On the Contrary

In the New York Times this morning there were two editorials that set out what is the conventional wisdom about the recent election and what it portends for the Democrats and the other probably more to the reality of the situation instead of the conventional wisdom.  Sadly the nation moves usually on conventional wisdom, not reality which has been badly mangled by the media which tends to bend to the conventional wisdom without questioning some of its underlying assumptions.  To be sure, the media rarely speaks truth to power. They are too afraid to lose their access if they actually challenge these people.   Least we forget Iraq, death panels, socialize medicine, and I could go on indefinitely.

David Brooks in his editorial, What Independents Want, was pushing what I consider the conventional wisdom, albeit, inaccurate.  He accurately noted that there was a swing in independent voters toward conservatives, but he then identified the effects as the cause instead of the real root cause.  His premise was that independents think that President Obama “is moving too fast.”  He cites the economy (the real cause), increasing distrust in government, fear of the deficit, too much government regulation, and probably the accommodation of Wall Street by the Democrats (this one is right on).  Then of course he recommended to his conservative brethren that we should get back to the basics of small government and let businesses do their thing, and fail if they must (read wall street).  He did get one of these things right:  “Independents support the party that seems most likely to establish a frame of stability and order within which they can lead their lives.”  Problem is his conservative prescription for that will only fail as it did last time around.

As always the devil is in the details and one should ask David how he would have handled the bank crisis back in 2007 and what should we do now to make sure the whole economy is not threatened.  Would we do that with less government and fewer regulations?  Same with health care or the climate/energy bill.  If less government is so wonderful, why aren’t these problems already solved after eight years of Republican control?  The real issue here is that the economy is not improving and all the rest, distrust in government, less regulations, etc. are a result of the lack of improvement, not the cause of the problem.   The one thing I always find astounding is that when things are going bad, why do the voters want to bring back the people who got us in this mess and have no ideas for our future?

The other editorial was from Paul Krugman, Obama Faces His Anzio, where Paul identifies what I think is the real problem.  It is not that President Obama has tried to do too much, but he has been too timid with what he has done.  His intrepidation caused him to implement policies that are only minimally effective.  The bank crisis was averted, but then he started accommodating the bankers and real change was not effected.  The stimulus bill by his own staff’s estimation was too small.  He has compromised or watered down what he was going to do and the result is very little progress.  Paul compares this to the Anzio Beach fiasco in World War II:

“The World War II battle of Anzio was a classic example of the perils of being too cautious. Allied forces landed far behind enemy lines, catching their opponents by surprise. Instead of following up on this advantage, however, the American commander hunkered down in his beachhead — and soon found himself penned in by German forces on the surrounding hills, suffering heavy casualties.”

President Obama was elected on a change agenda and then he didn’t.  Mr. Krugman’s final summary is where I think the truth really lies:

“If the Democrats lose badly in the midterms, the talking heads will say that Mr. Obama tried to do too much, this is a center-right nation, and so on. But the truth is that Mr. Obama put his agenda at risk by doing too little. The fateful decision, early this year, to go for economic half-measures may haunt Democrats for years to come.”

Well, as noted, that is what Mr. Brooks is saying already, but I am with Paul on this.  President Obama was too timid and without some real backbone from the Democrats between now and 2010, I believe he may have wasted his chance.  The conventional wisdom summarized by Mr. Brooks is gaining speed, and if the Democrats cannot do something to improve the economy, the conventonial wisdom will prevail and we will have the same failed policies voted back into office in 2010.

I am not talking about conservative anger here, I am talking about progressive anger.  President Obama is a wonderful man, intelligent, thoughtful, and very, very likable.  He has a wonderful family, which is a testament to the parenting provided by he and his beautiful wife.  So it is hard to be really angry at him, but many of us are.  It is not just the waffling on health care or all the other promises he has yet to keep.  Need I remind you that “Don’t ask, Don’t Tell” is still ruining lives and the State Secrets Act is still being used to keep us from finding out what really happened during the Bush years.  It is so much more fundamental than that and Paul Krugman hit on it so elegantly in his column this Monday morning in the New York Times (All the President’s Zombies). 

When we won the election in 2008 we thought that the era of Ronald Reagan and big government is bad was finally put to rest.  As Paul points out, the Reagan philosophy of low taxes, emasculated government, and little regulation which was put into full force in the Bush years, proved the fallacy of this philosophy as our economy faltered except for the very rich.  More basic to this whole philosophy is the idea that self-aggrandizement is good and that sacrifice is for suckers and losers.  The whole idea of government not having an important role to play in our lives, we thought, was finally over with the election of Barack Obama and the progressive agenda.

