he is trying to impose on America – and that this agenda is so awful, it would be better to suffer another Great Depression or worse than to capitulate. Rush has described Obama as acting in bad faith, as being deranged, as having a mental illness (which Rush diagnoses as liberalism), and as all manner of awful and un-conservative things. Rush is a true propagandist and ideologue – and he has become the rallying point for movement conservatives.

His critiques now have power as the anticipatory fear of what Obama might do overwhelms the sense of what Obama is doing – and if Obama fails, Rush will be hailed as a visionary and a leader. But if Obama continues to display the conservative temperament and pragmatism that won him the election, then he will be as little remembered as Father Coughlin with his anti-Roosevelt screeds.

Rush – like proponents of failed ideologies everyone – continues to maintain that the conservative movement did not fail, but rather that it never truly had the power to achieve it’s agenda.

Continue reading “The 7 Layers of Opposing Obama’s Response to the Financial Crisis”
Categories
China Financial Crisis Foreign Policy Politics The Opinionsphere

Signs of the Coming Upheaval

Andrew Ross Sorkin and Mary Williams Walsh in the New York Times:

The loss that A.I.G. is preparing to report on Monday would be the largest ever by any company in a single quarter.

Tom Friedman quoting Ian Bremmer:

“As we look at 2009, on every issue, with the single exception of Iraq, everything is worse…Pakistan is worse. Afghanistan is worse. Russia is worse. Emerging markets are worse. Everything big out there is worse, and some will be made even worse by the economic crisis.”

There is a geopolitical storm coming, concluded Bremmer, “and it is not priced into the market yet.”

Tim Bowler of the BBC reports:

The biggest challenge facing China is not slowing growth but unemployment, which could trigger social unrest, a Chinese government minister has said.

Categories
Barack Obama Politics

Piercing the White House Bubble

Eli Saslow in the Washington Post quotes White House scheduler Alyssa Mastromonaco who was perhaps unintentionally revealing in her formulation of people not to be kept waiting:

“Since we’ve gotten to the White House, the president has told us that there’s too much padding and things can be back to back because he needs to fit a lot into the day,” Mastromonaco said. “I still err with caution, because you don’t want someone like Secretary Clinton or a foreign leader waiting for 40 minutes. But he feels like ‘I’m here.’ And he wants to get things done.”

“Someone like Secretary Clinton or a foreign leader” – as opposed to a Cabinet Secretary or a foreign leader; or Tony Blair or Hillary Clinton. It makes it seem as if Obama’s staff is treating Hillary Clinton with a kind of distant respect rather than camraderie. 

The article later goes on to describe the steps which Obama takes to remain in contact with a somewhat normal life:

Younger staff members said Obama likes to be kept up on their gossip about weekend nights and new girlfriends and feels left out anytime he’s the last to know what’s going on in their lives. On Super Bowl Sunday, he invited a few dozen people to the White House for a party and implemented two rules: no talking about politics and no posed pictures. Instead, Obama instructed a personal photographer to follow him during the party and take candid shots of him chatting with his guests, which would be mailed to them later. Obama explained to a few congressmen in attendance that he wanted to feel like a part of the group, not apart from it.

Still, whenever Obama hosts, his guests must first submit their Social Security numbers, birth dates, addresses and cities of birth to the Secret Service – a screening process for which Obama has sometimes felt compelled to apologize.