Rep. Kanjorski is saying that he thinks the AIG bonus controversy has closed off the opportunity for Congress to pass further bailout funds. I hope not. But if so, doesn't the President bear some responsibility for the climate of outrage, and the insistence that something should be done? Isn't this a moment for someone to say, this is terrible, but we can't do anything without making it worse and let's focus on the real issues? Isn't the President supposed to lead the country through unpleasant choices to a constructive perspective?
Instead, we see Congress talking about confiscation of property via ex post facto law, and the White House signalling "openness" to such talk. Are they really that crazy?
I really think not, which makes me wonder what the real purpose is. The President just took questions and said that one question is, why were these guys making so much money in the first place, and why can't we regulate those compensation arrangements? And that, I think, speaks to the real purpose of this. The Democrats are using the episode to attack excess compensation generally, to embarrass it and to build support for regulating it. They are playing this as a class warfare episode to justify their taxes on wealth and expand government's influence through the economy.
Wednesday, March 18, 2009
Tuesday, March 17, 2009
Don't Govern Angry!
How, exactly, does the yelling about the AIG bonus payments help stabilize our financial system? Yes, it's a lot of money, and no, it's hard to imagine how people in that CDS shop deserve a dime of it. So what? The Administration's economic leadership has been occupied with this tangent for three or four days. Don't they have a G20 summit to plan for, an auto bailout to arrange, a stabilization plan to design/announce/implement?
(An aside: we don't know how much of the money is commission for some sort of salespeople, which I actually think would be justifiable and even smart. Then again, if many of the recipients weren't in the CDS shop, that fact would probably have been leaked by now.)
This is a political exercise. Some participants are trying to embarrass wealth. Others are avoiding association with apparent greed and incompetence. There may also be an atavistic response to rage against this stuff rather than address financial complexities the politicians barely understand. All told, it's one more datum for the argument that we lack policy leadership.
(An aside: we don't know how much of the money is commission for some sort of salespeople, which I actually think would be justifiable and even smart. Then again, if many of the recipients weren't in the CDS shop, that fact would probably have been leaked by now.)
This is a political exercise. Some participants are trying to embarrass wealth. Others are avoiding association with apparent greed and incompetence. There may also be an atavistic response to rage against this stuff rather than address financial complexities the politicians barely understand. All told, it's one more datum for the argument that we lack policy leadership.
Monday, March 16, 2009
Can't Anyone Play This Game?
Christina Romer was sent out Sunday to Meet the Press to explain the nuances of "fundamentally sound":
"MR. GREGORY: But perhaps Senator McCain was right when he said the fundamentals of the economy were strong, because you have President Obama saying roughly the same thing now?
"DR. ROMER: I really think you're misinterpreting the president. I think the key thing that the president was saying is we have our eyes on the fundamentals, that is why we're concerned about.
"MR. GREGORY: Hm."
Maybe it would help if the President didn't repeat his electoral rival's exact vocabulary on the issue the President himself defined as central to the economy? Staff often have to explain "what the President really meant", but they aren't often required to explain that day is night and night is day, on national television, on the defining issue of the campaign and chief policy question before the nation. I'm not thinking that asking Dr. Romer to fix this is a sign of a great boss. This was a serious mistake by the President himself, and he should have found an opportunity to clean it up. How could anyone but the President "explain his meaning"? He did actually say exactly the same thing as Senator McCain did last fall, and there is no getting around it.
I did imagine one answer: "The President thinks many elements of the economy are quite sound, and is very confident of our future once we fix the problems holding us back. So I suppose he does agree with Senator McCain in that. The difference is the moment and the emphasis. Senator McCain spoke as we were beginning to see the depth of the problem, and before it was clear that he or anyone understood its complexity and scale. At that time, the President sought to avoid diminishing the importance and scale of the challenge -- that was what that debate was about. I think everyone now sees the issues much more clearly. Certainly there is little doubt that the President thinks we have some serious challenges, or that he is doing all he can to address them. So now that we're agreed on the problem, in a way we weren't last fall, yes, it is time to make sure that everyone also understands that we have terrific opportunities once we solve the problem."
