Tuesday, December 23, 2008
Nobody has a real good handle on how all this is going to shake out, but I strongly suspect that one of the things that will be a part of a hypothetical recovery is the combination of low unemployment and lower (than present) wages.
We need people working to maintain stability in our economy and standard of living, and the more the better. But we also have to cope with the process of revaluation. Certain things that we had previously thought were valuable in better economic circumstances will turn out to be less valuable. Therefore the people who make these things need to be paid less. But, there are other things, some of which we know about and others we don't, that will turn out to be more valuable than we anticipated. As we go down the road of figuring out which is which, typical workers seeking a raise naturally migrate from low-value labor to higher-value labor. That is, they will if the capital flows are more or less transparent.
All this sounds good and antiseptic. Unfortunately, there is likely to be substantial pressure to keep inefficiently deployed capital where it is to mitigate the disruptive impact of moving it somewhere else. Obviously this has been most prominent recently with respect to the car company bailouts, but that's admittedly an extreme case.
More generally, labor does better relative to capital in an expansion, because most people are employed so labor is scarce and the demand for it is high because there's opportunity available in the economy to produce high returns. Capital does better relative to labor in a recession because those things don't hold and also because capital tends to be more maneuverable whereas labor tends to be stuck where it lives. But, people tend to resent capital in the best of times and even more now since "capital" or "capitalism" gets the blame for the Wall Street failures and the subsequent bailouts. The temptation for demogoguery will be high.
Thursday, December 18, 2008
"It is, it is a glorious thing to be a pirate king" - Gilbert and Sullivan
Hat tip to Naked Capitalism for this one from London Banker.
The Banker is clearly right that the biggest risk we face now is the lack of access to credit for the US gov't. That is a real possibility now for the first time in my life, and one that might impose fiscal discipline on the government where generations of Republicans failed. On the other hand, it might not, and then we will in truly interesting times indeed.
I like how the Banker describes the deleveraging of the US financial sector as financial piracy against East Asia and the Gulf States. Unfortunately, he's just wrong on that score. The reason that the US (and to some extent the UK) got its role as the world's banker is because it has the a strong tradition of property rights and the Rule of Law. It is only in that environment that a private banking sector as we know it can develop. These other countries don't have these things, that's one of the reasons why they have to send the money over here. That's something to bear in mind, "...Despite the US being the epicentre of all the failed debts, failed securitisations, failed credit derivatives, failed rating agencies, failed banking businesses, failed corporate governance, failed accounting standards, failed capital adequacy models, and failed regulatory forbearance..." If, as a result of this bubble bursting, they were to develop these things it would be best for all concerned.
There's also the fact, as Spengler would surely note, that US has the risk-taking young people willing to borrow. The greying populations of East Asia don't so it's not exactly clear who's going to be able to generate the "reasonably predictable positive return" the Banker requires.
Finally, the Banker doesn't dwell on it too much in that post, but he also likes to hate on the knowledge economy. For all the talk about sustainability, it ought to be clear that the knowledge economy is much more sustainable than the alternatives, usually taken to be agriculture or manufacturing. The trend in that direction has been going for decades, arguably centuries. Not only are manufactured goods cheap to produce, there also not worth very much. What's worth more to you, a correctly filled prescription by a reputable pharmacist, a new iPod, or a twenty pairs of socks. I'm guessing there's not too many people who would choose the last.
Wednesday, December 17, 2008
One of the most depressing facts of this Presidential cycle is the wholesale loss of the intellectual class to Obama and the Democrats. Both Slate and Reason published quasi-endorsements from all of their contributors, and put together they form a particularly gloomy spectacle. Everybody wants to be able hold the red-state bourgeois accountable for the supposed failings of America, but nobody wants to do anything to help.
Tuesday, December 16, 2008
Spengler is a pseudonym of a columnist for Asia Times. In the links above he hits on a pet theory of mine that I have not seen very much public discussion of. Islam in many ways is much weaker than she appears, something that has obvious consequences for the future of jihad in the next decades.
Spengler emphasizes the weak textual foundation of the Koran as sacred scripture. I think the larger point goes way beyond that. That is, that Muslim apologetics, the ability to pronouce the reasons for belief in religious teachings and persuade others of them, are embarrassingly weak to the point of being something of a joke. In fact, that's almost the point of the matter. The teachings of Islams aren't things to be believed as much as submitted to, because Allah is greater than us.
In my view, this is the religious expression of the tribal nature of society in the Middle East and other places where Islam reigns, and captures the crucial anthropoligical insight there: survival is a collective accomplishment. There is no individual so strong or smart so that he can guarantee his own security. So, he must depend on various group loyalties (to family, to clan, to tribe) to protect him. And because he is dependent on them at the level of his very existence, he submits to the group's will. Fortunately for us, we have developed strong traditions of the Rule of Law, property rights, and impartial police. Otherwise we'd be in the same boat.
But there is more to religion than that. It also functions on a historical and teleological levels. And it is very likely that viewed in these ways, Islam is simply not true, and not perceived to be true by people who consider the question closely. This is a huge vulnerability whose impact we haven't seen yet, but likely will.
On the surface, it might be taken as a liberal show, as its creators are certainly liberals and there are no recognizable conservatives the show. More importantly, if there were, they would appear as hopeless squares in that environment, which validates how liberals tend to think of conservatives in general. But it's more complicated than that.
In this sense, The Wire is the rarest and most precious of beasts: A work of art that's intensely political but rarely devolves into agitprop.
First of all, the show explodes any notion of being culturally simpatico to the modern black underclass, the staple of liberal inclinations on urban issues for decades. Clearly for those of us in the bourgeois world, those people are not us. The greatness of the show is that they are compelling in their own right.
I think there's an implicit contrast with The Sopranos. In general, the narrative of black people in America is much more prominent than Italians. But this doesn't necessarily extend to the criminal class, where The Godfather is a major touchstone of American culture. The consituents of Baltimore's drug wars are forgotten people. We want law enforcement to enforce some measure of quarantine on them away from bourgeois America, and as soon as that happens we won't spare them a second thought. Nonetheless, protagonists of The Wire are completely compelling anyway, while at the same time not making any excuses or rationalizations of their criminality. Through this prism we see that what happens to them is important, even if in real life it's not important to us.
