Party Of No Clue

I briefly alluded to Mark Sanford rejecting stimulus funds that will result in up to 7,500 teachers being laid off. South Carolina legislators are trying to outflank him on that. But he's not the only one. Governor Goodhair of Texas is denying his citizens stimulus funds, too:

Gov. Rick Perry will announce today that he is blocking the state from accepting $550 million for expanded unemployment benefits as part of the federal stimulus package.

With an upscale Houston hardware store as his backdrop, he will paint the expansion as a burden on small business.

The Legislature still could move to change state law to draw down the money, but those changes would be subject to a Perry veto.

To be eligible for all the money, Texas must enact legislation that would change how the state’s calculates a worker’s eligibility and extend benefits to more workers, including those looking for part-time work.

Arnold Schwarznegger is trying the same thing in California, with the same argument that the changes in eligibility would impose an "unnecessary burden" on state businesses. Actually, what would impose a burden on them is them having to file for bankruptcy because nobody's buying goods because their unemployment ran out.

There's no real argument for this obstinacy from a policy perspective, just shopworn and outdated ideology. Sanford compared the stimulus to the policies of Zimbabwe, saying all this federal spending will lead to hyper-inflation. I wish! Right now we're in a deflationary spiral, and the only thing the Fed has the monetary tools to combat is inflation at this point. If we were experiencing any inflation at all, it would mean that the economy is at least sort of working again.

Then there's the argument that all this fiscal policy is like what FDR did during the Depression. Yes, they use that as a negative. The Bible for this revisionist history is a book by Amity Shlaes, and Jon Chait fairly well demolishes it.

Now here is the extremely strange thing about The Forgotten Man: it does not really argue that the New Deal failed. In fact, Shlaes does not make any actual argument at all, though she does venture some bold claims, which she both fails to substantiate and contradicts elsewhere. Reviewing her book in The New York Times, David Leonhardt noted that Shlaes makes her arguments "mostly by implication." This is putting it kindly. Shlaes introduces the book by asserting her thesis, but she barely even tries to demonstrate it. Instead she chooses to fill nearly four hundred pages with stories that mostly go nowhere. The experience of reading The Forgotten Man is more like talking to an old person who lived through the Depression than it is like reading an actual history of the Depression. Major events get cursory treatment while minor characters, such as an idiosyncratic black preacher or the founder of Alcoholics Anonymous, receive lengthy portraits. Having been prepared for a revisionist argument against the New Deal, I kept wondering if I had picked up the wrong book [...]

Shlaes begins every chapter with a date (say, December 1936), an unemployment percentage (15.3) and a Dow Jones Industrial Average. The tick-tick-tick of statistics is meant to show that conditions did not improve throughout the course of Roosevelt's presidency. Yet her statistics are highly selective. As those of us who get our economic information from sources other than the CNBC ticker know, the stock market is not a broad representative of living standards. Meanwhile, as the historian Eric Rauchway has pointed out, her unemployment figures exclude those employed by the Works Progress Administration and other workrelief agencies. Shlaes has explained in an op-ed piece that she did this because "to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn't have regular work with long-term prospects." So, if you worked twelve hours per day in a coal mine hoping not to contract black lung or suffer an injury that would render you useless, you were employed. But if you constructed the Lincoln Tunnel, you had an anxiety-inducing make-work job.

In response to this criticism, Shlaes has retreated to the defense that unemployment was still high anyway. "Even if you add in all the work relief jobs, as some economists do," she has contended, "Roosevelt-era unemployment averages well above 10 percent. That's a level Obama has referred to once or twice--as a nightmare." But Roosevelt inherited unemployment that was over 20 percent! Sure, the level to which it fell was high by absolute standards, but it is certainly pertinent that he cut that level by more than half. By Shlaes's method of reckoning, Thomas Jefferson rates poorly on the scale of territorial acquisition, because on his watch the United States had less than half the square mileage it has today.

This is the intellectual heft on the right. And it manifests itself into policy with things like the "no-cost stimulus" - really - which would create two million jobs by, um, drill baby drilling, I guess. Never mind that oil prices are down, auto mileage is down and it takes ten years to get a drop of oil out of a new platform. That's going to be the "timely, targeted" stimulus to save our souls.

I'm beginning to think that, by trying to talk himself out of the RNC Chairmanship, Michael Steele is the SMART one.

No Economists On The Teevee

Turns out that the traditional media doesn't put a premium on informing the public. Over the last month, which has been dominated by debate about the stimulus package, the experts most likely to be able to actually perform the debate in a credible and intelligent manner, economists, haven't been on the scene.

