Tuesday, March 15, 2011

Aftershocks and Afterthoughts about US Economic Vulnerability in 2011

As I write this moment world stock markets are down again -- perhaps over-reacting but reacting nevertheless to a new bout of major uncertainty. Some forecasters believe this is the beginning of another economic meltdown. It is too soon to be making judgments like that but ff nothing else it should remind us about the fragility of the US economy and how vulnerable we are to shocks. In this post I continue my ranting about the urgent need to come to some agreement about future US deficits and debt. To not make progress makes us ever more susceptible to every shock that comes around. We are not making adequate progress largely because our political parties would rather squabble about traditional and sensitive issues than do the hard work of finding a way out of our debt mess. One morning last week, the headline in my local newspaper featured Vi Simpson, a respected leader of the state’s democratic party, declaring that the Republicans had declared war on the working man and the middle class. Yes, this usually intelligent and helpful representative of the Hoosier government used the “W” word. And she said it in public.

So now we are at war in Iraq, Afghanistan, and Indiana. Of course, the war she speaks of also has fronts in Wisconsin, Ohio, and DC. So I will now scream at the top of my lungs – YOU STUPID REPUBLICANS – YOU GOT WHAT YOU DESERVE. And the result is that moderate Americans who just want to see the economy improve have yet again been sucker punched by extremes in both parties. Are we so myopic (nice word for stupid) that we don’t see the game they play to perpetuate their own power? When are we going to recall all these extremists in our government and replace them with people who will focus on the whole country?

Surely when the Republican leadership meets they sometimes discuss the fact that their Democratic opponents and especially the extreme wing of that party can be pretty rough if not loud and ugly. What were the Republican leaders thinking when they decided that 2011 was the opportune time to take back all they had lost in recent years? Let’s make it impossible for gays to marry. Let’s throw water balloons at union members. Let’s re-write abortion laws. Let’s gut really popular government programs. Let’s make schools more like they used to be in the1950s during the Sputnik scare. Did I miss anything?

Really – was 2011 with a divided government the best time to irritate the other party by focusing on all their hot buttons? Really – was 2011 the time to let all the extremes in both parties elevate all their hot buttons so much that the REAL ISSUE does not have a chance to be debated and confronted in a contentious but eventually cooperative environment?

Some people say that this is politics as usual. But I beg to differ. This is politics at its worst because the leaders of both parties let their extremes dominate. I am not kidding when I say that I wish for the time when parties acted like real parties. They always had extreme factions – but there was a time when these extremes were thrown a few crumbs and told to sit in the corner. But look at Reid and Pelosi – they are a joke.  Boehner isn’t much better. They help these extremists throw Molotov cocktails at the rest of us.

The way we all go along with this destructive behavior makes you wonder if there is some elusive or hidden benefit we receive by smiling as the USS Titanic leaves port. Perhaps we like the freedom that allows all sides to express their opinions. Okay – that’s fine. Whether or not the armed forces have a “don’t ask don’t tell” policy is very important to many people. But do we really want to spend all our time RIGHT NOW debating that issue instead of coming to a real compromise on government deficits and debt? When the Titanic was going down people didn’t argue about unions. They focused on how to save themselves. The times require a solution to the most pressing issues. Yet we let the extremes persuade us that it is better to let the ship go down while we spend our last precious moments arguing whether Miller Lite is less filling or less tasty. 

Why do we sanction this destructive behavior? I think there are three key reasons. First, none of us like to admit that we have to go backward before we can move forward again. We got hit by a car, have numerous injuries, face a long rehab, and we are faced with the fact that there is no wonder drug to makes us immediately well again. Second, the rehab program is not without controversy. Good physicians disagree on the best programs because the body is complicated enough that no one can know exactly how a program will work. Third, we know there will be side-effects from the treatments and we fear the unknown. Faced with a very difficult situation it is understandable that we humans may want to postpone decisions even knowing that postponing may make things worse. As a result we are easily distracted and those at the EXTREMES see this as easy fodder for them.

So what do they do as we worry about very difficult and imminent challenges? They divert our attention to things that are guaranteed to arouse us emotionally. Hey guys, don’t worry about the Titanic going down – let’s watch re-runs of Charlie Sheen? Or maybe you would prefer Oprah? Let’s solve poverty today. Or maybe we should make sure rich people pay a larger share of taxes. PLEASE. These ARE important issues and we need to address them – but right now we have to sober up and focus all our energy on deficits and debt. Let’s not be duped by the extremists. We are smarter than that. Spillovers from the recent earthquake and tsunami ought to remind us of that!

