Disaster
Not much time to blog. Now working full time. But I can’t resist a little pause to be pleased. The Republicans imploded ahead of the schedule I set for them. In my prescient blog of summer 2004, (“Republicanism Makes Me Sick,” shortly before “Kerry Will Win,”) I noted that there was too much gap between party rhetoric and party reality, and that no group could sustain that kind of cynical, hollow performance for long. At least, no group outside the South.
So it caught up to them in the form of Iraq, but also of Congressional leaders and evangelists with no scruples to shore up their bombast. You can just hear men at the church social saying, “The truth is, the whole bunch of em is no better’n Bill Clinton.” Neither of the losing issues captures the real problem, but both were essentially created by the lack of integrity that I was pointing out.
Since I wrote that, I have read some nice stuff by Thomas Merton, mainly in “No Man Is an Island,” which puts it in good perspective. Wasn’t it Michael Moore who showed us Bush saying, “This is my real base,” to the big corporate givers? Bush is just naïve enough to be able to see himself as serving the country while he cynically hands out patronage to his set. It is the beauty of free market ideology – a true believer can sit there and proclaim that their interest is in the country’s interest, like “Engine Charlie” of the 50s declaring that what was good for GM was good for the country. But people who are out there trying to retail this garbage to the public have to reflect on it, and ultimately they will mainly not be able to be true believers when the practice is so different from the message.
So what will the GOP do? I don’t know, but it is no wonder that Newt Gingrich is one of three names that Republicans support in any numbers. His cynicism is of the shallow sort that Bill and Hillary Clinton got caught up in, like Gary Hart and any number of Washington insiders. Hiding your personal shortcomings doesn’t undermine your ability to reason about the public interest. But like Lady Thatcher, he truly believes the right wing line, so he can’t tell where to stop. I suspect we will have McCain as the next president, or perhaps Mitt Romney, because Barack Obama is too young, Hillary Clinton is too female, Eliot Spitzer is too urban, and John Edwards is too serious. But if another gifted but seasoned Democrat can come along, the White House will be theirs for the taking.
In economics, the debate is still too stultified by lack of popular interest. Bond market hacks argue about how much of a threat inflation is, even though the yield curve inversion is up to 60 basis points and the money supply is contracting. The latest warning sign on their minds is rising labor cost (see Business Week) as though the division between labor income and capital income has anything to do with whether there is room to grow. Lower unemployment rates might be more of an issue, (4.4% vs. 4.9% a year ago), but the truth is that labor costs don’t determine inflation any more, even in the high wage end of the labor market. But the main reason the argument is worse than useless is that the brakes are already on pretty hard, and the slowing is evident.
The collapse in construction and manufacturing will only get worse in the next six months, and the only question is whether the Fed will wait that long to start dropping interest rates, like Greenspan did in 2001, or whether Bernanke learned from the experience, which the signs suggest he did. At least the 3 month rate has been allowed to fall in the last few weeks, tracking the 10 year rate downward as it goes into the drop that typically occurs just before an engineered recession really sets in.
If Asia lets the dollar drop another 5% it could save them from having to worry about the decision, (interest rates up in the market, manufacturing gets a boost, foreigners invest in the private sector), but I sort of doubt that will happen. And even if it does, there will be people out there arguing that the resulting inflation is unacceptable.
By the way, watch what is happening to the “net” price of oil, as both its dollar price and the dollar’s exchange value drop. It is an under-recognized statistic.
And, Milton Friedman died. I have tremendous respect for the guy, for his insight and ideas. But his time has already passed even as people celebrate him as the equal of Keynes (which is an exaggeration, but since he clearly eclipses Samuelson, the other “giant” of the profession in the 20th century, maybe not too far-fetched for obituary time.) It’s not that free market economics is wrong. It needs more conscience, but that is secondary in judging ideas. He was in fact a fount of challenging ideas, and those ideas were usually more insightful than I like to think. Not always right, but pretty much always worth thinking about.
But he believed too readily and too wholeheartedly. If education vouchers were as magic as Mr. Friedman would have had us believe, for example, we would know it by now. That does not mean that his essential insight about them was wrong. Only that other complexities, including the difficulties of maintaining racial integration, are more important than the marginal improvements available from the profit motive in education. On the need for maintaining doctor quality, he was also right that the AMA uses restricted entry to keep salaries high, and spectacularly wrong in proposing free entry to the profession as a solution.
But the real problem is that his ideology does not address the problems of the day. How could anyone sit through the footage after Katrina and not see that we have urgent community problems which call for community solutions?