Friday, November 07, 2008
Let's grant to David Frum that politics is a game of addition. Who do we add to Joe the Plumber to make a winning coalition? If we go after wealthy coastal voters, we have to be able to demonstrate greater credibility on economic issues than the Democrats. Depending on what happens in the Obama Administration, I suspect that might be very plausible soon enough.
I don't think it will work to shave the values issues. Politically speaking, the differences are too wide, as Ross points out. Not only that, there's nothing we can deliver on anyway. For the bluebloods and the bobos, much of the values conflict (environmentalism in particular) is an attempt to maintain superior social status over the red state bourgeios and those that represent them, ie, the Palins. Given that the Palins are exactly the sort of people who keeping us from being a typical useless Euroweenie country, we gotta have their back. And if it were up to me, this is exactly the argument I'd make to the bluebloods. For whatever is wrong with the USA, it should be clear that it's in better shape than the major Western European countries, every which way it's possible to measure.
....the conservative movement needs is a message that it's willing to be held accountable for. David Frum is one of the most astute conservative commentators out there, but this wasn't one of his better efforts. If we have a message, we have to propagate it. If we don't, the few Senate seats that are "saved" won't accomplish very much.
If we throw in the towel on the McCain campaign (this was three weeks ago, mind you) the message we're sending is "we surrender" which is definitely not our intent.
In Ayn Rand's dystopia Atlas Shrugged, mainstream culture is gradually taken over by collectivism piece by piece. In response, John Galt and the productive members of society sequester themselves in Galt's Gulch and allow the rest of the world to rot according to its own devices.
This scenario has been suggested (in a couple of variations) in the context of our most recent election. Ie, if my guy doesn't win, I'll just check out and leave the rest of you to figure it out for yourself, and you'll be sorry then. One version of this has to do with Hollywood types who are distraught that the United States is more Republican than they'd like. Somehow they never pull it off. Maybe it has something to do with the fact that Sean Penn would have to forgo $10M per picture, whereas those of us in our log cabins would somehow have to make do without Mystic River.
On a slightly more serious note, I think it's much more plausible to consider families like Palins as the John Galt of our time. We might be able to go without Sarbanes-Oxley compliance specialists and auto sales managers for a while, but if people quit having children, fixing transmissions, and plowing snow, we'd be in big trouble in a hurry. But at least as important as what people do for a living is what they do for free. And it's married people with children who populate things like the PTA, the Junior League, and supervise the Boy Scouts. Of course, people like the Palins aren't going to hide from society in a hissy fit. But they do need a fair bit of cultural latitude or their time, money, and inclination to carry the world on their shoulders withers away. As things stand now, people need at least as much space to be normal as they do to be eccentric.
For those who have been looking for silver linings in Sen Obama's election victory, it has been said (or muttered) that at least the country didn't have to endure riots and post-election anger if Obama had some so close only to have the football snatched away just before he kicked it. For my part, I disagree. There may be some good things about election of Obama, but that is not one of them. In fact, one of the few good consequences of a hypothetical McCain win is the hope that for a substantial part of the million or so Obama fans who gathered in Grant Park on Election Night; the bike messengers, fifth-year college sophomores, and guys who got their city job because their uncle is a supervisor for Streets and San, that they would have rioted for a day or so, and then been so disillusioned with the whole political process that they don't participate in it for the next few cycles.
This seems harsh at first glance, but for the good for the health of a republic, in particular ours. Most appreciate that it's good for social harmony that, by voting, people in general can feel they have some influence in public affairs. But even if that's an important part of the story, it's not the whole story. It's also important important that we are governed by citizens, not people at random, or even people who reside here.
Literally speaking, citizenship is a loose thing. In American law, everybody who is born here (among others) gets it. But there's more to it than that. Not everybody has the credibility, the societal capital, the personal means, or the intent to act on behalf of the community as a whole. The Palins clearly have these things, which is (among other reasons) why some of us were so enthused about them.
Monday, November 03, 2008
There's an obscure English cliche, "Where there's muck, there's brass." It means that wherever there's difficult or dirty jobs to be done, there's money to be made. The problem with the economic pessimists is that they always tend to underestimate the muck to be shoveled away if people are fairly compensated for doing it. It's a forgivable error. The statistics so beloved of economics measure this poorly, if at all. Free market types are often ridiculed for using phrases like, "unleashing the power of the markets" but sometimes that's just the plain truth of the matter.
What does this have to do with the price of tea in China? According to Glenn Reynolds, Obama leads in 18 out of 19 states with the largest decline in housing prices (and presumably will win most of them). Thirteen out of the fourteen states where housing values have declined the least, McCain leads.
Now, do we suppose that when The One takes office, and is confronted with the hordes angry at what they see (with some justification) as $700 Bn of free government money for Wall Street, he is somehow not going to try to dole out some largesse to his supporters? I doubt it. The piggy bank ought to be empty for such maneuvers, but somehow I doubt that it really is. The point is, such things cost more than money. They accumulate cottage industries built around the preservation of inefficiencies. But the way out is for people who see opportunities and materialize them.
Somewhere in my personal list of useless conservatives, Austin Bramwell has a place of honor. So I was somewhat surprised to find that I actually agree with most of his latest effort for the American Conservative. His point is that various conservative intellectuals don't need the conservative movement to thrive. In fact many of them will do better if they are not regarded as being attached to it. (Though, let's also acknowledge that policy implementation and electoral coalitions do require the conservative movement, but we'll leave that for another day.)
In any case, Bramwell mentions an interesting group of scholars, many of which wouldn't be identified as conservative to most people anyway. It's funny that Bramwell cites them as failures of the conservative movement, in particular the failure of the conservative movement to produce and nurture such people. Of course the unspoken assumption behind this is that the such people in some way "ought" to belong to conservative movement. And the only reason why Bramwell assumes this in the first place is that we all take for granted that the liberal establishment essentially been brain dead for thirty years or so and so any public intellectual with a modicum of creativity or who has broken through the ossification of the modern academy is assumed to be conservative by default.
It's very likely we'll need some ideas that we've never thought of before to get out of the straits that we're in. If Sen Barack Obama continues to be a rubberstamp for the liberal Democratic establishment, we'll never get them.
As is sometimes typical for pundits backing a loser, Ross tries to blame the campaign for the failures of the candidate. In this case I think it's exactly backwards. I think the McCain campaign has actually been fairly effective. It has taken substantial disadvantages in money and overall environment, and has still managed to be fairly competitive, even to the point of setting the agenda for a significant part of the campaign. Really, the only thing I fault the campaign for is conceding Michigan, and that's probably a money issue anyway.
