From the monthly archives: August 2011

Small Deficits Prolong Depressions, Big Ones End Them?

by Lev on 31 August 2011

This is worth sharing:

http://motherjones.com/files/images/blog_deficit_wwii_0.jpg

It’s from Kevin Drum, who asks: “Did WWII rescue the American economy or not? And if it did, what’s the argument for not trying it again, but without the war?” If I had to give what I consider to be a knee-jerk answer from a right-wing perspective, it would be that WWII created a sense of national purpose in standing together against evil and eliminating all those  National Socialists, clearing the way for new business opportunities in Italy and Germany. New Deal programs, however, just made people lazy by taking away the incentive to give them “real” jobs, sapped the peoples independence and made the government’s books being unbalanced set a bad example for the public on debt. Am I right? It’s a shame that economists don’t take narratives of good and evil into account in making their predictions. Then again, no prominent conservatives believed any of this when a Republican president had a crappy economy, and they won’t when another Republican president has a crappy economy in the future.

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Remember, These Guys Want To Invest YOUR Money

by Lev on 31 August 2011

John Paulson, the hedge fund manager famous for making billions from bets that securities backed by subprime mortgages would prove worthless during the financial crisis, has also suffered as large bets on banks recovering have turned bad. Bill Gross, manager of the world’s largest bond fund for Pimco, has seen his widely followed call to avoid US government debt backfire. [...]

According to a person familiar with Mr Paulson’s thinking, he was also exceptionally keen on gold. When the Fed began to buy bonds in 2009 in an attempt to stimulate the economy, he was advised by Alan Greenspan, former Fed chairman, that this would ultimately lead to higher inflation as the economy recovered. So his $35bn hedge fund decided to allow its investors worried about inflation to transfer their holdings from US dollars into gold, using derivatives that track the price of the precious metal.

Inflation was also on the mind of Pimco’s Mr Gross, co-chief investment officer for Pimco and another recipient of a Morningstar award – fixed income manager of the decade – for his stewardship of the $244bn Total Return bond fund. He spent the first half of this year warning investors that holders of US Treasuries were not compensated for the risk of higher inflation by the low interest rates on offer. “Bond holders are being duped into thinking that inflation will renormalise to justify existing yields,” he said when 10-year Treasury yields stood at 3.5 per cent.

To be clear: inflation can become a problem. It is not one now, and hasn’t been a significant problem for nearly thirty years. I find it exceptionally perverse that much of the financial and political establishments are paralyzed by fears of prospective inflation that they refuse to act to fix the actual problems we confront in our economy today, but this provides some evidence that these fears might not be entirely cynical. Merely irrational, and perhaps based on some sort of misremembered incident from years ago. Sort of like how people are so freaked about terrorism, right?

Anyway, it’s good to see inflation hawks put their money where their mouth is and lose. Maybe this will convince other finance industry types to cool it a little bit with the inflation talk? Also, listening to Alan Greenspan at this point in time is so misguided as to be simply baffling. It’s like the Romanovs asking Rasputin about how to manage the empire, isn’t it?

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Quote of the Day: Bush-Appointed Judge on GOP Hypocrisy

by Metavirus on 31 August 2011
Here’s a gem from a Bush I-appointed federal judge who struck down a Texas law that basically forced healthcare providers to become anti-choice advocates:
It is ironic that many of the same people who zealously defend the state’s righteous duty to become intimately involved in a woman’s decision to get an abortion are also positively scandalized at the government’s gross overreaching in the area of health care.
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What’d I Say?

by Lev on 30 August 2011

Pretty much this:

Hence the dilemma for the White House — which is leading to real disagreements in the West Wing over where to go next. One gets the sense Team Obama is surprised by how much damage the president suffered during the debt ceiling debate. Many folks in the president’s circle thought he’d get more credit with the public for looking like the reasonable guy in the room. A miscalculation?

Of course they did. And maybe high-information voters realized that Obama was in a really tough position and had some sympathy for the man. Then again, most high-information voters are partisans, and there wasn’t much for a partisan Democrat to like about the compromise. But we all know partisans weren’t the target of this. The White House’s avowed strategy is to pursue independents through both rhetorical and policy choices. Independents, as survey after survey shows, tend to be the least-informed of all groups. Expecting a narrative about Obama’s reasonableness to rise above the din of screeching Republicans and panicked finance and media folks just seems very unlikely to me.