Well, shorter. And I'm not sure that's an accurate account of Senator McCain's stance at the time. But it is surely accurate enough by the standards of this White House! And I came up with that five minutes after knowing the question was out there. Dr. Romer is no one's spinmeister, but surely she should have been better prepared for this?
It seems to me that they don't entirely understand what they are doing. Perhaps there is a disconnect between the political mind, which might have come up with something like my idea, and the economic mind, which might not remember the campaign as well as it should? If the development of policy and politics aren't intertwined, their proposals won't solve the problem or won't be salable to the public. Interleaving the two is hard, and I don't see much facility in the Administration for it. We've seen that in a "stimulus" bill that seems to serve political priorities first, and to view economics as a serious of rhetorical justifications for the package.
And perhaps they aren't thinking things through, and beginning to respond reflexively to events. The President is told he has to be more positive, he agrees, they quickly write up some points to check that box, and somehow "fundamentally sound" slips through.
Their staff and culture also lack deep grounding in economics and history. Chris Wallace used a quote from the Budget including the phrase "commanding heights" -- surely the White House should be sufficiently literate to avoid Leninist terminology?
And while verifying the quote (Budget, p. 5) I noticed this: "Prudent investments in education, clean energy, health care, and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected." Really? I thought Al Gore campaigned on putting the surplus in the Social Security lockbox, and Bush advocated for putting it in tax cuts because Washington would eventually spend the money if it were retained. (He then went on to spend the money anyway, which is how we got here in the first place.) Is the Budget now saying that George Bush was right and that the money would have been "invested"? I don't recall the Democrats complaining that the GOP was spending on the wrong things, just that it wasn't spending enough, and raising the deficit to boot. Telling Americans that the alternative to Bush's spending was not deficit reduction, but Obama's spending on top of Bush's, is probably the only thing that could validate Bush's economic policies as the least bad alternative.
This sort of thing has been scattered over Obama's history and campaign. They really make me wonder if Obama is as smart and competent as everyone says.
"MR. GREGORY: But perhaps Senator McCain was right when he said the fundamentals of the economy were strong, because you have President Obama saying roughly the same thing now?
"DR. ROMER: I really think you're misinterpreting the president. I think the key thing that the president was saying is we have our eyes on the fundamentals, that is why we're concerned about.
"MR. GREGORY: Hm."
Maybe it would help if the President didn't repeat his electoral rival's exact vocabulary on the issue the President himself defined as central to the economy? Staff often have to explain "what the President really meant", but they aren't often required to explain that day is night and night is day, on national television, on the defining issue of the campaign and chief policy question before the nation. I'm not thinking that asking Dr. Romer to fix this is a sign of a great boss. This was a serious mistake by the President himself, and he should have found an opportunity to clean it up. How could anyone but the President "explain his meaning"? He did actually say exactly the same thing as Senator McCain did last fall, and there is no getting around it.
I did imagine one answer: "The President thinks many elements of the economy are quite sound, and is very confident of our future once we fix the problems holding us back. So I suppose he does agree with Senator McCain in that. The difference is the moment and the emphasis. Senator McCain spoke as we were beginning to see the depth of the problem, and before it was clear that he or anyone understood its complexity and scale. At that time, the President sought to avoid diminishing the importance and scale of the challenge -- that was what that debate was about. I think everyone now sees the issues much more clearly. Certainly there is little doubt that the President thinks we have some serious challenges, or that he is doing all he can to address them. So now that we're agreed on the problem, in a way we weren't last fall, yes, it is time to make sure that everyone also understands that we have terrific opportunities once we solve the problem."
Well, shorter. And I'm not sure that's an accurate account of Senator McCain's stance at the time. But it is surely accurate enough by the standards of this White House! And I came up with that five minutes after knowing the question was out there. Dr. Romer is no one's spinmeister, but surely she should have been better prepared for this?