If he loses there is one overriding reason why. His response to the economic crisis has been weak. It's been weak in substance, and weak in the perception that Sen McCain has the intelligence and energy to get to the bottom of it all and sort it out for the benefit of the country. Frankly, Obama's substance has been equally weak if not worse, but he has been able to project the aura of a person whose elevator is going all the way to the top floor and McCain hasn't.
Sunday, November 02, 2008
Or another example, take energy. Obviously for most people the important fact about energy is that the price of oil has declined from nearly $150/bbl to $65/bbl. That seemed likely really good news at the time until the world's attention was taken over by the stability crisis in our major financial institutions.
In any case, it should be clear that we need to increase our capability for producing energy, oil and otherwise. But it's interesting to look at this through the prism of the upcoming recession. As consumer spending decreases, it's very likely that the economy as a whole will require fewer cell phones and mortgage brokers. But we will still need access to more energy, both for our own economy and to help the process of industrialization in China, India, and other countries in the same situation. Therefore we should regard our hard-earned expertise in energy production as an important foothold in working our way out of our economic problems.
Unfortunately, I don't see this as likely under President Obama. In particular, it would require the repudiation of the global warming agenda which doesn't strike me as being remotely plausible given that such a large percentage of Obama's base favors it. The are other issues as well that tend to mitigate against any kind of industrial-scale energy production; nuclear, oil, natural gas, coal, electric grid infrastructure. Essentially, the Democratic party has Luddite mentality on the whole issue for thirty years. Maybe President Obama is going to change that, but we haven't seen any signs of that yet.
As this election season nears the end, my anxiety over the prospect of President Barack Obama isn't so much that if he becomes President this or that bad thing will happen. It's more that given what we know of his inclinations and the path he has taken so far, a hypothetical President Obama (and the things that go with that) is likely to deprive us of the opportunity to work our way out of the fixes that we're in, or will be soon enough.
I was talking with a friend of mine the other day and he asked me a question. I forget what it was exactly but I remember the answer had to do with Griggs v. Duke Power Company, a court case almost forty years old now. It's an important case, though hardly a household topic of conversation. It essentially means that a company cannot give standardized tests as a significant part of a job application process unless they can show that minority groups score as white males on the test (which it can't, because they don't) or demonstrate that the knowledge tested for is crucial to the performance of the job sought (which is beyond the capabilities of most companies).
This leads to a crucial defect of affirmative action. Beyond contentious issues of fairness or diversity and so on, there's a little known reality that the impact of affirmative action goes way beyond its intended beneficiaries or its "losers". Take a canonical case where there are ten white guys and one black guy applying for four job openings or slots in medical school or what have you. Most of controversy is usually about whether the black guy gets one of the jobs and the criteria involved for deciding one way or the other. But, as a matter of simple math at least three (and maybe four) of the new hires are going to be white guys. So in order to be successful the HR department or the admissions committee has to make intelligent choices between which white guys make the cut. But the straightforward ways of sorting them out disparately impact minority groups and in many cases are effectively illegal.
Which brings me to this (hat tip to Rod Dreher). Our professor friend pulls the curtain back on some of the lazier aspects of undergraduate education, and university life in general for that matter. Even though the perspective of the faculty is new for me, the overall gist is well-known to most intelligent Americans. Why then, as the value of the bachelor's degree is being depreciated, why do so many young Americans continue to devote years of their lives to getting it? Obviously because to do most things prospective employers (and graduate schools) require it. For people looking at a glance, a 22-year-old BA is thought generally accepted to be ready adult responsibilities and an 18-year-old with a high school diploma isn't. Even if the newly minted college graduate didn't do anything particularly compelling while he was there, he has a few years more maturity and has shown the ability to jump through hoops to accomplish an objective, and in many circumstances that's enough.
The important thing to notice in all this, is that this state of affairs is the result of many smaller things that have built up over time to the point where it is taken to be "the way things are". But it is not an inevitable fact of nature. One of these things is Griggs. Probably not person in ten who has been affected by Griggs has ever heard of it.
Now, as far as this presidential race goes, Griggs is completely uncontroversial. As far as I know, neither candidate has said anything about it, and both sides have been pretty quiet about affirmative action in general. Everybody has adapted to that particular status quo.
But now we are in moment of severe economic uncertainty, with the possibility that "the way things are" that we have taken for granted in many ways are in fact up for change. It very well happen that we'll see a different model for "typical" late adolescence than we're used to. For the sake of saving public expenditure, and reducing young people's debt, more of them might try to start their career path at 19 or 20 instead of 23 or 25. This won't happen because of some mandate from Washington, but it will require some changes to make possible. And it's the nature of those changes (overruling Griggs in some way, relaxing child labor laws, less public spending on education), that I think it's beyond hope to expect from President Obama.
McCain hasn't exactly campaigned on this platform, there's no reason to, we're all used to the way things are. But as it becomes clear "the way things are" aren't working for us any more, I hope we can adapt in good ways instead of bad ones.
Friday, October 31, 2008
I might write the what I see to the positive consequences of a hypothetical McCain win (and there aren't that many). But the one obvious one that springs to mind is that in many many cases it would piss off the right people. Here is Erica Jong going through her quadrennial anxiety spasms. For God's sake, move to Canada already and get it over with.
I suspect, without any real evidence, that the McCain boomlet over the last few days has run its course, and that Barack Obama will be the next POTUS. I think this not because anything in particular has happened since yesterday, but because essentially nothing has. The polls are where they are, and I think they're more or less accurate. Though I still do expect a break toward McCain of about 3% from undecideds and weak Obama supporters on Election Day, it won't be enough, and Obama will win with a popular vote majority of 0-5%. (The usual caveats apply. In particular, 3 three days is a long time in a situation like this, and I reserve the right to change my mind.)
In any case, let's say I'm right, or stipulate that Obama is going to win in some scenario. What should center-right America do, in the next three days and the next three months before President Obama takes office?
Well, for starters let's try to get a straight story on the current economic crisis. And to acknowledge that it is in fact a crisis. And for the various interventions and bailouts that have occurred or are going to occur, they are done in the context of a crisis and with the intention of ameliorating the crisis. In an ideal world this ought to go without saying, but for all the uproar and debate in the genesis of the Paulson plans and their journey through Congress, it's not at all obvious to me that everybody expects this will happen.
