The political wrangling — in Congress, among our elites, and between the peons — exists IMO (guessing) only because of confidence that mainstream economists are correct. They believe that this recession (or depression) will trough late this year. No matter how rapid the decline, there is little the government can do in the next few quarters. So they maneuver for political advantage, assuming the recovery will take care of itself.
Conservatives organize tea parties to build support for their party, and vote against any action to mitigate the downturn. They plan to run in 2010 as thrift heroes! (For more on this see Are the new “tea party” protests a grass roots rebellion or agitprop?)
Liberals strive under the cover of the crisis to pass legislation unrelated to the crisis, playing the game that worked so well for FDR. But the world has changed since the 1930’s. They’re like elderly generals in 1913 reciting The 1907 British Cavalry Training Manual , unaware that the world had changed:
“It must be accepted as a principle that the rifle, effective as it is, cannot replace the effect produced by the speed of the horse, the magnetism of the charge, and the terror of cold steel.”
Liberals moronically play this game of deception in full view of the spectators, apparently believing that crisis means both danger and opportunity (perhaps having fallen for the myth about the Mandarin ideogram). In this post we peak behind the curtain of liberal thinking to see their calculations. It’s easy to do, just by reading the newspapers.
Playing these games while the world economy burns is the second major policy error of the Obama Administration (see here for the first).
Contents
- “In Crisis, Opportunity for Obama“, Wall Street Journal, 21 November 2008
- “The Great Non Sequitur“, Charles Krauthammer, Washington Post, 6 March 2009 — “The Sleight of Hand Behind Obama’s Agenda.”
- “Never waste a good crisis, Clinton says on climate“, Reuters, 7 March 2009
- Buffett on CNBC explains this as being like war — and both parties are failing to take it seriously. See the transcript.
- Afterword, and where to go for more information
Excerpts
(1) “In Crisis, Opportunity for Obama“, Wall Street Journal, 21 November 2008 — Excerpt (slightly paraphrased):
Therein lies the opportunity for President-elect Barack Obama. His plans for an activist government agenda are in many ways being given a boost by this crisis atmosphere and the nearly universal call for the government to do something fast to stimulate the economy. This opportunity isn’t lost on the new president and his team. Rahm Emanuel, Mr. Obama’s new chief of staff, explained to a Wall Street Journal conference of top corporate chief executives this week:
“You never want a serious crisis to go to waste. Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before.”
… That creates an opening through which Mr. Obama can drive a fair amount of his domestic agenda. Certainly the field is open for some immediate form of the president-elect’s middle-class tax cut to become part of a stimulus package.
By the same token, the yearning for government spending on “infrastructure” to stimulate economic activity creates an opening for the new president to push the kind of green projects that fit his call for a transition to alternative energy sources, including new kinds of mass-transit systems. And the Obama call for government “investment” in alternative energies will be easier to turn into reality if it, too, can be cloaked as part of stimulus spending.
At the same time, as thousands of additional Americans lose jobs in the recession that lies ahead, they also will lose their employer-provided health insurance and swell the ranks of the nation’s uninsured. That will add a bit of rocket fuel to the Obama call for universal health coverage. And certainly the broad dissatisfaction with the way financial markets were regulated will make it easier to rebuild regulatory structures.
(2) “The Great Non Sequitur“, Charles Krauthammer, Washington Post, 6 March 2009 — “The Sleight of Hand Behind Obama’s Agenda.” Excerpt:
The logic of Obama’s address to Congress went like this:
“Our economy did not fall into decline overnight,” he averred. Indeed, it all began before the housing crisis. What did we do wrong? We are paying for past sins in three principal areas: energy, health care and education — importing too much oil and not finding new sources of energy (as in the Arctic National Wildlife Refuge and the Outer Continental Shelf?), not reforming health care, and tolerating too many bad schools.
The “day of reckoning” has arrived. And because “it is only by understanding how we arrived at this moment that we’ll be able to lift ourselves out of this predicament,” Obama has come to redeem us with his far-seeing program of universal, heavily nationalized health care; a cap-and-trade tax on energy; and a major federalization of education with universal access to college as the goal.
Amazing. As an explanation of our current economic difficulties, this is total fantasy. As a cure for rapidly growing joblessness, a massive destruction of wealth, a deepening worldwide recession, this is perhaps the greatest non sequitur ever foisted upon the American people.
… The list is long. But the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe.
And yet with our financial house on fire, Obama makes clear both in his speech and his budget that the essence of his presidency will be the transformation of health care, education and energy. Four months after winning the election, six weeks after his swearing-in, Obama has yet to unveil a plan to deal with the banking crisis.
… Clever politics, but intellectually dishonest to the core. Health, education and energy — worthy and weighty as they may be — are not the cause of our financial collapse. And they are not the cure. The fraudulent claim that they are both cause and cure is the rhetorical device by which an ambitious president intends to enact the most radical agenda of social transformation seen in our lifetime.
(3) “Never waste a good crisis, Clinton says on climate“, Reuters, 7 March 2009 – Excerpt:
“Clinton told young Europeans at the European Parliament that global economic turmoil provided a fresh opening. “Never waste a good crisis … Don’t waste it when it can have a very positive impact on climate change and energy security,” she said.”
(4) Buffett on CNBC explains this as being like war — and both parties are failing to take it seriously
Warren Buffett on CNBC’s Squawk Box, 9 March 2009 — See pages 6 – 7 of the transcript.
BUFFETT: If you’re in a war, and we really are on an economic war, there’s a obligation to the majority to behave in ways that don’t go around inflaming the minority. If on December 7th, when Roosevelt convened Congress to have a vote on the war, he didn’t say, `I’m throwing in about 10 of my pet projects,’ and you didn’t have congress people putting on 8,000 earmarks onto the declaration of war in 1941.
So I think that the minority really do have an obligation to support things that in general are clearly designed to fight the war in a big way. And I don’t think before D-Day on June 1st you ought to have a congressional hearing and have 535 people give their opinion about where the troops should land and what the weather should be and how many troops should land and all of that. And I think after June 6th you don’t have another hearing that says, `Gee, if we’d just landed a mile north.’
JOE: You might not have fixed global warming the day after D-Day, Warren.