It seems to me that they don't entirely understand what they are doing. Perhaps there is a disconnect between the political mind, which might have come up with something like my idea, and the economic mind, which might not remember the campaign as well as it should? If the development of policy and politics aren't intertwined, their proposals won't solve the problem or won't be salable to the public. Interleaving the two is hard, and I don't see much facility in the Administration for it. We've seen that in a "stimulus" bill that seems to serve political priorities first, and to view economics as a serious of rhetorical justifications for the package.
And perhaps they aren't thinking things through, and beginning to respond reflexively to events. The President is told he has to be more positive, he agrees, they quickly write up some points to check that box, and somehow "fundamentally sound" slips through.
Their staff and culture also lack deep grounding in economics and history. Chris Wallace used a quote from the Budget including the phrase "commanding heights" -- surely the White House should be sufficiently literate to avoid Leninist terminology?
And while verifying the quote (Budget, p. 5) I noticed this: "Prudent investments in education, clean energy, health care, and infrastructure were sacrificed for huge tax cuts for the wealthy and well-connected." Really? I thought Al Gore campaigned on putting the surplus in the Social Security lockbox, and Bush advocated for putting it in tax cuts because Washington would eventually spend the money if it were retained. (He then went on to spend the money anyway, which is how we got here in the first place.) Is the Budget now saying that George Bush was right and that the money would have been "invested"? I don't recall the Democrats complaining that the GOP was spending on the wrong things, just that it wasn't spending enough, and raising the deficit to boot. Telling Americans that the alternative to Bush's spending was not deficit reduction, but Obama's spending on top of Bush's, is probably the only thing that could validate Bush's economic policies as the least bad alternative.
This sort of thing has been scattered over Obama's history and campaign. They really make me wonder if Obama is as smart and competent as everyone says.
Wednesday, March 11, 2009
A Little Patience For the Patient
The Obama Administration is taking fire from all sides right now. Figures across the intellectual spectrum -- Brooks, Gergen, Buffet, Dowd -- are expressing concern about overreach and misaligned priorities. Responsible, thoughtful conservatives and free market types are suggesting connections between the Administration's proposals and the stock market. The less responsible are just pinning the market on the President. Political conservatives are cheerfully reminding the recently unsettled among Obama's moderate supporters that they warned of these policies all along.
Some are taking the opportunity to revisit the signs that perhaps Barack Obama thinks he knows a bit more than he actually does. Rich Lowry has a mildly sarcastic column about Obama's temperament: "Last fall, Barack Obama was deemed by all the great and good as the man to save the country from its financial crisis because of his calm. As John McCain flailed around, Obama stayed steady, and commentators ascribed to him the most extraordinary leadership qualities based merely on his equipoise. How is that working out?"
Well, we don't yet know, do we? And the outcome of those policies will provide the test of those leadership qualities, won't it?
Treasury's plans might work. They are preparing plans to finance these public/private partnerships, which will purchase "toxic" assets from the banks. They are working on these "stress tests", which will provide an occasion to reassess bank capital and identify the quantity of assets they will have to offload.
I don't entirely understand the financial issues, and the system has issues outside the banks. (The overall decrease in leverage, for one.) But if those steps stabilize confidence in the banks, we'll have secured a core element of a system that is full of uncertainties. That would provide a basis for moving forward to address other financial issues.
The Obama Administration has been criticized for the pace of its efforts and the seemingly low priority assigned to financial stabilization. But preparing a stabilization plan might always have taken considerable time. If they are moving as fast as they can on that, why shouldn't they address their other priorities? If the stabilization plan works, the complaints about timing will be forgotten, and the concerns about priorities relieved. And if the stabilization plan works and the market recovers, won't the Administration deserve as much credit for the responsibility assigned to it for the market's collapse?
There is little that I like about the Administration's economic policies, and much reason to worry they will fail to stabilize the markets or the economy. But the whole question is how those contemporary worries will eventually translate to long-term conclusions.
To the extent the current alarm over the Administration gets people thinking seriously about how the government can and can't foster Americans' productivity, that's a tonic against the recent excess of naive faith in government action to enact "common sense" reform. To the extent they are now taking seriously concerns about Obama's philosophy that were dismissed too quickly in the campaign, that's a useful reminder of the basic choices facing any government. If the nation is suddenly realizing that there is less to Obama's "new politics" than meets the eye, it will move toward a more healthy vigilance.
