Deep Sleep and Other News
from Peter Radford
“the rotten economics that brought us the crisis has not been purged”
With the US immersed in one of its weekly presidential elections – they seem to be that frequent – nothing substantial can be done about our malaise. No one wants to do anything for fear of inciting a tsunami of attack ads, venomous deformations of the truth, and contorted definitions of what is actually going on. Too much is at stake for anyone to make a move. So we drift instead. This is more a function of the extraordinary divide in our politics than it is of the electoral system itself, but it is, nonetheless, the primary cause of our problems. While we clearly have an ideological battle being waged within economics, it pales by comparison to that in our politics. Until one side or the other emerges victorious, or at least sufficiently dominant to do what it proposes, we will be stalled. That, I think, could take a decade or more.
The only person in Washington to talk much about our problems this week was John Boehner, the indefatigable leader of the Tea Party House Republicans, who gloomily predicted that there is little or no chance of reaching a compromise over the onrushing ‘fiscal cliff’ at year end. This may be because his definition of a compromise appears to require total capitulation on the part of the White House with respect to all it holds dear, or it may be because he realizes that he has lost control over his own party and that the zealots now run the show. The fiscal cliff, you may recall, is the combination of radical spending cuts and tax increases put in place after the last compromise effort as a nuclear armageddon like warning to force more compromise. It is a testimony to the hatred and bitterness that pervades our politics that the only way to engender discussion is a threat so dire that the economy, and tens of millions of people, would be thrown under the bus if those discussions are not fruitful.
Meanwhile the deep sleep continues.
Our malaise appears never ending. When the crisis broke upon us I among many predicted it might take a decade or more for us to recover. That grim prognosis was based on the economics, not the politics. The problem is that the rotten economics that brought us the crisis has not been purged and the consequent malaise has proven a fertile breeding ground for the extreme right’s extraordinarily radical vision. While comparison with Weimar Germany is not accurate in entirety – despite the vitriol we do not have Hitler on the rise – the thematic comparison is quite appropriate.
Our deep sleep continues because our elite is stuck in a broken world view. It is educated in and committed to a set of ideas that are long decisively disproven, and cannot re-educate itself fast enough to keep up with events. Our media is obsessed with a mindless and dangerous search for relativist equality. It lost its ability to distinguish between a good argument and a bad one. Rather it gives credence to all arguments on an equal footing no matter how radical they are. And no matter how little substance there is in support. This is because our media is either lazy, ignorant, or incompetent. My guess is all three. It, too, suffers from an over education in bad ideas. It too is stuffed to the gunnels with too-clever-by-half people whose goal is self aggrandizement not reportage. And it too is easily bought.
So when Mitt Romney and Paul Ryan give us an economic plan that exists in mid-air devoid of detail and full of vaporous platitudes no one treats it with the derision it so clearly calls for. Instead they solemnly repeat its outline and offer it to the voters without comment, critique, or analytical thought. They have shrunk their self-defintion to one of being a mere conduit. They no longer add value. But they do add cost: their lack of thought allows disinformstion to flood unfiltered to cloud discussion.
This is not to argue that Obama’s plan is terrific, but at least its clear in what it does. Whether it works is something we can debate based upon its content not upon the series of winks, nods, and hand waving that form the most structured part of the Romney/Ryan alternative.
Within this fog it is no wonder that the economy wanders around aimlessly.
Our small business owners are a dogged lot. They persist despite being perpetually dyspeptic. Take, for instance, this week’s report from the Federation of Independent Business Owners. It tells us that small business owner optimism rose slightly last month to reach a reading of 92.9. That compares with a pre-crisis level of 94.4 and a high of 94.5 in February this year. It only fell to a low of 86.5 in the depths of the crisis, so clearly small business owners are an upbeat crowd even in the grimmest of moments. This happy outlook doesn’t accord with the way in which they are constantly being positioned by our politicians. To listen to an average politician is to listen to a dirge of end-of-the-world proportions. In those speeches our small businesses are all about to close up shop because of the oppression of high taxes, high regulation, rotten banks, and goodness knows what other plagues that afflict them. Yes, small business is a significant part of the economy, and it needs to be kept healthy, but small business owners get into business with their eyes wide open, and they appear to be happy to do so. Their attitude contradicts the grim picture painted by our leadership. Perhaps said leaders ought to read the news.
Then there’s the job market. Oh dear.
The recent string of mildly better news was broken last week with the report that the economy only added 92,00 jobs in August. That’s less than the growth in the population and is abysmal. But not surprising. In an economy starving for demand it can be no shock to learn employers don’t want to hire. The number of job openings being currently advertised stood at 3.66 million in July. That’s down from June’s 3.72 million, but is up about 9% over the last year. That means there are about 3.5 job seekers per job, also down from last year when the ratio hovered above 4 . The monthly number of new hires also fell a little in July, down to 4.23 million, from 4.28 million, but so too did the combination of layoffs and other quits by workers, from 4.25 million in June to 4.06 million in July. So the underlying job market is slightly better after another long year of effort. It just isn’t recovering quickly enough to lift the nation’s mood.
Trade too is firmly stuck. The report that the trade gap grew very slightly, but was still close to its 18 month low, induced a hearty yawn all round. The real news is that exports stalled because of worldwide economic problems, and that imports weakened on the back of slightly less domestic US activity as well. The problem is that, though tis news is largely neutral for GDP, it also suggests that an emphasis on trade as an engine for recovery is a fool’s game. It would be far better to deal with our domestic issues. But they are more intractable because of the politics, and politicians always sound good and patriotic when they urge on our exporters.
Finally there’s monetary policy. Are we going to get another round of easing? Will the great ship QE3 be launched? Who knows? Never has the Fed been more politicized. Never has it been more transparent. And rarely, if ever, has it been more indecisive. The Republicans are lashing out at the Fed for its efforts to help the economy. So committed are they to doing nothing that might assist growth they disparage poor old Ben Bernanke at every turn. Worse still: we are being treated to a steady diet of gold standard, Fed abolition, and other radical ideas from the libertarians who infest the modern GOP. Only the briefest review of history is needed to see how rotten such ideas are, but apparently going all out to repeat the errors of the past is now the driving force behind the extreme right’s economic vision. It’s no wonder the Fed dithers.
No wonder, but a disappointment all the same.
So the deep sleep continues and the other news offers little insight into its end.
Meanwhile it’s all eyes on November. Right now it looks as if Obama will squeeze out the win. Whether that means a break in the political impasse I highly doubt. My thought is that this election will be the high water mark of the Tea Party’s power. Demographics will cause the steady erosion of the extreme right’s attraction from here on out. Which is why it is so raucous now. This is the last chance it has to trash re-cast America in its libertarian image. If Obama wins his health care reform will become entrenched and will gain in popularity. As for economic policy: I see only modest hope and endless fights over the budget.
The deep sleep will take, in other words, the full decade to be cured.