BUFFETT: Absolutely. And I think that the Republicans have an obligation to regard this as an economic war and to realize you need one leader and, in general, support of that. But I think that the Democrats — and I voted for Obama and I strongly support him, and I think he’s the right guy — but I think they should not use this when they’re calling for unity on a question this important. They should not use it to roll the Republicans all.
I think job one is to win the economic war, job two is to win the economic war, and job three. And you can’t expect people to unite behind you if you’re trying to jam a whole bunch of things down their throat. I would absolutely say for the interim, untill we get this one solved, I would not be pushing a lot of things that are contentious, and I also would do no finger-pointing whatsoever. I would not say, you know, `George’–`the previous administration got us into this.’ Forget it. I mean, you know, the Navy made a mistake at Pearl Harbor and had too many ships there. But the idea that we’d spend our time after that pointing fingers at the Navy, we needed the Navy. So no finger pointing, no vengeance, none of that stuff. Just look forward.
5a. Afterword
Please share your comments by posting below. Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post. Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).
For information about this site see the About page, at the top of the right-side menu bar.
5b. For more information from the FM site
To read other articles about these things, see the FM reference page on the right side menu bar. Of esp interest are:
- About Financial crisis – what’s happening? how will this end? (see section 7 for solutions)
- About Obama, his administration and Ameican policies today
- About America – how can we reform it?
About the policies of the Obama Administration:
- Our metastable Empire, built on a foundation of clay, 3 March 2008 — We elect leaders with vast ambitions, but can no longer afford them.
- American history changes direction as the baton passes between our political parties, 18 May 2008 – Importance of the November 2008 political landslide.
- Obama describes the first step to America’s renewal, 8 August 2008 — Obama’s statement about America may be the simple truth; this may be why so many find it disturbing.
- The evil of socialism approaches!, 22 October 2008 — Economic crisis and a leftist President. Can socialism be avoided, or is it our destined fate?
- America gets ready for new leadership (or is it back to the future?), 14 November 2008
- “What Barack Obama Needs to Know About Tim Geithner, the AIG Fiasco and Citigroup”, 3 December 2008
- Obama proposes a new New Deal – like Japan, will we burn money to keep warm?, 8 December 2008
- The transition between Imperial reigns: what will it mean for America?, 16 December 2008
- Obama opens his Administration with a powerful act that will echo for many years, 4 February 2009
Unfortunately, nothing government is likely to do will mitigate the problem. So one may as well have a lot of tea parties, coffee parties, home brewed beer parties, and single malt scotch parties, because the parties will give you something to do besides worry about the destruction of the economy by megalomaniac elected officials.
The proprietor of this site is intelligent enough to understand that the world economy is lying on terra incognita. Is he also intelligent enough to understand that almost all conceivable solutions to this unholy confluence of problems are almost certainly wrong, including his own?
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Fabius Maximus replies: I don’t believe most of this is correct.
This has been thoroughly studied over the past 50 years, a large body of evidence showing that government action can mitigate both the suffering and damage to the economy. No “cures” or “sparking recovery”, but valuable nevertheless. There is the too small but still significant fiscal stimulus of the New Deal, the massive and effective WWII “stimulus”, Japan’s experience in the 1990s, and the many short recession from 1950 – 2002.
I believe the 2nd paragraph also overstates the situation. While we are outside the boundaries of conventional Keynesian theory, which does not adequately consider aggregate debt as a limiting factor for the economy, that does not render useless the rest of the theory.
“almost all conceivable solutions to this unholy confluence of problems are almost certainly wrong,”
You must have quite a strong basis in history and theory for such a categorical statement. What is it?
Unfortunately for all of us, the policy moves used to take advantage of the crisis will not help the underlying crisis, and may perhaps worsen them. Future americans will not take lightly this betrayal of their interests by their elites. A idle, listless educated population hungry for their own marketing induced wants and needs and still young enough to remember their excesses is a dangerous for the health of those elites. And in a one-world society, where would you be able to hide anyway beyond the cloistered palms of dubai? (FM – did you ever get to read Superclass?) The disenfranchised intelligencia can always vote with their feet as well.
Is the above commentator suggesting that there is, in fact, no solution to this crisis, and that we must progress down the road to utter armageddon before rebuilding? In such a case, is it not more intelligent to have a few parties to enjoy the time one has left before the guillotine?
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Fabius Maximus replies: There are solutions, some of which are described on this site. See the FM reference page (on the top of the right side menu): About Financial crisis – what’s happening? how will this end? (see section 7 — “solutions”) .
Well, though, the problem isn’t that they are trying wrong solutions to the problem. The problem is that they aren’t taking the problem seriously at all.
The Democrats are the more serious offenders, because they are the ones with the power. The Republicans and their silly theatrics are annoying, but I don’t expect them to bow down before their mortal enemies.
They figure that we are in a recession, but not the end of the world. Hearing them talk about the crisis being an opportunity is a kind of madness. “There’s no silver lining!” a quote I love to repeat whenever anyone I meet says, “Well, at least this recession will…” (It will improve our moral character, finally get us off foreign oil, stop global climate change, cut the military budget… etc.)
If you are on Terra Incognita, what do you do? You explore( carefully), you look around. You determine the most prudent course of action, and then you act. You don’t say, “this looks like a pleasant spot for a tea party, ” and then re-enact the scene from Alice in Wonderland. Here There Be Tygers! Take no precautions and become a feast!
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Fabius Maximus replies: I fully agree with this, esp your first paragraph. In fact that is what this post says.
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Roughly six months back, during the initial crash, I made a comment here to the extent that I hoped Congress did nothing – not because I thought doing nothing was the best course of action, but because I found nothing to be preferable to any measure our Congress was likely to pass. Roughly two trillion dollars of additional government debt later, I find my argument sadly vindicated. To this extent, irrespective of their motives, I find myself wishing the conservatives luck in their efforts to hamper the Democrats – choosing the lesser of two evils.
Our political class is broken. What should be classed as fraud is the daily business of our elected officials. Systemic reform of both the appropriations process and the way we elect our representatives is needed. There is a chance that the groundswell of anger we’re seeing might lead to something along those lines, so I wish the Tea Party movement well.
