Tag: David Brooks

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Barack Obama Criticism Economics Financial Crisis National Security Politics The Bush Legacy The Media The Opinionsphere The War on Terrorism

Dueling Op-Eds

Last Friday saw two sets of dueling op-eds on the opinion pages of the Washington Post and the New York Times.

At the Post, Charles Krauthammer, professional pundit, accuses the Obama administration of aiding Khalid Sheikh Muhammad in giving “voice” to the “propaganda of the deed” that was September 11. Krauthammer accepts no justification offered and launches one after another attack on the very idea of trying KSM, and most of all, on the Obama administration for bringing him to trial. Reading Krauthammer, it is difficult to understand why Attorney General Holder made the decision he did. It seems unfathomable and downright un-American.

Elsewhere in the section, two former top Bush Justice Department officials – Jack Goldsmith and James Comey – make the case that Attorney General Holder’s decision was reasonable, though there may be reason to disagree with it. They go through some of the advantages of the Attorney General’s decision, and conclude:

The wisdom of that difficult judgment will be determined by future events. But Holder’s critics do not help their case by understating the criminal justice system’s capacities, overstating the military system’s virtues and bumper-stickering a reasonable decision.

Over at the New York Times, David Brooks and Paul Krugman have a more evenly balanced argument over Timothy Geithner.

Brooks’s conclusion was that Geither’s intervention was effective:

On the other hand, you would also have to say that Geithner, like many top members of the Obama economic team, is extremely context-sensitive. He’s less defined by any preset political doctrine than by the situation he happens to find himself in…In the administration’s first big test, that sort of pragmatism paid off.

Krugman though concludes Geither is part of the problem, and even if he got the short-term economics right, the political situation won’t allow for any significant course corrections because the initial steps were so against the popular mood:

Throughout the financial crisis key officials — most notably Timothy Geithner, who was president of the New York Fed in 2008 and is now Treasury secretary — have shied away from doing anything that might rattle Wall Street. And the bitter paradox is that this play-it-safe approach has ended up undermining prospects for economic recovery.

It’s interesting to see such jousting on the same op-ed page. As opposing sides make their case, one can often learn more than from reading mere news.

Categories
Criticism Law The Opinionsphere

Mining Right Wing Critiques for Some Honesty

I’ve gotten tired of being outraged at every self-serving lie and every new line crossed and picking apart idiotic arguments by right wingers. This served some purpose during the campaign – and I believe it is important to do when disinformation campaigns are being waged (as during August of the health care debate). But it is not what I feel most comfortable doing.

At the same time, I believe Republicans are undermining the two-party system and our democratic institutions by using their considerable clout to promote fantastical claims and lies about the efforts of their opponents instead of engaging in more pragmatic or fair-minded criticisms. Right wingers who back the Republicans have likewise mainly fallen into this trap – aside from a few notable exceptions (Ross Douthat, Reihan Salam, David Frum, Bruce Bartlett, David Brooks.)One of my goals then will be to not only promote these individuals – as Andrew Sullivan for example is – but to read the propagandist crap from more mainstream right wingers and mine it for legitimate criticism.

I’ve had this thought in my head for a few weeks – and have been reading wit this in mind. But when reading items like this by Steve Huntley in the Chicago Sun Times, it becomes very difficult:

Someone’s brain is clearly addled – for there is nothing contradictory about claiming you inherited the worst economy since the Great Depression (which it technically was) and that it is even worse than was thought (especially as several weeks after Biden’s remark, the Department of Commerce released the official statistics revising its statistics down for the past year as it periodically does.)

It amazes me that such paragraphs get past an editor.

Other concerns – while perhaps legitimate – are so self-serving they are hard to reconcile with past views. For example, Wesley Smith over at National Review‘s The Corner did not from my reading of him bring up the subject of the “rule of law” at all during George W. Bush’s presidency. However, now he brings it up with a hard criticism of the Obama administration’s position on medical marijuana:

Part of the sleight of hand here is a subtle mischaracterization of the change. Obama is not “refusing to enforce federal marijuana laws” but rather shifting resources away from targeting these groups, or as Devlin Barrett of the Associated Press described it, prosecutors will be told that “it is not a good use of their time to arrest people who use or provide medical marijuana in strict compliance with state law.” And Smith doesn’t acknowledge the long tradition (he refers only to Andrew Jackson) of presidents refusing to enforce laws as part of the checks and balances described in most textbooks on the Constitution. Smith also ignores the far more serious violations of the rule of law that Bush committed in actually ordering the law be broken and declaring it void when it violated his duty to protect Americans.