People might not care about this now, but I suspect they should very soon. My gut feeling is that economically speaking, the crisis stage is going to be over soon but a severe cookie-cutter type recession is just starting. And God willing, we'll work our way out of this recession just like we've worked our way out of prior ones. But if this is in fact the case, the various bailouts aren't going to help and will probably make things worse. In fact, the best scholars of the Great Depression (in particular Amity Shlaes) think that New Deal did not end the Depression but instead prolonged it.
Moreover there's a simpler point to be made to anyone who's still listening. Most of our federal money is spent on programs that were started in the attempt to address a crisis. (Defense is an exception: that money is spent before the crisis). We (as mainstream conservatives) are willing to spend money to address a crisis, but we need to insist that when the crisis is over the money flow stops. Otherwise, the federal government doesn't have any money left over to pay for its response to the next crisis. That ought to be especially clear now, where the combination of ballooning entitlements, the bailouts, and the Iraq War have left the government straining near the end of its ability to borrow money, as enormous as that is. And right now, we have the chance to empahsize this while George W. Bush is President so that we have the opportunity to hold Barack Obama to it later.
Thursday, October 30, 2008
The other thing underlying the substantial support for Obama among people who ought to know better is the yearning to elevate the level of public discourse after eight years of George W. Bush's public torture of the English language. I have a particle of sympathy for this, except that many of them are inflating their hopes for Barack Obama on that score way above any kind of rational expectation. He speaks well from a prepared text, but beyond Hamlet-style hand-wringing over an uncertain racial identity, there's very little interesting thought there.
Beyond that, I'd recommend _Intellectuals_, a fascinating study of the private lives of prominent intellectuals by Paul Johnson that's about twenty years old now. We need smart people obviously, but it's very dangerous to other parties to hand them privileges them on that account. It encourages a very weird sort of moral hazard for them to shade their personas in order to maintain those privileges.
For a while now, we've seen the phenomenon of various "conservatives" or prominent people who for some reason ought to be aligned with the Republican Presidential candidate supporting Obama. Off the top of my head, there's Doug Kmiec, Wick Allison, Christopher Buckley, Jeffrey Hart, Kenneth Adelman, Colin Powell and several formerly rightish libertarians. On top of that, David Frum, Peggy Noonan, and Quin Hillyer have been publicly critical of the selection of Sarah Palin while still supporting the Republican ticket on balance.
And just now I've figured out why, and figured out why I've never been strongly tempted to be one of them. Essentially, for most or all of the people above, there is strong resentment against, say, Sean Hannity and the sort of media figure he represents, and Sarah Palin and who she represents. So these, above all else, want to repudiate the Hannity-Palin axis. This is most depressing in the case of Anne Applebaum, a very thoughtful woman whose reasoning on behalf of Obama is specious to the point of embarrassment.
I can see why some people don't like Sean Hannity very much, though I personally don't watch much of Fox News. But for all our current problems, Sarah Palin and the people who support her are about as blameless as it's humanly possible to be, and represent a substantial part of our hope in America.
Every election is about identity politics to some extent, but this one, at the Presidential level at least, has turned on identity politics more than any other that I can recall, in the United States at least. The demographic polarization of this election is unusually stark. It's the cognitive elite and the various ethic minorities versus Middle America.
John McCain has ran a decent campaign in some ways, but his ability to articulate a forward-looking message has been abysmal. Given all that, and the desire of a large number of Americans for a clean sweep of Republicans, it's a near miracle that John McCain has any chance at all. But he does have a chance, and I have a sneaking suspicion that McCain is doing better than the polls would indicate. The problem is, even if he is, he is still a long way from winning.
But, if somehow he does pull it off, one of the few things we can genuinely look forward to is an improvement in race relations in a very bassackwards way. The Left will have to rethink its strategy of bulldozing over the mind of Middle America, and will have to work to engage it instead.
Wednesday, October 29, 2008
Last week I wrote that the McCain campaign isn't quite dead but is on life support. I stand by that. If anything, they look better now than they did then. So what has to happen for McCain to pull this out?
The bad news is, Barack Obama is clearly a plausible President to anyone who's paying attention. But he's not quite an inevitable one, and it's crucial for McCain that Obama doesn't become until he's actually elected. There are a huge number of weak Obama supporters who will vote for Obama just out of intertia if appears that the election is functionally over. Similarly, the lesser committed McCain supporters will probably just stay home.
To keep this from happening, McCain needs some poll movement in his favor. Optimally sometime between now and Friday he needs at least one major national poll showing him in the lead (by any amount, even 1%). It would be even better if there were two. This way a significant number of voters will have to reconsider exactly who they want to be the next President of the United States. As it is, we've seen several polls showing Obama leading by 2-4%. My gut feeling is that isn't quite good enough, but we've got a couple of days yet before the weekend.
Then assuming that happens, McCain needs to have a plurality of these leaners and undecideds to break for him on Monday and Tuesday of next week. Maybe it's just wishful thinking but I actually expect this to happen.
Finally he needs to have the right states break in his favor to win the Electoral College. Remember, the whole business about winning the EC while losing the popular vote only works if the candidates are within say 2% of each other. I think it's beyond hope to think McCain will beat Obama by more than that so he'll need to have some luck in picking up votes in the right places.
Even if McCain is losing, he is definitely not out of the picture, but he needs help from the polls tomorrow and the next day.
Strange New Respect is the name usually given to some conservative who "shows maturity" by moving away from his previously-held troglodyte views. In that vein, I hope my new overlords will show me some mercy when the Change We've Been Waiting For finally arrives.
Mostly though, I'm talking about strange new respect in the literal sense, taking a look at what the other team has done right. The first thing is Bill Clinton's handling of the economy in the first two years. Like the rest of the world I've been thinking of our economic troubles over the last few months or so, and I reread parts of _The Agenda_, by Bob Woodward. He definitely wanted to fund the usual dogooder giveaways. But out of necessity, he "cut" the rate of increase in government programs and let the economy catch up the to the size of the state it was supporting. It seems that many if not most people who support Barack Obama are expecting him to do the same thing. Maybe they're right, but frankly I'm not nearly as confident as they are.