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Fabius Maximus replies: Perhaps amidst the widespread suffering of a depression — esp if (as some fear) we lose social cohesion — think riots, cities burning — you will have a change of heart. Too late, of course. But I am confident you will find someone else to blame for the unfortunate outcome. Certainly your neo-Hooverism will not not be responsible (as you seem to feel it was not for the Great Depression).
I don’t think Obama can be faulted for pushing his agenda with the tail wind of the financial crisis to help him out. Just because we cannot see beyond the singularity that is about to confront us does not mean that we should not put in place policies that are deemed important both now and post singularity. We can list a handful of crises in the last century, perceived or real, that have provided the political capital to make major policy changes, most recently 9-11. Naomi Klein makes the point that it is just such “shocks” that have been exploited by the neoconservatives to advance their agenda. When these opportunities arise we can only hope that those in a position to exploit them will do so wisely. Well thought out policies that can stand on their own merits after the crisis is behind us have a better chance of surviving the NEXT firestorm and opportunity for a political shift.
The democrats are as plain as the rebs in the wheatfield at Gettysburg. Pickett’s charge ended the high water mark of the south. See you in 2010
When we hear how WWII got us out of the Great Depression, It’s important to remember that for one thing, our elites took the war effort seriously. Maybe it was Keynes theories at work, and maybe it was also our elites being serious as a heart attack about managing the country through a period of great peril. We are now doing the experiment to see if just stimulus is sufficient, or stimulus plus giving a shit is the real secret.
You are right about the short term, but what about the long term? Yes, libertarians have set themselves against all spending. Can you blame them? What are they getting in return for going along with massive increases in short term spending? NOTHING. Obama is going full bore in his effort to remake the american economic system, using the current crisis as cover.
Even though I am a conservative leaning libertarian, I am practical. I would be willing to go along with short term stimulus IF the government would reduce long term spending. I see no signs whatsoever of that happening.
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Fabius Maximus replies: The house is burning, and you want to discuss re-decorating. Howeer well-meant, it is bad timing and makes you part of the problem — not the solution.
I don’t know where the idea originated that short-term spending has no effect. Not only does it make no sense, there is a vast body of both theory and evidence that is historically wrong. At the very least, the benefits should be obvious of providing income maintence for the unemployed and putting idle workers to work.
Looking at the bigger picture, the “let the fire burn itself out” is another form of neo-Hooverism. Like the original “liquidatist” version, it will inevitabily be discredited. With any luck, it will strip its adherents of any political influence for a generation or two. Such views were understandable for Hoover’s generation; they are inexcusable today.
“There’s no silver lining!”
Not even yurts?
“this looks like a pleasant spot for a tea party, ” and then re-enact the scene from Alice in Wonderland.
The elites are going to do what they are going to do – and they are neither going to listen to me nor – may I humbly suggest – other posters on this blog. So the issue really is not what policies they should be pursuing – for that is unlikely to happen in any event – but rather what you, or I, or Fred over there might be able to do despite them.
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Fabius Maximus replies: While you might be comfortably abandoning the Republic, others of us are not. We have the power to determine our fates, although exercising has lately seemed too much effort for us (collectively).
Have your considered which to adopt among the classic philosophies for serfs: Stoicism (resignation), Epicureanism (tranquility thru modest materialism), Hedonism (what the hell, have fun), and mysticism (e.g., Christianity)? Don’t bother telling us which you choose; I for one am only interested in those people who stay in the game.
Barack Obama has become our Emperor Nero. He plays his liberal lyre as he watches the country burn. We all know what happened to Nero.
“Naomi Klein makes the point that it is just such “shocks” that have been exploited by the neoconservatives to advance their agenda.”
I can’t help noticing that the Democrats agenda and the neocons agenda look almost identical. So pardon me if I don’t stand up and cheer as the same corrupt and inept people who’ve been running the country continue to do so, to the detriment of us all.
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Fabius Maximus replies: Agreed. I say much the same thing in Politics of the FM site: radical leftist reformer or right-wing iconoclast? (25 February 2009).
Republicans “vote against any action to mitigate the downturn”. I call BS on that. Republicans have indeed offered policies to mitigate the downturn, and are not obligated to vote for the poor bills written by the Democrats. Do you really believe that political advantage is the only reason to vote against the stimulus or omnibus spending bills?
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Fabius Maximus replies: We’ve discussed this several times on this site. Nobody can cite a proposal that obtained widespread Republican support. Voting down an emergency treatment without offering an alternative is IMO irresponsible political opportunism.
So I suggest you cite evidence before “calling BS”.
In regards to “taking things seriously,” Obama’s stimulus plan and budget both seem to largely follow the basic fiscal outline for Federal government spending instituted under Clinton and carried forward by W. What’s the big change?
To mix metaphors ferociously, Obama seems to be rearranging deck chairs on the Titanic while stuffing more and more billions down well-worn ratholes. I really though Obama meant it when he said he was not for big government nor small government but government that worked. If he found programs that worked, he’d expand them. If programs were not working, he’d ruthlessly zero them out.
I can appreciate that the hurry-up stimulus needed to follow the basic structures of the old budget to be practical, but why so shy about making changes in his first budget? If he waits to work his Obama magic by only starting to change the shape of the Federal government in his third or fourth budget, that’s too late,and he won’t have a seventh or eighth budget opportunity to fix things.
Seize the day. It’s not Treaury Secretary Geithner who’s too slow and timid, it’s Geithner’s boss.
What we are seeing is not that uncommon in world history. Bureaucratic elites and their enablers are seeking to wrest power from economic elites. Using the power of currency and regulation, they are succeeding in creating a large number of citizens on the dole (some by necessity, some by choice).
In reaction, the self-reliant (think yeoman farmers, kulaks, southern rebels, minor nobles, merchants) stand up and say no more. The methods to get there may be masked by words like tea party and tools like Facebook, but the end result is the same. A showdown between the groups – first by ballot, and then by violence (either by revolution or represssion). The economic elites will fall in line behind the bureaucrats to save their fortunes, and the result will either be a succession of crises (marked by greater authoritarian control and the death of the republic)until the civilization falls, or a perceived rebirth of “values,” which lasts a generation until the entrenched interests once again seek to take control.