This sudden concern for the rule of law – concern suggesting it was incredibly fragile and can be destroyed in an instant – seems to reinforce the point I made earlier – that the strong positions taken by conservatives regarding curbing executive power and discretion are entirely unprincipled. They have everything to do with the fact that a liberal is now in power and will be abandoned again when they have power.

However, I did find one conservative critique I could endorse: Marie Gryphon’s piece in the National Review that makes the case against scapegoating Ken Lewis of Bank of America. To blame him for accepting the deal he did – especially given the amount of pressure he was under from Hank Paulson, Ben Bernanke, and those working with them is ridiculous. Whether or not there is a legal case against him, it should not be pursued.

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Barack Obama Conservativism Criticism Financial Crisis Latin America Politics

In Case You Missed It: Best Reads of the Week on Whining Conservatives, Internet Battles, Peru, The Single Life, and the Unborn

1. Whiny Conservatives. David Frum scolds conservatives for  quite whining and points out how silly they look doing so given how far the conservative movement has moved America since it gained power:

In 1975, the federal government set the price of every airline ticket, every ton of rail freight, every cubic foot of natural gas and every barrel of oil. It controlled the interest rates paid on checking accounts and the commission charged by stockbrokers. If you wanted to ship a crate of lettuce from one state to another, you first had to file a routemap with a federal agency. It was a crime for a private citizen to own a gold coin. The draft had ended only two years before, but not until 1975 itself did Congress formally end the state of emergency (and the special grant of presidential powers) declared at US entry into the First World War.

2. The Battle for the Internets. Fred Vogelstein writes in Wired about the brewing battle between Facebook and Google for the internet.

3. Peru’s Moment. Most of the world has lost ground in the financial crisis and recession. Daniel Gross in Newsweek tells the story of one country that has managed the financial crisis perfectly (Peru), and their secret ingredient: leadership in the years leading up to the crisis:

In the latter half of 2008, being a poor, export-dependent, commodity-producing country set you up for a vicious downturn. But Peru has weathered the storm, in large part because President Alan García, an old leftist turned center-leftist, and the Peruvian central bank have proved adept at a set of capabilities notably lacking in the United States in recent years: sound fiscal and financial management. Fearful of a return of hyperinflation amid rapid growth, Peru’s central bank raised interest rates throughout 2008. Instead of spending the foreign currency that piled up on its books ($32 billion at the end of 2008), the government saved it. In 2008, Peru ran a $3.3 billion budget surplus.
And so, when troubles came, it was able to respond in textbook fashion. In December 2008, García announced a stimulus program, promising to boost government spending by $3.2 billion, and to take up to $10 billion in further measures. The total of $13 billion in promised stimulus doesn’t sound like much, but that’s equal to about 10 percent of Peru’s GDP.

4. New York Wins Again. Forbes has released a list of the top cities for singles. New York is – as in everything else – number one.

5. This strong, invisible and unacknowledged force. David Brooks (in a piece that Yglesias ridiculed, justly on some grounds) – manages to write an interesting meditation on the importance of the unborn to our society:

People live in a compact between the dead, the living and the unborn, and the value of the thought experiment is that it reminds us of the power posterity holds over our lives.

Bonus: This song came out months ago, but I just starting enjoying it recently, so here’s to sharing:

[Image by me.]

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Barack Obama Criticism Foreign Policy History Iran Law National Security Politics The Bush Legacy The Opinionsphere The War on Terrorism

McNamara, Cuomo, Bearing Witness, Iran’s Bomb, Sri Lanken Victories, and Historical Dignity

It’s that glorious time of the week – Friday. So, here’s my recommendations of some interesting reads for this weekend that came up this past week…