The best way to appeal to independents right now is by improving the economy. The next best way is to have a simple, appealing, pervasive message that you pound into submission through every channel available to you, something that filters down to the bottom. I have to hand it to the GOP, they’re really, really good at doing that. Obama, on the other hand, seems to think wooing independents is no different from wooing the college graduates and pragmatic progressives he won over during the Democratic primaries. He’s going after them the same way: assuming they’re paying attention, making a cerebral and thoughtful case, and counting on people being smart enough to see through the bullshit. Only he’s doing it with people who aren’t paying attention and don’t think much about politics. At least they realize it didn’t work out. The first step is admitting there is a problem, etc.

All in all, in a balanced, fair political environment Obama might have garnered something from being seen as responsible. But it’s puzzling to me that the Administration ever thought we had such a thing. Really, the Administration should have realized that the wise old men were full of shit when they ignored the deficit-cutting measures of the Affordable Care Act and echoed any criticism of it they could find.

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Bush’s Greatest Success: Terrorism Somehow Became An Existential Threat

by Metavirus on 30 August 2011

One of the biggest things that bothers me about life in America post-9/11 is the accepted common wisdom that Islamic terrorism is some kind of existential threat to homeland security/civilization/the western world/etc.

Leaving aside the fact that acts of terrorism carry with them the grave potential to goad our own governments into tearing down the walls of civilization onto ourselves (see, e.g., torture), it really is a mind-boggling proposition to think that a ragtag band of several hundred religious zealots could somehow level all of Western Europe and the U.S. with their superhuman Jihad Deathrays.

The whole bag of nonsense becomes really ridiculous when you consider how few people are actually killed by Islamic terrorism on a regular basis:

“The number of people worldwide who are killed by Muslim-type terrorists, Al Qaeda wannabes, is maybe a few hundred outside of war zones. It’s basically the same number of people who die drowning in the bathtub each year,” said John Mueller, an Ohio State University professor who has written extensively about the balance between threat and expenditures in fighting terrorism.

Last year, McClatchy characterized this threat in similar terms: ”undoubtedly more American citizens died overseas from traffic accidents or intestinal illnesses than from terrorism.”  The March, 2011, Harper‘s Index expressed the point this way: ”Number of American civilians who died worldwide in terrorist attacks last year: 8 — Minimum number who died after being struck by lightning: 29.”  That’s the threat in the name of which a vast domestic Security State is constructed, wars and other attacks are and continue to be launched, and trillions of dollars are transferred to the private security and defense contracting industry at exactly the time that Americans — even as they face massive wealth inequality — are told that they must sacrifice basic economic security because of budgetary constraints.

For this we’ve tortured people?

This is what we’re spending hundreds of billions of dollars a year to fight against?

We’re barreling down the road of someday needing a routine anal probe at the airport security checkpoint for this?

(h/t JC)

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News Flash For Republican Ayn Rand Lovers: She Really Hated Religion

by Metavirus on 30 August 2011
Ever since Obama was elected, a starry-eyed Republican love affair with Ayn Rand has continued to blossom.    California Republican Member of Congress John Campbell breathlessly passes out copies of Atlas Shrugged to his staff.  Medicare-Hater-In-Chief Paul Ryan is a self-avowed Rand devotee.  And the list goes on and on… The thing that amazes me about all this is how willfully blind all these Rand lovers are to her well-documented hatred of religion.
Doesn’t it seem more than a little bit funny to anyone that the party of fundamentalist Christian dogma in this country is so shamefully puppy-eyed over one of the first serious modern antitheists, who preceded Christopher Hitchens and Sam Harris by decades?
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Life During Wartime: Typically Free Of Bipartisan Unity

by Lev on 29 August 2011

Another week, another Tom Friedman piece trying to create the Democratic Party as though it didn’t exist:

As for America, we’ve thrived in recent decades with a credit-consumption-led economy, whereby we maintained a middle class by using more steroids (easy credit, subprime mortgages and construction work) and less muscle-building (education, skill-building and innovation). It’s put us in a deep hole, and the only way to dig out now is a new, hybrid politics that mixes spending cuts, tax increases, tax reform and investments in infrastructure, education, research and production. But that mix is not the agenda of either party. Either our two parties find a way to collaborate in the center around this new hybrid politics, or a third party is going to emerge — or we’re stuck and the pain will just get worse.