But as Paul points out, those zombies never die and President Obama with his philosophy of appeasement may have just given it a new life, to rise up again, and once again destroy our dreams for the future as the country stagnates under this failed philosophy.  This to many of us is unforgiveable.  President Obama has the chance to put the final stake in the heart of our failed past and he has failed to rise to that challenge.  Oh, we saw glimmers when he fought back early in the health care wars when he asked what was it about the public plan that conservatives were so afraid of, competition?  But then he fell back into his old accommodating style of not actively engaging with Republicans to refute their attacks on his plan.

What many of us are so angry about is that he is accommodating a failed philosophy and giving it new life.  The Republican Party today does not represent any viable option for our future and it is time to quit pandering to them, and put them out of their misery.  Instead, by trying to find common ground with failed ideas, he may just set us back many more years and give conservatives a chance to do much more damage to our country.   It is time to pull the plug on them  Mr. President.  To do that you need to actively attack these failed ideas and lead the way instead of pandering in the false hope of bipartisanship.  They have nothing to offer and we have nothing to gain by listening to them.  Please don’t let Reaganism rise up again.  That Mr. President, would be unforgivable.

California used to the place where trends for the country were set.  Some that come to mind are a top-notch education system, great road systems, parks next to none, smoke-free workplaces, environmental standards superior to the most of the country, and an attempt to get a handle on global warming while others napped.  But lately we have been on a very bad trip that started back in the 80’s with the passage of Proposition 13 and the two-thirds majority voting requirement for any funding action.  I must also admit I am deeply embarrassed about the vote on Prop 8, banning equality for gays.  We spend less on students in school than 47 other states, our roadways are a mess as we focused on the automobile over mass transit, and now the state may soon be bankrupt.

The bankruptcy is no surprise as it has been coming for years as Californians want more and more and are willing to pay less and less.  The government is immobilized by the mandatory spending initiatives that passed, and the minorities’ death grip on any compromise with the two-thirds majority required to raise any taxes.  It has been a recipe for disaster for years and it is finally coming to pass.  Paul Krugman opined about it on Monday in the New York Times (State of Paralysis) and he correctly identified the problem but then made the logical leap of what could happen to the federal government if we let a small radical political party (the Republicans) stymie action in the Congress.  In California they will acccept no budget with tax increases.  In one bargaining session the Democrats agreed that for every cut in programs the Republicans would agree to an equal increase in taxes, tit for tat if you will.  There would be no deal because the Republicans stood intransigently mired in no new taxes.  Not much room to negotiate here so we have finally run out of smoke and mirrors and the ship of state is headed directly for the rocks.

After the last “deal” went down in flames at the polls, Arnold and his spokespersons have been repeating that they heard loud and clear from the voters and the message was all cuts, no new taxes.  Actually I don’t think that was what the message was.  The real message was that these propositions were smoke and mirrors, more borrowing and kicking the can down the road without a permanent fix and that is no longer tolerable.  If they had presented a real plan that put us on the road to financial stability again, that got rid of all the borrowing, raised taxes, but also limited many programs that were popular with the voters but needed to be trimmed to balance the budget, the voters would have swallowed hard and accepted it.  But that is not what we got.  It was not possible because we are held hostage by one-third of the state’s representatives who will not allow any revenue increases.

What may be good is that most people have no concept of the impact of the cuts that are coming or how that is going to further depress California’s economy.  It is time for a wake-up call to those that think everybody else’s programs should be cut but not theirs.  It is time to demonstrate how we are all connected and when we think that just those lazy government workers will get laid off, and then the ripple effect shuts down your small business, it is wake-up call time.  These are the people who don’t think they need to pay school taxes after their kids graduate.  Remember we are now 47th in that spending and declining.  I think the only way they are going to get on board with the real changes that need to be made in California governing is if the system finally collapses and I just think it might.