  1. There were a number of excellent obituaries of Robert McNamara published upon his death. But what I would recommend would be reading this speech given in 1966 at the height of his power.
  2. Another speech worth reading is Mario Cuomo’s “Our Lady of the Law” speech from November 2007 which was published for the first time on this blog earlier in the week.
  3. Roger Cohen in the New York Times tries to express the insufficiency of online reporting aggregating news and media – as Andrew Sullivan and Nico Pitney did so usefully did during the Iranian protests. As these two journalists amassed tweets, photos, videos, news stories and every other bit of information about what was going on in Iran, Roger Cohen himself was in Tehran having evaded the Iranian censors. He went to the protests, interviewed the protesters, ran from basij with them. What I could see then was that while what Sullivan and Pitney were doing was new and unique – and extremely useful for understanding what was happening, it was missing a certain urgency that Cohen was able to provide with his bylines from Tehran. So he writes here about the “actual responsibility” of the journalist – to “bear witness:

    “Not everyone realizes,” Weber told students, “that to write a really good piece of journalism is at least as demanding intellectually as the achievement of any scholar. This is particularly true when we recollect that it has to be written on the spot, to order, and that it must create an immediate effect, even though it is produced under completely different conditions from that of scholarly research. It is generally overlooked that a journalist’s actual responsibility is far greater than the scholar’s.”

    Yes, journalism is a matter of gravity. It’s more fashionable to denigrate than praise the media these days. In the 24/7 howl of partisan pontification, and the scarcely less-constant death knell din surrounding the press, a basic truth gets lost: that to be a journalist is to bear witness.

    The rest is no more than ornamentation.

    To bear witness means being there — and that’s not free. No search engine gives you the smell of a crime, the tremor in the air, the eyes that smolder, or the cadence of a scream.
    No news aggregator tells of the ravaged city exhaling in the dusk, nor summons the defiant cries that rise into the night. No miracle of technology renders the lip-drying taste of fear. No algorithm captures the hush of dignity, nor evokes the adrenalin rush of courage coalescing, nor traces the fresh raw line of a welt.

  4. Robert Patterson in Foreign Policy brings some measured historical analysis to what would happen if Iran got the bomb.
  5. Robert Kaplan in The Atlantic explains how the Sri Lankan government was able to achieve a monumental victory over a terrorist group – and also why America should not imitate its methods in any way. He concludes bleakly:

    So is there any lesson here? Only a chilling one. The ruthlessness and brutality to which the Sri Lankan government was reduced in order to defeat the Tigers points up just how nasty and intractable the problem of insurgency is. The Sri Lankan government made no progress against the insurgents for nearly a quarter century, until they turned to extreme and unsavory methods.

  6. David Brooks wrote about dignity:

    In so doing, [George Washington] turned himself into a new kind of hero. He wasn’t primarily a military hero or a political hero. As the historian Gordon Wood has written, “Washington became a great man and was acclaimed as a classical hero because of the way he conducted himself during times of temptation. It was his moral character that set him off from other men.”

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Iran

All About Iran: Iran’s Social Bargain, Maximal Uncertainty, and Breaking News

Now for the best reads of the week – all Iran-related:

Iran’s Social Bargain. Mark LeVine for Al Jazeera describes “Iran on the Brink” – with a “?” His piece offered insights none of the mountains of commentary seemed to have touched on. As an added bonus, he comments on questions of how a state legitimizes itself and how China’s response to its democracy movement in 1989 is not open to Iran today:

Cultural liberalisation became the safety valve that allowed the emerging generation of Chinese citizens to accept the continued power of the Communist party.

Needless to say, no such safety valve exists in the Islamic Republic, where a cultural perestroika is precisely what Ahmadinejad and his supporters in the leadership and among the people want to prevent…

In China the government struck a bargain with the people, telling them: “You can do whatever you want as long as you don’t challenge the power of the state.”

The Iranian government has over the last two decades negotiated a very different and more narrow bargain with its citizens: “You can do what you want behind closed doors, as long as you keep the music down. But we own the street and the public sphere. So put your headscarf on before you leave the house, and don’t think about challenging cultural or political limits publicly.”

That bargain has now collapsed as hundreds of thousands of Iranians have, at least for the moment, reclaimed the streets…

Iran long ago lost the singular, collective will that enabled the revolution; the protesters are no longer imbued with the idea of bi-kodi, or self-annihilation, martyrdom and complete self-sacrifice that toppled the Shah and helped the country withstand eight years of brutal war with Iraq.