The real question is whether the real wealth (as opposed to the money wealth) we’ve built up as a society is great enough to alter the track of civilizational decline. Civil War doesn’t occur from 3% rises in the marginal rate and a death tax. It occurs when an entire generation is robbed of the opportunity to create wealth and there are enough of the young who see no future.
We’re going to find out.
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Fabius Maximus replies: While I agree with much that you say, the conflict is being waged during a crisis — and preventing effective action. So we see another commonplace of history: a society facing a threat (usually an external enemy, sometimes a natural event like famine or drought), unable to respond due to internal divisions (lack of social cohesion). Hang together or hand seperately, as Franklin said.
You’re certainly right that no one really believes Rome will fall to the barbarian hordes until it actually happens. Kind of like how victims of serious crime don’t quite believe it’s happening until it’s a bit on the late side. It just seems so strangely unlikely that we should be living in epochal times. I recall the weird sense of dislocation and unreality in 1990 or so when the USSR fell apart before our eyes. A very important lesson that has stayed with me from then is that NOBODY was ready for it, and nobody correctly predicted the first few years of events after it. History, when it lurches this way and that, is utterly unpredictable.
But if you think the naked struggle among elites to cynically capitalize on the crisis will somehow be stopped by an awakened citizenry, I fear you have not read enough history, or naively believe that we who are alive now are somehow hugely different — much more sensible, much more intelligent, much less prone to self-delusion — than our ancestors. There’s very little evidence of that, I’d say.
And, no, I don’t think technology — we have the Internet! Blogs! The Romans didn’t! — is going to save the day. Technology doesn’t mean a damn thing without the wit and wisdom to use it. That’s why your 1907 Cavalry Training Manual wasn’t totally stupid, even though the rifle had been invented about 75 years earlier. Tactics hadn’t yet caught up, and in this area (military supremacy) people are powerfully motivated to figure out how to use technology well.
What makes you think the citizens are going to use this shiny new media better than they did the old one? Radio and TV in their day were also considered powerful tools for individual liberty, the end of ignorance among the masses. Didn’t work out that way. I’d be surprised if Internet media ends up differently. In the end, most folks will get their predigested factoids from the Internet equivalent of Dan Rather, Walter Cronkite, and company, and emperors will be able to walk among us without clothes for a surprisingly long time.
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Fabius Maximus replies: Since you use no quotes, nor provide any specific references, I have no idea to what this refers. It reads like a rant of despair. If so, just get out of the way and let the rest of us get on with fixing America. The “it’s hopeless brigade” are just dead weight on the wagon.
O!-No will use the economic scandals brought on by statism to justify more statism, just as Bush used foreign policy scandals brought on by statism to justify more statism. Is anyone surprised by this? Both of these incumbent parties are responsible for this situation, and they are rancid and corrupt to their core. No amount of frantically dashing back and forth between Democrat left-wing nonsense and Republican right-wing nonsense will solve any of this. The worse things get, the more they will use their own failures to justify more of the same. Get out of their maze, people. Neither of these two rotten gangs have anything left to offer us. They are essentially institutionalized criminal syndicates. Dump them both in 2010.
For what it is worth, I offer the possibly obvious thought that if the “elites” can fiddle while Rome is burning, then the question is how to fix a fundamentally broken political system that allows them to do this with which to begin. This begs the question (yes, I know of the controversy over the use of that term in that way) of what is the nature of the “People” such that a broken political system can exist, let alone such that it can be repaired in a meaningful way.
To clarify the context of this post, I vehemently oppose the huge bailouts, while recognising that there is little to nothing I can do about them now. The overgrown babies who lacked self-control and respect for other people will be rescued by Big Mommy, using *your* money. I also cast a severely jaundiced eye on the Wall Street mathematical tricksters who exercised the utmost brilliance in concealing risk in so many finely sliced pie slices, so that it could be parcelled out to every sucker born under the Sun, and not a few born under rocks.
I seriously wonder at the potential for a huge mass shrugging of Atlas by a large group of prudent people who, fed up at last, simply withdraw from the common financial system and tell the overgrown babies to pay their own damn debts, while doling out the money needed for basic services such as fire departments, police departments, roads and military defense, with the usual quibbles and a downward adjustment to compensate for the bloated pensions that have for so long been given to arrogant public employee unions. I realise that this means establishing a new, stable currency, among other things.
I have had other ideas that may be of more relevance, but prefer to wait for a better formulation of these ideas. Confusion is worse than ignorance. In any case, such are my brief and quick thoughts on the matter of a wild party of elites at which the common man is treated like a valet.
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Fabius Maximus replies: It’s amazing how far people will go to rationalize ignoring their duty as citizens to get involved in the government. This is esp delusional:
“simply withdraw from the common financial system and tell the overgrown babies to pay their own damn debts”
Move to rural Idaho, live in yurts and herd goats? Fine with me. Get out of the way and let the rest of us get on with the task of fixing America.
This is one of the most annoying posts on this site, ever. As one of those moronic liberals cited behind a cloak of pseudonymity here, I confess and accept being badly named and duly hanged. However, it is also true that:
The numbers show that Americans pay more and get less for health care than in all other industrial democracies. Those who accuse Obama of overreaching or whatever have to take the burden of choosing one of the following: 1. this is OK 2. this is bad but the economy is more important and it has no effect on the economy 3. proposing an alternative, given that this is not OK and it has an effect on the economy.
Similarly, the numbers show that all the gains in the past two bubbles went to the upper classes and the financial industry as the result of government policies implemented by ‘conservatives’ with the help of some corrupt ‘liberals.’ Obama is attempting to address this. Those who accuse him of overreaching or whatever again have the same three choices as outlined above.
Then there are the sources. If Buffett is so smart, how come he lost so much money last year? If Krauthammer is so smart, why is he a traitor who puts Israel’s interests ahead of those of the US, and constantly agitating for war with Iran, which would have… what economic effects?
Yes, Obama is a fool, and he is doing everything wrong, and liberals like me are morons. But at least we are not passive-aggressive critics with nothing positive to offer. I submit as a thought experiment, exactly how things would be now with President McCain, Vice President Palin, chief economic adviser Gramm, and chief of staff Lindsey Graham in charge, duly advised by the empty Everyman figure of Samuel-not-Joe the idiot-not-Plumber. I imagine the elites would be shaking in their Italian shoes.