My own thought here is that as long as we expect the super majority (two-thirds majority) to make and go along with really tough decisions, it is never going to happen, especially when the opposition party has become so radicalized (that would be Krugman’s assumption extrapolated to the federal government also (filibuster)).  My experience trying to bring about change in government bureaucracies is that there is always about 40% who are invested in the status quo, never want change, and sabotage any effort for change.  So until California is allowed to totally fail and we get rid of the two-third requirement for funding issues and let a simple majority decide our fate, California will never fix its problems.  California is a shinning example of failure of populace governance as we have a State constitution with over 500 amendments.  It needs to be trashed.

One thought to those Republicans out there that are obstructing any change in Washington or California:  Why not let the Democrats try their solutions?  If you are right then they will fail, the country will be in a mess and you will be swept into office.  You will finally have your mandate.  Instead you keep trying to maintain the status quo and you are creating the deep mess we are in by obstructing any change to the path we are currently on, which by the way was your bright idea.  What’s the problem?  Are you afraid they will succeed?

On Monday, David Schuster of MSNBC’s 1600 Pennsylvania Avenue had Paul Krugman on to discuss his column in the New York Times on Monday (Behind the Curve).  In this column Professor Krugman took the Obama team to task on their economic plan.  Specifically that the stimulus plan was not near bold enough.  He has consistently argued that the Obama plan is not keeping up with the degrading economy and is not nearly bold enough.  He also feels that their approach on the banks is really dithering and is causing further turbulence in the markets.

Apparently this criticism is grating on the West Wing as David read a quote from Rahm Emanuel, President Obama’s Chief of Staff:  “How many bills has he passed?  Now my view is that Krugman as an economist is not wrong.  But in the art of the possible, the deal, he is wrong.  He couldn’t get his legislation.  No disrespect to Paul Krugman, but has he found a way to seat the Minnesota senator?  Write a (explicative) column about how to seat (explicative).  I would be fascinated with that column, O.K.?  Anytime they want, they can have it.  I give them my chair.” (Interview)

In other words, that’s nice, but not practical and we are doing what is practical.  It reminds me of an ongoing argument I have with my spouse about Abraham Lincoln.  Lincoln, who in my estimation was a truly great man is challenged by my wife who saw him as some historians do, of equivocating what was right with what was politically expedient.  I would argue that Lincoln was a man of his times and he knew that even small steps were progress.  My wife would find that morally reprehensible.  If it is wrong, it is wrong.  He should have stood for equal rights for slaves from day one because it was the right thing to do.

Professor Krugman wisely did not enter into this argument, but I will.  In this case I have to take the side of Professor Krugman.  If what you are doing is not going to help, and may lend ammunition to your enemies to say your policies are ineffective, then half-way, what is possible, will be self-defeating in the end.  This is different from the Lincoln argument in that he was moving inexorably forward and moving the nation as they would move.  To be morally pure is nice, but if it helped no one, it was counter productive.  But in this case, doing not enough, but some, may in fact just empty the treasury and not resolve the problem.  Worse, it will empower those who disagree with this approach and stymie progress for years to come.

The argument boils down to this simple idea:  If what is practical is not sufficient, why are you wasting your ammunition?  I think this comes down to a “War on the Economy”.  Decide what is the appropriate course of action, lead by selling it, and don’t compromise away success.  Democrats, sadly, need to get a pair.  This fight may be more important than the war on terror as our whole economic future is at stake.  So take the fight directly to the Republicans and some conservative Democrats.  Don’t be afraid to actually fight a filibuster.

I understand Rahm Emanuel’s frustration, but he is failing to see the forest for the trees.  Half measures are not progress in this war on the economy.  There is a great story told by Stephen Covey in The Seven Habits of Highly Effective People and I will paraphrase it here.  It is the difference between management (managing legislation through Congress), and leadership (standing up for the right approach).  There were a group of managers that were hacking their way through a thick jungle.  They had come up with a way to change leads often so there were always have fresh hackers and they were making excellent progress.  But one in the group wanted them to stop so he could climb up in a tree to see their progress.  There was great dissention in the group because they were making such great progress and did not want to stop. The point is that it makes no difference if you are making great progress if you making it in the wrong direction.  In this case Rahm is a hacker and Paul is a tree climber.

A breath of fresh air is blowing in from Washington.  For me it is like leaving the 80’s and going straight to the 21st century.  It’s a chance to stop doing stupid things, to be free to think new thoughts.  It is like losing 30 pounds and having this new body where there are all kinds of new possibilities.  It’s like being twenty-something again and having your whole life in front of you.  The change has already been palpable in the celebrations that speak to a younger generation and the look of hope in the participant’s eyes.  The reins of government may have finally been wrested from fat old white guys with tired ideas.  Hope instead of fear may be the order of the day. Rational thought and fact may finally overcome ideology.  Ignorance may no longer be a badge of honor.