The other item is the Howard Dean campaign in 2003-2004. The crash and burn was widely ridiculed among those of us on the Right, but this one especially has had very substantial long-lasting impact. The Dean campaign successfully disciplined the Democratic political establishment to accept the authority of the Democratic base. The substance doesn't matter so much to me because as far as I'm concerned there's not very much worthwhile from either one. But on our side, it's not so much that the Republican political class has ran off the rails as opposed to the reality that the conservative pundit class and the Republican base have utterly failed to enforce accountability on it, and that reality continues to this day.
I was reminded of this when I see that a Federal jury has just convicted Sen Ted Stevens. Maybe he's not even really guilty of anything except the quasi-crimes prosecutors like to use to get rid of inconvenient people. Nonetheless, it doesn't speak very well of us that the Department of Justice is doing our dirty work for us.
Wednesday, October 22, 2008
I suspect part of the reason that so many prominent conservatives have gone for Obama is the weariness of having to keep one's own house in order while at the same time assuming some measure of responsibility for government. If I vote this election, I'll vote for McCain but truth be told I'm wavering on just how much I hope he wins. I am fairly secure on this, though. If McCain wins, I hope he gets an anti-honeymoon. I for one would like to see some Republican bigshots announce their total commitment to opposing McCain's immigration policy before he even gets the chance to announce it.
Tuesday, October 21, 2008
One of the undercurrents of this campaign is Sen. Barack Obama's work history as a community organizer. From what's been written about it, he actually accomplished little or nothing. But it is important nonetheless as it the key data point to be able to pigeonhole Sen. Obama, for both ends of the spectrum. The Right can say, "Oh look, he was pinko rabble rouser, the horror!" The Left will give him street cred for the same reason.
But to me the most interesting aspect of the whole thing is how the career of Saul Alinsky fits into all this. Alinsky is considered to be the godfather of community organizing, including DCP and the Gamaliel Foundation where Barack Obama cut his teeth. As much as Obama's period as a community organizer has been a rhetorical flashpoint for the campaign, there's been very little attention to Obama's failure to accomplish anything as one. And in the process, Obama rejected the defining feature of the Alinsky model, the nature of leadership. As John Judis wrote in The New Republic,
"As a result, the job of an organizer is to discover what citizens think is in their self-interest and then help them fight for it. Alinsky also instructed that the organizer himself should not become a public leader, but should operate behind the scenes to encourage "natural" or "native" leaders among the people he is organizing. That is, the goal of an organizer is never to create a movement based on his own charisma. ("We're trying to build an organization with staying power, not a movement based on instant power and charisma," Ernesto Cortes Jr., a prominent Alinsky disciple, explained in 1988.)"
He took a turn into politics instead, an endeavor that by its very nature requires charismatic leaders and smooth-talkers. How very convenient, like so many other things about the young Obama.But if Obama is not a true disciple of Alinsky then who is? Well, I suspect that we'll find out that it will be Joe the Plumber and the more or less apolitical conservative base. The complement to Alinsky's view of leadership was his view of "consciousness raising." People in general best learn the value of abstract principle in the struggle for their own interests. I suspect this is going to come home to bourgeois America in ways that we haven't seen for at least a couple of decades.
The right to own guns, the right to politically incorrect speech, the right to take exception to the establishment's line on the usual hot-button issues, they are all going to come under tremendous pressure. They will also be defended, but not just by blandly invoking words on a piece of paper, but also by force and through repeated clashes against authority.
It's very possible that American will be entering a period of substantial social unrest no matter what happends. But, in contrast to some others I see more of it if Obama wins than if he loses.
Monday, October 20, 2008
Blogger Robert Stacy McCain (no relation) has extensively taken up the subject of the Pundit Wars, both in his own blog and the group blog of the American Spectator.
His angle is mostly a generational one, that this is a symptom of the reality that the Right has too many callow 20-somethings, Ross Douthat in particular. I don't buy it. Ross is one of the fresher voices on the Right, and if the Right suffers from too many Ann Coulter wannabes, Ross isn't one of them.
McCain's bigger point is correct, though I personally like to think of it terms of sovereignty. Ultimately, the people in flyover country are sovereign and if the United States has any future will remain so. Others can and do speak on their behalf in Washington and elsewhere. But even if that is sometimes useful, it's not always necessary. The point of Sarah Palin is to illustrate that they can speak for themselves.
The people who don't like it just have to deal. Some of the complaints of some of the pundits may even be legit. Frankly I don't care very much if they are. They should have worked harder against the GOP political class when they had the chance.
The Pundit Wars are a multifaceted thing, and Ross Douthat has been near the center of most of the controversies. Here and here he defends the need for the GOP (and the Right in general) to have associated elites. I'm sympathetic to his conclusion but I think his reasoning is specious. The Right needs to have elites for the obvious (to me, at least) reason that there are important circumstances where knowledge or expertise is not widespread amongst the grassroots and somebody with that expertise has to be in position to make decisions or communicate the state of the game. Ross' concern with the conservative cocoon is well-placed, I think, but doesn't imply what he thinks it does. In fact, it's way more plausible to say that it's the nature of the cocoon is that various members of the conservative elite talk to each other and no one else, which belies the theory that the elite will stop us from putting ourselves in a cocoon.
Most of the drama of the Pundit Wars has centered on Sarah Palin, but to some extent that's a proxy for the inability of the GOP and the Right in general to compete in the debate over the economy. What a farce! In his heart of hearts, everybody knows (or ought to know) that the Republicans are the party of prosperity whereas the Democrats are one or two steps away from the Politburo for the sake of social acceptability.
So now, we are in the major of a huge economic crisis, and we have a Presidential candidate whose supposed strength is the ability to handle crises. What is our response? Hope it goes away so we can talk about Bill Ayers and Tony Rezko.
Finally, it's interesting to see how the recriminations against McCain's poor standing at the polls have been directed at the right wing pundit class. It's as if everybody already knows there's no hope of any accountability from the GOP political class.
With a slight uptick in John McCain's fortunes, I'm willing to concede that the prospects of his becoming President aren't completely dead but are merely on life support.
Much more interesting is the various sniping amongst people who are generally considered right-wing pundits of one stripe or another. I for one don't buy the theory "Let's wait till after the election for this sort of thing." First of all, McCain's prospects aren't worth that much. Second of all, it's precisely "this sort of thing" that has been long over due on the Right for say, two or three years at least (longer if you're particularly cranky).
