Eurocrisis

It's been said many times that democracies are unable to deal with economic crises, but I don't mind saying it again. Voters always respond to promises of free lunch, despite having been told, over and over again, that there is none.

Keynesian economics really ought to work — and would, were it not for democracy. Stimulus really is necessary to pull an economy out of a recession, but the other side of Keynesianism never happens: when economies are booming, responsible governments should raise taxes and cut spending, building reserves to use during the inevitable downturns. Democracy makes that impossible. When there's extra money flowing in, pandering politicians delight in giving it away.

By comparison with most of Europe — especially the south — the USofA doesn't look all that bad. Greece, of course, is a total basket case. Word is out that bondholders will have to take a 50% haircut, although I'm inclined to think 50% won't be enough, and we should brace for the crash and burn. The Germans have approved about $600 billion in bailout funds, but most economists think that's not nearly enough. It's more than enough for the German voters, however, who don't want their tax money going to bail out those feckless, swarthy southerners.

One of the biggest problems central banks around the world have to deal with, as usual, is lack of transparency. Nobody is clear on how much exposure banks around the world are carrying — not only for Greek debt, but for sovereign debt from other shaky countries as well. Banks have been allowed too much power to hide their holdings, worldwide.

For Europe, moreover, getting a fiscal solution to the financial crisis is even harder than it is in the United States. If the Eurozone is going to survive, it needs fiscal as well as monetary union — and the usual democratic political restraints make that look next to impossible. The ECB, if it gets up the nerve, may just have to inflate Europe out of its dilemma. Bankers and bondholders, of course, will hate that — but the only way I can see for all that sovereign debt to be paid off is with a much cheaper Euro.

The Germans, of course, will hate it the most — but so will individuals whose savings, in Euros, are greater that their debts. It would, of course, also hurt all those trying to boost their economies by exporting to Europe. All in all, it's a mess.

Obama Mans Up

It is good to see Our President taking up the populist banner and telling us it's time to "soak the rich." I guess Plouff and Axelrod finally figured out that the old Clinton approach of "triangulation" wasn't working, and it was time to try the old Clinton approach of "doing whatever the polls say." A sizable majority of Americans want the rich to pay significantly higher taxes. Now, so does Obama.

"Class warfare," say the Republicans. I don't know about you, but I saw the class war begin thirty years ago, and guess what, fellow proletarians? We lost. If there really were any "class warfare" going on now, it would have to be a counterrevolution. The rich won the war outright, culminating in the Bush income tax cuts and, more important, the reduction of capital gains taxes to 15%.

I'm still not at all persuaded that Our President is on Our Side, but if it keeps Rick Perry out of the White House, whatever chicanery he attempts is okay with me. More important, delivering a strong, populist, anti-fat cat message could help the Democrats weaken or break the Tea Party grip on the Republican Party and the House, and also hang onto the Senate.

As for economic stimulus, the new tax proposals, even if they were enacted into law, would not do any more than the similarly doomed JOBS proposal; but, like the JOBS plan, they make for good politics. Anyway, the actual proposals don't matter, provided the president is seen as aggressively asserting his belief in them.

An unspoken but obvious truth of American politics is that independents don't know enough to make rational choices. Granted, most registered Democrats and Republicans also don't know shit from Shinola, but at least they have people telling them what to believe.

Independents ignore policy, and vote based on personalities. They particularly look for strength. One must hope that fourteen months is long enough for America to get over its perception of Obama as a wimp. If not, a raging asshole like Rick Perry might be our next president.

The Vickers Commission

Regular readers of this blog are familiar with my view on the repeal of Glass-Steagle back in the last days of the Clinton administration, and my view of Bill Clinton for signing it. Irregular readers, I suppose, should be made aware that my feelings about that action are far more uncomfortable than their constipation.

The British, at least, seem to see the problem in allowing retail banks and investment banks to be one in the same. Governments that provide deposit insurance, when banks are on the brink of failure, find themselves facing the necessity to bail out the whole institution — thereby making whole investors, speculators, and just plain gamblers as well as depositors.

What Sir John Vickers and his colleagues have come up with, for the UK, is a plan to "ringfence" the segments of the banking industry that serve ordinary consumers and businesses, while letting the "players" eat their losses. It sounds like a good idea to me, albeit a bit odd. The too-big-to-fail institutions, under the Vickers plan, could be allowed to fail — while their retail subsidiaries would be saved. Go figure.

Well, if that's all that's politically possible, I say, "Go for it." The British, according to all the talking heads I've heard, are likely, indeed, to "go for it." Here in the USofA, of course, anything similar wouldn't be at all likely. The banks still own both our political parties, and they're still working (with nauseatingly predictable success) to eviscerate Dodd-Frank, which wasn't a particularly strong bill in the first place.

