Archive for October, 2008

Barbara Ehrenreich is all wet

October 26, 2008

Barbara Ehrenreich, in books like Nickel and Dimed, tried to demonstrate, through living it herself, that the working life in America no longer gets you anywhere.

A young fellow named Adam Shepard didn’t like her attitude. He believed Ehrenreich set out to fail, and so she did, but that a different attitude could produce different results. He was also fed up with the whining entitlement mentality, the lack of drive, he saw among his peers.

Against all this, he launched his own experiment, chronicled in his book, Scratch Beginnings. Adam picked a US city out of a hat, and started there literally from scratch: with nothing but the clothes on his back, $25 in his pocket, and an empty gym bag. His previous life and associations, even his driver’s license, were left behind. He began unemployed and living in a homeless shelter. The goal was to achieve, within a year, a furnished apartment, a car, $2500 in savings, and—most important—a path to continue improving his situation. Adam got them all, and some inspiring friendships besides. He succeeded without begging, cheating, or scamming, but through self-discipline, hard work, sensible frugality, and a go-get-‘em spirit. Adam acknowledged that others may have disadvantages he didn’t face. But he did prove Ehrenreich wrong, that virtue is rewarded, and the deck is not stacked against working people in this land of opportunity.

(I met Adam at a book signing; he’s a good guy. Here is a link to his website.)

Change and New Politics

October 19, 2008


         Barack Obama is an outstanding candidate. We can be proud our system has produced such a candidate. A non-white president would be a very good thing for this country. And Washington’s political culture does need shaking up, it needs a boat rocker. But unfortunately, Obama is not that man.

         His entire career bespeaks a “go along, get along” approach, from playing the game of Chicago’s political machine, to his Senate term, to his presidential campaign. Never has he done anything to rock the boat of Democratic liberal orthodoxy, or that challenged any of the party’s constituencies or interest groups, like unions, lawyers, and pro-choicers. (His answer in the third debate was risible. He supports clean coal technology? Wow, that’s really sticking his neck out.)

         Look instead at the key issue of trade. No reputable economist believes that free trade, as exemplified by NAFTA, is not a good thing for the American economy and consumers. But the Democrats’ left wing, and its unions, hate it, and Obama has obsequiously pandered to them by spouting nonsense on free trade.

         He proposes numerous new spending programs, yet also tax cuts for 95% of “working people.” To pay for it all, he proposes to “tax the rich.” I have a better suggestion: repeal the shameful farm bill for which he voted. That was a biggie, and it moots all his rhetoric about change and “new politics.” That was old politics on stilts.

         But Obama did do one thing that was new in presidential politics. Though he had originally pledged to abide by the federal election financing system, he broke his word and became the first candidate ever to opt out of it for a general election, in order to raise and spend even more.

         John McCain, over two decades, has challenged status quo orthodoxy, and even his own party, again and again. He has never been afraid to rock the boat. And it wasn’t just tilting at windmills; unlike the silver-tongued talker Obama, McCain has racked up a long record of solid accomplishment.

         He opposed President Reagan’s Lebanon deployment. He opposed George W. Bush’s original tax cuts. He consistently criticized the conduct of the Iraq War, from the beginning, being the first to call for Rumsfeld’s resignation, and for more troops. He rose above his own personal history to push for restoring relations with Vietnam. He bucked entrenched interests in both parties, and worked with reformist Democrats, to gain enactment of the landmark McCain-Feingold campaign finance law. He opposed most of his party on global warming, and on immigration reform. He broke the logjam on judicial confirmations by leading a bipartisan coalition, the “gang of 14.” (Obama wouldn’t join.) McCain got an anti-torture bill enacted, despite White House opposition.

         McCain has been the one senator who consistently has fought Washington’s pork barrel earmark spending culture. He is the one senator with no earmarks to his “credit.”

         And, yes, he had the guts to vote against that vile farm bill.

         He also voted against the energy bill, a Christmas Tree of park barrel excess. Obama, depressingly, voted for it.

         It’s not that the issue of park barrel spending itself is such a big deal. It’s not. But the real point is how it illuminates the true contrast in the behavior of the candidates: one who does what’s easy and safe, the other willing to do the tough things. Unlike all the other presidential wannabees, John McCain was willing to lose Iowa rather than endorse the boondoggle of ethanol subsidies.

         Democrats love to quote McCain saying he doesn’t really understand economics. He was way too modest. McCain understood perfectly why that farm bill, and that energy bill, and those ethanol subsidies, were bad deals for the great majority of Americans. And he understands how free trade truly benefits most American consumers and working people. This is critically important. It’s Obama who “doesn’t get it.”