In the hour following President Obama's February 9 press conference -- during which he gave a brief address about the economic recovery legislation currently moving through Congress -- cable news programs featured guests and panelists to discuss Obama's remarks. But CNN, Fox News, and MSNBC did not bring on a single economist to discuss the plan. The absence of economists in the post-press conference discussion was consistent with the observation made by Crooksandliars.com founder John Amato in a February 4 article on The Huffington Post: "I'm sure you've heard about the hundreds of economists that are either for or against President Obama's stimulus plan. My question to the media is: Where are they?" Indeed, a Media Matters for America review of the Sunday talk shows and 12 cable news programs from January 25 through February 8 found that during 139 1/2 hours of programming on Sunday mornings and weekday afternoons and evenings, of 460 total guest appearances in discussions about the economic recovery legislation and debate in Congress, only 25 were made by economists -- a mere 5 percent.

Economists actually differed wildly on the stimulus, and had their own biases that they brought to the debate. But surely that would be a debate grounded more in facts than what we currently see on the teevee. Of course, economists aren't adept at determining whether Obama flipped the bird to Hillary Clinton when he was scratching his nose, or how Obama's body language signifies his belief in civil rights, so they are kind of useless on cable. John Amato and Digby have more.

When you have a debate about the economy without the economists, you end up having a debate featuring this guy.

U.S. Rep. Steve Austria said he supports a scaled-down federal economic-stimulus proposal, but the Beavercreek Republican told The Dispatch editorial board that the huge influx of money into the economy could have a negative effect.

"When (President Franklin) Roosevelt did this, he put our country into a Great Depression," Austria said. "He tried to borrow and spend, he tried to use the Keynesian approach, and our country ended up in a Great Depression. That's just history."

That is just history, with the added invention of a time machine so that Roosevelt could return to the 1920s and be President when the stock market crashed. Now, this was such a stupid statement that Austria had to walk it back, but there are hundreds more little white lies that come up from the know-nothings, which the media turns into a debate worthy of broadcast entertainment. But it lacks one thing - precise information.

In fact, for most of the New Deal era, the economy grew quickly -- an annual rate of about 13 percent from 1933 to 1937 and more than 10 percent from 1938 to 1941, Commerce Department data show.

Many liberal economists say that shows the virtue of boosting spending. Dean Baker, co-director of the Center for Economic and Policy Research, said that "when Roosevelt came in, he started spending money, and from 1933 to 1937 the economy grew at a double-digit annual rate. It was soaring, and the unemployment rate fell at 4 percentage points a year."

But in 1937, the economy started tumbling backward again. Drawing an analogy to today's fiscally conservative Democrats in Congress, Baker said Roosevelt "listened to the Blue Dogs of his day and cut spending, and the unemployment rate rose again."

Here's a handy chart:



I got that from Rachel Maddow's show, the oasis in the cable desert.

The Chinese Big Bang Theory

Considering that China has been the leading indicator for everything economic in the past decade, seeing them unload hundreds of billions on a mass stimulus package is kind of unsettling. Mainly because no other country has the reserves to match such an outlay, which China clearly feels is what's needed to sustain growth.

Faced with the prospect of zero export growth, closing factories and mass layoffs, China joined moves by governments around the world to cushion the blow of the global slowdown with the announcement of the $586 billion package.

Stock markets in Japan, Hong Kong and mainland China soared in response.

The plan calls for higher spending on roads, airports and other infrastructure, tax deductions for exporters and more aid to the poor and farmers. Spending on health and education will increase, as well as on environmental protection and high technology.

''We must implement the measures to ensure a fast and stable economic development,'' Premier Wen Jiabao said at a meeting of government leaders, according to a report read out on the state television. ''They are not only the needs of the development of ourselves, but also our biggest contribution to the world.''

It certainly does help this country when China is strong, in light of the fact that our survival is predicated on them continuing to buy our Treasury notes. But I'm pretty sure a stimulus here will be significantly smaller than China's which is the equivalent of of $2.4 trillion US dollars. Half-measures are going to be harshly judged, so it's time to step up. I'm not saying we have to drop a couple trillion, but we need to make investments at a size comparable to the problem.

Wherein I Waffle

They're debating the bailout bill and the Sanders amendment in the Senate. Sen. Obama gave a speech that was a mixed bag. There was some real populism in it, and he set out some excellent ideas, like a second stiumulus with a focus on infrastructure investment, allowing bankruptcy judges to restructure mortgages, re-regulating Wall Street, and creating a new HOLC to have the government buy up mortgages as well.