What we really need, of course, is a return to Glass-Steagle — which would require the megabanks to split their investment and retail segments into separate companies, and might encourage a bit more healthy fragmentation along the way.

2008 should have taught us that too big to fail is to big to exist.

Remembering 9/11

On the morning of September 11, 2001, I woke up in the guest room of my mother's condo in Margate, Florida. I was due to start driving back to New York that morning. She was saying something about somebody blowing up the World Trade Center.

My mother was suffering from dementia, and it was getting worse. I'd been in Florida all the previous week, trying to get her life straightened out, and to figure out how long I could let her stay on her own. When she told me about the World Trade Center, I thought she must have been watching the History Channel — a show about the 1990 attempt — and mistaken it for the news.

I made my way to the kitchen, and looked at her little TV. A minute later, the second plane struck.

Mom thought I should stay a few more days, but I wanted to get home. I had to get home. I got out on the road, listening to the radio. In South Carolina, I stopped for gas. The attendant noticed my New York tags.

"Did you know anybody got kilt?" he asked me.

"I don't know," I told him. "I just have to get home."

"I'll pray for you," he said.

Inside the station, the walls were hung with NRA banners, American flags, and a big portrait of Ronald Reagan. "These people," I thought, "are my polar opposites, but they're going to pray for me." Throughout the South, everywhere I stopped, my New York plates brought me special kindness and sympathy. It was the only time, in my frequent travels up and down I-95, that ever happened. I would leave a rest stop with fresh coffee, think about just how goddamned nice people could be, and drive on with tears rolling down my face.

I drove straight through the night. As I came closer to home, I heard about bridge and tunnel closings, and wondered if I'd be stuck in New Jersey for who knew how long, but I got lucky. I hit the Verrazano Narrows Bridge during about a two hour window when it was open. When I got onto the Brooklyn-Queens Expressway, mine was the only car on the road. If you know the BQE, you know that never happens.

There is one section of the BQE where the eastbound lanes run underneath the westbound lanes, and the roadway makes a wide turn. As I came around that turn, lower Manhattan came into view across the river.

I'd seen the endlessly repeated video of the impacts on every TV at every gas station and rest stop along my way. Now, though, I was seeing what was left. It was still dark, but the scene was lit with floodlights. Two giant columns of smoke went up and up until they disappeared into the sky.

Eventually, I got home and collapsed into bed. Of all the times I've driven between Margate and Long Island, that was the fastest I've ever done it.

It wasn't long before the war drums were beating. Many of us marched against invading Iraq, but it made no impression on anybody in power. All the major news media were caught up in a patriotic frenzy, and none of them seemed to be paying attention to the available facts. Some of the Southerners who had prayed for us New Yorkers on 9/11 were saying that the attack was God's punishment for our sinful, liberal ways.

National unity lasted about a week. Now, ten years later, our country is more balkanized than ever.

The JOBS bill: weak economics, great politics

Yes, having listened to the Republican debate, I felt obliged to listen to the President's "JOBS" speech as well. Since it was a bit more subtle than the debate, I listened twice.

The first thing I noticed, of course, was that Obama was taking an aggressive tone — something he hasn't done since before he was elected. I'm wondering if David Plouffe, chief Obama political adviser and architect of Clinton's "triangulation" approach, might be tendering his resignation soon. Damn, I hope so, but I suppose that even Plouffe must have learned something over the past two years. It really is time for a new, ballsier* Obama.

*[Surprisingly, the word "ballsier" is not identified as a spelling mistake by my computer's dictionary.]

I liked the fact that the White House "leaked" a $300 billion proposal, then came through with 50% more. Maybe Obama is finally getting the hang of how to negotiate. By presenting the Republicans with policies they supported in the past, he leaves them with the choice of going along with most of it, or looking like the obstructionists they are. Count on seeing about $300 billion worth of stimulus.

The new stimulus package, based on politics rather than economics, will do little or nothing to create new jobs, of course. I suppose it's conceivable that a further extension of unemployment benefits might make it through the House, but I wouldn't place any bets on it. That leaves the payroll tax cuts, the infrastructure projects, and some state aid.

Tax cuts rarely increase demand. Payroll tax cuts for workers only affect people who already have jobs. Some of them will use the extra money to pay down debt, and most of the rest will use it to increase savings in the face of job insecurity. (When their jobs are insecure, workers tend to take defensive stances — not yell "Whoopie!" and buy a new sofa or a trip to Vegas.) If employers get cuts to their share of payroll taxes, they'll just pocket the money. They won't hire new workers unless there's a lot of new demand — demand that can't be met by bleeding their existing workers dry.