And finally the subject is much more entertaining, unlike the McCain campaign which almost hurts my head just to think about (and even allowing for the possibility that he has some chance of winning).
Sunday, October 12, 2008
Monday, September 29, 2008
Update: What he said.
......and the flames went higher.
The latest iteration of the bailout bill failed just a moment ago, and financial markets are in turmoil.
Our political class is deservedly blamed for many things, and many castigate them in this case for failing to act in the face of an urgent situation. But at least as far as this bailout goes, their hands are relatively clean. One word we haven't heard very much of is citizenship. But in an oblique way, it's actually relevant here.
Congress, and by extention the American people, have been asked to do something that they definitively do not want to do. They (or we) may end up doing it if they have to. But, the various machinations of the credit markets have to be internalized at a broader level of society, so we can establish the credibility of personal relationships that we all evaluate to make our way around the world. And simply put, that hasn't happened yet. In another week or so, it might. And at that point, a bill like today's proposed bailout might pass, and more importantly, ought to pass.
Friday, September 26, 2008
"Let's say you have ten banks and two of them are insolvent. But youWe can and probably should work to figure who is the bad credit risk, but we know that it's not the new guy who just came into the room.
don't yet know which two. So the credit market is messed up for all
ten because at some sufficiently high level of risk credit just shuts down."
- Tyler Cowen
Thursday, September 25, 2008
There was supposedly a mortgage securities bailout deal nearly in place today before the House Republicans threw a wrench in the gears. I'm glad the GOP is slowing this train down, but for now I'm even less enthused with the House Republicans' alternative deal than the original Paulson plan.
The Rep Reps want to insure the questionable-quality mortgage backed securities in lieu of buying them, but I like my idea better. Part of the problem is that these MBS's are too opaque to easiliy manage them in the first place. So to insure them adds yet another layer of obfuscation, and btw does anybody have any idea for how much premium the gov't is supposed to be charging for this insurance? No, these MBS's are working like cholesterol in the bloodstream of our major financial institutions, so to fix the problem we need to get rid of it by putting it on the government's books instead. On that score Secretary Paulson is correct.
My biggest quibble with the Paulson plan is that it overpays for the MBS's. In fact, if we can build a legitimate mechanism for determining market value, I'd give Secretary Paulson a check for $700Bn today and let him buy whatever he wants (with some minimal oversight), as long as he never pays higher than market value for whatever he buys. Why would the owners of these MBS's sell them to the Treasury under these conditions? Because we're the government and we're not going to give them a choice. We tell the banks, "If you're not in good shape and you have bad MBS's, you have to clear them out. If you don't want to sell them to us, find someone else to buy them."
When this plan is implemented, anyone loaning money to a bank knows that the bank has the resources to repay them independtly of whatever they might own in MBS's. Then the banks can get access to capital, and loan money out to whoever they deem is creditworthy.
I appreciate Ross' point here, but I don't buy it. This is not a conventional issue-defined election, is definitively not about nothing. He may characterize the differences as tactical, but as he allows there is good reason to think that in terms of temperment, each man will govern as he campaigns. We see the effect of this already with the bailout. It seems likely that if McCain doesn't deliver Republican votes in the Senate the bill will fail.
Today was a near pitch-perfect illustration of the flaws of our major Presidential candidates.
Barack Obama has had various positions of authority, but as near as I can see he's never been held accountable for accomplishing anything, or even staked his personal reputation on the attempt. Today is no exception. By now, he's been the de facto leader of the Democratic Party for almost six months and his voice carries all the power of Marcel Marceau. John McCain has an innate feel for the exercise of leadership, but poor judgment for its end. Ie, he knows how to overcome inertia and rationalization for a common purpose, but he doesn't know what the common purpose is.
Today, John McCain suspended his campaign and is going to Washington to participate in the bailout debate. This has been characterized by many as a stunt, and that's certainly a legitimate pov. But I can almost guarantee that it's not a stunt in McCain's mind, but a real statement of priorities. For the sake of the economy, this might be good or bad. It's easy for me to envision the scenario where McCain builds a legislative consensus where there otherwise wouldn't be one. But the resulting bill might be your typical Congressional hodgepodge we'd have been better off without.
Fwiw, the lay of the land is changing so quickly, I don't know what we want to happen. I still expect some sort of intervention to happen, but it looks a lot less urgent now than it did a few days ago, which is a very good thing in my book.
If I had my druthers, here's the framework I'd use. Come up with criteria for a reasonable dividing line between "healthy" banks who we think can survive without an intervention. Figure out what the current market liquidation price of the various sorts of bad paper is, and have the Treasury bid at a small to medium-sized premium to that price, ie, well below the hold-to-maturity price Sec. Paulson has been talking about. Then, use the regulatory power of the government to force the "unhealthy" banks to clear out all their bad paper, either to the government or to somebody else. For many of them, this will not give them enough capital to continue operations. For those, we handle like an ordinary bank failure, ie, inject enough capital into it for a healthy bank to take over. Finally streamline the process of chartering new banks with new capital, perhaps allowing them to operate in a looser regulatory environment for a while. That should be okay, we know they're not carrying bad paper.
This approach would solve the moral hazard problem and be the best for the taxpayer. It avoids demagoguery and blame games. On the downside we're left hoping we're using enough club to get the job done. On that score, today at least, I think we just have to take our chances. From what I've seen, there is no magic bullet where we're guaranteed to get out of the mess if we give the Treasury X number of dollars worth of spending authority.
Like anyone else, my view on this might be completely different tomorrow.
Tuesday, September 23, 2008
As I noted in the last post, McCain's various statements about the credit crisis or the economy in general are less than inspiring. However, he's getting closer to where he needs to be with today's statement.
The problem is complex, and the legislation to fix it surely will be as well. So first, let's state some principles we can use to guide us instead of barking barely coherent complaints against various bogeymen, some innocent and some guilty.
I would have stated the guiding principles a little differently. Whether we characterize what eventually gets done as a bailout or not, there will eventually be some kind of intervention, because there is a very substantial likelihood that we would have a second Great Depression without one. But the money is so huge, and the amount of government control over the economy is so extraordinary, that we have to emphasize that the intervention is something we have to do, not something we want to do. And, this is something we only intend to do once, with provisions for sunsetting and reselling debt back into the private market when the opportunity arises.
