The Speech

I thought it was kind of flat.  When did Obama decide to abandon the “Yes We Can” style of speaking?  Not that I expected him to use that particular phrase, but I expected to be inspired.  And I wasn’t.  Take the beginning of the speech for example.  We’ve just witnessed the entrance of a new cabinet (wow, it’s Democrats), Supreme Court Justices (wow, there’s Justice Ginsberg recovering from cancer surgery, a new president—and so forth.  Applause all around.  The room is buzzing.  The nation is uncertain, concerned about the future. Surely the new president is going to give us a grand vision of country, put our current woes in historic context, personalize the trials we will face, and the grand sense of accomplishment when we triumph over adversity!!

Instead, in the first minutes of the speech (literally) He launches immediately into telling us how bad things are.  Here are the first words:

I know that for many Americans watching right now, the state of our economy is a concern that rises above all others.  And rightly so.  If you haven’t been personally affected by this recession, you probably know someone who has – a friend; a neighbor; a member of your family.  You don’t need to hear another list of statistics to know that our economy is in crisis, because you live it every day.  It’s the worry you wake up with and the source of sleepless nights.  It’s the job you thought you’d retire from but now have lost; the business you built your dreams upon that’s now hanging by a thread; the college acceptance letter your child had to put back in the envelope.  The impact of this recession is real, and it is everywhere.

But while our economy may be weakened and our confidence shaken; though we are living through difficult and uncertain times, tonight I want every American to know this:

We will rebuild, we will recover, and the United States of America will emerge stronger than before.

The buzz is gone.

I was expecting him to tell a great story, make me feel confident and ready to “rebuild and recover”.  Instead he just asserted that that’s how it would be.   The biggest applause lines seemed to be for some specific program proposals (ending agriculture subsidies!!  honest budgeting!!!).  Not what I expected and pretty much forgettable for most people, I suspect.

It seems very strange to me that the guy who inspired everyone on the campaign trail has abandoned that style of speaking as president.


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Feeding the Myth

What is the deal with Martin Feldstein?  He’s a conservative economist, but unlike the political funtionairies now operating what passes for a conservative party in this country, Feldstein understands that the government cannot just stand back and let the market work its magic.  He understands  that our economy faces a crisis, that government spending is the only plausible solution, and that we have to do something now.  But he just can’t let go of the Fannie Mae myth.  Here he is being interviewed on Frontline’s “Inside the Meltdown” last week:

Frontline:  The conservatorship of Fannie [Mae (Federal National Mortgage Association)] and Freddie [Mac (Federal Home Mortgage Corp.)], again, a surprise that this step would be taken, or a necessity?

Feldstein:  I think it was a necessity…. Their purpose on paper was to facilitate lower interest rates and the spread of mortgage availability to low-income individuals, but because there were no creditors watching, of course, why would you care what risks they were taking if you had a U.S. government guarantee? They were able to take outrageous risks, and that’s what we saw happen.
Frontline:  And they contributed to the problem in a sort of big and fundamental way.

Feldstein:  They did, yes.

It would have been nice if the interviewer had asked if he had any evidence to support that conclusion.  Yes, we know they are big, government sponsored enterprises involved in the mortgage market.  But if they were not involved in originating or securitizing junk mortgages (or even owning them as investments) until 2007–how exactly did they contribute to the problem in “a big and fundamental way”? Even Alan Greenspan acknowledges that Fannie and Freddie were not prime drivers of this fiasco.

Yet, Feldstein won’t give it up.  I know everyone has a story they tell themselves about how the world works, and we are always looking for ways to confirm the truth of our own personal story.  Conservatives tell themselves that government causes all problems.  Therefore our financial meltdown must have been caused by some government action.  Enter Fannie Mae. Evidence is irrelevant when the Myth Must Be Fed.

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Quote of the Day

Jonathan Chait on the need for government spending, wasteful or not:

The point of stimulus spending…  is simply to spend money–on something useful if possible, wasteful if necessary. Keynes proposed burying money in mineshafts, so that workers would be hired to dig it out. (Imagine what the GOP could do with material like that.) World War II was an effective stimulus that, economically speaking, consisted of 100 percent waste. If war hadn’t broken out, we could have enjoyed the same economic benefit by building all those tanks and planes and dumping them into the ocean.

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The Banking Fiasco

I see Congress added a provision to the stimulus bill limiting CEO bonuses and the compensation of “all highly paid individuals at the 359 banks that are receiving government aid.”  According to the NY Times, industry insiders are worried:

“This is a big deal. This is a problem,” said Scott Talbott, chief lobbyist for the nation’s largest financial services firms. “It undermines the current incentive structure.”

Talbott said banking executives expected certain restrictions would be applied to them but are concerned that some of the most highly paid employees, such as top traders, who bring in hefty sums for the company, would flee to hedge funds or foreign banks that have not accepted U.S. government funds

I can see how this provision might cause some weird incentives.  I wish Congress didn’t have to do it, but the public outrage Congress must be hearing about CEO bonuses has to be deafening.

