On the Contrary

One of the great quotes this morning was from an Op-Ed by Bill Keller who writes and edits for the New York Times.  He decided to do a little research to see if he could understand our economic crisis and path forward (The Politics of Economics in the Age of Shouting):

“The first thing I gleaned from this little tutorial will probably not surprise you: There really is a textbook way to fix our current mess. Short-term stimulus works to help an economy recover from a recession. Some kinds of stimulus pay off more quickly than others. Once the economic heart is pumping again, we need to get our deficits under control. The way to do that is a balance of spending cuts, increased tax revenues and entitlement reforms. There is room to argue about the proportions and the timing, and small differences can produce large consequences, but the basic formula is not only common sense, it is mainstream economic science, tested many times in the real world.”

The answers are out there, they are tried and true and yet we refuse to do them.  Here is my favorite quote from Paul Krugman on our continued stupidity:

“Future historians will look back in astonishment at the Great Pivot of 2010, in which all the Very Serious People on both sides of the Atlantic– and, sad to say, in both parties in the United States — decided that in the face of high unemployment, weak growth, and low inflation, what the world really needed was austerity.”

On the Euro crisis, which, my friends, will also bring down our own economy and is headed to do just that, the answer is really quite simple.  The ECB needs to be the lender of last resort.  While the interior countries spend to stimulate, the peripheral countries need to belt tighten.  But when the whole EU is belt tightening, and the ECB refuses to step in, growth is not going to just stall, it is going to plummet.  In some Calvinistic belief that suffering for your sins leads to redemption, they are on the path to destroying the world economy.  Sometimes what seems moral is just plain counter productive, but a very conservative thing to do.

All of this was brought home on Sunday Television if you were paying attention, mostly on Chris Hayes’s UP on MSNBC.  One of his guests, Robert Johnson, a leading expert on European Economics,  was a managing director at Sorros Fund Management, served on the UN Commission of Monetary Reform, who basically said, “Austerity doesn’t work, Austerity is over, it is killing the planet….The biggest causes of deficits is idle resources, and that is true in America as well…We need programs to put people back to work.”

His next guest, Paul Starr who was an adviser to the Clinton White House on Health Care Reform, noted that the biggest contributor to the deficit going forward is growing health care costs and how our country, unlike the rest of the world, cannot come to terms with reforming the system.  He noted that Obama Care, referred to as the worst thing that could happen to medicine by the conservatives, is nothing more than Republican ideas a few years ago. He noted the hysteria of conservatives around the discussion of allowing the federal government to pay for health care (public option) as though that was somehow communism.  His greatest contribution to this discussion was to note that if public education was private today and someone proposed having education funded by the government, the conservatives would see this as government plot to control the minds of our children.

But probably the most insightful conversation occurred around the way forward.  Maya McGuineas was the conservative on the panel, albeit calling herself independent.  When asked what she would like to ask the guests on the Sunday morning talk shows, she wanted to ask the question to Chuck Schumer on Meet the Press, that with the failure of the debt commission, “What are you going to do next, because we can’t just sit back and do nothing.  It goes back to leadership.  What are they going to put in place to make sure that big deficit plans are going to get considered and move forward.”

Now what is interesting is her shift back to austerity and the deficit instead of growth and jobs, the cart before the horse.  But what was even more interesting was this really moderate Republican’s belief that leadership in the presently constituted Congress can do anything.  Ezra Klein pointed out that the media had done a terrible job of covering the negotiations on the deficit and for every two steps forward the Democrats would take to try to come to an agreement, the conservatives would take two steps back.  At one point he noted that Obama, the conservative’s socialist, was nothing more than a moderate Republican from the 1990s.  We have a conservative Republican Congress that will not take yes for an answer and are marching the country off a cliff.

Finally on Fareed Zakaria’s GPS, he had Michael Spence, a Nobel Laureate, a professor at NYU, looking at the real problem in America, the great divide in inequality.  When asked how he would fix it and our economic woes, Professor Spence noted that after reforming the tax codes, first we have to recognize that the deficit is not the short term problem.  We need to get the economy running again and face the deficit in 7-10 years.  Then he said:

“I am sure you have heard this, but the great depression came to an end in WWII and two things happened at that point.  One, there was a huge fiscal stimulus because we could not finance a war effort on current income, and then we got rid of it over time, and the second one was that we went to the people and said you know what, it is a war and we are going to have to invest a huge amount of our resources in this and your consumption levels are going to have to go down because we can’t keep them up and make this big investment.  We just don’t have the resources and because it was a war, people said okay.  And so we created this powerful engine that not only took us through the war, but took us into the post period in pretty high gear…If we really wanted to overcome this one fast, then what would happen is a political leader would go and say this isn’t a war, but it is that sort of challenge and create recovery (war) bonds…I mean that is pretty politically unrealistic, but that would really put a jet engine behind this thing over time.”

Well there it is.  The path forward is a no-brainer and conservatives (and some Democrats) simply won’t allow the country to move forward.  Policies President Obama are proposing are nothing but 1990′s recycled Republican ideas, but the party has move so far to the right that no compromises and no accommodations are possible.  It is not the economy that is the problem, it is the conservatives.  If they aren’t replaced in 2012, which sorry to explain this to you Maya, but that is our only chance for any movement forward, then the country is doomed to stagnation and depression. The present crop will just move further and further right so there can be no compromise with the feckless Democrats.  And any compromise that might be possible will be antithetical to solving any of our problems.  Conservatives are the problem.  The answers are already out there and it is mind boggling that we can’t act on them because of ideological morons.