If you were wondering just how scared the Republicans are about the shit storm of financial disaster that is heading our way just check this out. The Post asked Amity Shlaes to defend Phil Gramm and to explain to the rubes--I mean the voters--that there is nothing to fear but fear itself. The thing is that her area of expertise is, apparently, writing stuff that makes the malefactors of great wealth happy so her advice must be utterly disinterested. Hey, she even wrote a book demonstrating to someone's satisfaction that the great depression itself was no great depression, certainly nothing to bitch about. When they have to bring us an expert on the Great Depression and the invidiousness of government bailouts that are aimed at workers and not at corporations, you know they are terrified that the consequences of losing this election will be as bad for them as the 4 terms of FDR's power. And Campaign Econ has costs. The first is that talk of a downturn -- or "mental recession," as Gramm put -- can itself generate a downturn. Keynesian economists say this is so because consumer spending slows when people are afraid. But there's also a non-Keynesian dynamic. Grumbling leads to costly government rescues that scare markets and slow growth.
Shlae's starts out with a bang explaining to us that we are wrong to worry that the current situation is *just like* the Great Depression because its taking place at a different time, and might not be as bad yet, plus, people wear different clothes now. More... I've got no dog in this hunt. You can call it another great depression, or recession, or secession for all I care but I do suspect that something is slightly rotten in our economic system. When people are living in their cars instead of in their three bedroom apartments because they've lost their jobs, or because their landlord lost the house and they can't get together a new security deposit, or because they put money down on a house that isn't being built, like most people the first thing I reach for isn't the Wall Street Journal's favorite whipping boy, FDR.
But Amity isn't most people. Like Phil Gramm she's doing fine. So tell us, Amity, how not-so-bad is it? Well, for one thing, its totally definitionally absurd to say that "the economy" is doing badly because by definition a recession is "two consecutive quarters in which the economy shrinks, and last quarter it grew. " So there! See, the aggregate indicators for the economy as a whole must make the problems of the little people just look like a hill of beans--to republicans. At this point in her essay, which I urge all of you to read but with an air sickness bag nearby, Amity is starting to remind me of a Nepali student I had once who couldn't speak English at all but who assured me that her only problem with English was "those little words" like "and" and "the" and "but." I took her point, but actually those little words? they were just the tip of the iceberg.
So when you start to drill down under Amity's breezy assertions that "the economy" is doing just fine you realize that she has really no idea what "the economy" means to actual people actually living in it. Take, for example, her assertion that "rising gas prices" mean that people can't take driving vacations. Just take that trip to the Hamptons off the table and you are golden, apparently. Now me, I dimly recall that money, and gas, are kind of fungible and that both may be needed for things other than summer vacations. Its true that the demand for gas goes up in the summer what with vacations and stuff. But the need for gas remains fairly constant for the rest of the year what with the need for people to get to work, or put food on their families. You not only don't need to be a weatherman to see the way the wind blows it actually helps, sometimes, not to be an economics writer from the WSJ to grasp these simple facts. So, as gas prices go up we might choose to notice things like this --that people are unable to drive to work , like these home health care workers whose pay hasn't kept up with the distance they must drive to get to their charges. But hey, grandma, tighten that belt. You can easily save money by simply choosing bed sores over being turned three times a day. Save even more by firing that Health Care worker. She can probably find an identical job within walking distance of her house. And she'll save a mint of money not having to buy clothes for work if she can't find another job.
And Amity, what about the mortgage crisis, the disappearance of asset value, and the worsening homeless problem? What about people losing their houses? Oh, puh-leese, *sure* people are losing their houses at a tremendous clip but because they had no money to put into them in the first place its no harm no foul, not like in the depression when they lost their houses with 90 percent down. The knock on effect as cities and towns lose their tax base, schools lose their funding, police and fire departments lose their budgets, and boarded up homes with no clear title sit empty? Vanished. That is becaues, and it will come as no surprise to my gentle readers, those cities and towns and tax payers don't really exist for Amity. Instead, she's worried that some poor slob might *get away* with something like thinking he was entitled to own his own house. Yes, in a link to her Amazon book site Amity explains that what she is really worried about "... is the morphing of homeownership from a right to an entitlement. " Once that is done, apparently, the floodgates to "really bad policy" will be opened and all hell could break loose. That really bad policy would be, apparently, any form of regulation of the mortgage industry, lenders, and banks and this despite the obvious fact that it was the unregulated capitalistic practices of mortgage companies which pushed home ownership for the unqualified which produced the current state of affairs. It wasn't hordes of renters demanding loans from prostrate banks, but the banks own refusal to apply their own standards to loans. But I digress.