But least we forget where we have been, here are a few of the tidbits from the weekends news to remind you of how much we have to overcome:

• In the last three months, at least 24 detainees have been declared improperly held by courts or a tribunal — or nearly 10 percent of the population at the detention camp in Guantánamo Bay, Cuba, where about 245 men remain (New York Times).  Think about it.  10% of your life being held, mistreated, and quite possibly tortured, and then released with a  “Never mind”.  Those that are truly guilty and should face trials will not be tried because out treatment so tarnished our behavior that a fair trail is no longer possible.  We might as well just release them and face the consequences.  If they didn’t hate us before, they do now.
• As Representative Pelosi pointed out in her differing position from President Obama on repealing the Bush tax cuts, “Nothing contributed more to the budget deficit than the tax cuts for the wealthiest people in America.”  Now we are starting a major fight against a downturn in our economy with a debilitating debt run up by the Bush Administration (Associated Press).
• Judge Vaughn Walker rejected the ridiculous claim by the Bush administration that no one can sue for illegal wiretapping unless the government admits the surveillance.  This puts the Bush administration’s violation of Americans’ rights when it intercepted their phone calls and emails without seeking a court’s permission back in play and maybe we will finally get a full airing of what went on and how our rights have been violated (San Francisco Chronicle).
• Abstinence-Only Programs to be challenged.  The Bush administration spends $176 million to push abstinence only programs that have been shown to be ineffective to deterring teen sex and in fact may lead to more frequent occurrences of unprotected sex.  But stupidity and ideology dies hard and in places like Georgia (the South, where else?) they are going to continue to throw their money away on this program.  For some people facts are just too hard to accept but maybe we won’t be wasting federal dollars on failed ideas any more (Plain Dealer).
• Paul Krugman made an elegant argument why we can’t just look the other way on torture, politicizing the Justice Department, illegal wire taps, et. al., and move on (New York Times).   We know President Obama will move immediately to make sure that even the CIA won’t torture anymore, but we don’t know if he has the political courage to face the war crimes and other laws we have broken.  We must hold those who committed these crimes against America accountable.  If it is a new day in America, actions must have consequences and the rule of law must prevail.
• And finally maybe we can end that moron approach we have to Cuba that has been driven by right wing Cuban refugees that has been totally counter-productive, made Cubans suffer, and helped prop up Fidel Castro.  Wouldn’t that be a breath of fresh air?  If we could make this change maybe we could even understand that gays threaten no one.

It is a truly new day and hopefully we can start looking at policies we have been promulgated and judge them truly on their efficacy, not on partisan ideological need.  That is the promise so many of us are so excited about.  Welcome President Obama.  May the wind be at your back.

Paul Krugman has written an intriguing book called “The Return of Depression Economics and the Crisis of 2008”.  It is an important read for most Americans because it probably says more than any other piece I have read so far about our way forward.  Oh, I know what you are thinking.  “Paul Krugman is that liberal economist who just wants to spend, spend, spend.”    Well that is what he is recommending for our present situation, but unlike most Republicans he doesn’t spend, spend, spend, while cutting taxes.  But this book, whether you agree with his prescription for curing what may become a Depression or not, is more about the state of economics.  He goes through each of the various “cycles” that we have gone through in the last century in the world economy and tries to make sense out of their cause and effect, and the lessons learned.  Since I know that most of you won’t read his book, I am going to try to synthesize the main points (which Dr. Krugman may dispute) which should be non-partisan.

If you read my blog, The Dismal Science, you know that way forward for our present predicament depends upon your political perspective.  The big debate is between tax cuts versus public spending, and how big should the public spending be.  One very enlightening exchange was between Nate Silver of Fivethirtyeight.com and Professor Greg Mankiw’s article in the New York Times on Sunday (Is Government Spending Too Easy an Answer?) where the debate revolved around a study that Mankiw claimed showed that tax cuts are highly effective in producing economic stimulus and Silver claimed this was a complete misreading of the study.  You can read it for yourself, my point here is not who is right (Silver obviously is, but that is my political perspective), but that cause and effect in economics is still being argued and disputed along partisan political lines instead of scientific logic.  For those of you who care, the problem is that there are too many variables so the root cause is always up for grabs depending on which variable you think had more impact.