18 comments:

  1. Whew!!! That was a rant. You pulled the words out of my mouth. DISTRACTION To prevent our middle public from getting political traction to make things right our leaders throw out distractions for fear of losing power or maybe they have leadership dumbness. Then again, there is also a tremendous amount of naivety about these issues and the darker ( defined as un -or misinformed) the public is kept, the easier it is for the powerful to influence the representatives. Then the small squeaky voice of the middle cannot be heard or at least respected. The public in general also acts like lemmings with an optimistic smile that says things will soon return to the "spending past your means days" and all of these issues will go away...so they do not make demands.

    The question is "how can we change this?" I believe it has gotten way out of control and way from what our founders intended. We the people have lost lost control and seem to not want it back any time too soon.

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  2. James,

    How do we change it? Good question! When do smokers quit? When do people lose weight? My guess is that it takes some sort of major event that catches our attention. People need to see more vividly that excessive national debt does have negative consequences. People also need to see more clearly that we have excessive debt in the US. WE seem to be in denial about both things...

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  3. Yeah, Lar, quite a rant. I feel pain, too, except that I am not inclined to “go along to get along” with liberal philosophy (now renamed “progressive” to mitigate the negative connotation of liberal; but should be referred to as “regressive” – without the ‘p’). The pain I feel is the moral, financial, and economic decline our country is experiencing due to poor political decisions\legislation – mainly those of the L but also attributable to some R, as in 43’s big spending contrary to general R doctrine advocating less govomit. Pox in him for that. But, I believe most of the weakening is due to R’s capitulation – and in some cases due to not having the votes – to the L “to go along to get along.” Kudos to Vi for articulating the “w” word; let’s have it out.

    Same-sex marriage. Exemplifies further moral decay supported by L. R’s should oppose it fervently. Civil unions OK; marriage no. Our kids are confused enough.

    Collective bargaining. OK for private unions. I believe taxpayer’s should not have to pay wages for public union employees AND also effectively pay 100% of their retirement (or any % for that matter) – AS WELL AS HAVING TO PAY THEIR OWN. This is a travesty and matter of principle on which R’s like Kasick, Walker, Daniels, Scott, and Christy should never-ever comprise and “go along to get along.” Don’t want another too big to fail AKA GM and its union legacy costs to grow under the radar in the public sector that need me and you to bail them out (many public pension funds already are about to implode). The L’s demand for and success in growing govomit at the expense of the private sector has got to stop . . . and someone has to make that happen.

    Abortion. I assume you refer to Planned Parenthood – if I’m incorrect then jump to the next subject. R’s issue with PPH is federal funding of abortions ---- yeah, yeah, yeah ---- PPH cannot pay for abortions with fed $$$$. Right. Wink. Wink. I support R’s position in that I do not want my earnings to pay for someone else’s dalliance and failure to use condoms\birth control pills\measures or lack of abstinence. You play, score a homer . . . you pay. If you can’t afford the doc, keep your pants uncocked and\or your legs locked.

    Unpopular govomit programs. You didn’t mention the over 500 programs the GAO report just listed accounting for wasted billions: Teaching = 82 programs @ $4B; Economic development = 80 programs @ $6.5B; Trans for disadvantaged = 80 programs could not total cost due to fragmented reporting. Is this reason to “go along to get along”? Who’s gonna pick up the ball and run these programs out of town? Not the Ls.

    Schools? More like the 50’s when the kids behaved, and if not, the teachers could break a jaw at max and keep the kid after school at min? When failing a grade posed sufficient stigma that you feared getting left behind? When going to college was important enough to make sure you got good grades? When teachers unions didn’t exist? – Oh, geese, there I go about public-sector unions again. Hey, bring on the 50’s with groovy taillights, big bumpers, and drive-in movies.

    Here’s a fantasy thought: Would much of this have happened without FDR, Carter, Clinton, and now OB? How much longer can this country afford “to go along to get along?”

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  4. Charlie,

    My post did not challenge the Republican social agenda in any way. I am familiar with these positions. What I was trying to say is that we need to approach first things first. If there really is a social conservative rebellion then it will last long enough to approach all these issues you mention. I was suggesting that the deficit/debt issue needs to come first and it worries me that too much emphasis too soon on the social part is slowing or jeopardizing progress on deficit/debt. Obviously you think we need to make progress on the social issues first. That's your opinion and a valuable one. It just isn't mine. Viva la difference.