But it is far too soon to assign Obama responsibility for the stock market, or draw conclusions about his policy and temper. Such conclusions can't possibly have any certainty, not at this moment.
Obama's calm may be confident or arrogant. But it is also consistent with a de-emphasis on conclusions based on the very limited information we have at this particular moment, in favor of patient attention to core issues and grounding in solid information. Since last summer I have regarded Obama's political skills as highly over-rated. But he has a real gift for avoiding over-reaction to events. He seems to decide on the fundamentals of a political problem, devise strategy addressing those fundamentals, and stick to that strategy through the noise and chop of the day to day. That might seem insensitive when compared to the hypersensitivity of the typical American politician, but that doesn't mean it is the wrong posture. I don't want politicians to emulate Obama's candor, but it wouldn't hurt them to emulate his patience.
Let's focus on the fundamentals. Is policy hastening or halting the recovery? Are we laying groundwork for American productivity or not? Does the Administration improve or diminish our national debate or not? As we debate those questions, let's avoid acting as if we yet know more about the answers than we actually do.
Some are taking the opportunity to revisit the signs that perhaps Barack Obama thinks he knows a bit more than he actually does. Rich Lowry has a mildly sarcastic column about Obama's temperament: "Last fall, Barack Obama was deemed by all the great and good as the man to save the country from its financial crisis because of his calm. As John McCain flailed around, Obama stayed steady, and commentators ascribed to him the most extraordinary leadership qualities based merely on his equipoise. How is that working out?"
Well, we don't yet know, do we? And the outcome of those policies will provide the test of those leadership qualities, won't it?
Treasury's plans might work. They are preparing plans to finance these public/private partnerships, which will purchase "toxic" assets from the banks. They are working on these "stress tests", which will provide an occasion to reassess bank capital and identify the quantity of assets they will have to offload.
I don't entirely understand the financial issues, and the system has issues outside the banks. (The overall decrease in leverage, for one.) But if those steps stabilize confidence in the banks, we'll have secured a core element of a system that is full of uncertainties. That would provide a basis for moving forward to address other financial issues.
The Obama Administration has been criticized for the pace of its efforts and the seemingly low priority assigned to financial stabilization. But preparing a stabilization plan might always have taken considerable time. If they are moving as fast as they can on that, why shouldn't they address their other priorities? If the stabilization plan works, the complaints about timing will be forgotten, and the concerns about priorities relieved. And if the stabilization plan works and the market recovers, won't the Administration deserve as much credit for the responsibility assigned to it for the market's collapse?
There is little that I like about the Administration's economic policies, and much reason to worry they will fail to stabilize the markets or the economy. But the whole question is how those contemporary worries will eventually translate to long-term conclusions.
To the extent the current alarm over the Administration gets people thinking seriously about how the government can and can't foster Americans' productivity, that's a tonic against the recent excess of naive faith in government action to enact "common sense" reform. To the extent they are now taking seriously concerns about Obama's philosophy that were dismissed too quickly in the campaign, that's a useful reminder of the basic choices facing any government. If the nation is suddenly realizing that there is less to Obama's "new politics" than meets the eye, it will move toward a more healthy vigilance.
But it is far too soon to assign Obama responsibility for the stock market, or draw conclusions about his policy and temper. Such conclusions can't possibly have any certainty, not at this moment.
Obama's calm may be confident or arrogant. But it is also consistent with a de-emphasis on conclusions based on the very limited information we have at this particular moment, in favor of patient attention to core issues and grounding in solid information. Since last summer I have regarded Obama's political skills as highly over-rated. But he has a real gift for avoiding over-reaction to events. He seems to decide on the fundamentals of a political problem, devise strategy addressing those fundamentals, and stick to that strategy through the noise and chop of the day to day. That might seem insensitive when compared to the hypersensitivity of the typical American politician, but that doesn't mean it is the wrong posture. I don't want politicians to emulate Obama's candor, but it wouldn't hurt them to emulate his patience.