A maximally uncertain future. David Brooks’s column this morning tries to look at the past week’s events in Iran from an historical perspective:

At these moments — like the one in Iran right now — change is not generated incrementally from the top. Instead, power is radically dispersed. The real action is out on the streets. The future course of events is maximally uncertain.

The fate of nations is determined by glances and chance encounters: by the looks policemen give one another as a protesting crowd approaches down a boulevard; by the presence of a spontaneous leader who sets off a chant or a song and with it an emotional contagion; by a captain who either decides to kill his countrymen or not; by a shy woman who emerges from a throng to throw herself on the thugs who are pummeling a kid prone on the sidewalk.

Brooks quotes on of Obama’s advisers commenting years ago:

In retrospect, all revolutions seem inevitable. Beforehand, all revolutions seem impossible.

Keeping Up To Date on Iran. Andrew Sullivan, the Tehran Bureau, and the Times’ The Lede have made themselves indispensable sources for breaking news and insights on what’s going on in Iran.

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Barack Obama Conservativism Domestic issues Economics Financial Crisis History Liberalism Libertarianism Political Philosophy The Opinionsphere

A Generational Bargain (in which we are getting screwed)

[digg-reddit-me]Back when California’s looming bankruptcy was in the news, George Will wrote:

California’s perennial boast — that it is the incubator of America’s future — now has an increasingly dark urgency…California has become liberalism’s laboratory, in which the case for fiscal conservatism is being confirmed.

Will may be right about fiscal conservatism – but he’s wrong in laying the blame for California’s problems on liberalism. The fault in California, like the fault in America, is deeper – a refusal by the Baby Boom generation to make tough choices to create a sustainable world, economy, or government. Bill Maher summarized California’s trap best:

We govern by ballot initiative – and we only write two kinds of those: spend money on things I like and don’t raise my taxes.

California’s initiative system aggravated a tendency that has been dominant in American politics for some time now. The problem with California – and America – is a combination of two factors:

  1. a kind of accidental unholy alliance between liberals who push for more government spending to alleviate poverty and better the nation and conservatives who want to cut taxes – with neither group having the power or political will to be fiscally responsible at the same time as they push for their pet projects ((This is a bit unfair on the national level – as George H. W. Bush and Bill Clinton – with opposition Congresses checking them – proved to be exceedingly responsible, putting America on a sustainable course after the tax-cutting, free-spending Ronald Reagan and before the tax-cutting, free-spending George W. Bush.))
  2. the deliberate plan of the right-wingers who want to “starve the beast” – by which they mean encouraging the irresponsible system above of  increasing spending while cutting taxes (and these right-wingers do this knowing that the system is unsustainable and will crash, which is the only way they see to get rid of popular programs.)

This is a story of the cowardice of politicians and the idiocy of people.

This idiocy – in almost all of its forms – can be traced to the ascent of the Baby Boom generation as they took power with the Reagan administration. By increasing spending exponentially while cutting taxes – creating enormous deficits – Reagan supercharged (stimulated) the economy out of the stagflation of the 1970s. At the same time, he began the American government’s practice of becoming dependent on East Asia – relying on Japan to lend vast amounts of its money as our trade deficit with them grew. Reagan also began the trend of deregulation of industries – allowing them to take greater risks and reap greater profits if they succeeded – which also allowed companies to kick off a merger boom, leading more and more companies becoming too big to fail while they were regulated less and less. All of these steps led to an economy focused more on finance than industry – leading, along with factors due to globalization, to America’s industrial decline. The dominance of the financial sector in the economy, which is well known for its boom and bust cycle, led to a series of economic bubbles – and in fact, an economy in which growth was maintained through bubbles rather than real worth.

Beginning with Reagan, president after president stimulated the economy constantly – to avoid having to take the fall. But this system was unsustainable. As the Baby Boomers “surfed on a growing wave of debt” – both public and private – they sought to use debt to meet their rising expectations in the absence of creating real value. This was the generational bargain at the heart of the Reagan presidency – a bargain that allowed America to spend the Soviet Union into the ground and jumpstart the economy from the stagflation of the 1970s – but that, unchecked, thirty years later, now threatens our future.

