Lilliputians at the helm -- Why we can’t escape this recession

I heard this joke a long time ago – A guy is driving his car in the mountains. As he heads into a sharp turn a person standing next to the road yells to him – “Pig”. The driver is incensed and yells back at him “Jerk”. Immediately after turning the corner he runs right into a pig in the road.

This joke reminds me of our political leadership. They seem to have no ability to communicate. It seems to me that the problem is worse now but maybe it has always been that way. I don’t know but it is making me more and more irritable!

Since my life has been spent thinking about macroeconomics, it amazes me how the current debates about economic stimulus get us nowhere.  Even the pace of the recovery has become politicized. Republicans seem to want the economy to double-dip so they can point their fingers at the Democrat’s whose stimulus policies did not work. Democrats want the recovery to look good but not good enough to stave off another round or two of stimulus.

While economists also join the usual partisan bickering we are inflicted by our inability to say anything that the politicians seem to understand.  Economists are a lot like meteorologists during hurricane season. We have a lot of theory and a lot of data but we still make a lot of errors! When we try to explain our reasoning, the average politician or TV viewer heads to the kitchen for another slice of black forest cherry cake with vanilla ice cream.  Don’t say all that jibberish! Just tell me if a hurricane is going to hit my house! And when!

The lucky thing for meteorologists is that politicians don’t usually act on hurricane predictions!  So we economists duke it out in the Wall Street Journal, the Financial Times, and Fox News.  I knew that would wake-up some of you! J    And yet, the politicians keep saying inane things and then VOTING on real policies that will affect most of us from now until Hell freezes over.

So I am going to give both sides a little advice. First, in all likelihood we are not headed for either a pure capitalist or socialist state in the near future. This is not about extreme states – it is about the best way to permanently exit a recession and a way to return the unemployment rate to something more normal. SO SHUT-UP YOUR SLOGANS AND QUIT CALLING EACH OTHER NAMES. 

Second, this recession IS different. It is not only deep and enduring but it is the result of a perfect storm of myriad forces that took some time to manifest and will take some time to heal – with or without brilliant policy. My neighbor had serious heart surgery recently. He is on the road to recovery but he knows that not every day will be a good one. There will be ups and downs. He must be patient. Healing will take a while. Why then do our politicians pounce on every bounce in the economy – ready to declare a horrible or beautiful new course of policy? Geez guys and gals – the recovery is not going to be smooth or linear. TAKE A BIG BREATHE.  You have an unprecedented amount of stimulus working in the system – don’t add more!

Third – talk to each other. You guys are like rival gangs at a biker bar. The second Big Moe’s elbow accidentally barely scrapes Hot Mary’s elegantly sculptured boob tattoo of a snake eating the head of a winged dinosaur, all hell breaks out.  As soon as Mary screams the Purple Devils and Mauling Marauders weapon-up and go to their respective corners to prepare for the battle. The Democrats are armed with silly slogans about multipliers and a heart full of compassion for the unemployed while the Republicans load up on Barro’s version of rational expectations and strongly expressed love for fiduciary responsibility. You don’t talk to the enemy during the war – you lob stupid bombs at each other until the other finally gives up – i.e. loses the election.

One must wonder if our politicians are not like proverbial warriors who live only for the fight. My guess is that given the special nature of this recession it is going to take some real compromises to get this thing fixed. Consider the compromise story.  Policy has already and will continue to address all of the following issues– stabilizing aggregate demand, financing the aging of the population, correcting imbalances in the distribution of income, regulating the financial sector, reforming healthcare, widening access to green energy, a war on terrorism, immigration policy, and more. It seems to me that a more overt recognition of the complexity of these issues warrants significant compromise on both sides. Yet instead of viewing the whole policy scene as an opportunity for both parties to improve the country, they take each issue piecemeal and try to win the hearts and minds of the voters bit by bit. Surely with all these opportunities for legislation, there is plenty of room for give and take. Both sides could declare victory. But so far, our warriors seem to relish in the fight and grapple for wins on virtually every point of contention. Meanwhile we languish in a seemingly never-ending economic limbo as our politicians play dueling banjos.

Why does common sense seem so out of line with what we observe from our politicians? I think it is because we have really big issues right now and we have really small politicians. While I like today’s movements towards more transparency, right now I long for the good old days when politicians went behind closed doors, drank brandy and smoked cigars, and made deals.  Imagine the scene -- Obama taps his ash, leans across the table and tells John Boehner – I’ll give you two corporate income tax reductions for one extension of job benefits. John smiles and rubs his knee against Nancy Pelosi’s throbbing thigh and says, Okay Nancy, throw in a reduction in capital gains tax and I’ll not only go with the unemployment extension but I’ll give you a new tax on imported oil. Nancy pours her Armenian cognac in John’s lap and says it all sounds good so long as we throw in a few more dollars for education.

Okay, so I drink while I write. But you get the point. We need a new crop of politicians – if you don’t like what you see, then why do you stick with the idea that these bozos in both parties are there to help us? These folks are not helping us and we need to show them the door. We need some political leaders who will stop being warriors and try becoming statesmen. This is a very challenging time. We need better.