Let's focus on the fundamentals. Is policy hastening or halting the recovery? Are we laying groundwork for American productivity or not? Does the Administration improve or diminish our national debate or not? As we debate those questions, let's avoid acting as if we yet know more about the answers than we actually do.
Tuesday, March 10, 2009
Birth of An Oxymoron
Yesterday the President removed the limitations on stem cell research with the reassurance that "We will develop strict guidelines, which we will rigorously enforce, because we cannot ever tolerate misuse or abuse." But there is not a single word in his remarks of the principles that should drive those guidelines, or that would define "misuse."
These are not simple issues. I cannot imagine the frustration of a person with Parkinson's Disease at the impediments to research that might materially improve their lives within a decade. But neither can I, or anyone, imagine the potential danger of exploiting a manipulated human identity.
Of the dissenters, the President says "I understand their concerns, and we must respect their point of view," but then states "we make scientific decisions based on facts, not ideology." Well, there is no "scientific" definition of human life, and no technical resolution of the chief moral difficulties. Science provides us with facts and terms, but it does not provide a clear moral interpretation of those facts. A biologist may be able to describe an embryo in technical terms, and these can inform a discussion of that embryo's humanity and the application of criteria to that embryo. But that technical description cannot speak to the philosophy by which we determine whether that embryo is human, and any rights that may inhere in that embryo. A coroner can tell us cause of death, but cannot tell us if that cause was somehow justified or amounts to criminal murder. He can only give us facts which inform our assessment of how that death came about.
The question is not whether one embryo is somehow different from another that would be removed from a mother's womb by some natural operation of her body -- the question is our intentions toward that embryo.
My view any embryo is fully human in its dignity before man, society and God is not an "ideology". I do not seek to advance this view to support some larger political purpose. I hold it because I believe it to be true. I appreciate others disagree with me, for reasons of varying quality -- but their opinions are no more "scientific" than mine. Their appeal to "science" does not settle question, it avoids it altogether.
The language of the President's announcement reflects the fundamental thoughtlessness of its logic:
"But after much discussion, debate and reflection, the proper course has become clear. The majority of Americans -- from across the political spectrum, and of all backgrounds and beliefs -- have come to a consensus that we should pursue this research. "
Just what, exactly, is a "consensus" of a majority? The agreement of a majority is an agreement among a faction, not an agreement across factions. Can the President find an orthodox Catholic or a conservative Baptist who agrees with him -- and as he cannot, he cannot claim support from "all backgrounds and beliefs". And if the proper course is so clear, then why does he not address the fundamental objections raised against this policy? You cannot find a single word in his statement that suggests that anyone believes his policy permits the abuse of human life. The President has resolutely avoided the arguments of his critics, and argues for the "clarity" of his course only mangling the English language. And it is worth noting that the President resolutely ignores the development of techniques and science that promise to dramatically reduce the importance of the Bush administration research constraints.
This is not "reason", it is politics. It is the very ideology of which he accuses his critics. I simply cannot see how it is possible to have a reasonable debate of principles with a person willing to distort language like this.
These are not simple issues. I cannot imagine the frustration of a person with Parkinson's Disease at the impediments to research that might materially improve their lives within a decade. But neither can I, or anyone, imagine the potential danger of exploiting a manipulated human identity.
Of the dissenters, the President says "I understand their concerns, and we must respect their point of view," but then states "we make scientific decisions based on facts, not ideology." Well, there is no "scientific" definition of human life, and no technical resolution of the chief moral difficulties. Science provides us with facts and terms, but it does not provide a clear moral interpretation of those facts. A biologist may be able to describe an embryo in technical terms, and these can inform a discussion of that embryo's humanity and the application of criteria to that embryo. But that technical description cannot speak to the philosophy by which we determine whether that embryo is human, and any rights that may inhere in that embryo. A coroner can tell us cause of death, but cannot tell us if that cause was somehow justified or amounts to criminal murder. He can only give us facts which inform our assessment of how that death came about.
The question is not whether one embryo is somehow different from another that would be removed from a mother's womb by some natural operation of her body -- the question is our intentions toward that embryo.