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Fabius Maximus replies: While you ideas about re-decorating the house are interesting, the house is burning. Perhaps that deserves our primary attention, a bi-partisian focus (as we have successfully done in previous crisies). That was the point of the post — and of these critics. Was this not clear to you?
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“Yes, Obama is a fool, and he is doing everything wrong, and liberals like me are morons.” Well said, Greg.
It seems clear that Mr. Maximus believes that he has a good idea of what should be done here. It is equally clear that his ideas were obsolete before begin hatched. His overriding hubris here reminds one of James Hansen or Al Gore on the issue of climate change. They are certain they understand the problem and what should be done.
Obama is not the only fool whose ideological blind spots have led him into a deep and nearly inescapable hole.
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Fabius Maximus replies: Since you provide not the smallest specific, we have no evidence that you know what my ideas about solutions are — let alone have any basis on which to say that they “were obsolete before begin hatched.”
In general I can’t stand Krauthammer, but who can deny this zinger?
That being said, it seems that we are stuck in a strange nexus of American exceptionalism, understanding the uniqueness of the crisis, and looking back at history with rose colored glasses. We don’t think we need to adopt a Swedish solution, we are not back in the 30s and (somehow this is said with a straight face) we are more effective than Japan (“The Japan Fallacy – Today’s U.S. Financial Crisis Is Not Like Tokyo’s ‘Lost Decade’“, Richard Katz, Foreign Affairs, March/April 2009), but we want to pick and choose the goodies from the FDR era we want to reincarnate for the new century.
Gotta wonder if Krugman and the others who are calling the US economic response ‘dithering’ aren’t suffering from an extreme case of the Cassandras right now.
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Fabius Maximus replies: I do not understand what you are saying.
* What American exceptionalism?
* In what sense is this crisis unique?
* How do you know we are not “back in the 1930’s”? The situation seems quite like 1930.
* What do you mean by Krugman et al have “an extreme case of the Cassandras”? Cassandra was always right.
The Richard Katz article was absurd, whistling past the graveyard. He says “The current crisis is the result of correctable policy mistakes rather than deep structural flaws in the economy.” This is obviously incorrect, even moronic to say at this late date.
Reforming health care and socializing its entire cost makes sense to me. Trying to devise a national energy plan that diversifies sources, and sponsors research and development in the hopes a vitalizing a new sector of production makes sense to me. Trying to improve public education to provide a more intelligent citizenry and more skilled workforce makes sense to me. Executing a national long-range public transportation plan would also make sense to me.
What makes less sense is Treasury’s “wait and see” approach to banking reform. I would prefer a more systematic, lawful response, one that might dismantle insolvent banks more promptly, according to the rules on the books. Resizing “too-big-to-fail” institutions will require international cooperation, and re-regulating banks — re-instituting Glass-Steagall, new accounting rules, scrutiny for shadow banking, etc. — will require congressional action.
This debt crisis will be with us until prices are discovered, markets clear, and some semblance of balance and fairness in the distribution of wealth is achieved. We may have a real bout with inflation before all that happens. Deep down, what we need is some sort of fairness in incomes worldwide. Fair income would provide demand in balanced measure to the world’s capacity of production. Can capitalism as we understand it accommodate a “world income policy”? Can free markets and fairness be compatible?
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Fabius Maximus replies: IMO it is far too early to consider structural refrom of our financial system. Despite the pronouncements of overconfident blowhards, it is not yet clear exactly went wrong, and esp why we experienced such a profound level of regulatory failure. Some serious research and analysis will be needed. Lets not make things worse by fire-ready-aim.
As for your opening paragraph, you are not responding to the specific criticism given in the articles cited. They explain why the contraversal elements of these things should wait at least until the fires are dampened down.
I think the issue at hand is not that socialized health care isn’t great (I have been one of the many uninsured, my workplace doesn’t provide any health care and I must pay for my own) but that all things considered, it’s an unnecessary political fight given the context of this crisis. For instance–why is Obama paying any attention to stem cells right now? It’s not that I don’t want to see cancer cured or an end to politically ideology in funding science, but I just don’t see the reason to open that can of worms when he still has the biggest financial crisis in the past 70 odd years or so on his plate. These items are for dessert, but they’re being passed off as dinner. If he gets the financial crisis under control (as much as a crisis can ever be controlled any how) I am sure he will have enough political capital to get the rest of his agenda passed.
FM Note: As it says at the end of every post, the comment policy sets a limit of 250 words. I don’t mind advertisements for other sites (so long as non-commercial), but be brief. Longer posts, esp off-topic ones like this, will be brutally truncated.
When I look out upon the perspectives of W’press bloggers I see nothing but circular pattern in the unfolding discussions. You all obviously have intelligence, good command of our beloved English (nonsensical as it is at times) and many other fine qualities I’m sure. What I’m hoping to witness more of is evidence of people taking a break from the labyrinth of typical opinions and judgements we ‘fire away’ with toward any issue we see in our social environs. (Every issue) currently in the light of examination and protest are merely (symptoms) of human global thoughtform. It’s not unlike going to the doctor’s office to have a condition (symptom) addressed and when one leaves the doctor’s examination one has a prescription for something that is supposed to ‘kill the symptom’. Wait a minute, isn’t there a cause to the symptom?
So from me (a newbie WordPress user) to the author of this post, to those who commented, and to anyone else who may contribute, the elites you speak of and the dire conditions you connect them with all represents nothing other than fear-based perceptual dysfunction. We’re all very good at pointing fingers at other things, other people who appear separate from us. We’re all One because we come from the same ‘Source’. We conveniently forget this when we ‘perceive our world in separation’. The hierarchy of elitism and the resulting current conditions manifested are symptomatic of A WHOLE RACE OF HUMANS wallowing in dysfunction and imbalance! {snip}
You’re welcome to visit “435Mhz.wordpress.com”
Shorter Warren Buffett: “Wahhhhh! I’m losing money and somebody needs to help me! Wahhhhhh!”
Some people think there are more important issues than making a billionaire like Warren Buffett richer. Like the fact that the sea is getting fished out and the oceans are turning acidic and the land is getting polluted into a toxic moonscape and areas the size of the continent of Australia in the center of the Pacific Ocean are now filled with industrial plastic bag waste.