As for the infrastructure projects, they're unlikely to generate new jobs for a year or two. Granted, we'll certainly still need those new jobs in a year or two, and the jobs have to be done, but I can't see any great increase in construction jobs any time soon.

As I've said many times before, though, federal aid to the states can be one of the best things Congress can do. Yes, it will be too little, too late, but at least some jobs could be saved — provided the aid is targeted at keeping state and local employees from losing their jobs. We really don't need any more subsidized sports arenas, for example, providing short-term construction jobs followed by long-term tax drains.

To me, the jobs bill the President will be sending along to Congress was a pleasant surprise. It already has the likes of Eric Cantor on the defensive, and it just might give the Democrats a boost in the next elections.

On the other hand, it's hard to imagine any real economic progress any time soon.

The Republican Debate

Unlike most of America, I actually watched it. Needless to say, what most of America thinks about it depends on what most of America's individually preferred media have to say about it. Here are some personal impressions:

Rick Santorum's facial expressions, as he listened to the few questions the moderators bothered to address to him, precluded anybody actually listening to whatever answers he eventually offered. "Gee," I thought, "he looks like he comes to school on the little bus." I suspect he won't be around for the next debate. (By the way, the eventual answers were not too impressive either.)

Michele Bachman's hair and makeup were just wrong. There was a bit too much blue eyeliner, and a hell of a lot too much hair lacquer. Many will say that it's a shame that a female candidate's appearance should matter so much, but appearances matter just as much for male candidates as well. As for what she had to say, who knows? She got totally predictable questions, and answered them with generally off-topic talking points.

Newt Gingrich, who knows he's out of it, was just having fun. I kind of enjoyed the way he stirred the pot — when the "moderators" (ha!) gave him the chance. As a long-term pot stirrer myself, I just had to smile.

Herman Cain acquitted himself nicely. Although I suspect nobody in the mostly Tea Party audience was following his "9-9-9" plan, he sounded as if he knew what he was talking about, which, of course, is what matters most. The plan itself would exacerbate the rift between the rich and the poor (and the decimation of the middle class) in the United States, but it is proof that race need not be a significant factor in the class war. Wealth is colorless. Nevertheless, as we're all aware, he doesn't stand a chance.

Jon Huntsman has good hair, but he's a bit too tan. Is that supposed to suggest that he actually spent time outdoors in Afghanistan? If so, I suspect that suggestion might be just too subtle for the Republican base. Anyway, he didn't use the opportunity of the debate to establish himself as a centrist — his only chance to differentiate himself from the pack — and hence made little or no impression at all.

Ron Paul came over as aged and frail, I'm afraid. He's lost the oomph he showed four years ago, and while he tossed a dart or two at Perry, they didn't hit very hard.

So, that leaves Mitt Romney and Rick Perry, the front-runners. In the handsome-off, I thought Romney had a slight advantage tonight — that is, until MSNBC tossed in an homage to Ronald Reagan (presumably because the debate was held at the Reagan Library.) Perry, we could see, looks a lot more like Reagan that Romney does.

The big news, however, will be that Romney wants to preserve Social Security while Perry wants to end it. Given that primary voters tend to be a bunch of old farts like me, I'd say "advantage Romney" for tonight — but you can't, by any means, count Perry out.

Hell. He really looks quite a lot like Reagan.

Balanced Budget Amendment

Frankly, I don't know why I'm even bothering to write about a balanced budget amendment, because it is now, and always has been, an extraordinarily stupid idea. A balanced budget amendment means that government no longer has access to fiscal policy — and given that monetary policy appears to be totally tapped out at the moment, fiscal is all that's left.

Well, it would be left — if the right-wing crazies were willing to use it — but, no, then the economy might pick up a little and offer a little advantage to the center-right not-quite-so-crazies represented by Our President.

In case anybody reading this is unaware, the states that must balance their budgets tend to do it with tricks — case in point, New Jersey raiding its public employee pension system for a couple of decades — and with federal subsidies. Nobody is going to subsidize the feds, though.

Then, there's that "family" argument. Families do not run balanced budgets, year to year — even the most responsible. Scarcely anybody buys a house or a car without borrowing; and, these days, scarcely anybody gets a higher education without borrowing. They get the economic advantage when they need it, and pay it back over time.

So, just in case you think a balanced budget amendment is a good idea, remember — you're an asshole.

The Speech

We don't know what Barack Obama will say to draw viewers away from the opening game of the NFL season next week, but Robert Reich has thought about it. You will find his thoughts here.

Sadly, his ideas would require that Our President grow a set of balls. I don't see much chance of that happening, of course.

Read Reich. He says it a lot better than I could.