My view any embryo is fully human in its dignity before man, society and God is not an "ideology". I do not seek to advance this view to support some larger political purpose. I hold it because I believe it to be true. I appreciate others disagree with me, for reasons of varying quality -- but their opinions are no more "scientific" than mine. Their appeal to "science" does not settle question, it avoids it altogether.
The language of the President's announcement reflects the fundamental thoughtlessness of its logic:
"But after much discussion, debate and reflection, the proper course has become clear. The majority of Americans -- from across the political spectrum, and of all backgrounds and beliefs -- have come to a consensus that we should pursue this research. "
Just what, exactly, is a "consensus" of a majority? The agreement of a majority is an agreement among a faction, not an agreement across factions. Can the President find an orthodox Catholic or a conservative Baptist who agrees with him -- and as he cannot, he cannot claim support from "all backgrounds and beliefs". And if the proper course is so clear, then why does he not address the fundamental objections raised against this policy? You cannot find a single word in his statement that suggests that anyone believes his policy permits the abuse of human life. The President has resolutely avoided the arguments of his critics, and argues for the "clarity" of his course only mangling the English language. And it is worth noting that the President resolutely ignores the development of techniques and science that promise to dramatically reduce the importance of the Bush administration research constraints.
This is not "reason", it is politics. It is the very ideology of which he accuses his critics. I simply cannot see how it is possible to have a reasonable debate of principles with a person willing to distort language like this.
Wednesday, March 4, 2009
Raise Their Rates, Until They Deduct
Budget Director Orszag explained the reduction in mortgage interest deduction to CNBC: it isn't fair that Bill Gates gets a $3500 tax break on a $10,000 interest bill while someone else gets a $2800 tax break. I think I've heard him make the same argument for the charitable deduction reduction.
But Bill Gates gets the larger break because he's paying a higher tax rate! He's paying $3500 in tax on a marginal $10,000 while someone else pays $2800. A higher rate is fair when he's paying tax, and a lower rate fair when he's deducting from them.
This isn't fairness. It's a clever formulation to justify further tax increases on wealth. It is a transparent violation of principle, a distortion of language to secure a petty increment of additional revenue.
But Bill Gates gets the larger break because he's paying a higher tax rate! He's paying $3500 in tax on a marginal $10,000 while someone else pays $2800. A higher rate is fair when he's paying tax, and a lower rate fair when he's deducting from them.
This isn't fairness. It's a clever formulation to justify further tax increases on wealth. It is a transparent violation of principle, a distortion of language to secure a petty increment of additional revenue.
Tuesday, March 3, 2009
How's That?
"What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it. I think that consumer confidence -- as they see the American Recovery and Reinvestment Act taking root, businesses are starting to see opportunities for investment and potential hiring, we are going to start creating jobs again." -- President Obama, 3 March 2009
I was going to focus on the plug for the stock market. I've never heard a President say such a thing. What if the market goes up a bit, and then craters, and stays down? This will be cited as evidence the President underestimated the contemporary economic problem while pursuing his social agenda. He has just associated his success or failure with the stock market, the very thing his larger statement was supposed to avoid. Yes, he can take credit if the market rises from here, but he could have done that anyway. Now it's easier to make him wear a collapse. This is just stupid, politically, rhetorically, economically.
But what's with the rest of this paragraph? For one thing, Mr. President, will we be _creating_ jobs? Or _saving_ them -- which, by the way, might be harder to _see_. He has just undermined a key nuance of his policy claims. For another, in a single jumbled sentence he has just associated consumer confidence and business investment with his policies. Again, dandy if they go up, but he could already have claimed credit. Now he's closer to the failures.
I get it. Savvy policymakers _know_ that markets are fickle, so they don't make promises about them. Bob Rubin famously insisted that Clinton should never ring the bell at the New York Stock Exchange. This is hardly a policy address, but these aren't the words of someone who feels in his bones the complexity and uncertainty of economic events. Either he is far more confident of his policies than I had thought, or he doesn't really understand what is going.
I have always suspected that the extraordinary estimates of his intelligence were overdone. I'm now beginning to see evidence of it. Obama has an uncommon knack for projecting mastery of the subject material. Moments like this belie that mastery.