         The Economist says Obama is the least business-friendly presidential candidate in 25 years. I’d say “ever.” For all his talk about the middle class, he doesn’t seem to get that most middle class people get their paychecks from businesses; and if businesses aren’t healthy and profitable, the middle class will really be in trouble.

         McCain does get it. His willingness to lead, rather than just doing what’s easy and popular, is the change we can believe in.   

What happened — further reflections

October 13, 2008

         Wall Street did screw up royally, and needed government’s help. The problem was a triple whammy: many big financial institutions underestimated the risks in mortgage-based securities should house prices fall, compounded by a perverse incentive for banks to make mortgage loans disregarding ability to pay (another case of unforeseen consequences), and by a credit bubble fueled by low interest rates, which promoted financing by borrowing rather than selling shares (a good thing as long as a firm makes money, but dangerous otherwise). Capitalism was a victim of its success: huge wealth had been generated, sloshing around in search of investments, and Wall Street was (overly) creative in responding.

            The actual mortgage related losses were not that huge, but triggered a crisis of confidence that spiraled out of control and paralyzed the credit system, which in turn prompted a panicked financial selling frenzy. Thus the problem wasn’t so much the system as the psychology of its human participants. Of course, any system worth its salt must allow for that. But this was a one-off, a unique event, like a once-per-century storm. No system could ever be impervious to such storms.

            Blame has been put on deregulation, or government regulatory failure. There was some fraud, that should have been stopped. However, beyond that, it is far from clear what regulation could, or should, actually have done that would have prevented the smash-up. It would have required government second-guessing business and investment decisions by private firms using their own money. Some of those decisions proved disastrous, but why expect government to make better ones with other people’s money? And if you do blame government for the situation, what that really shows is just how difficult it is for government to navigate in today’s exceedingly complex financial landscape.

            This is all about how credit and capital get distributed throughout the economy. Government-run systems, like the USSR’s, did that poorly. Our freer system, with moneyholders possessing the flexibility to invest based on finding promising opportunities has, in recent decades, midwifed fantastic economic growth—even considering the 2008 setback. There isn’t any viable alternative system.

            This is not to say “the market is always right,” or is the answer for every societal concern. Life isn’t that simple. For example, we all know about “the tragedy of the commons”—if everyone can graze sheep on common land, it soon will be grassless. And if every fisherman maximizes his catch, fish populations implode. But note that in such situations, where someone can get something for nothing, that isn’t really market economics. Hence the term “market failure” is often used. In market economics, you have to pay for what you get, there are no free lunches; and if government must step in to close the buffet, that doesn’t violate free market principles, it protects them.

            Thus, the idea of “unfettered” free markets, with no government role, is a false straw man. No defender of capitalism advocates that. We do need government, to act as referee, and to intervene to keep markets open, competitive, and genuinely free. That’s what “unfettered markets” should really mean.

Election prediction

October 5, 2008

      The Presidential election may be fairly close. My prediction is that, IF McCain wins, there will be loud screams of fraud, theft, conspiracy, and that ubiquitous buzzword, “disenfranchisement.” The blogosphere will go nuts; books will be written; outrage will be shouted by those for whom outrage is the preferred political stance.

      They are in fact already gearing up for this post-campaign campaign. Having rehearsed their outrage over the past two elections, they’re not about to take a pass on the next one.

      Did some dirty stuff go down in 2004? Sure it did. I was an opposition ward leader in Albany, New York, in the days of the legendary O’Connell Machine, so I know a thing or two about that kind of stuff. Voting and counting are imperfect processes.

      But please don’t try to tell me that all the dirty doings are by one party while the other is populated exclusively by innocent angels who would never dream of anything naughty. In this 50-50 nation, a pretty good nationwide estimate of Republicans versus Democratic vote skullduggery would have to be 50-50. That is, Republican thefts are pretty much cancelled out by Democratic thefts.

         What about the 2000 election? A “judicial coup”? Look – the 2000 election was a tie. No one can claim that one candidate or the other “really won,” or should have; the Florida count was well within the margin of error for such an unavoidably imperfect process. The tie had to be resolved through the legal system. By ruling as it did, the Supreme Court did resolve the matter – in the only way the Court could in fact have achieved a resolution. Critics never seemed to realize that any different decision could not, in the circumstances, have simply given the election to Gore instead; it would have left the election unresolved, and probably unresolvable, opening the gates to intensified political war and ultimate constitutional blow-up.

     I believe the Court’s majority realized its decision would be seen as partisan, but they were willing to take the hit as the price for avoiding a potential nightmare scenario of unpredictable dimensions. I believe they acted wisely and did the country a real service. And at any rate, the election was resolved through rule of law.
     To argue that, because of inevitable imperfections in the voting and counting processes, American democracy is some kind of sham, or that we don’t really even have a democracy, is very very wrong.