Buffett’s “solution” is to party like it’s 1999, cranking an unsustainable global economic system back up to overdrive so we can burn more unreplenishable oil and chop down more Amazonian forests so fat-assed American can sit in front of 60 inch flat-screen TVs and gorge themselves on Cheetos.
Maybe that’s not the solution — maybe that’s the problem. The global economy of the 1990s was radically unsustainable. And this billionaire’s answer is…more of the same???
Bottom line: billionaire informs us in tones of punitive hysteria that the basic problem is that he needs more money. Why am I not surprised? And why am I not convinced? If we lived in the 19th century and Buffett was America’s biggest slaveowner, he’d be telling us the problem is that we need a lot more slaves. If we were in central Mexico in the 10th century and Buffett was an Aztec priest, he’d be telling us the solution to our problem is that we need to get serious about performing human sacrifice. Is there anything this rich creep Buffett is saying that isn’t total crass naked self-interest of the most contemptible kind?
Bruce Sterling summed it up pretty well in his Webstock 09 speech:
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Fabius Maximus replies: Do you believe it’s cool to just make up stuff and attribute it to Buffett? Why not copy the practice of the ancients: make up stuff and say God, Jesus, St. X, or Plato wrote it? Still nonsense, but that would show some style.
“Fabius Maximus replies: I do not understand what you are saying.”
Sorry for the muddled comment. To clarify:
By American Exceptionalism I mean the notion that the US is somehow special compared to other developed nation, due to the unique place we occupy in history. I, like many Americans, often like to think so. However, the underside to this theory is that it leads to a proliferation of people who do not believe that Sweden or Japan can be instructive examples of our current mess. The Katz article is a case in point. And moronic is putting it nicely.
By unique and not in the 1930s, I am referring to Obama’s declaration that he will not be beholden to solutions from the past. In a sense, I think this is a good thing–not everything FDR was brilliant or effective and the two crises are likely not perfectly analogous. The problem with this (in addition to the above point) is that it seems to have led to government and policy makers underestimating the gravity of the recession/depression and not acting appropriately, as you have illustrated.
Finally, while Cassandra was right, she was also never believed.
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Fabius Maximus replies: That’s quite clear, and all good points. Thank you!
FM wrote: “the house is burning. Perhaps that deserves our primary attention, a bi-partisian focus (as we have successfully done in previous crisies). That was the point of the post — and of these critics.”
Well for one thing the point of many of those critics was mainly to carp at whatever to fill space. If you haven’t noticed, when Obama does anything, half the Villager poondits have a criticism… ethical standards too loose, too tight; too much action, not enough; too much like Bush, not enough like Bush, too much like Clinton, not enough like Clinton, etc. This after less than two months to deal with eight years (minimum) of complete incompetence.
But more specifically, if the house is on fire, it is not necessarily true that the mayor and all the citizens should attend to nothing else. It is not as if everyone is an expert or even competent at fire-fighting, or that there is sufficient water and space for everyone to participate. I see no scenario in which it is at all productive to have all of Congress and every governmental department engaged 24-7 in the minutiae of the financial system meltdown. That would seem guaranteed to make it worse… we already have more than one opinion per economist. Using your metaphor the doctors in the hospital should stop operating, the garbagemen (forgive me, the sanitation engineers) should stop collecting refuse etc. until the fire is out. This is ridiculous on the face of it. Indeed I would posit and I am sure in some sense that Obama would disagree, that if the doctor is healing an arsonist’s brain tumor, and the garbagemen (sorry again, I mean recycling professionals) are getting rid of flammable materials being left about, that would reduce the probability of this fire spreading, or of more fires being started.
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Fabius Maximus replies: You are exaggerating and distorting this message of this post. It says nothing about “every governmental department engaged 24-7 in the minutiae of the financial system meltdown.”
It does say that we should adopt a common practice for democracies in time of crisis, put aside for the duration contraversal partisan objectives and focus on fixing the crisis. I do not see how this focus by the White House and Congressional leaders would be “guaranteed to make it worse.”
The rest of your metaphor is similarly absurd exaggeration, like “garbagemen should stop collecting refuse etc” — not worth replying to.
Your response was unfair, Fabius Maximus. You read into the literal meaning of what I said, thoughts that were not there with which to begin. Having too many years of experience with this on the old BBSses, then later on the more modern Internet and then Web, I will simply offer a few thoughts.
First, I try to say only what I mean. If I don’t say something, then I haven’t said it. That other people may have the habit of implying this or that when they say something is irrelevant. That is them, this is I.
Second, nowhere did I imply an unsophisticated retreat from reality. “Live in yurts and herd goats.” Meh. An intelligent and determined set of people can withdraw from the common financial system and, as I said, set up an alternate currency superior to the dollar, as well as set up a better financial and legal system without the corruption of the current system. Naturally, this would be a large undertaking, but the mess it would be meant to fix is large indeed. I wondered about that. I did not announce any current and immediate plans to do so, although the idea grows in attraction with every passing minute as Obama and his socialist goons destroy the future and its children.
Third, Ayn Rand already wrote about the obscene concept of “duty”. I’ll not rehash it.
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Fabius Maximus replies: I take a quote and respond to your words. I don’t know what you think or mean. Thank you for responding. However, I doubt very much a “set of people” can do such a thing. Even determined folks like the Amish find this very difficult. Sounds to me like a fantasy to avoid assuming responsibilty for our problems — and avoid working to fix them.
That you consider “duty” an “obscene concept” re-enforces this guess — just more dead weight on the wagon of State. Fortunately I believe there are sufficient Americans to fix the nation and carry on.
FM Note: As I said, the comment policy says 250 words max. This appears at the end of every post and in more detail here. A little over is fine, but 2x is not OK.