What Professor Krugman does is try to make sense out of all this mish-mash, and even if you don’t totally agree with his cause and effect analysis, the overall thrust is undeniable if not disturbing.  This, simply said, is that there is a lot more risk in the economic world that we ever imagined, and our ability to control this risk and our economy is a lot less than we imagined.  As we go through each crisis from Japan, Asia, Mexico, Argentina, Brazil, or the United States what we find is ever increasing complexities of investments and financial instruments that are more and more susceptible to controlled or uncontrolled changes in the market.  Currency fluctuations and the attendant currency speculation impact investment viability and financial arrangements.  What becomes most evident is that a fix for one nation’s problem exacerbate another’s.  Add to that the free flow of world capital and what you have is a system that is driven by expectations and confidence, said another way, psychology and rumor.  Where in the past runs on banks could be localized and controlled, massive movement of capital (pulling it out of one market to go after another) is now internationalized and computerized.  The bottom line here is that even normal downturns in the business cycle are now reflected across nations, and in some cases magnified worldwide.

We have assumed that we could control our fate by normal monetary policy (interest rates and liquidity) and we are finding out that these are less effective than we thought in a global market place.  We are finding out that our evaluation of risk in investments is much more an iffy proposition.  We are finding out that things we thought weren’t critical to the safety of our economy (and thus required little or no regulation) can cause catastrophic changes across the entire economy.  If you are a fan of chaos theory, think about this:  predicting weather accurately requires the input of almost an infinite number of variables.  It is not really a chaotic process, just that there are so many variables and their interaction so complex that ignoring just a few throws the whole prediction process off.  Welcome to our complex international economy.

We have allowed the free enterprise system run free, or at least controlled those things that we thought could prevent or reduce the impact of major downturns.  Think about simple things like a Federal Reserve System and Federal Deposit Insurance that prevent bank runs, or keep banks solvent during a run  (even if that run has no rational basis).  While these controls have worked in the past, new markets and their mechanisms may make them obsolete.   If we want a world economy that is less volatile, then we may get a free enterprise system that is a lot less free.  Otherwise we are just starting to see this volatility as a normal part of the business climate.  Businesses thrive when they can control their risk, in other words to have some certainty about their investment.  When they can’t, they withdraw from that market or place marginal bets and that starts the downturn of a cycle.  Controls were designed to minimize these perturbations and they aren’t working.

The real issue with all of this is that there is no real agreement on what steps can be taken to reduce this risk.  We don’t yet know or at least don’t have an agreement on how to fix this volatility, what needs to be regulated and protected, and what doesn’t.  What you are left with is that the old answers that have been our conventional wisdom about our economy may now be obsolete.  Think of Einstein’s Theory of Relativity’s impact on Sir Isaac Newton’s Laws of Gravity:  Newton wasn’t wrong, just overly simplistic as we came to understood the complexity of the universe around us.  As these arguments go on around partisan political ideology, our economy may be truly adrift (My conclusion not Professor Krugman’s).  We are truly in uncharted waters and the way forward is quite unclear.  Depressed Yet?

“It is often stated that the Victorian historian Thomas Carlyle in the 19th century gave economics the nickname “dismal science” as a response to the late 18th century writings of The Reverend Thomas Robert Malthus, who grimly predicted that starvation would result as projected population growth exceeded the rate of increase in the food supply.” (Wikipedia)  Eventually he may still be right.  I like to think it is a dismal science because it really isn’t a science at all.  If you are listening to competing economists today recommending what our way forward should be, it is clear that each has a different set of “facts” or root causes.

Recession, depression, deflation, inflation, stagflation, pick your economic malady.  For fixes we have monetary policy (interest rates and controlling the money supply), and economic stimulus (direct government spending and tax policy).  We all know that there are business cycles.   Sometimes people spend and sometimes they don’t.  When they don’t, we go into a recession.  When people are spending (assuming they have money to spend) then goods and services are flowing, there are jobs and incomes.  If they are spending enough, then the economy grows to match their demand.  So what causes them to not spend or not to spend enough to keep us growing?  That is the critical question of economics because if we understand the root cause of these problems, we can prevent downturns or at least control their severity.  But based on the recent battling economists made all the more shrill by the ideological needs of the Republicans, and our inability to control our problems in our current economy with monetary policy, it is clear that the evidence for root causes is still open to debate.

