|Is Head-Smashed-In the Solution to Smash-Mouth Politics?||We're Not In 1995 Any More|
by Christopher Chantrill
July 20, 2011 at 12:58 pm
SUPPOSE you are a liberal and you are wondering, after the truly dismal June jobs report, what went wrong. All right, you dont wonder. If you are Jonathan Cohn, you merely parrot Paul Krugman about the insanity of trying to balance the budget right now and try to gum the following unchewable morsel:
Addressing the governments long-term budget problem is important. But putting people back to work is also important. Its possible to do the two things simultaneously. In fact, an agreement to increase short-term deficits in ways that boost growth and then reduce long-term deficits through structural economic policy changes would be pretty close to ideal. But the chances of that happening seem awfully slim right now.
This is rubbish, because the two political parties are diametrically opposed on recession-fighting policy. The Republican recipe to boost growth is to lower tax rates and regulation, and the Democratic recipe is to invest in stimulus spending. For Republicans, structural economic policy changes means reform Social Security and Medicare; for Democrats it means raise taxes.
There is no agreement. There is only a game of chicken to see who blinks first before August 2.
But we are conservatives. We do not just want to win; we want to do the right thing. How do we get out of the recession?
The best way to understand a recession is this: It is a period of adjustment during which the malinvestments of the previous boom are liquidated. Usually, in our era, booms are ignited by cheap money injected into the credit system by government. Cheap money seduces people into borrowing too much.
In the 2000s boom the malinvestments were the homes that millions of people bought with cheap credit, courtesy of Fannie, Freddie and CRA. Homebuilders expanded and sucked a ton of workers and capital goods into homebuilding. Everything looked good until interests rates rose and home prices started to decline.
You know what happened next. Malinvestment became nightmare investment, as the greedy bankers foreclosed on millions of homes, and home prices cratered.
But at some point the foreclosures will ease up, bottom-feeders will buy up the flood of houses, and home construction will resume.
The logic of Democratic stimulus is that if government shovels out enough money it will tide the economy over the crater. Home prices will recover, businesses will revive, and growth will resume. But what if home prices dont recover before the stimulus runs out?
Back in 2009, the Obama administration made a judgment, implicit or explicit, that the housing crisis would be over in a couple of years, and that cheap money (QE1 and QE2) and a trillion dollar stimulus program would tide the economy over till then. But they were wrong. The housing market still hasnt bottomed out, and the economy hasnt snapped back, as this chart demonstrates.
The Obama mistake was bad enough but the Obamis made a second error. Assuming that the economy would revive in accordance with Baldricks cunning plan, they went ahead with their plans for expanding government spending and regulation, spraying money at their deserving supporters. They thought that the economy would soon be strong enough to increase the weight of government. With ObamaCare they increased the weight of government in health care. With regulation, spending, and subsidies pushing green energy they increased the weight of government in energy production.
Thats where the slick assumptions in Cohns increase short-term deficits in ways that boost growth kicks in. Suppose your short-term deficit doesnt boost growth? Suppose it is just another wasteful government program that increases the weight of government, and postpones the day when happy days are here again?
Thats where the Obamis are sitting right now. They have shot their bolt with cheap money and stimulus spending and cranked up the National Debt by 40 percent. But here we are in Summer 2011 and there is still no light at the end of the tunnel.
To fix things the Obamis would have to adopt the Republican agenda and reduce the weight of government. They would have to repeal ObamaCare, reverse their green energy boondoggle, lower tax rates, and cut wasteful government spending.
You can see the problem. For the last 40 years, ever since the unexpected success of Reaganomics, liberals have been telling themselves and everyone else that supply-side economics is a mirage. Now they have to admit that everything they believe is wrong.
Im with Paul Krugman:
[T]he truth about our slump that we know how to fix it, that we could fix it in a year if we had the political will, but that bad ideas and worse politicians are standing in the way makes people uncomfortable.
Couldnt agree more, old chap. Only, Dr. Krugman, bless your heart, its your bad ideas, your worse politicians, and the $100 trillion in unredeemable liberal entitlement promises that makes people like me uncomfortable.
Buy his Road to the Middle Class.
[The Axial Age] highlights the conception of a responsible self... [that] promise[s] man for the first time that he can understand the fundamental structure of reality and through salvation participate actively in it.
Robert N Bellah, "Religious Evolution", American Sociological Review, Vol. 29, No. 3.
[To make] of each individual member of the army a soldier who, in character, capability, and knowledge, is self-reliant, self-confident, dedicated, and joyful in taking responsibility [verantwortungsfreudig] as a man and a soldier. — Gen. Hans von Seeckt
MacGregor Knox, Williamson Murray, ed., The dynamics of military revolution, 1300-2050
Civil Societya complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churchesbuilds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.
Francis Fukuyama, Trust
[W]hen I asked a liberal longtime editor I know with a mainstream [publishing] house for a candid, shorthand version of the assumptions she and her colleagues make about conservatives, she didn't hesitate. Racist, sexist, homophobic, anti-choice fascists, she offered, smiling but meaning it.
Harry Stein, I Can't Believe I'm Sitting Next to a Republican
[T]he Liberal, and still more the subspecies Radical... more than any other in these latter days seems under the impression that so long as he has a good end in view he is warranted in exercising over men all the coercion he is able[.]
Herbert Spencer, The Man Versus the State
These emerge out of long-standing moral notions of freedom, benevolence, and the affirmation of ordinary life... I have been sketching a schematic map... [of] the moral sources [of these notions]... the original theistic grounding for these standards... a naturalism of disengaged reason, which in our day takes scientistic forms, and a third family of views which finds its sources in Romantic expressivism, or in one of the modernist successor visions.
Charles Taylor, Sources of the Self
Families helped each other putting up homes and barns. Together, they built churches, schools, and common civic buildings. They collaborated to build roads and bridges. They took pride in being free persons, independent, and self-reliant; but the texture of their lives was cooperative and fraternal.
Michael Novak, The Spirit of Democratic Capitalism
For [the left] there is only the state and the individual, nothing in between. No family to rely on, no friend to depend on, no community to call on. No neighbourhood to grow in, no faith to share in, no charities to work in. No-one but the Minister, nowhere but Whitehall, no such thing as society - just them, and their laws, and their rules, and their arrogance.
David Cameron, Conference Speech 2008
As far as the Catholic Church is concerned, the principal focus of her interventions in the public arena is the protection and promotion of the dignity of the person, and she is thereby consciously drawing particular attention to principles which are not negotiable...
[1.] protection of life in all its stages, from the first moment of conception until natural death; [2.] recognition and promotion of the natural structure of the family... [3.] the protection of the right of parents to educate their children.
Pope Benedict XVI, Speech to European Peoples Party, 2006
No lesson seems to be so deeply inculcated by the experience of life as that you should never trust experts. If you believe doctors, nothing is wholesome: if you believe the theologians, nothing is innocent: if you believe the soldiers, nothing is safe. They all require their strong wine diluted by a very large admixture of insipid common sense.
Lord Salisbury, Letter to Lord Lytton
What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph
In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status... Then came the triumph of Margaret Thatcher... The academics lost their power and prestige and... have been gloomy ever since.
Freeman Dyson, The Scientist as Rebel