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There is no empirical evidence that Keynesian spending programs work. They did not end the Great Depression. They have not ended Japan’s fifteen year malaise. The theoretical foundations for Keynesian multipliers are highly suspect to say the least, and the most recent studies conclude little or no GDP gains (See Cogan, Cwik, Taylor & Wieland, “New Keynesian vs. Old Keynesian Government Spending Multipliers,” Feb. 2009.) Even the CBO analysis of the Obama stimulus bill estimated a negative overall economic effect (some boost in the near term which is more than reversed in the out years.) I don’t put a lot of faith in any of this analytical work, because I don’t think it’s even theoretically possible to measure the effects of government spending in isolation from all other factors. But I cannot construct any scenario — empirical or theoretical — in which massive government borrowing in order to write checks to people with no correlation to work effort, risk taking, innovation or productivity gains — can possibly lead to healthy economic growth. The Republicans — even in the absence of alternative policy offerings — are right to oppose all of these pernicious initiatives.
Lest I be accused of ‘Hooverism’ (which was simply the New Deal with training wheels) I will provide a list of policy changes which — individually or taken together — would be very likely to lead to healthy economic growth: {snip}
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Fabius Maximus replies: At some point this is just aggressive ignorance. Conservatives have told themselves this so often that their troops have come to believe it. Stuff like “no evidence that Keynesian spending programs work” and “Hooverism is just the New Deal with training wheels” is just ignorance. It’s been discussed here and hundreds of other places too many times already.
I suspect that DarkHelmet is beyond help, but some others might find this a good place to start: “Wasting Away in Hooverville“, Jonathan Chait, The New Republic, 18 March 2009 — A powerful rebuttal to the historical revisionism of Amity Shalaes about the Great Depression, which has become so popular among conservatives.
This is a fantastic post. It really points out that we are suffering not just a financial and economic crisis but a crisis of competency in our leadership as well.
Of course Fabius has pointed this it out in detail. From observation the Democrats are betting that things will recover late this year or early next irregardless,and they will take credit with the “stimulus” package. They have not asked themselves what happens if it doesnt! The Republicans seem to believe it will be a longer recession, so by just opposing the “stimulus” they can claim to be right but then they adhere to economic principles that really can’t resolve the issues that face us. Neither side is offering any new ideas to the mix and so we stumble along.
This would be a good time to reestablish a sound footing for the US and maybe find some new industries to start rebuilding our economy. But since we have no real leadership, and remember the people picked them, we will just fumble around in the dark.
A good example of what could be done is a book I’m re-reading called “The Third Industrial Revolution” by G. Harry Stine. It gives a good description of a possible direction for future American Industry.
Not only are these numb-skulls who are leading the country leading us to hell in a handbasket… they are laughing all the way to the bank!
Check out our new post about how Congress plans to bamboozle taxpayers into giving them A RAISE! See this.
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Fabius Maximus: Note the picture of the poster on that site —
FM: “The house is burning, and you want to discuss re-decorating. Howeer well-meant, it is bad timing and makes you part of the problem — not the solution.”
But why is the house burning? Could it be because too many people cashed out all the equity in their houses and used it to buy crap from China? And then complex financial derivatives hid this information from investors, allowing us to continue the party past a reasonable hour.
I don’t disagree with this. In your opinion, do you think Stimulus of $X would have a greater, the same or less of an effect on the economy if the total federal debt was 0?
I understand that because of our high national debt we cannot let deflation occur – that really would kill us and force us to default. That is why we must slash our long term debt by the time this happens again. I don’t want to redecorate; I don’t want to be back here trying to put out another fire 5 years from now with no water.
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Fabius Maximus replies: I believe you are confused. It is not possible to have the national debt decrease during a severe recession, unless you wish to have a major depression. Government revenue declines, expenses increase (e.g., unemployment, welfare) — and that’s before considering any stimulus programs (e.g., job programs, retraining).
There were two things I found interesting about your post:
Listing Charles Krauthamer as an example of “liberals moronically play[ing] this game of deception” and the feeling that this is somehow a new idea whether in its conception or application in American politics.
(1) Surely this is the game the neocons (especially those with a connection to the second Bush presidency) have been playing since September 11, 2001.
(2) Besides, how can you really blame the Obama administration for a crisis that was not of his making? Will you hold the tea-party-organizers to the same level of responsibility?
(2) This whole notion that Westerners discovered this great notion of “crisis + opportunity” in the study of Chinese characters seems like wish fulfillment. I would say that this idea sounds as Machiavellian as anything we might wish the Chinese to have produced. If the idea didn’t originate with Western thinkers, why do we seem to understand it so effortlessly?
When Americans start coming up with concepts borrowing from wu wei and showing how investing in loss can be a balm to the nation’s economy or political policy, then I’ll be all for giving the Chinese their due in influencing American culture, not before.
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Fabius Maximus replies: (1) The neocons proposed a straightforward reply to 9/11. Massive increase in the domestic security appartus and foreign wars. Both were directly related to 9/11. There was no deception, and Congress approved (majorities in both parties) both the funding and legislation (and did nothing following disclosure of secret activities). While I consider this response to be crazy, I do not see any similarity to what is discussed here.
(2) There is no reference to blame in this post. As I have explained at some length, the roots of this crisis go back two decades. For more on this see section 3 on the FM Reference Page Financial crisis – what’s happening? how will this end?
(3) I do not understand any of this. As I said, the “crisis + opportunity” is an urban legend.
While I agree that the Republican response was lacking (although the House caucus did offer an alternative bill) I don’t agree that it was “irresponsible political opportunism” to oppose the Democrat stimulus. It’s widely reported how Republicans were shut out of the closed-door process (as were most rank-and-file Democrats) of drafting the stimulus, and all regular processes were suspended for debate. How would you have handled offering your opposition, had you been in their place?
You speak admirably about “fixing America,” and our avenue is through the legislative process. When those in power elect to bypass that process, how then are alternative ideas to be debated?
I will not argue that Republicans are ineffective, but I think it is disingenuous of Democrats to short-circuit the process in place for debate of bills. At this point, the process they’re using to legislate is sorely lacking. I don’t blame the Republicans for going on record against it.
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Fabius Maximus replies: Why do so few people know how to use quotes? I did not say “”irresponsible political opportunism to oppose the Democrat stimulus”. I said it was so to oppose the bill without an alternative.
They did not try with HR 470, as they did not even get a Committee vote on it. Nor did they make much effort to sell it to the American people. Looks to me like just a PR stunt.
The only possible reform I see coming out of this is canceling Nobel Prizes for economics or at least transferring them to a category of political science, which is of course journalism of a special kind.