Meanwhile, Brooks confesses he underestimated how Left Obama would be, and Gergen counsels focus on the economy. Obama has a self-supporting image of savvy and intelligence and freshness that has motivated observers to overlook flaws and read all statements charitably. Anything that depends on virtuous cycles and mutal support from interlocking presumptions is vulnerable to vicious cycles and wholesale reassessments. If the wheels start to come off this wagon, this thing could get ugly in a hurry.
I was going to focus on the plug for the stock market. I've never heard a President say such a thing. What if the market goes up a bit, and then craters, and stays down? This will be cited as evidence the President underestimated the contemporary economic problem while pursuing his social agenda. He has just associated his success or failure with the stock market, the very thing his larger statement was supposed to avoid. Yes, he can take credit if the market rises from here, but he could have done that anyway. Now it's easier to make him wear a collapse. This is just stupid, politically, rhetorically, economically.
But what's with the rest of this paragraph? For one thing, Mr. President, will we be _creating_ jobs? Or _saving_ them -- which, by the way, might be harder to _see_. He has just undermined a key nuance of his policy claims. For another, in a single jumbled sentence he has just associated consumer confidence and business investment with his policies. Again, dandy if they go up, but he could already have claimed credit. Now he's closer to the failures.
I get it. Savvy policymakers _know_ that markets are fickle, so they don't make promises about them. Bob Rubin famously insisted that Clinton should never ring the bell at the New York Stock Exchange. This is hardly a policy address, but these aren't the words of someone who feels in his bones the complexity and uncertainty of economic events. Either he is far more confident of his policies than I had thought, or he doesn't really understand what is going.
I have always suspected that the extraordinary estimates of his intelligence were overdone. I'm now beginning to see evidence of it. Obama has an uncommon knack for projecting mastery of the subject material. Moments like this belie that mastery.
Meanwhile, Brooks confesses he underestimated how Left Obama would be, and Gergen counsels focus on the economy. Obama has a self-supporting image of savvy and intelligence and freshness that has motivated observers to overlook flaws and read all statements charitably. Anything that depends on virtuous cycles and mutal support from interlocking presumptions is vulnerable to vicious cycles and wholesale reassessments. If the wheels start to come off this wagon, this thing could get ugly in a hurry.
Tax Me Later, Tax Me Now
Secretary Geithner insists the Administration will not raise taxes in a recession, as the recession will be over in when their proposed increases take effect in 2011.
Let's hope the recession is over then. But people plan for taxes, and their expectations affect their perceived wealth. If they know a tax increase is coming, and suspect a larger one may follow, they will be less confident in their wealth and less likely to consume.
The reductions in mortgage interest deductions are particularly daft. We might argue about the importance of income expectations. But any responsible homebuyer will look at their service costs over the long term. They will not estimate tax savings on interest based on temporary deduction rules. To the extent those deductions affect home prices, the proposed reductions will surely act against home price recovery. Is that the policy this Administration wants to pursue?
Let's hope the recession is over then. But people plan for taxes, and their expectations affect their perceived wealth. If they know a tax increase is coming, and suspect a larger one may follow, they will be less confident in their wealth and less likely to consume.
The reductions in mortgage interest deductions are particularly daft. We might argue about the importance of income expectations. But any responsible homebuyer will look at their service costs over the long term. They will not estimate tax savings on interest based on temporary deduction rules. To the extent those deductions affect home prices, the proposed reductions will surely act against home price recovery. Is that the policy this Administration wants to pursue?
Obama and The Dow
This morning's Journal: "Yesterday the Dow fell . . . for an overall decline of 25% in two months . . . . The dismaying message here is that President Obama's policies have become part of the economy's problem."
Well, it isn't clear whether the Administration is making things worse, or if the markets are realizing that they won't make them better. And no one can demonstrate that some other set of policies would have helped more. Perhaps the economic declines, and the market's anticipations of them, were always inevitable. The correlations between Administration statements and market declines don't necessarily distinguish between the views.