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  5. Larry, while I understand the point you are trying to make it may be a tall order. As Charles pointed out there are 82 programs related to teaching alone. Are some of the worth saving, are any of them worth saving, should they all be eliminated? Realistically that is not an easy question to answer. Maybe if I had a week to review them I could come with a good answer. Then I would need another week to move on to the next 80 programs; ans so on. And this does not take into account all the political ramifications of eliminating programs; or the teachers union.

    The repub's idea of reducing spending by $US100 billion is a joke when compared to total govt spending; and look at how the dems fight it tooth and nail. The plain fact of the matter is that to really reduce spending will require some major changes in how the govt functions; and I do not see that happening.

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  6. Lar, I missed the point of your rant (deficits and debt) – sorry, didn’t see the forest for the trees. I agree the deficit\debt is a major problem – if not the single most important one. I guess (because I haven’t paid 24\7 attention to R’s strategy for attacking the deficit\debt problem) the R’s strategy is indirect rather than trying to get major deficit\debt reduction bills past the Senate head-on where they don’t have the votes. I don’t see R focus on same-sex marriage or schools at the expense of deficit\debt reduction – but do see a connection to deficit\debt reduction with respect to collective bargaining (although at the state level), abortion, and unpopular programs (my comment regarding the GAO report). The latter two directly affect deficit\debt reduction, but not to the extent of making a significant dent in deficit\debt since they collectively do not amount to a lot of $$$$.

    I do note Rs jabbing at CRs tactically to chip away at some spending while keeping the Ds on the ropes. I think the next big major Congressional decision involves the debt ceiling, with which I think Rs have some leverage (and play chicken with Ds to see who will shut the govomit down – some folks say an alternative is to shut down specific programs\departments rather than the whole show). How this plays into a grand R strategy to significantly reduce deficit\debt is unclear to me, however, since any success in the House to significantly address deficit\debt is subject to Reid’s priorities and his D’s votes. To say that House and Senate extremists are fiddling while U.S. deficit\debt burns I think does not take this legislative reality into account.

    Whatever grand strategy Rs might have to reduce deficit\debt, however, will be obliterated when House\Senate negotiation occurs – just as good strategies in war typically fall apart as soon as the enemy is engaged (kudos, again, to Vi Simpson for embracing the war metaphor . . . ). Extremists guarantee fierce\nasty negotiations. Since mega reductions must be made to the deficit\debt I doubt the centrist strategy (go along to get along) for either party will produce needed spending cuts. So, let there be blood – and since the Rs have the House let them force the issue (maybe House Ds will cut and run for Bermuda aka Wisconsin?) and kick the can over to the Senate. And then . . . . and then (no, Jones does not come along . . . ) the big OB will need to sign it . . . will he do the dirty deed?

    I don’t share the sentiment that Rs are not focusing on deficit\debt reduction. I think they do have deficit\debt priorities, but are biding their time given the legislative landscape.

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  7. Hi Tom,

    I never said it would be easy. Yes there are 82 programs (at least) and there are many different ways to skin this cat. But I do believe it is worth pointing out the correct order in things. First, find a number that cuts the deficit/debt. Second, let them argue about how they want to reach that target. Third, if they can't agree then some arbitrary leveling process cuts just about everything. Indiana's Governor gets it and he is making this the central aspect of his apparent run for the Presidency.

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  8. Charlie,

    I definitely get your drift. You like the idea of "war" and you think the Rs can win it. It is just a question regarding who will blink first - especially as it relates to the debt extension bill. Both sides seem to be backing away from that hardball -- and mostly because they fear retribution for being the side that caused the double dip recession. And this is exactly my point. The party that gets the most votes in 2012 will be the one that appears to have done the most to improve the economy. All this fighting on other issues -- even if some of them are related to the deficit -- and the war you relish prevents a real attack on the deficit. In fact, it retards progress on the budget because it hardens the divide between the sides. You see there is a divided government. One choice is to harden the differences and hope your side wins. Another one is to realize that compromise is the only way forward for at least the next two years. You seem to prefer the former. I don't. But either way, the sun will probably rise in the morning.

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  9. The Ship of Fools already left port, and the wrong 535 people were on it. One of the major problems is that we no longer have statesmen, we only have politicians. The big difference is that politicians have little concern for the good of the country and a great deal of concern for preserving personal and party power. Washington has become a big game of "Tag," and we're perpetually "it," and "it" always loses. As Tom said, the things that really need to be changed ain't gonna happen.