But truth be told, what's in the statement isn't too bad for now. Everything going forward has to emphasize two things. First, let's do X, Y, and Z and we'll avoid the 1932-scenario. Second, after the crisis is past, we'll remain vigilant against government mission creep. We're not going to maintain intrusive government power past the point where it's needed.
Monday, September 22, 2008
By now, we've all heard about the Fed/Treasury Resolution Trust Corp. reprise. Among other things, various parties are tut-tutting over the "moral hazard," ie, the idea that having an external party bail our protagonists out of trouble greatly increases the probability they will get into trouble in the first place. In this case, this is usually meant to mean that the lenders and investors are leaning against the gov't bailout, thereby propping up institutions which should have either failed or taken a more conservative business plan some time ago.
That is not something to dismiss out of hand. But on balance it's difficult to say this outweighs the possibility that our banking system was an hour or three away from collapse, a story which nobody has really tried to refute. About the creditors and the equityholders, they might catch a break from the government, but then again they might not. It'll depend on the details, and those might not be in their favor.
However, now that it's clear that some kind of bailout will occur, there is a significant risk of moral hazard that we should be aware of, and take measures against. We should be more afraid of recklessness from the political class than the financial class. Various politicians and bureaucrats will have control over assets, de facto and de jure, on a scale they had only dreamed of beforehand. This might be necessary to resolve an emergency liquidity crisis, so it's important for us to insist that the government intervention be taken for that end, and nothing else. That certainly won't happen by force of bureaucratic intertia, so it will require vigilance from those of us not in government. The flip side is, once we agree that this intervention is something we doing because we have to, not because we want to, the consequences are probably not so bad.
Sunday, September 21, 2008
If you were to ask 10 well-informed conservatives who they would rather have as President if they had to choose between John McCain and Chris Cox, I think Mr. Cox would get at least nine votes. Of course, John McCain does not strike anyone as being particularly adept economic policy expert, so it was doubly unfortunate that Mr. McCain chose to take out his frustrations on Mr. Cox last Thursday. This is just one symptom of the larger condition of this campaign diagnonsed by Peggy Noonan, where for many of us, we support Mr. McCain but don't necessarily believe in him.
Donald Rumsfeld famously told a soldier that we go to war "with the Army we have, not the one we want." There's a tendency to apply the same train of thought toward elections, and in this case it would be a substantial mistake. Among other things, the "chain of command" in this case runs in the opposite direction, where the voters are sovereign. But even beyond that, for the credibility of the GOP base and the health of the economy as a whole, we can't afford to pretend this particular emperor is well-dressed when he's really naked.
Tuesday, September 16, 2008
Just six days ago, I wrote that John McCain was late giving up manufactured outrage over lipstick and needed to pivot toward a real message on the economy. Unfortunately I suspect that window is shut now. First of all, with all that's happened this week, he appears to be late to the party. Second, what he has said isn't exactly worthy of the brilliancy prize (more on that later).
It's been said of several big teetering financial institutions, Long Term Capital, Fannie and Freddie, Bear Stearns, Lehman Bros. (oops sorry guys), and most recently AIG that they are "too big to fail." This has been repeated enough to be a cliche without necessarily figuring why. Financial institutions have to be able to deal with each other with the understanding that in the vast majority of the time (more often than with other generic businesses), the other party will be able to live up to their obligations. Too big to fail means that a financial institution is so entrenched in its obligations to other firms that if it fails then its counterparties likely will as well. By the time the cascade of failures is finished, there won't be enough solvent institutions remaining to lubricate the wheels of a healthy economy.
The point being, most of the economy lives outside the financial sector, and the crisis inside it needs to be viewed from that point of view. The economy as a whole needs institutions that can store capital on others' behalf, and extend various kinds of credit. Even if the events of this week are resolved well enough, we're still not out of the woods. Just because there's players out there with money who can extend credit, does not at all imply that they will. In the big picture, the crucial factor is growth. In the end, it is growth which generates the credibility that money lent out will eventually be paid back. As it stands right now, things aren't so bad. Growth has been ok, and credit is available for creditworthy parties, even if the liquidity of the secondary debt market has dried up. It's what happens when things turn for the worse from now that we should be afraid of.
Except for the Bush tax cuts, John McCain's record in the Senate is actually pretty good. The problem is, he seems to view the mechanics of the economy as morality play. He's not alone in that of course, but for him it fuels the perception that his life experience is in substantial ways lacking in the ability to engage peoples concerns now. In any case, it's seems to me that the weakness in the Republican ticket is on the top, not the bottom.
New York judge Gideon Tucker once said "Nobody's life, liberty or property are safe while the Legislature is in session." Bearing that in mind, it's useful to remember that for the big ticket issues, it's almost always better to roll the Democrats instead of negotiating with them. That's not a matter of being macho or mulish resistance to compromise. It's just that conservatives can never get half a loaf when both sides emerge from the proverbial smoke-filled room. And wrt the energy "compromise" floating around Capitol Hill, that's the way National Review sees it. To be honest I haven't checked all this out too carefully but I'm inclined to agree with them.
In the smoke-filled room column we have the Medicare Prescription Drug Bill, Leave No Child Behind, the infamous 1990 Budget deal (ie, the repudiation of "Read my lips."), and who could forget last year's Comprehensive Immigration bill. In the other column we have the nomination fights over Roberts and Alito, the 1996 Welfare Reform, any of the recent major tax cut bills, and the Iraq War vote for that matter.
The trick is to sharpen the difference between the parties toward maximum clarity for the public at large. In this case is not too difficult. The GOP, if they're smart, ought to be in favor of "all of the above" wrt energy production. As it stands there are lots of statutory barriers to energy production in America, there's no point in adding to them. Anything we can get out of the Democrats now, let's take. Anything we can't get, we'll try for later.
Saturday, September 13, 2008
For the moment, the Presidential race has found its equilibrium. McCain has a small lead, and the Obama campaign appears lost. As things stand, both sides look ready to fight the trench warfare at the end of Presidential elections: sound bites, debates, ritual denunciations, the ground war, etc. McCain has a small advantage here, but it's too vulnerable to try to protect. One mistake in a debate, poor organization in Ohio, and it all goes away.