I do suspect the Administration is hurting more than it helps, that markets are pricing larger regulatory and tax burdens than previously expected, and pricing less effective financial resolution. But I can see how Obama's supporters are less concerned. I think it is really too soon to blame the markets on the President.
Well, it isn't clear whether the Administration is making things worse, or if the markets are realizing that they won't make them better. And no one can demonstrate that some other set of policies would have helped more. Perhaps the economic declines, and the market's anticipations of them, were always inevitable. The correlations between Administration statements and market declines don't necessarily distinguish between the views.
I do suspect the Administration is hurting more than it helps, that markets are pricing larger regulatory and tax burdens than previously expected, and pricing less effective financial resolution. But I can see how Obama's supporters are less concerned. I think it is really too soon to blame the markets on the President.
Monday, March 2, 2009
Tax Cuts: As Bad At The Margin As Spending
Quoth Richard Lowry, at the Corner, on the Obama Administration's priorities:
"It's as if FDR skipped the bank holiday and focused first on passing the CCC. . . . if I were Eric Cantor or John Boehner, I'd be talking about a "real recovery package" every day— payroll and corporate tax cuts, regulatory reforms for the financial and auto industries, relief for small business. "
Do conservatives favor tax cuts at _every_ margin?
If Obama is neglecting the financial system, the Congressional Republicans should be talking about it every day, never mind the tax cuts.
But they should go further. They should study and discuss the roots of the situation, and address those with their proposals. I think they'll find asset prices are collapsed by a reduction in credit for over-leveraged levels. That leverage isn't (shouldn't) return, those assets prices aren't returning, and the reversal of wealth-effect consumption will be long term. Tax cuts won't increase perceived wealth enough to overcome the perceived losses from asset price falls, especially since recipients would would anticipate higher future taxes to pay for them. The cuts would help households reduce their debt, but that would be offset by the increase in federal debt.
If they've got a better explanation of the problem, let's hear it. If they don't understand the problem, let's hear _that_ -- and when Obama et al respond with mockery, force _them_ to give _their_ explanations. I promise you, those won't make any sense at all. No one in Washington sounds like they understand the problem. They're all pretending they do, because they're supposed to, but they don't. And if everyone is just guessing anyway, "try something" sounds pretty good, and "help people at the same time" sounds good too. Confusion aids the side with the better soundbites -- and "health care for kids!" will beat "incentive for entrepreneurs!" every time.
Let's stop hearing about how complicated all this is, and start hearing people pick it apart.
If the GOP and the conservatives don't start to talk like grownups, no one will.
"It's as if FDR skipped the bank holiday and focused first on passing the CCC. . . . if I were Eric Cantor or John Boehner, I'd be talking about a "real recovery package" every day— payroll and corporate tax cuts, regulatory reforms for the financial and auto industries, relief for small business. "
Do conservatives favor tax cuts at _every_ margin?
If Obama is neglecting the financial system, the Congressional Republicans should be talking about it every day, never mind the tax cuts.
But they should go further. They should study and discuss the roots of the situation, and address those with their proposals. I think they'll find asset prices are collapsed by a reduction in credit for over-leveraged levels. That leverage isn't (shouldn't) return, those assets prices aren't returning, and the reversal of wealth-effect consumption will be long term. Tax cuts won't increase perceived wealth enough to overcome the perceived losses from asset price falls, especially since recipients would would anticipate higher future taxes to pay for them. The cuts would help households reduce their debt, but that would be offset by the increase in federal debt.
If they've got a better explanation of the problem, let's hear it. If they don't understand the problem, let's hear _that_ -- and when Obama et al respond with mockery, force _them_ to give _their_ explanations. I promise you, those won't make any sense at all. No one in Washington sounds like they understand the problem. They're all pretending they do, because they're supposed to, but they don't. And if everyone is just guessing anyway, "try something" sounds pretty good, and "help people at the same time" sounds good too. Confusion aids the side with the better soundbites -- and "health care for kids!" will beat "incentive for entrepreneurs!" every time.
Let's stop hearing about how complicated all this is, and start hearing people pick it apart.
If the GOP and the conservatives don't start to talk like grownups, no one will.
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