Brassai ‘Place de Italia’I guess David Stockman is looking for a job in the new Steve From Virginia administration:
Four Deformations of the Apocalypse
By DAVID STOCKMAN
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.
More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.
… during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street’s shrinking economy — got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.
The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing — as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach — balanced budgets, sound money and financial discipline — is needed more than ever.
The entire article is a must- read. The estimable Barry Ritholtz provides the condensed version:
Over the years, I have described myself politically as a “Jacob Javitz* Republican.” For those of you unfamiliar with the Senator from NY, Javitz was a social progressive, a fiscal conservative, “a political descendant of Theodore Roosevelt’s Progressive Republicanism.”
After he “retired” in 1980, the GOP took a very different turn: The emphasis on Fiscal conservatism was lost. Balanced budgets were no longer a priority. In terms of electoral politics, the embrace with the Religious Right was a deal with the devil. It married the party to a backwards combination of social regressiveness and magical thinking. Ideology trumped facts, and conflicting data and science was ignored.
In short, the party became more focused on Politics than Policy.
I bring this up as an intro to David Stockman’s brutal critique of Republican fiscal policy. Stockman was the director of the Office of Management and Budget under President Ronald Reagan. His NYT OpEd — subhed: How the GOP Destroyed the US economy — perfectly summarizes the most legitimate critiques of decades of GOP economic policy.
I can sum it up thusly: Whereas the Democrats have no economic policy, the Republicans have a very bad one.
The details are what makes Stockman’s take so astonishing.
What can I say, the balanced budgets, sound money and finance discipline are as chimerical as … the balanced domestic energy budget. Energy waste is a tiny ‘detail’ Stockman fails to mention.
The energy crises of 1973 and 1979-80 were part of the Reaganomic socio- political landscape. To not acknowledge the energy input is bizarre, considering Reagan’s symbolic removal of President Carter’s ‘solar collectors’ from the White House roof in 1986.
Typical economist; to put all the probity in place sans- conservation the consequence will still be a continuing “long hangover of debt liquidation and downsizing …” due to the ongoing and unyielding demands that energy costs are making on ‘cheap input’ commerce.
Nevertheless, we can add some material to April’s “Broken” key- post:
Our country is broken. It is a victim of neglect. This is a list of problems, many of which are not part of the public conversation. In some cases, policy makes the problems worse.
The media suggests the country’s economy – and the world’s as well – is on the mend. I suggest that until the following problems are fixed, there will be no recovery. Any single one of these problems is sufficient to derail the ambitions of a state. Here are eighty- eight!
– Public corruption and the purchasing of influence by corporations and special interests.
– The ‘revolving door’ of officials taking jobs with companies that they formerly regulated.
– Unprincipled partisanship.
– Undisciplined populist- style pandering to extremists
– Concentration: ‘Too Big To Fail’, support for monopolies and cartels.
– Accelerating concentration of wealth and resources in the hands of the (inept) few: the widening gap between rich and poor and the erosion of the middle class.
– Corporate welfare.
– Uneducated policy makers.
– Bottomless conflicts of interest.
– Election processes corrupted by private funds and advertising.
– Erosion of Constitutional protections limiting intrusions of state power into the lives of the citizens.
– The rise of ‘Shadow’ states- within- the- state such as private militias and security departments.
– A wasteful and incompetent military establishment which is rewarded for failure after failure.
– The shift from a public military to a mercenary military.
– ‘The Untouchables’: unquestioning support for the defense/security industrial complex and its excesses.
– Unaccountable intelligence services and opaque intelligence gathering activities, including torture, domestic spying and detention- without trial.
– The massive expansion of unfunded public liabilities including retirement, pension, public sector compensation and medical care programs.
– A rising and general sensation of high- level public lawlessness, that invariably translates into private lawlessness at all levels of public and private life.
– The failure to discuss then formulate a population growth policy.
– The failure to discuss the material requirements and costs of lifestyle: paying the ever- expanding marginal costs of ‘convenience’ for ever- shrinking marginal returns.
– Commercial imperialism and the hegemony of commercial interests at the expense of all else, including longer term US political and security interests!
– The transfer of public assets to private interests for private gain.
– The privatization of business profits along with nationalization of private losses: ‘Socialism for the bosses, capitalism for the workers!’
– The institutionalization of impunity and moral hazard: that select individuals and firms can do as they will without regard for any consequences.
– Failure of the Establishment to prepare the country to withstand economic hardship.
– Reliance on propaganda – lies – as a primary policy tool: ‘Potemkinism’.
– Structural impediments to productive employment and failure on the part of the Establishment to create effective employment strategies.
– Pandering to religions, religious interests and other cultists.
– Too- short policy time horizons.
– The erosion of capital as the byproduct of short- term gains: eating the seed- corn.
– Improper accounting at all levels: the wilful ignorance of externalities as well as off- balance sheet manipulations and ‘extend- pretend’ and ‘mark to mockery’ frauds.
– The tolerance of finance- level black markets: the shadow banking system.
– Embrace of excessive leverage across the economy: the abandonment of economic restraint or discipline. “If I don’t do it, somebody else will.”