Money remains a black box. I guess we are going to find out whether Keynes’ stim works. If it does not the Ks will argue it was not enough, if it does they will say, see….and then when it collapses again, they will say something else. No doubt it is more complex than this, but simply put the U.S. has been the consumer of last resort. Suppliers financed our consumption which was not compulsory after the fall of the S.U. Instead of reform we increased consumption. No doubt there was a technical error of some kind that sparked the meltdown but does anyone really believe if AIG had not plunged recklessly into derivates something else would have triggered this. Look at Iceland folks? Is there anything reasonable or even rational going on there? We cannot transform our consumption patterns overnight but any stimulus that results in everyone shipping their crap over here again will collapse quickly into something worse than what we are experiencing now. When do we start talking turkey? US Congress is hopeless. Auto companies need to bankrupt and reemerge if they have something. Bankers? Let them fall, new banks will rise. Why treat them differently than S&Ls just because they paid off more?
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Fabius Maximus replies: I suppose dismissing large bodies of knowledge like poltiical science and economics as “journalism” sounds cool to you. It sounds like proud ignorance to me.
The United States was a product of centuries of political science thought, going back (at least) to Machiavelli (circa 1500, see Wikipedia). If you consider all that work to be journalism, I feel sorry for you.
The massive increase in global wealth during the 20th century — unlike anything ever before seen — resulted from many factors. Among them was the development of economics, which showed how to assemble the activity of billions of people in hundreds of nations into a working system of industry, finance, and trade. Nobody of any intelligence can read the work of Fisher, Tobin, or Keynes and consider it journalism.
The rest is just confused, no surprise after reading the opening.
Here are a few posts with excerpts from Keynes work. Nothing technical.
* The greatness of John Maynard Keynes, our only guide in this crisis, 4 December 2008
* About the state of economic science, and advice from a famous economist, 8 December 2008
* Words of wisdom about the global recession, from the greatest economist of our era, 29 December 2008
* Some thoughts about the economy of mid-21st century America, 12 January 2009
* Economics is not a morality tale, 14 January 2009
“Radio and TV in their day were also considered powerful tools for individual liberty”
No, it was always understood that radio and TV were powerful tools at the disposal of the mass state and that they were at least a potential threat to individual liberty.
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Fabius Maximus replies: Both statements are nonsense. They are just tools, which can act either way depending on circumstances. Consider radio’s role for Hitler, FDR, and 21st century US conservatives (modern talk radio). Also, cellular phones are a form of radio (similar technology, broadly speaking).
Re #23. I took Krauthammer’s objections to be bombast, not entirely earnest. As to Buffett, I agree that we would do well to rally around our President on basic principles. I also agree that the President would be wise not to behave brusquely toward the Republicans, but should rather continue to seek their support. I am not sure I agree with his characterization that the President is trying to “roll” the Republicans. Personally, I thought a stimulus was necessary, though I would have preferred to see it confined to unemployment aid and aid to states and municipalities to maintain ordinary services, and skip the tax breaks. I would like a long-view, deliberate approach to health care, energy, transportation, and education. It’s not like these things can’t be worked on simultaneously. Our debt problem is going to be with us for a fair while, I imagine. I prefer digging our way out of debt to propping up collapsing enterprises. If the choice is between pursuing external brilliance or a return to simplicity, I’ll take simplicity.
“The political wrangling — in Congress, among our elites, and between the peons — exists..”
Excellent topic but I missed analysis about elites and peons. It is not my impression that Congress is all that important except to preserve a status quo that is increasingly oligarchical and opaque and for which Congress acts as part agent, part fig leaf. I see them as upper middle class in the overall scheme, not leadership class. Perhaps this is wrong?
I would be very interested to learn more about the wrangling going on between the peons – nothing comes to mind – but even more about wrangling among the elites, and even more about who these elites really are and how they currently fit into the overall body politic and cultural.
The ‘elite agenda’, if there even is such a thing, is surely part of the cause and nature of the current predicament and also perhaps the major force, or dynamic, to be reckoned with if indeed saving the Republic as such is the goal. I am not convinced that is something ‘they’ are all on board with.
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Fabius Maximus replies: You don’t see wrangling among the peons? Look at the tea parties (few or no elites there, and little coverage in the mainstream media). Listen to talk radio. Read the comments on this site, or the mass audience sites like Little Green Footballs.
Congress has immense power, allocating trillions of dollars per year. Which is why the elections are so well funded. I cannot imagine why you say that it is not “all that important.”
Your last sentence contradicts the first. The opening is about “wrangling among our elites.” In the last you speak of the elite agenda, as if it was a unitary entity. I dont’ understand what you are attempting to say.
Lots of people are fed up with our government, but they want to look for the causes of their malcontent in all but the most obvious place, which is the mirror.
When all is said and done, the weakest link in a democracy is its people; civilizations tend to get the leaders they deserve. How can we possibly expect our leaders to transcend partisan gamesmanship when their own electorate cannot? Ok, partisan gamesmanship may be an existential requirement of democracy, but it’s getting perilously close to partisan brinkmanship at this point. Yet the political game must go on, no matter how hard Obama tries to “change” it. And we have no one to blame but ourselves.
That said, as big an understatement as this is, I think the Democrats are on firmer ground today than the GOP. Yes, they are spending precious money on typically liberal ends, and yes that spending may have little to do with the financial crisis. But we DO have a jobs crisis too, so we HAVE to spend anyway right? To my ears, Obama has made compelling, post-partisan arguments for why we must spend on liberal check-list items. By contrast, the GOP has so far only been flailing its ideological textbook around and cowering to Rush Limbaugh. I’m sorry, but that tells me that Republicans are more concerned with how to get back into power ASAP than fixing anything. Country First huh? Only if McCain was elected, it seems.
You better believe that if the Republicans are in power right now, they would be stimulating the economy much like the Democrats are, and not just cutting taxes either. I know this is not what the GOP says, but that is just political posturing (as FM might say?).
Speaking of political posturing, Obama just raised the tax on my roll-your-own smoking habit by 2,144% >_< Ugh!!! I knew I was going to be taxed one way or another, and I don’t make anything close to $250K..
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Fabius Maximus replies: Nicely said. I agree!