I'm scratching my head trying to figure out what world this woman lives in where gas consumption is entirely optional and associated only with summer vacations, and where living arrangements are so elastic that losing one house simply means that you move on, cost free, to new housing of equal value--same community, same schools, same everything but the landlord, and I don't know where it is to be found. Then I remember Megan McCardle's priceless essay into "does my prose make me look fat? No, really, I want to know" at the Atlantic snatched from abyss of irrelevance by Roy at Alicublog and then I recognized it at once. In Megan's world of wealth and privilige the only problems are really social ones--the embarrassment one feels at the possibility that one's social peers might think that you didn't have enough money. As Megan is forced by the horror of a credit check to confront the existence of people without sufficient credit she stops, looks, and moves on with this priceless bit of gentle sympathy:
The worst thing that happens to you if you borrow too much money is--it gets hard to borrow still more money. Yet during the recent financial crisis, commentators refer to bankruptcy, or foreclosure, as something akin dying of cancer, rather than losing your credit cards and moving to a rental flat.
So Megan, like Amity Shlaes (who at least should have known better) thinks that becoming homeless and jobless and creditless produces nothing more than a shift in housing location to a "rental flat?" Homelessness, like *these* people are experiencing (mother lives in car with three dogs), as they are forced from their rental housing into their cars, must be another figment of the American imagination.
But why be surprised? This anti democratic shtick in which the voters are fools, tied to the whim of the moment while the rulers, owners, and corporations are wise and to be left to their own devices is as old as the republic itself. The genius of these people, as evidenced by the commentary over at Amazon on Shlaes' book, is that they have managed to convince people who survived the great depression on government aid and programs that they shouldn't believe their own lying eyes and should realize that if they'd just put on a happy face and resigned themselves to accepting crumbs from the charity of the decimated wealthy classes there would have been no problem. I wish some time that someone would start a blog called "Real People, Real Lives, Real Suffering, Real Death, Real Time" which would simply capture the lives and sufferings of people as, we are told, the country as a whole moves majestically and indifferently through these "cyclic downturns" and "corrections."
Having denied that there is any similiarity to the great depression and its great scary follow on like regulation, banking laws, and tax policy Amity shakes her curls at us, more in sorrow than in anger, and explains what John McCain should do. He should give us some straight, hard, ugly talk about "tough choices" like throwing grandma to the wolves. And if someone doesn't do that soon? This crisis that is no crisis is going to miraculously and bizarrely blossom into an actual recession or worse. Talking about the indicators and blaming poor governmental policies, lack of regulation, how people feel about the big squeeze, and fraud if you are a democrat and want to stop the recession? Bad. Talking about the indicators, blaming poor governmental policies, fraud, consumer confidence, and demanding more regulation (of someone) if you are a republican expert? Good.
We see this down is up and IOKIYAR attitdue in the discussion of the whole "whining" thing as well as John McCain's psychological excuses for ANWAR drilling. When Republicans talk about consumer confidence they really mean consumer confidence in the confidence trick that is Republican economics. Just like talking about the mental state of voters is "pandering" to them and coddling them and deluding them into thinking they are more important than they are, except when Republicans do it, or when Republicans change the word "voters" to "corporations." You can see this bait and switch in Shlaes's magisterial denunciation of the Kenysians who are right but for the wrong reasons, or right but because they think that the people who matter are people and not "markets."
So, when is a government intervention not a government intervention? When it is not about "luxuriating" in a recession like all those people projects like the WPA but when it is aimed at "stopping it" by "restructuring" corporate entities and bailing them out with taxpayer money.
Second, as evidenced by the plummeting prices of Fannie Mae and Freddie Mac shares, serious trouble may be closer than we think. The plunging stock of the government-sponsored mortgage companies reminds us that those entities urgently require restructuring. Wall Street figures and the Senate Finance Committee that Gramm used to chair are already talking about how to structure a bailout. But this task is about stopping recession, not luxuriating in it.
Publisher's weekly damns Amity with faint praise:
This breezy narrative comes from the pen of a veteran journalist and economics reporter. Rather than telling a new story, she tells an old one (scarcely lacking for historians) in a fresh way. Shlaes brings to the tale an emphasis on economic realities and consequences, especially when seen from the perspective of monetarist theory, and a focus on particular individuals and events, both celebrated and forgotten (at least relatively so). Thus the spotlight plays not only on Andrew Mellon, Wendell Wilkie and Rexford Tugwell but also on Father Divine and the Schechter brothers—kosher butcher wholesalers prosecuted by the federal National Recovery Administration for selling "sick chickens." As befits a former writer for the Wall Street Journal, Shlaes is sensitive to the dangers of government intervention in the economy—but also to the danger of the government's not intervening. In her telling, policymakers of the 1920s weren't so incompetent as they're often made out to be—everyone in the 1930s was floundering and all made errors—and WWII, not the New Deal, ended the Depression. This is plausible history, if not authoritative, novel or deeply analytical.
And Campaign Econ has costs. The first is that talk of a downturn -- or "mental recession," as Gramm put -- can itself generate a downturn. Keynesian economists say this is so because consumer spending slows when people are afraid. But there's also a non-Keynesian dynamic. Grumbling leads to costly government rescues that scare markets and slow growth.