– Wilful failure to restructure insolvent business entities that make ongoing claims against the public!
– An economy based on the monetization of waste and waste gate- keeping.
– A trend toward economic returns from rentier- and rent seeking activities.
– The declining national level of critical thinking, skills and artistry. America, has become a nation of boobs!
– Refusal to include natural resources and carry capacity in policy- level economic discussions.
– Refusal to understand fundamental nature of money and credit! This is mind- boggling in an establishment that claims to gain wealth by the manipulation of money and credit!
– Conflicts of interest involving economists and the agencies which employ them.
– A multi- decade malinvestment in a physical and social plant that is stranded by its material and credit inputs.
– A multi- decade malinvestment in an economic metric that requires the constant input of new funds to pay returns – the ‘Ponzi economy’.
– The reinforcing of failure at all economic levels: support of bubble- housing prices, Fannie Mae and Freddie Mac, etc.
– Over reliance on automation and technology.
– Heavy industry- modeled social infrastructure such as education and ‘wellness’ systems which have all failed.
– A physical plant that is over- leveraged to the automobile.
– A counterproductive ‘War On Drugs’ narcotics policy.
– A perverse immigration policy which rewards individuals who break the law and which depresses American business profits by means of ‘wage arbitrage’. Immigrants cannot earn enough to support high- cost US businesses.
– State government revenues that are dependent upon an accelerating level of consumer waste.
– A cavalier disregard to the consequences of pollution and resource depletion.
– Public ignorance of the exponent function and thermodynamics.
– The elevation of fantasy and wishful thinking to equality with scientific facts as an element of the public policy discussion.
– Malinvestment in non- productive enterprises such as the taxpayer purchase of GM: the endless cycle of bailouts.
– Inability to hold finance accountable for its actions and/or negligence.
– Inability to enforce laws on the books against theft, influence peddling, racketeering, corruption and fraud.
– Inability of government(s) to balance revenue and expenditures.
– Inability to reject useless and counterproductive initiatives – ‘Earmarks’.
– The non- stop increase in unfunded policy mandates and programs: governments cannot add or subtract!
– Top- line support for monopolies and foreign/offshore business interests.
– A fiscal policy that is dependent upon foreign lenders and producers.
– The absolute lack of any energy policy!
– The failure to adequately defend the public finances by regulations.
– A ruinous and counterproductive tax ‘system’.
– Incoherent public accounting.
– Misleading, manipulated and inaccurate economic figures.
– The abdication of serious economic policy making: deferring to a ‘free market’ which doesn’t exist and to the finance/banking apparatus which is pedatory and corrupt.
– The national shift away from production and the fruits of labor toward gambling and speculation.
– The uncontrolled expansion of noncollectable claims against productive labor in the form of credit and derivatives.
– The reactive, unequivocal fiscal support for ‘risk renting’ gambling activities.
– The politicization of regulation; regulatory capture and policy- level conflicts of interest.
– The over- reliance upon the Federal Reserve (and other central banks’) monetary policy tools to effect economic output.
– The parallel ambition of the Central Bank to gain more authoritiy.
– An opaque US central bank which does not allow lawful audits of its activities and clients in this country and elsewhere.
– An inflationary bias to Fed monetary policies despite claims to the contrary.
– A reliance on the ‘carry trade’ to finance the US government.
– The abdication of monetary policy to foreign interests.
– The false premise of Fed effectiveness opposing deflation.
– The general acceptance of unlawful central bank activities where the ‘end justifies the means’.
– Manipulation and interference by the central bank in all markets.
– Ignoring bank malfeasance: substituting Fed credit for proper and prudent regulatory oversight.
– Aiding and abetting Wall Street criminal acts as a form of monetary policy.
– Failure to provide adequate liquidity within the general economy while maintaining a high level of liquidity for client banks (and banking officers).
– Failing to recognize the deflationary implications of oil price upper bound and peak oil.
– Inflating credit- and asset price bubbles as substitutes for top- line economic output.
– The blatant institutional prejudice favoring finance flim- flammery at the expense of labor and production.
– The endless and economically counterproductive ZIRP: perverse incentive to dis- save and the consequent ongoing shortage of investment capital.
– Currency and trade- dynamic imperialism including interest rate manipulation.
– The refusal to restrain ‘hot money’ capital flows.
Believe it or not, there will be no economic ‘recovery’ until ALL these issues are properly addressed. These are all old problems that have been patched over with short- term expedients. We are at the point where the expedients have outlived their usefulness, rendered ineffective by the rising costs of primary inputs.
Looking at this list it is clear that simply keeping interest rates @ zero or bailing out some banks with borrowed funds will not solve anything. Suggesting that the economy has ‘recovered’ while these problems are unaddressed is false.
Our so- called recovery is too easy. It took more than ten years and a world war to exit the Great Depression, that was without the current energy crisis!
It wouldn’t take too much effort to add more problems to this list. What is clear is the immense scope of the problem and complexities that the layers of problems present. At bottom is the issue of a people living beyond their means – and feeling entitled to more of the same.