    Careful there Charlie! When you refer to "L's," you could be stepping on the toes of us Libertarians.

    Larry, compromise is for sissies.

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  10. Watch out Crash,

    If you aren't good I am going to hit you with my handbag! Anyway, I have said enough on this topic but this is too much fun to stop. I agree that politicians are self-motivated as you say. But I also know that moods shift. The risk of a double dip is getting larger and people know that. They also know that debt doesn't make sense. Mitch Daniels is saying what I am saying and he is a politician. These self-motivated politicians will quickly morph into deficit saints when they realize that their livelihoods depend on debt reduction. Now where did my Louis Vuitton Urban Handbag go?

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  11. This comment has been removed by the author.

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  12. THIS POST IS FROM CHARLES -- HE COULD NOT POST IT HIMSELF SO I AM DOING IT FOR HIM.....

    Crash . . . never fear confusion betwixt L for liberal and L for Libertarian . . . I surmise your acumen and passion would never let you approach such a preposterous conclusion. Stay the course.

    Stu, I do not share your ambivalence that neither side wants to blink first – fearing repercussions of blame for a govomit shutdown or dub-dip recession. Also, I do not believe the party getting the most votes in 2012 – governors, House, Senate, or the WH – can claim victory over the economy. It is so mired in international crap and domestic dysfunction that not even the bond markets can figger it out – except PIMCO that jettisoned all its T-bills – and not because BTW of R policy. Only those that voted for OB in ’08 would believe the Ds had any direct positive impact on an economy that is flip-flopping like a live mackerel in a hot greasy pan. No, I think the Rs – especially those aligned with the T-party – will take the ball and run it either into the zone or crash and burn into oblivion since they will not survive a recall as Miami’s mayor found out – presuming their respective states allow recall. Good for them, if you believe they are true to their campaign promises (?). Let’s hope Boehner doesn’t blink.

    I do relish war and winner take all because so much is at stake. Winner does\will have\should have significant impact on deficit\debt; that assumes Rs win. If Ds win fawgetit ‘cause we gonna be kissing cousins with Greece, Spain, Italy, et al. Retarding progress on the deficit\debt, hardening the divide – only to acquiesce to flaccid comprise – why? What’s gained in the long run – surely no meaningful reduction in deficit\debt? The only thing that can effect real deficit\debt reduction is R in the WH. Otherwise the OB will veto. Period.

    Hope that Rs enjoy landslide in ’12.

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  13. Wow Charlie!! I love it when you talk dirty!!!

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  14. Recently, I read a blog by a commentator who has termed the current group of R's "General George B. McClellan Republicans".........all the resources are available but they're never quite ready to fight.

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  15. http://townhall.com/columnists/mikeadams/2011/03/21/rigor_please

    This has absolutely nothing to do with the subject (anything I say rarely does), but it made me laugh. Larry, I'm betting you were a bit like this in class.....the prof, actually.

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  16. Crash, the commentator’s tagging Rs as G-GBM’ers is insightful; but, I think better applicable to Boehner. As I responded to LSD, Boehner might be biding his time since the debt ceiling vote is just ‘round the corner. However, if the Rs charge into a fight over spending now, they might be better termed Picketts.

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  17. Crash,

    For all of my career I mostly taught courses to business students who were NOT majoring in economics. Many of these students would rather have been in other courses but their programs required them to take one or more econ courses. As a result I decided a long time ago that life would be easier and I might have more converts if I took a more friendly and patient approach. While my writing can be highly direct and adversarial sometimes, that was never my approach in the flesh. So I often bit my tongue when students asked me which pages of the chapter they should study or could they take the final exam on a different day because they already had plane reservations. I would politely say something like -- "please read all of the pages" or "sorry but school regulations provide for only one make-up session and that is AFTER the regular one." All this makes me laugh when I remember how many of us peed in our pants when Prof. Adler asked us questions at Georgia Tech. I guess one last point. Some of the profs are worst than the students -- they don't have clear syllabi, they make last-minute changes to dates of critical assignments, and are often late or missing in action. As a result, even if you are very organized, the students have already learned that they can and perhaps should get away with asking a lot of what should be inane questions....Cheers, Larry

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  18. "....in the flesh!" The picture! I may have to gouge out my eyes!

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