When the world is experiencing so many wrenching changes at once — with already high unemployment and weak economies — the need for America, the most important pillar of all, to be rock solid is greater than ever. If we don’t get our act together — which will require collective action normally reserved for wartime — we are not going to just be prolonging an American crisis, but feeding a global one. [Emphasis added by myself]

Steve Benen rightly points out: “Let’s see, a combination of long-term cuts, combined with additional revenue, with an emphasis on boosting investments in infrastructure, education, research, and production. Why does this sound familiar? Because it’s President Obama’s agenda.” Which is true, of course. One almost wonders if there’s an official NY Times rule never to single out one party for criticism, which would explain quite a bit actually. Only I know there isn’t because they haven’t fired Paul Krugman yet.

But it’s worth noting that the premise here isn’t even correct. It’s true that, during WWII, a lot of Republicans set aside their differences and joined with FDR to beat Germany and Japan. I am not well-versed enough on American History to declare this for certain on every war, but from what I’ve read, that’s far more the exception than the rule. Civil War Democrats were absolutely horrible to Abraham Lincoln, opportunistic and double-dealing from the start. According to McPherson’s book, virtually all war- and slavery-related legislation passed on strict party lines, and Democrats frequently resorted to outright racist attacks on Lincoln and his policies to some effect. In addition, Lincoln had to suffer through the indignity of the Congressional Joint Committee On The Conduct Of The War, led by hardcore antislavery Republicans who pushed for a far more aggressive warfare strategy. This occurred in 1861, by the way, which was only the first year of Lincoln’s term. Just imagine if the Democrats had created a special Congressional Committee in 2009 merely to chew out Barack Obama and the people executing his strategy, and you sort of get the idea. Ultimately, the Civil War was not especially a time of unity, even in the North. There’s a reason Lincoln always gets that #1 rating out of all the presidents, after all.

Friedman’s argument also omits Vietnam, the most obvious example of partisan disunity during wartime. The conflict was integral, in fact, in destroying the system so cherished by Friedman and his forbears, in which both parties had liberal, moderate and conservative wings. The Democratic Party’s messy, public turn against the war–and the Republican Party’s harsh turn against those who opposed it–led to a reordering of the political system in which the Northeast and the West Coast went from being generally Republican to being generally Democratic, and the South, Interior West and Southwest all went the other way. Of the actual debates of the time enough has been said already, Rick Perlstein’s books document it all well enough. Additionally, it’s widely known that Richard Nixon went so far as to play partisan games with the war’s outcome by sabotaging Lyndon Johnson’s attempt to get a peace deal in advance of the 1968 election. So much for patriotism and standing behind the president. The Vietnam era is well known as a low point in national unity, and rightly so.

There are other examples as well–one could cite Dwight Eisenhower’s promise to go to Korea in 1952 as a partisan ploy (though one with an ultimately positive outcome), there were the bad faith negotiations of Henry Cabot Lodge with Woodrow Wilson over the League of Nations (and Wilson’s civil liberties-demolishing actions during the War, mainly directed at his left-wing critics), or the near-treasonous antics of several pre-Civil War Democratic Presidents (Pierce, mostly, though also Buchanan) that hurt the country deeply to advance slavery and their own party’s fortunes. Put simply, WWII is an outlier in American History. Far more often, wars are declared in a bipartisan fashion, and then after some time are deployed by the out party to attack the party in power. And here’s the kicker: that in and of itself is not wrong. There’s no particular reason why the out-of-power party ought not to mount criticisms on the handling of a war. I’ve never found the “not supporting the troops” argument persuasive. Much of the time, politicians blunder into wars without much of a plan to win them, and if not pressured they more often than not will devolve into quagmires where we can’t leave because that would mean that lives were wasted. (No, I’m not thinking of any one in particular, why do you ask?) But the notion that wars breed unity is oversimplified. Sure, maybe for a little while at first. Maybe if it looks like we’re winning. But the simple fact is that wars encourage exclusionary, nationalistic sentiments that don’t stop at the battlefield, usually the dynamic fractures the relations between countries that go to war, then it fractures the countries themselves. I can’t even think of a single exception to this dynamic–the only times it’s avoided is with really quick wars, like the Mexican-American or Spanish-American Wars for example. I really, really think the war at home is closely related to the wars we fight elsewhere, and there is certainly a correlation between the times when we fight wars and the times when we can’t act together as a people. If Barack Obama really wants to let the country heal, he’d ignore the generals and get us out of Iraq and Afghanistan yesterday. And if history is any guide, that would be about fifty times more effective than rhetorical gestures (and infinitely more so than bipartisan trade deals). Finally, as always, Tom Friedman is an ill-reasoned pompous ass who ought to be writing nothing bigger than a PTA newsletter.

Also, there’s no way I am not posting this:

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