darkandgray: notes on the economy and politics

The debt ceiling ‘deal’ was a great tactical victory for the libertarian wing of the Republican party¹: a minority of Congress, representing a minority of Americans, managed to rewrite the federal budget in ways that most Americans oppose and that will be a disaster for the economy.² But it was also the final and conclusive proof that the president’s approach to politics has failed. Following the health care mess and the GOP takeover of the House, this defeat shows that he is pursuing a losing strategy. That doesn’t mean Obama won’t get reelected – given the current field of GOP candidates, he has a real chance. But his failures have left the Democratic party, and the country, in dire straits.

There are, I think, two elements that define president’s politics (and that have gotten us into this mess): the ‘good government’ postulate and the ‘sensible centrist’ stance.


‘Good Government’

Obama seems committed to the ‘good government’ postulate – the notion that there is such a thing as objectively ‘good’ policy, policy that is independent of ideology, and that people of differing political leanings can agree on. This is a view of politics much beloved by editorial writers and it fits well with the anti-ideology views held by many Americans, including much of the news media. Unfortunately, it has serious problems. Continue reading →

The U.S. economy’s ongoing malaise has had rather peculiar treatment in the news media. The persistence of high unemployment has been gotten plenty of coverage. But almost nothing is being said about why unemployment remains so high (other than some vague references to government debt and uncertainty). In fact, there is a rather straightforward explanation, although certainly not a happy one. Needless to say, it has nothing to do with government debt.

Like all recessions, the recession of 2008 was in part a vicious circle. Businesses saw sales weakening and responded by reducing investment and laying off workers. Laid off workers had to cut their spending, further weakening sales and leading to more cutbacks by business … and down we go. In a recovery, the process runs in reverse, albeit more slowly.

However, the 2008 recession was also associated with changes that may be permanent. Two, in particular, are having major effects on the economy: (i) the collapse of housing construction and (ii) the largely ignored change in that least glamorous of economic variables, the savings rate. Together, these two factors account for much of the continuing high level of unemployment. Continue reading →

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Anti-government sentiment has a long and venerable history in the U.S. Many Americans hate government, and of course no one likes paying taxes. So it’s no surprise that attacking ‘Big Government’ is a staple of American politics and a perennial favorite of conservatives. It worked for Ronald Reagan in the 1980s and it seems to be working for Tea Partiers (and their ‘friends’ at Fox) today. After all, who wouldn’t like to think that we could solve our nation’s problems by reducing spending – and with it our tax bills. Continue reading →