The Baby Boomers pissed away the prosperity their parents bequeathed them and squandered the opportunities presented to them – and now are busy using their children’s future earnings (our future earnings) to buy their way out of the mess they have created. They avoided the challenges of their times and found people to blame. They focused on OJ Simpson, Britney Spears, Madonna, and Monica Lewinsky – on abortion, Vietnam, gays, and religion – and not on global warming, on campaign finance, on the corruption of our political process, on an overleveraged economy.

After decades of avoiding systematic problems – as the solutions became embroiled in the ongoing culture war – we now must face them. With two wars in the Mid-East, a failing world economy, a growing threat of catastrophic terrorism, and whatever else may come our way, procrastination is impossible. Now it’s time for us to try to salvage this wreck. It remains to be seen if we’re up to it.

David Brooks explained this grave situation facing Obama and the difficult tasks ahead (focusing especially on the growing deficit). Brooks concludes with reasons for hope and despair:

The members of the Obama administration fully understand this and are brimming with good ideas about how to move from a bubble economy to an investment economy. Finding a political strategy to accomplish this, however, is proving to be very difficult. And getting Congress to move in this direction might be impossible.

Your cards do not improve if you complain about the hand you have been dealt. But it is essential to understand how we got here. We also must not be complacent now that a leader who we admire has been given power. Individuals are empowered to a greater extent than ever before in history – for good or ill. Which is why it is never enough to get the right man or woman into public office – even if this is a useful initial step. What we must do – as individuals – is to see the world around us clearly and take steps to effect what changes we can, to live the values we hold in our hearts, to reach out to those affected by our actions.

[Image by orangejack licensed under Creative Commons.]

Categories
Barack Obama Domestic issues Health care Politics The Opinionsphere

Are The Pieces Aligning on Health Care?

[digg-reddit-me]David Brooks’s column is quickly becoming one of the most insightful, inside looks at the larger plans of the Obama administration (which suggests a column kneecapping Obama is forthcoming so Brooks can maintain his conservative cred). His latest column is practically gushing – but it certainly paints a plausible picture of what the Obama administration sees as it’s game plan on health care. Brooks starts his piece with this half-jesting, half-admiring set-up:

Let’s say that you are President Obama. You’ve inherited a health care system that is the insane spawn of a team of evil geniuses from an alien power. Pay is divorced from performance. Users are separated from costs. Rising costs threaten to destroy your nation and everything you hold dear.

You also know that [the only] two approaches [to actually fixing this] have one thing in common. They are both currently politically unsellable. Others have tried and perished. There are vast (opposing) armies arrayed against them. The whole issue is a nightmare.

You are daunted by the challenges in front of you until you remember that by some great act of fortune, you happen to be Barack Obama. This calms you down.

He then goes on to describe a strategy which runs like this:

  1. Table-setting. Court everyone – get everyone to the table and agreeing on some basic meaningless “pablum.”
  2. Congress. Ask Congress to put something together, keeping your distance as they investigate and write many competing proposals.
  3. The Long Tease. Refuse to rule anything out or commit to anything – thus keeping all the interest groups at the table.
  4. The Scrum. At the end of the summer session, when Congress actually begins to assemble health care in a series of all-night sessions, take a stronger role. But be willing to compromise. This scrum needs to end quickly – and send the bill off to be passed before the interest groups have time to realize who has and hasn’t been taken care of.
  5. MedPAC. Include in the bill this medical equivalent of the Federal Reserve – an independent, technocratic body to oversee the industry. This is where the real reform will stem from.

This scenario sounds plausible – although a David Brooks column explaining it would seem to undermine the strategy itself.

So far, the Obama administration has been extremely impressive in how it has managed the health care debate. They make it seem as if things really are going according to plan so far – an extraordinary thing given the history of Washington and health care. For example, Ezra Klein provided some insight into why the American Medical Association quickly retracted it’s direct opposition to a public option in the health care debate, citing this Roll Call piece:

Top aides to Senate Finance Chairman Max Baucus (D-Mont.) called a last-minute, pre-emptive strike on Wednesday with a group of prominent Democratic lobbyists, warning them to advise their clients not to attend a meeting with Senate Republicans set for Thursday.

[Meeting] with a bloc of more than 20 contract lobbyists, including several former Baucus aides…“They said, ‘Republicans are having this meeting and you need to let all of your clients know if they have someone there, that will be viewed as a hostile act,’” said a Democratic lobbyist who attended the meeting.