Our current condition certainly was caused by the housing market bubble, or more specifically the implosion of the financial markets.  Michael Lewis and David Einhorn wrote an intriguing piece in the New York Times a week ago about the multiple factors that lead to the financial bubble and burst (“The End of the Financial World as We Know It”).  So much for the Masters of the Universe and unrestricted/unregulated capitalism.  One more conventional wisdom hits the dust.  I am probably oversimplifying, but what this did was take a great deal of money out of the system (devaluation or outright loss of equity).  So this shrank the system, but more importantly made people fearful.  And here is the bottom line on the economy:  Confidence.  Not only did a great deal of wealth go away (ability to buy and invest), but people’s willingness to spend or invest went away also, beginning the contraction of our economy.  Coupled with that is the unwillingness of banks to lend (if people wanted to borrow) because they know there is still a great deal of bad debt out there that is unexposed (another outcome of no regulation) and banks have no confidence in who really has the ability to pay it back.  Put another way, risk is out of control right now and everybody is holding on to their money.

So one way to look at what the Fed did was to put a whole bunch of money back, and lower interest rates (increase the money supply), but it was not near enough and did not restore confidence. People are still turning inward and hunkering down, financially speaking, for the bad times (except for me of course doing my best to keep the economy running through Amazon.com).  In other words the economy is still shrinking and it is feeding on itself and continuing to shrink.  Confidence said in another way, is the mood in the nation that says tomorrow will be better than today, I can buy stuff today (or invest) because I will be able to pay it off tomorrow (still have a job, with an increasing income), or my investment will grow.  Now monetary policy has failed to stimulate the economy and we are left with our only other tool, direct economic stimulus.  That leaves us with direct government spending and cutting taxes.  That is where the games begin.

In either mode, cutting taxes or direct government spending with a contracting economy is going to start pushing the deficit skyward and we have all been conditioned to fear a growing deficit.  But the argument against worrying about the deficit right now is that if we don’t get our economy jump-started, the deficit growth will look like small potatoes to the damage that will be done to our economy.  So the argument has boiled down to, not whether to stimulate our economy, but with tax cuts or government spending and by how much.  Now enter the ideology (Note: An extremely good analysis of how the conservatives are reinventing history to defeat the Economic Stimulus Package can be found on MediaMaters.com).

If you look back at the Great Depression, it is argued that the massive spending program that President Franklin Roosevelt embarked upon saved us and put people to work.  So the argument goes that because private spending will not mobilize the capacity of our economy, public spending must.  Lessons from the Japanese experience (10 years of stagnation) seems to tell us that to be cautious and timid in using government spending to stimulate the economy is worse than no spending at all.  It simply raises the deficit without the commensurate growth in the economy.  I say “seems” because we have different economists interpreting the data differently (The Dismal Science).  But now enter the conservatives.  Most economists are telling us we need a major investment (read spending) by our government.  But government spending is anathema to Republicans.  They would much rather see tax cuts that puts money into the hands of consumers (private spending).  They are also against raising the deficit which ought to give you pause since they created it.  The end result here is going to be a real fight between massive spending and tax cuts, along with an attempt to reduce the overall spending effort.

President-Elect Obama has proposed a spending plan that is about one-third tax cuts and two-thirds public spending.  My and others arguments against the tax cuts are they are very ineffective in stimulating the economy as the last round of tax cuts and rebates demonstrated.  People either spend it on foreign made consumer goods or more likely, save it.  So what we get for the expenditure is nothing.  The other argument is why would business (who get a tax credit for hiring people) hire people in a declining market?  They wouldn’t and once again this is an example of how the Republicans have failed to recognize that private spending can no longer get us out of this shrinking economy.

Finally there is the issue of the size of the spending effort.  Republicans want to limit this using the public’s fear of deficits as their fear card.  They are good at using the fear card but usually not to good ends.  My fear is the same as many Democrats, that President-Elect Obama has not been aggressive enough on the spending plan.  As this argument rages, we sink further into oblivion.  Just keep this in mind:  Public spending on infrastructure gets us something for our money besides jobs.  It gets us the stuff to run our economy on in the future.

So the fight is on.  My thought is that conservative economic ideology, in some ways co-opted by Democrats over the last 30 years starting with Ronald Reagan, has brought us to the brink.  If they win the arguments about being tentative, it may just push us over the edge.  We need real change and that means real courage to try something new.  I am not sure we are up to it and we don’t have a World War II to rally the nation like Franklin Roosevelt did.

