Prepare Two Envelopes
(posted by Jim Henley)
Reading Scott Horton and seeing
But I was astounded at how Ignatius and The NewsHour discussed the issues in exactly the way the Bush Administration wants to have them discussed.
suggests to me the reason for at least faint hope that, if the Democrats gain the White House and maintain or expand their control of Congress in the fall, they really will hold the Republican elite to account for all their depredations of the last eight years. Why? They’ll have to.
Afghanistan is effed. Iraq is effed. The military’s equipment is worn out and, oh by the way, the country can’t afford to restock. The fisc is debased; the fundamentals of the economy, broken. "Borrowing money from China to transfer to Saudi Arabia," someone wrote today. (If anyone can find the link I’ll fix the cite.) Things are only going to get worse in the short to medium term.
Politically, the only shot the Democrats have is to blame their predecessors, as in the famous joke that gives this post its title. And the only way to successfully blame their predecessors is to lay bare the machinery of lies and confusion the GOP has constructed in the White House and the Pentagon, with its distributorship in the major media. They have to parade the incompetence and dishonesty of the current regime in the public’s face, to conclusively demonstrate that "The mess we have now is so big because of that crew of thugs and grifters we just kicked out, and they hid it from you all these years." And since the media still ultimately works for the War Party the Dems have to make the theater unignorable, with hearings and speeches and maybe, if we’re lucky, some prosecutions too. They won’t do it for justice or honor but to save their own skins. Because it will be the only way to buy the public patience that will keep them in office.
Of course, that assumes the Democratic Party possesses a minimum threshold of insight and competence we just can’t take for granted. But one can hope.
May 1st, 2008 at 10:06 pm
I call a Pundit’s Fallacy on this one.
If the Democrats so much as consider indicting one of the Bush-era criminals, the Republican Party will cry Stalin! faster than you can say missing e-mails.
May 2nd, 2008 at 12:32 am
Unfortunately, I’m with Chuckles on this one.
If the Democrats are capable of holding GOP feet to the fire for political advantage, why haven’t we seen it yet?
May 2nd, 2008 at 11:30 am
I fear the Fed will keep inflating the economy by any means necessary, just to stave off a complete housing and stock market crash until after Inauguration Day. If the Democrats win, they’ll be the fall guy when it finally happens. Might actually be better to let doddering old bastard McCain take the blame for it.
May 2nd, 2008 at 12:31 pm
@Jim:
The Democrats are unlikely to stick it to the GOP for one important reason: the most evil deeds committed by the current regime were done with broad bipartisan support. The Democrats will, of course, blame the GOP for every problem in America (including the ones the Democrats have caused or abetted). However, I don’t believe for a minute that real accountability will occur. I’d be ecstatic to be proved wrong on that point, but . . . we’ll see.
@Kevin:
It’s an open question whether the Fed can stave off crisis that long. If they fail and the economy crashes early, events could get very interesting . . . maybe interesting enough that real accountability becomes a possibility.
May 3rd, 2008 at 12:28 am
“If they fail and the economy crashes early, events could get very interesting . . . maybe interesting enough that real accountability becomes a possibility.”
These guys are sufficiently entrenched, and the public sufficiently complacent, that “real accountability” will probably require a very nasty crisis. I’m not ready to hope for that.
May 3rd, 2008 at 1:09 am
I’m afraid the very nasty crisis–along the lines of 50% or more drop in the DOW and housing prices, and over 10% unemployment–is coming anyway. If it’s going to happen I’d rather it happened on Bush’s watch, or during a McCain admin.
May 3rd, 2008 at 1:05 pm
“I fear the Fed will keep inflating the economy by any means necessary”
Kevin, is it wrong to try to inflate an economy that is in recession?
I agree with you that a bad recession is coming. Nouriel Roubini has argued that this is the worst housing recession in U.S. history. I’ve no problem with estimates that suggest that this might be the worst crash since the 1930s.
But, if you believe that a bad crash is coming, why would you disagree with a Fed policy that tries to inflate the economy? The standard Keynesian line is that stimulus is bad when an economy is at full employment, because any stimulus at that point must lead to inflation or asset bubbles, rather than additional output. But stimulus during a crash is sort of the textbook answer for what the government should try to do.
I realize you’re not a Keynesian, but I’m not clear on what you think the appropriate (short-term) course forward is. Could you explain?
May 3rd, 2008 at 4:25 pm
If I may momentarily butt in: even if one agrees with the textbook — which I personally do not either — I doubt the textbook anticipated a slowdown of the type we have now, born of a huge chain reaction involving money supply, collapsing debt-backed assets formed pretty much from thin air, global energy consumption & an apolcalyptic mess of a foreign policy royally angering the people funding our deficit spending.
May 3rd, 2008 at 4:52 pm
“I doubt the textbook anticipated a slowdown of the type we have now, born of a huge chain reaction involving money supply, collapsing debt-backed assets formed pretty much from thin air, global energy consumption & an apolcalyptic mess of a foreign policy”
The textbook I’m referring to was written in 1935, when the world was in the middle of the Great Depression. The book grew out of careful observation of a recent “huge chain reaction involving money supply”. It was a decade that had seen a lot of “collapsing debt-backed assets formed pretty much from thin air”. The decade continued forward into “an apolcalyptic mess of a foreign policy” in which liberal, fascist and communist nations faced off in a duel that left 35 million dead.