But of course, all of those are left out of this bill. At the time when progressive leverage is at perhaps its greatest point. And the taxpayer protections and oversight boards and executive compensation limits in this bill leave me wanting; in fact, they're cosmetic and pretty terrible. Not only that, but suspending mark-to-market somehow wormed its way into the bill, which is a recipe for disaster. While Obama says that "passing this bill can't be the end of our work to strengthen the economy" it certainly throws a wrench into those efforts. Obama admitted that some useful programs would have to be delayed as a cause of the bailout (although that can also be attributed to the downturn of the larger economy, which this bailout doesn't begin to try and fix). I do like this, though:

There are certain investments in our future that we can't delay precisely because the economy's in turmoil. We can't wait to help Americans keep up with rising costs and shrinking paychecks and we're going to do that by making sure that we are giving our workers a middle-class tax cut. We can't wait to relieve the burden of crushing health care costs. We can't wait to create millions of new jobs by rebuilding our roads and our bridges and investing in broadband lines in rural communities and fixing our electricity grid so we can get renewable energy to population centers that need them. We need to develop an energy policy that prevents us from sending $700 billion a year to tyrants and dictators for their oil. We can't wait to education the next generation of Americans with the skills and knowledge they need to compete with any workers anywhere in the world. These are the priorities we can't -- cannot delay.

Now, let me just close by saying this. I do not think this is going to be easy. It's not going to come without costs. We are all going to need to sacrifice. We're all going to need to pull our weight. Because now, more than ever, we are all in this together. That's part of what this crisis has taught us, that at the end of the day, there's no real separation between Wall Street and Main Street. There's only the road we're traveling on as Americans. And we will rise or fall on that journey as one nation and as one people. I know that many Americans are feeling anxiety right now about their jobs, about their homes, about their life savings. But I also know this. That we can steer ourselves out of this crisis. We always have. During the great financial crisis of the last century, in his first fireside chat, F.D.R. told his fellow Americans that, "There is an element in the readjustment of our financial system more important than currency, more important than gold and that is the confidence of the people themselves. Confidence and courage are the essentials of success in carrying out our plan. Let us unite in banishing fear. Today we cannot fail. We cannot fail -- not now, not tomorrow, not next year.

That sounds like the beginnings of a new New Deal, and I would hope that Obama runs the last 34 days of the election on that platform.

I must confess to being torn on this bailout. While the media, the establishment elite and Wall Street have to some extent conspired to hype the danger to our economy, there isn't any question that the credit markets are hitting a precarious place. The interbank lending rate is skyrocketing and no money is moving through the system. Worst of all, this is crushing municipal governments who are closest to those who need help in a time of an economic downturn.

Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening.

The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike. In New York, a real estate boom has suddenly gone bust. Washington has shelved a planned bond offering to pay for terminal expansion and parking garages already under construction at Dulles and Reagan National Airports.

Billings, Mont., is struggling to come up with $70 million more for a new emergency room. And Maine has been unable to raise $50 million for highway repairs.

That is a very real problem, and not wanting to reward Wall Street for failing won't make that go away.

Now, there are other ways to deal with it, of course, most of them better than this ill-conceived plan. The Soros alternative, based on purchasing an equity stake in failing banks and investment firms, getting "Warren Buffett shares" the way he got them from Goldman Sachs, is better. There's the Michael Moore angle, having the rich pay for their own bailout and taxing stock transactions and closing loopholes so corporations actually pay taxes. These two may be liberal boogeymen, but the ideas are sound.

But you don't really get your pony plan here, at this stage. I'd much prefer a band-aid, throwing some money at Paulson and telling him to go away, and we solve this in January with a popular mandate. This gives us the proper time to assess the problem and solve it. As Brad Sherman (D-CA), who has led opposition to the bailout, says:

It is in the interest of Wall Street to cause us to panic and pass bad legislation.

No one can say for certain whether our economy will be better off next year if we pass the bill or if we defeat it. Only by avoiding a panic vote can we write a good bill next week.

The White House declared that the sky would fall if we did not pass a bill by September 24. They also said they would veto a bill with significant controls on the Administration or on the salaries of executives of bailed out firms. If not for Administration interference, we would have passed a good bill already.

Ultimately, I don't think this bill will solve the long-term problem, which is why Obama's New Deal must be taken up immediately in January. But part of me is where Krugman is; tepidly supporting, but mindful that the real heavy lifting will happen after the election.

...then again, Krugman could be completely wrong.