Restoring confidence is the key to economic recovery.  That is only going to happen when most of us believe we are on the right path.  Prior to the election almost three-quarters of our population thought we were on the wrong path.  Continuing Republican economic ideology just continues us down a path that we have already rejected.  Real change that will result in confidence in our future means that we have a vision for that future that we all believe in.  I haven’t seen that vision yet, but the outline of that vision is starting to form as we start to formulate our recovery plan.  If it is big enough and is focused on a green and technological future, we may all get our confidence back.  If it is pumping money into the free market so it can decide our future with its magic hands, we are doomed.

Note:  Paul Krugman has written a wonderful book (“The Return of Depression Economics”) if you want to understand how our economy works.  He wrote it for us regular people and it is worth your time.

There was an interesting discussion on CNN Sunday regarding whether the Republican Party in the upcoming economic stimulus debate would be the loyal opposition or obstructionists.  I would have to say the latter.  The overused expression is that we have to put away our partisanship and work together to solve our problems.  Blah, blah, blah.  The underlying flaw in this advice is that the way forward is the antithesis to what Republicans stand for.  From a purely political point of view Republicans have no interest in seeing Obama being widely successful.  It would be the death Nell of their party.  It would be the final nail in their economic theory’s coffin which is the underpinning of everything they stand for.  Let’s examine that philosophy and the talking points they have put out on why their 12 years in Congress and eight years in the Executive Branch had lead to such dismal results.

In a nutshell their economic religion goes something like this:  Government is bad, but necessary so you must minimize government interference with business (note to do this you also have to deny scientific information and findings); allowing the free market to operated unfettered will provide an equitable distribution of capital that rewards success and punishes inefficiency and waste; low taxes are the key to stimulating business; and the wealthy produce wealth which flows down to the rest of us.  Unless you have been asleep for the last 12 years, you know that this philosophy has been carried out to the nth degree and it has failed miserably (see my blogs:  Republicans Running on Empty and The End of Ayn Rand Fantasies and Reaganism).

Of course the Republicans don’t accept this and are busy reinventing history in statements like we lost our way and let spending get out of control.  That is true, but is not the problem.  The spending was for nothing; tax breaks for the rich and pork projects that did nothing for our infrastructure or economic viability in the future.  They let government grow, but they made it totally ineffective by handing off critical regulatory functions to private enterprise and gutting effective administration by appointing political lackeys instead of competent civil servants.  They were highly effective at reducing taxes and regulations on business and we are now in the greatest economic freefall we have ever faced.  My point is simple:  We are where we are due to Republican economic theory not because they lost their way.  It has played out and it may be our ruin.  Keep this in mind:  Our economic problems are not caused by the wars in the Middle East or George Bush’s incompetence (although a contributing factor).  They are caused by an economic theory put in practice that has failed miserably.

So what are the Republicans going to do in this climate?  They will let some form of stimulus package go forward, but not enough to make the argument that their theories are bankrupt.  They want some success, but as a party they can’t afford to see real success.  Their thinking has not changed and is exemplified by “Barack the Magic Negro” and their failure to understand this is not just a parody.  In the face of crumbling infrastructure and other nations racing past us, they still tout small government, lower taxes, and less regulation.  They have totally missed the lessons of the last twelve years.  If they are allowed to be the obstructionists they are, we as a nation are in deep trouble.  As Paul Krugman indicated in his column on Monday, they may just bring us the next Great Depression (Fighting Off Depression).

So my advice for all the pundits is simple.  Bipartisanship is only viable in this climate if Republicans accept that they must jettison failed ideology.  It is the difference between large tax cuts or government spending to stimulate the economy.  Tax cuts have failed miserably and do not stimulate spending on things that are strategically important for our future and create jobs.  But Republicans are not about to give up their identity so what will be called bipartisanship will be compromises to nowhere.  They will be compromises that don’t allow the big changes and programs we need to right our ship.  Republicans will go around screaming “Big Government, Be Afraid”, but their failed economic policies have brought us closer to a nationalized economy than anything Democrats have ever proposed.  What Republicans fail to recognize is that Democrats understand the power of the market place, but Democrats also understand that for it to work effectively it has to be channeled and controlled.  If big government spending programs save us and implementing smart regulations restores confidence, then the Republicans are doomed.  They can’t afford to let that happen.  So forget bipartisanship.  It is the road to nowhere.