“Going to the Republican meeting will say, ‘I’m interested in working with Republicans to stop health care reform,’” the lobbyist added.

Ezra Klein explains what this means:

They’re saying that you’re either with health reform, or you’re against it. And if you’re against it, you can’t expect to be taken care of in the final legislation. They’re not going to save your seat at the table while you’re trying to burn down the room. And the AMA, it seems, got the message.

This hardball strategy with interest groups plus the extraordinary wooing of legislators by the Obama administration that Matt Bai described in a piece this Sunday, the general agreement among most Americans including business interests that our health care system is broken, the impending deficit crisis, Obama’s mandate, and the unusual role ultra-conservative Orrin Hatch appears to be willing to play to help his good friend Teddy Kennedy achieve a dying wish (Suzy Khimm in The New Republic describes it as, “a particularly senatorial way to pay tribute to a dying friend.”) – with all of these pieces falling together, the Democrats may finally be able to achieve what Harry Truman started all those years ago.

[Image by JonathanHannpberger licensed under Creative Commons.]

Categories
Economics Politics The Opinionsphere

David Brooks’s Special Place in Washington

I’ve written before about David Brooks’s special place in Washington – as the almost always 

reliable barometer of the opinions and beliefs of the Washington establishment (and I don’t mean that as an insult.) The figure he cuts is a rather odd combination of an amateur (but insightful) anthropologist and a insider protecting the system.

There is an honesty about him, and his writing – an earnestness.

This observation from last Friday’s column struck me as probably true – and worrying:

If you read the C.B.O. testimony and talk to enough experts, you come away with a stark conclusion: There are deep structural forces, both in Medicare and the private insurance market, that have driven the explosion in health costs. It is nearly impossible to put together a majority coalition for a bill that challenges those essential structures. Therefore, the leading proposals on Capitol Hill do not directly address the structural problems. They are a collection of worthy but speculative ideas designed to possibly mitigate their effects.

In his way, I think David Brooks represents the best of what a columnist can offer – honest, informed opinions of intelligent people trying to make sense of the world around them.

Categories
Barack Obama Economics Financial Crisis

Theories of the Financial Crisis: Animal Spirits

[digg-reddit-me]David Brooks is a reliable barometer of the opinions and beliefs of the Washington establishment (and I don’t mean that as an insult.) The figure he cuts is a rather odd combination of an amateur (but insightful) anthropologist and a insider protecting the system. All of this makes it significant to note that David Brooks has on several occasions stated that the root of this financial crisis is a “loss of confidence.” He has stated this in several of his columns, including his one immediately following the September 15 freefall:

At its base, the turmoil wracking the world financial markets is a crisis of confidence.

Many of Geithner’s critics have said that he is treating the financial crisis primarily as a liquidity crisis – which is defined as “a ‘general feeling of mistrust in the banking system’ conducting to a temporary disappearance of credit.” This is a common form that a crisis of confidence in the financial system takes.  

The Congressional Oversight Panel in their report [pdf] written to evaluate the TARP bailouts, for example, described what they saw as one of Geithner’s asusmptions :

One key assumption that underlies Treasury’s approach is its belief that the system-wide deleveraging resulting from the decline in asset values, leading to an accompanying drop in net wealth across the country, is in large part the product of temporary liquidity constraints resulting from nonfunctioning markets for troubled assets. The debate turns on whether current prices, particularly for mortgage-related assets, reflect fundamental values or whether prices are artificially depressed by a liquidity discount due to frozen markets – or some combination of the two.

Paul Krugman has also often made this point – stating that Geithner seems to be acting as if we were in a liquidity crisis – in which the loss of confidence is the cause of the problem – instead of a solvency crisis – in which the loss of confidence is a symptom of the problem. 

Geithner, for his part, rejects this assertion that he is treating the problem as a liquidity crisis. When asked, he said it was, as all financial crises are, a combination of the two.

If this is primarily a crisis of confidence, there have been a number of historic examples of how these were contained. For example, this is a description of the resolution of the Panic of 1907 – in which J. P. Morgan’s timely intervention demonstrated how this could be done:

Shipments of gold were on the way from London to New York, and confidence had returned to the French Bourse, “owing,” reported one paper, “to the belief that the strong men in American finance would succeed in their efforts to check the spirit of the panic.” During a panic, confidence is almost as good as gold.