May 3rd, 2008 at 5:23 pm
You can’t address a monetary flood by opening the floodgates even further. That’s the root of all the current mess, parts of the world that we’ve been using for years to subsidize our way of life are calling BS on the dollar and we’ve propped ourselves up too long to adapt without excruciating pain. The difference between now & the WW2 period is this time we brought it on ourselves, and it’s us on one side and the rest of the world on the other.
May 4th, 2008 at 12:36 am
jackson,
I think the Austrians are right about the effects of monetary inflation. The business cycle, if not created, is exacerbated by expansion of the money supply. It makes capital investments look artificially profitable, and leads to overinvestment that is unsustainable in the long run. The only way to protect such malinvestment, when reality catches up with it, is to keep inflating the money supply. Eventually even this will fail.
Right now, if you look at plausible attempts to reconstruct M3 figures since the Fed quit publishing them, for the past few years they’ve been inflating the money supply 10% or more a year. Arguably for over ten years the Fed has been relying on monetary inflation to stave off one collapse after another; it fueled the real estate bubble to counteract the collapse of the tech bubble, and now it’s inflating things big time to prevent the chickens coming home to roost from the collapse of the real estate bubble. Deliberately inflating the money supply on that scale, just to inflate your way out of collapsing bubbles which themselves result from past inflation, is a recipe for disaster.
May 4th, 2008 at 10:19 pm
Kevin, I was in Barnes and Noble tonight and I noticed that Kevin Phillips had an article in Harpers Magazine (subscription required) that gave a summary of the history of how U.S. economic statistics have been distorted over time. He goes back to LBJ and then chronicles how each President undertook to undermine the factual accuracy of the numbers. You might especially like his look at the distortion of the inflation numbers. Using old methodologies, the inflation rate is much higher than what is now commonly reported. I can’t do justice to the article in this small weblog comment, but you might like the article (to the extent that you don’t already know this history yourself, which clearly you know a good portion of).
May 5th, 2008 at 1:25 am
Thanks, Jackson. I’ll have to check it out. The Wendell Berry article also grabbed my attention. I can’t remember where I saw it, but I remember something in the past few days about the real inflation rate being over 10%, if your basket of commodities includes all those “volatile” items like food and fuel that the current official indicator excludes. By that standard, there has been a dramatic decrease in real wages for most people, with even the upper middle class making only modest gains at best, and the plutocracy and senior management (still) increasing its income exponentially over the past decade.
May 5th, 2008 at 8:26 am
It was Tom Friedman who said “Borrowing money from China to transfer to Saudi Arabia,” in his Op-ed last week referring to the “Gas tax holiday” nonsense.
http://www.nytimes.com/2008/04/30/opinion/30friedman.html
May 5th, 2008 at 10:25 am
Kevin, yes, the article by Kevin Phillips makes the same point about inflation - using old methods of measuring the inflation rate, inflation is currently over 10%. If that figure represents reality, then the vast majority of the population has seen a decrease in real wages since 1973.
Kevin Phillips makes clear that the push to distort the inflation metrics has been a bipartisan effort, starting with LBJ and helped along by almost every President since (I don’t recall if Carter was accused of anything). All the same, I was left wondering where the “strong currency” conservatives had gone. Once upon a time, certainly in the 1920s, there were factions in the Republican party that seemed to have a passionate attachment to the idea of a solid currency, and those factions seemed to be running the party at that time. But to advocate for low inflation while changing the methods of measurement so that inflation is understated is (I would assume) self-defeating, and disappointing to those who actually care about the issue (which wouldn’t include me).
Jim Henley has written that we are entering a period of economic populism, and the new mood is effecting Republicans at least as much as it is effecting Democrats. I’ve been puzzled to watch the change come over some of my friends who call themselves Republican. Rhetoric about a strong currency doesn’t seem to appeal to them much. They are neutral at best, its not an issue that touches any emotional chords for them.
Once again, I find myself surprised regarding how much the Republican party has changed over the last 20 or 30 years.
May 5th, 2008 at 6:17 pm
jackson:
The “standard Keynsian line” is generally taken to have been either decisively refuted, or else shown to be in need of substantial revision, by the plain fact that a recession and massive monetary inflation coexisted for several years during the 1970s. There are cases where government monetary manipulation can create short-term bubbles in certain assets or industries, but it always comes at the expense (realized either sooner or later) of everyone else outside of those beneficiaries, and there’s no real guarantee that you won’t just end up pushing on a string, anyway.
Repeal the government money monopoly, instead of trying to find yet another government scheme to make the world safe for finance capital. That may seem drastic to you, but the fact is that it’s quite easy to do on the margins (just stop prosecuting people who, on their own, decide to establish alternative forms of currency and who set up alternative forms of banking), and in any case anything else is just going to produce more of the same old shit.
May 6th, 2008 at 10:38 am
“Jim Henley has written that we are entering a period of economic populism, and the new mood is effecting Republicans at least as much as it is effecting Democrats. I’ve been puzzled to watch the change come over some of my friends who call themselves Republican. ”
I think that people who believed in ‘trickle down’ are realizing that the trickle they’ve been getting smells a bit, ah,… yellow.
And with the collapse of the housing market, there are a large number of people who lost the last thing which they thought was adding to their wealth.
May 6th, 2008 at 2:31 pm
Barry, for what little personal anecodotes may be worth, I agree with your assessment of the importance of the collapse of the housing market. In my circle of friends, among those who identified or voted as Republican this decade, the collapse of the housing market has pushed them away from the issues that the Republican party was pushing 20 years ago.