This Sunday there were a couple of themes that came out in the Sunday News shows and the editorials that I think are worth reiterating here.  The first has to do with how the Republicans have campaigned, who they are campaigning to, and the second has to do with our economy, its fix, and its future.  Let’s start with the Republicans.

David Brooks, the conservative, opined in “Ceding the Middle”, that modernizing the Republican party was critical to a win and that John McCain “…never escaped the straightjacket of a party that is ailing and a conservatism that is behind the times. And that’s what makes the final weeks of this campaign so unspeakably sad.”  David is arguing that there is still great value in conservative values, but that by not modifying their approach to the challenges of today, the party missed a major opportunity to revamp and revitalize the Republican Party.  He still thinks John McCain would be a great president, but I would argue that if he couldn’t lead his own party out of yesteryear, how would he lead the nation out yesteryear.  But the real question here is that if you are appealing to old tired out ideas, just exactly who is your base who thinks these ideas work?

Without the blinders of conservative philosophy, Timothy Egan opined in “The Party of Yesterday”  that the Republicans have focused their whole approach on the less intelligent and ignorant of our population. A recent study identified the most educated cities in our nation based upon percentage of college graduates:

“Among the top 10, only two of those metro areas — Raleigh, N.C., and Lexington, Ky. — voted Republican in the 2004 presidential election.  This year, all 10 are likely to go Democratic. What’s more, with Colorado, New Hampshire and Virginia now trending blue, Republicans stand to lose the nation’s 10 best-educated states as well.”

Is this the less American parts of the country that Sarah Palin refers to?  The point here is very simple.  The Republicans have a campaign focused on anti-intellectualism, jingoism, and a fear based appeal by claiming we are moving to socialism, elitism, and consorting with terrorists.  They have not argued effectively on the issues and have focused on character instead to appeal to our less educated citizens.  I think the conclusion is obvious.  When your conservative philosophy for our future doesn’t really address the challenges we face, all you have left is to try appeal to those who don’t think deeply about the issues and react to fear.  Hopefully this election will be  a referendum on that kind of thinking.

The other theme was about what kind of an economy will we have for the future.  With the nationalization of the banking industry are we moving toward a much more nationalized capitalism?  Although conservatives see the need for strong intervention now, they would prefer far less government control and say in how banks operate.  But after the bank failures in 1929 and the reforms that were instituted to prevent such a catastrophe again, we forgot those lessons in conservative pushes to get government out of the markets.  The real issue here is when does government intervention limit the necessary risk taking that is the hallmark of a vibrant and innovative economy.  Thomas Friedman opined in “If Larry and Sergey Asked for a Loan”  that we need to regulate but in a careful and thoughtful way:

“Bottom line: We must not overshoot in regulating the markets just because they overshot in their risk-taking. That’s what markets do. We need to fix capitalism, not install socialism. Because, ultimately, we can’t bail our way out of this crisis. We can only grow our way out — with more innovation and entrepreneurship, which create new businesses and better jobs.”

The point here is that the world has changed and even progressives see how the market place is critical to our recovery and we must strike a balance.  But note a balance is a far cry from the conservative dogma of laisse-faire capitalism.  But I think the most important comment about where our economy is going was made by Paul Krugman in his editoral, “Desperately Seeking Seriousness”.  In this piece, Mr. Krugman opined that the Republicans were running a frivolous campaign and it was working until the economy focused the voters on serious issues.  He closed his editorial with this:

“Will the nation’s new demand for seriousness last? Maybe not — remember how 9/11 was supposed to end the focus on trivialities? For now, however, voters seem to be focused on real issues. And that’s bad for Mr. McCain and conservatives in general: right now, to paraphrase Rob Corddry, reality has a clear liberal bias.”

The point here is that we can always go on doing stupid things if they don’t have consequences that are immediately felt.  But reality has focused us on our economy and the market system as it has been working in this country.  The market place of the future will not be the market place of the past if we are to regain our leadership in the world.  It will be a market place that does have a liberal bias, but also as Mr. Friedman points out, a market place with “smart regulation”.  This is not a world for slogans and conventional wisdom, but for well thought out policies for our future.  These are not the voters that the Republican’s have targeted and is why they will lose because they are not thinking deeply about where we are going or presenting policies that can address our challenges.