It doesn't have to be that way. McCain has had a good six weeks. I'm reminded of a thought of Judge Sonia Klonsky in Laws of Our Fathers by Scott Turow, where she thinks (and I paraphrase), "This is the only cross-examination in my entire career on the bench that is actually going to change the verdict of the case." Everything that's gone right for the McCain campaign, the Saddleback Forum, the "celebrity" ad, the Palin selection, it all sets the stage for what happens next.
Now, while McCain has everybody's attention, he needs to execute the Michigan pivot. Ie, he tells the voters "Vote for me and the 1932-scenario is out of play. Vote for the other guy and it's a very real possibility." It's important to maintain as high a signal-to-noise ration as possible, and avoid electioneering theatrics. Fortunately, there are several very specific, very tangible data points available to make that clear. Michigan has been in a one-state recession for the last six years. The Democratic-controlled House of Representatives turned off the lights in lieu of debating energy production. The housing GSEs, whose management has largely been a gravy train for Democratic insiders, have failed and now require a government bailout.
One thing McCain can do is promise to drill, or more importantly, "all of the above". The second thing he can do is cut spending and talk up the dollar. The biggest problem with credit now is not risk of default. The lending bubble has largely been written down. Instead, it's about currency risk. Anybody loaning money to an American on any terms is going to be paid back in dollars and therefore taking a risk that the dollar will depreciate. Fortunately for McCain he has credibility on spending. He just needs to apply it in the right place.
If McCain can do this, I don't see this as a close election. This is where the voters are and Obama can't follow him. Obama has had his chance of running on a message and blew it, the voters are ignoring him at this point. I see a McCain win of 5-8 points and with a drama-free Election Day (and drama-free for the three weeks leading up to it as well). Will McCain actually make this pivot? It's anybody's guess.
Wednesday, September 10, 2008
The world is abuzz with speculation about whether "lipstick on a pig" was a deliberately ungracious insult of Gov Palin from Sen Obama, or an unfortunate choice of words. For the Republicans, this is good news and bad news.
The good news is that Sen Obama clearly has no message, he's out of his comfort zone and is flailing. From what we've seen so far, he's gaffe-prone and surprisingly ineloquent when forced to speak unprepared.
The bad news is that playing gotcha games is not good turf for the Republicans and they should make some effort to get out of there as soon as possible. In a very particular way the Republicans have unwound a significant part of the legacy of President Bush in the last ten days or so. They have the nation's attention and people are listening to what they have to say. It's been so long since the party has gotten a decent hearing that it's imperative to leverage this wisely. Ultimately our message to the voters has nothing to do with complaints about Sen Obama insulting them so let's not waste our time teaching trying to teach this particular pig to sing.
Instead, the economy is a very ripe issue for the Republicans, and if the McCain people play their cards right, the Presidential race could be functionally over by the beginning of October. The Republicans already own the oil issue. As it happens they stand to benefit from some good timing as well. The Congressional ban on offshore drilling sunsets at the end of the month. The debate over renewing it, inside and outside the halls of Congress, will work to the Republicans' benefit. The trick for the Congressional GOP is to establish the energy analog of the Brezhnev Doctrine. With respect to energy production, they are in favor of "all of the above" The Democrats will acquiesce to some forms of energy production and not others. The GOP should take whatever the Democrats acquiesce to, and agitate for the rest. They must resist the temptation to think that because they have some deal with the Democrats, the leftover forms of energy production are "off the table." The country will be better off for whatever energy production the Democrats allow, and the Democrats will look bad no matter what they do.
Plus, just Monday the government announced the takeover of GSE's Fannie Mae and Freddie Mac, both of which happen to have been woefully mismanaged by Democratic pooh-bahs sucking very generously on the public teat. McCain-Palin can't unilaterally promise to prop the housing market and end the mortgage crisis, but they can demonstrate that they are dialed in to the the real problems facing America.
Tuesday, September 09, 2008
Here's one more post on Gov Palin, then I suspect we'll be leaving the world of all-Sarah, all the time (me and the Presidential race both).
First let's recap the impact of The Speech a little bit. I had a wrong read initially, largely because I had already gotten to the place where everybody else was going. I already knew she was hot and poised, so I didn't need to see any more of that. I am probably one of the very few viewers who thought her speech was too nice toward Obama. In any case, the first impression for most of the world was that she is a woman who is composed and aggressive at the same time, a very appealing combination.
Since the announcement of her place on the ticket, Gov Palin has been hit with two separate waves of antagonism. The first was various negative insinuations and rumors about her family. The second was about her "inexperience." Both have boomeranged against their instigators to the benefit of the McCain-Palin ticket.
We've already written about the first a little bit, so let's hit on the second for a moment. Some people claim that she attracts support because she is an ordinary person that her constituents can relate to. I see the point but I find that explanation unsatisfactory because even though she is very normal in some ways she is also completely extraordinary. It's not just that she has five children. She also hunts, she fishes, she won the state championship in basketball, she finished runner-up in the state beauty pageant, she ran a small business, she got elected mayor and governor. Sarah Palin is the reason compasses point North. People identify not just with her ordinariness, but more importantly with her extraordinariness, as a crucial expression of their sovereignty. Ie, if the media, the Democrats and various bien-pensants of The Establishment will treat her the way they have, the rest of us have no hope.
Unfortunately for Gov Palin's detractors, in America the people still get a vote that counts, and they can and will use it to pull rank. We'll always have experts of various stripes, and it's a mistake to disparage the idea of expertise in general. Nonetheless, even if it's the experts who know how to sail the ship of state, we still pick the destination.
Thursday, September 04, 2008
After McCain's speech, I like him more but my expectations of him are less (when he gets to the Oval Office, and I think he will). I wrote before that the self-justification of the McCain candidacy is that he survived the Hanoi Hilton and you didn't, and I stand by that.
Obviously that is a substantial achievement that speaks impressively to steadfastness in character, but it isn't enough. Even though McCain has largely been doing what I suggested in the post I mentioned before I am not particularly optimistic about the upcoming McCain Administration. We've got very substantial problems in America that require real expertise to get through. More expertise than any one person has of course but in McCain's case I fear his tendency to view the world through his "public service" lens will keep him from getting the best out of others too.
Notwithstanding that, McCain vs. Obama is an easy call and at the moment most of the intelligent people who are sitting this one out are motivated by the need to indulge their own spite, which is their prerogative of course. I suspect when push comes to shove Palin is the real game-changer anyway. We need a broader base of political renewal than the Establishment has on offer. And now we have a chance of getting it.