As politicans saw how these crises could be contained – and as they realized Morgan who had successfully beaten back several of these panics was getting near his end – they created the Federal Reserve to officially take on the role Morgan had been unofficially occupying, the lender of last resort and de facto regulator. 

As panics are short, they generally do not affect the fundamentals of the economy – but in a liquidity crisis such as this, restoring confidence is a more delicate task. It involves restoring what John Maynard Keynes referred to as “animal spirits” – those positive energies that cause people to be trusting and optimistic that are essential to a thriving economy. As Keynes wrote in his seminal work, The General Theory of Employment, Interest, and Money:

Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits – a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. [my emphasis]

This idea of animal spirits has created an opening for what appears to be Obama’s favorite branch of economics – behavioral economics. While economics generally treats human beings as homo economics, rational, self-interested (indeed, selfish), individuals who act entirely to serve their best interest (and who know what their best interest is) – behavioral economics takes a more scientific view of human beings. They try to understand human behavior through testing and real-life examples rather than through theoretical models. Some of Obama’s top advsiors from Cass Sunstein to Austan Goolsbee are known to be proponents of behavioral economics. And a recent article by Chrystia Freeland in the Financial Times, suggests that Obama’s administration may be using behavioral economics to solve this crisis, describing how “emotions might yet save the economy“:

Judging by the upbeat economic message we have been hearing from the White House, the Treasury and even the Federal Reserve over the past six weeks, that is a shrewd guess. The authors argue that “we will never really understand important economic events unless we confront the fact that their causes are largely mental in nature”. Our “ideas and feelings” about the economy are not purely a rational reaction to data and experience; they themselves are an important driver of economic growth – and decline.

I don’t have the expertise to judge if this crisis is one of solvency or confidence or whatever else it may be. But at this point there is a feeling – almost of a wind at the back of the economy. (I certainly hope this is the case.) It does seem to me that the lack of confidence is a major cause (rather than merely a symptom) of this crisis; and Obama’s gradualist approach, with every move telegraphed and thus predictable – seems to be generating confidence.

Categories
Barack Obama Politics The Opinionsphere

3 interesting short essays

David Brooks approvingly describes the attitudes of the market-state liberals of the Obama administration in the New York Times:

When the members of this new establishment are confronted with a broken system — whether it involves hospitals, energy, air pollution or cars — their approach is the same. They aim to restructure incentives in order to channel the animal drives of the marketplace in responsible directions.

William Ecenbarger in the Smithsonian magazine asks if “we take more risks when we feel safe”:

This counterintuitive idea was introduced in academic circles several years ago and is broadly accepted today. The concept is that humans have an inborn tolerance for risk—meaning that as safety features are added to vehicles and roads, drivers feel less vulnerable and tend to take more chances. The feeling of greater security tempts us to be more reckless. Behavioral scientists call it “risk compensation.”

…The phenomenon has been observed well beyond the highway—in the workplace, on the playing field, at home, in the air. Researchers have found that improved parachute rip cords did not reduce the number of sky-diving accidents; overconfident sky divers hit the silk too late. The number of flooding deaths in the United States has hardly changed in 100 years despite the construction of stronger levees in flood plains; people moved onto the flood plains, in part because of subsidized flood insurance and federal disaster relief. Studies suggest that workers who wear back-support belts try to lift heavier loads and that children who wear protective sports equipment engage in rougher play…

Walter Shapiro explains why “Americans like Big Government” in The New Republic, even though that old Ronald Reagan line about “I’m here from the government and I’m here to help” still goes over well: because when federally-funded projects are successful, local politicians take the credit – and when it fails – they pass up the blame:

Even if these projects turn out to be the greatest job-creation engine since the construction of the pyramids, Obama and the stimulus package would only receive marginal political credit. Governor Ted Strickland will undoubtedly brag about the new roads and bridges when he runs for reelection next year and Columbus Mayor Michael Coleman will bask in the success of the police academy’s Class of ’09. This is not ingratitude, but an illustration of how the political game works. The feds pay the bills (and sometimes take the heat), while state and local officials never miss a ribbon cutting.