What’s interesting is that the CEOs and finance company executives apparently don’t hear it at all.  This tells you just how disconnected these people must be from life as we know it.  Consider a few facts:

  • People are looking into the abyss of economic doom caused in large part by a dysfunctional banking sector.
  • Wall Street stars paid themselves massive amounts of money over the last few years based on what we now know were phony profits.  They made no attempt to pay this back.
  • Unless they can fix their own industry, there is a very strong case to be made that the banking sector should be nationalized and reorganized—this means current executives would lose their jobs and shareholders wiped out.

Given these facts it seems like the banking executives would be launching a massive PR campaign to explain how they aren’t making much money anymore and everyone’s working together to fix the system.  Instead they are apparently working as hard as possible to extract maximum dollars from the system EVEN NOW.

My prediction:  all of the major banks–Citigroup, JPMorgan Chase, B of A–will be taken over by the government and reorganized.  The guys running these institutions now just don’t get it.  They are practically begging Congress to take them out.

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Fish Barriers

Republicans are demonizing Obama’s stimulus bill because it’s wasteful.  Yes, they say, we need the government to stimulate the economy, but this bill is just pork, not stimulus. To take one random example of this commentary, here’s  the Buffalo News:

How many new economy-stimulating jobs will be created immediately, if at all, by the tacked-on $650 million for new digital TV conversion coupons? Or the $1 billion to get ready for the 2010 Census, which would have to be done anyway? Or the $726 million for after-school snack programs, the $1 billion or so for climate research, $20 million to remove fish barriers at dams or $20 million to rehabilitate off-road ATV trails?

Now, to be fair, the writer of this piece is questioning how many jobs will be created by the spending bill immediately.  And the speed of the spending is a legitimate issue, but the real complaint here isn’t  that the spending isn’t quick enough, it’s that the spending is frivolous.  Fish barrier removal?  ATV trail rehab?   The implication is that we might as well be paying people to dig holes and fill them back up.

So, is it?  Let’s turn to the google.  It turns out that here in the Northwest there are lots of barriers to fish migration, mainly resulting from highway construction decades ago when people weren’t thinking much about the impact on fish.  With dwindling wild fish runs, it makes sense to rectify this situation.  Maybe that shouldn’t be a priority.  I don’t know enough about it to have an opinion.  But my point is GOPers who are criticizing it as frivolous don’t know enough about it to have an opinion either.  In fact they seem to know even less than I do, since at least I googled it for five minutes.

The reality is that virtually every economist on the planet says the economy is in a serious downward spiral that can only be broken by government spending.  So, if the GOP wants to propose OTHER SPENDING, I say let’s have a discussion. They want to spend more on Star Wars or the Great Mexican Fence?  Let’s discuss.  Just demogoguing the proposed spending isn’t very helpful.

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Zombie Republicans 3

Ron Paul joins the chorus of free market Republicans who don’t get it.  According to CNN Paul posted a video on Youtube in which he “agrees that the economy needs to be stimulated but doesn’t think the federal government should be doing it.”

“Sure, we want more spending,” Paul said. “We need a lot more spending in the economy, but it has to be done by market forces, by individuals, by businesses making proper decisions.”

Help me.  The problem is that businesses and individuals ARE making proper decisions.  It makes a ton of sense for individuals to stop spending money in very uncertain times like this.  It makes a ton of sense for businesses to stop investment and lay off workers when they don’t have enough customers.  These are “proper decisions” by individuals and businesses.  But the consequence of their proper decisions is a devastating feedback loop that leads to recession or depression.   That’s why the government has to step in and spend.  No one else will.

Economists call this a market failure.  Zombie Republicans deny the existence of market failure.  It’s Devil Worship.  Devil Worship, I tell you!!


My commenter links to an excellent GOP zombie photo:

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Zombie Republicans 2

Here’s Mitch McConnell on why we can’t spend our way out of a recession:

“…we know for sure that the big spending programs of the New Deal did not work. In 1940, unemployment was still 15%. And, it’s widely agreed among economists, that what got us out of the doldrums that we were in during the Depression was the beginning of World War II.”

A Senate Republican strays from the Capitalist Way

I heard Rush Limbaugh make exactly the same point last week, not to mention Joe the Plumber in the post below. The self-contradiction is pretty obvious, isn’t it?  WWII was a big spending project, much bigger than anything FDR undertook under the New Deal.  Conclusion:  yes we can spend our way out of a recession.  FDR’s New Deal spending just wasn’t big enough.

Another conclusion is pretty obvious too.  Republicans would be delighted to get us out of our economic problems right now if they could find an Adolph Hitler to fight.  But, lacking one, they would prefer to wait years, decades if necessary, for the economy to completely deflate, then recover on it’s own.  They would prefer that hundreds of thousands of workers sit idle, perhaps for years, witness the permanent loss of trillions of  dollars of economic output, the further deterioration of roads, bridges, docks; the consignment of millions more to poverty, many of them children.   All of this they would endure because the spectacle of government solving a problem, other than fighting a war, interferes with their cult-like devotion to the free market.

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