Both the global warming issue, with its inconvenient truths, and the increasing juxtaposition of poverty with affluence, require urgent measures. And because they are both global in scope, the U.S. will have to learn to work with the rest of the world. Can we do it? Well, let’s just say Katrina is not the last or the worst of the disasters coming.
So it caught up to them in the form of Iraq, but also of Congressional leaders and evangelists with no scruples to shore up their bombast. You can just hear men at the church social saying, “The truth is, the whole bunch of em is no better’n Bill Clinton.” Neither of the losing issues captures the real problem, but both were essentially created by the lack of integrity that I was pointing out.
Since I wrote that, I have read some nice stuff by Thomas Merton, mainly in “No Man Is an Island,” which puts it in good perspective. Wasn’t it Michael Moore who showed us Bush saying, “This is my real base,” to the big corporate givers? Bush is just naïve enough to be able to see himself as serving the country while he cynically hands out patronage to his set. It is the beauty of free market ideology – a true believer can sit there and proclaim that their interest is in the country’s interest, like “Engine Charlie” of the 50s declaring that what was good for GM was good for the country. But people who are out there trying to retail this garbage to the public have to reflect on it, and ultimately they will mainly not be able to be true believers when the practice is so different from the message.
So what will the GOP do? I don’t know, but it is no wonder that Newt Gingrich is one of three names that Republicans support in any numbers. His cynicism is of the shallow sort that Bill and Hillary Clinton got caught up in, like Gary Hart and any number of Washington insiders. Hiding your personal shortcomings doesn’t undermine your ability to reason about the public interest. But like Lady Thatcher, he truly believes the right wing line, so he can’t tell where to stop. I suspect we will have McCain as the next president, or perhaps Mitt Romney, because Barack Obama is too young, Hillary Clinton is too female, Eliot Spitzer is too urban, and John Edwards is too serious. But if another gifted but seasoned Democrat can come along, the White House will be theirs for the taking.
In economics, the debate is still too stultified by lack of popular interest. Bond market hacks argue about how much of a threat inflation is, even though the yield curve inversion is up to 60 basis points and the money supply is contracting. The latest warning sign on their minds is rising labor cost (see Business Week) as though the division between labor income and capital income has anything to do with whether there is room to grow. Lower unemployment rates might be more of an issue, (4.4% vs. 4.9% a year ago), but the truth is that labor costs don’t determine inflation any more, even in the high wage end of the labor market. But the main reason the argument is worse than useless is that the brakes are already on pretty hard, and the slowing is evident.
The collapse in construction and manufacturing will only get worse in the next six months, and the only question is whether the Fed will wait that long to start dropping interest rates, like Greenspan did in 2001, or whether Bernanke learned from the experience, which the signs suggest he did. At least the 3 month rate has been allowed to fall in the last few weeks, tracking the 10 year rate downward as it goes into the drop that typically occurs just before an engineered recession really sets in.
If Asia lets the dollar drop another 5% it could save them from having to worry about the decision, (interest rates up in the market, manufacturing gets a boost, foreigners invest in the private sector), but I sort of doubt that will happen. And even if it does, there will be people out there arguing that the resulting inflation is unacceptable.
By the way, watch what is happening to the “net” price of oil, as both its dollar price and the dollar’s exchange value drop. It is an under-recognized statistic.
And, Milton Friedman died. I have tremendous respect for the guy, for his insight and ideas. But his time has already passed even as people celebrate him as the equal of Keynes (which is an exaggeration, but since he clearly eclipses Samuelson, the other “giant” of the profession in the 20th century, maybe not too far-fetched for obituary time.) It’s not that free market economics is wrong. It needs more conscience, but that is secondary in judging ideas. He was in fact a fount of challenging ideas, and those ideas were usually more insightful than I like to think. Not always right, but pretty much always worth thinking about.
But he believed too readily and too wholeheartedly. If education vouchers were as magic as Mr. Friedman would have had us believe, for example, we would know it by now. That does not mean that his essential insight about them was wrong. Only that other complexities, including the difficulties of maintaining racial integration, are more important than the marginal improvements available from the profit motive in education. On the need for maintaining doctor quality, he was also right that the AMA uses restricted entry to keep salaries high, and spectacularly wrong in proposing free entry to the profession as a solution.
But the real problem is that his ideology does not address the problems of the day. How could anyone sit through the footage after Katrina and not see that we have urgent community problems which call for community solutions?
Both the global warming issue, with its inconvenient truths, and the increasing juxtaposition of poverty with affluence, require urgent measures. And because they are both global in scope, the U.S. will have to learn to work with the rest of the world. Can we do it? Well, let’s just say Katrina is not the last or the worst of the disasters coming.