Obamacons and Buyers’ Remorse
Earlier today, I took Andrew Sullivan and Christopher Buckley to task for their seeming surprise that Obama is a big spender. Some, including Steven Taylor, responded that they, like other center-right types who supported Obama, were aware that he would often make policy choices they would disagree with but were simply choosing between bad alternatives.
While I take their point, I believe that’s misguided. Yes, we have a two party system and are therefore invariably faced with candidates with whom we disagree, sometimes even on fundamental issues. But Sullivan, in particular, was an Obama enthusiast, not merely a reluctant supporter of him as The Least Bad Option (as I was with McCain). Obama made no secret that, if elected president, he would massively increase social spending programs and pay for it by a combination of deficit spending and soaking the “rich” (only the top 5 percent will see any tax increase at all!). So, it strikes me as peculiar for Obamacons to lambaste Obama for doing what he said he was going to do at the strategic concept level.
To illustrate a contrasting situation where Obama defenders have a legitimate gripe, one has only to turn to … Andrew Sullivan and his post “Has Anyone Seen Tim Geithner?” (and which was apparently originally conceived as “How Useless is Tim Geithner?”).
I’m a pretty sympathetic Obama supporter. I’d like to know what the Treasury secretary actually proposes with respect to the banking crisis. Is that really too much to ask? Maybe he’ll tell us today. Who knows? He should be a critical force in explaining the government’s economic policies, and yet he seems incapable of conveying anything to the American public whom he serves. He came across in his debut as a terrified intern who hadn’t mastered his brief. And his political presence since has been pathetic.
I know there are issues of confidence in talking out loud about all this; and I’ve aired many of the arguments against bank nationalization. But the markets are tanking because they don’t have any certainty about where the administration intends to take us. Geithner is a liability in this respect. So far, he’s drained confidence, not built it.
Obama supporters saw in him a competent technocrat which they contrasted with the bumbling, ideological approach of Bush. Geithner was presented as the Ãœber Wonk, a man whose extraordinary competence was so unique and so necessary to saving us from economic calamity that his tax issues had to be overlooked. Thus far, he’s been a disappointment.
In one case, then, we have complaints from Obama supporters about Obama doing the main thing he said he was going to do. In the second case, we have complaints from Obama supporters than he’s not living up to his promise. The latter strikes me as much more reasonable.
Image courtesy The Economist
I suppose that part of my point was that I didn’t see Sullivan actually doing that–although I suppose the Buckley was, although he was no where near the supporter of Obama that Sullivan was.
Really, my original point was simply in response to your original question of whether these guys saw the spending coming, and I think that they did. And for Sullivan in particular, I think other factors overshadowed the spending issue, especially since it was reasonable to assume that spending was going to massively increase under McCain as well, at least in the short term–and probably beyond that.
More broadly, all of this underscores, to me, the anemia of the GOP–something that isn’t going to be fixed by looking to Rush, Palin and Joe the Plumber–something that many seem to be doing at the moment (although I know that you aren’t–it is a generic lament).
Reality bites. In this case it’s biting all of us real hard.
This past week JPMorgan circulated a memo to their ultra high net worth clients containing the following statement: “[W]e believe there’s more downside risk right now on equity prices before the new realities and unintended consequences are fully priced in” (James, I’d be happy to forward you the memo if you’d like to see it). When I called to inquire further I was advised by a very senior person in the bank that a significant reason for the bank’s recommendation was the catastrophic incompetence of the Geithner / Obama team.
“Disappointment” doesn’t begin to cover it. The level of bumbling on the part of this administration thus far raises the issue of whether they are intentionally exacerbating the financial crisis to further a political agenda.
Is it the case that Obama is a “big spender”, as conservatives dearly wish to portray him, or is it rather that we’re in a rather largish recession and that fiscal stimulus is in order?
First of all: unlike republicans, the dems allow criticism within their ranks- nobody ever proclaimed to have THE SOLUTION. Second, this post is a gross mischaracterization of Andrew Sullivan views. Sure he opposes many of Obama’s spending programs, but if you read him every day you will know that it will be a cold day in hell before he votes for a republican. He states that one party has a set of philosophies that he disagrees with, the other is run by crazy people.
I guess the investment community – which includes everyone from public employee pension funds through hedge fund managers – does not see the correlation between fiscal stimulus and dramatic tax increases, including an across-the-board tax on every aspect of modern human activity (at least those which involve electricity, as I am referring to the carbon cap and trade program, which Obama himself admits will lead to skyrocketing prices for electric power).
I guess the world doesn’t understand how higher taxes and increased cost of doing business leads to stimulus. Thus the Dow at (as I type) 6700 and falling.
James, I think your reference to “economic calamity” is the buried lede, and really the failure to engage with it is not just the central failure of your essay, it is the central failure of the current Republican Party.
You really want us to avert our eyes, and then only think about “spending” in the abstract, and as if this was just another year.
Did you catch any of Benanke’s comments today?
Shorter, and to borrow from your illustration: If one gentleman scored political points on another, after the lifeboats left the Titanic, history could not record it.
Scott, apparently the markets and consumers have little faith in Obama’s cure for the malaise. Obama is a committed socialist, period. Socialism is not the best prescription for vibrant growth. Much of this “stimulus” is permanent increase in social spending that may stimulate in the short term but will be a drag on the economy over the long term.
Geez Louise, you’ve got me agitated enough for a triple post!
First OTB spends a couple months saying there is no economic crisis, and that it is all fear mongering on the part of Democrats.
Then the smartly turn on their heels to say there is a big economic problem, and the Democrats are at fault for not fixing it all in a month and a half.
That is, not fixing the same problem you were obstructing last week.
Who here has argued that? Do I think our leaders, of both parties, have exacerbated the problem with inflammatory rhetoric? Yep. Do I think there’s no problem? Nope.
Actually, my argument on that score has been that government isn’t able to fix the problem and that the “stimulus” thus became an excuse to justify preexisting policy preferences.
In this particular point, I’m making a different point: That it’s reasonable for Sullivan to criticize Obama for failure to do what he promised — offer competent, technocratic leadership to the problem — but not for engaging in the massive stimulus he promised.
What about all that squawking (and it was squawking) everytime someone said “worst since the Great Depression”?
Hello? Maybe it was shaping up that way and protests about “inflammatory rhetoric” were nothing more than stuffing your ears in the face of a serious problem.
BTW, if you think that do “think our leaders, of both parties, have exacerbated the problem with inflammatory rhetoric” then you probably don’t yet grasp the nature of the problem.
Bernanke tell us today how angry he was about the need to bail out AIG, and the reason (that they ran their insurance company “like a hedge fund”). That was not in any part “animal spirits” trimming around the edges. That was a fundamental and structural miss misapprehension of risk.
sorry for the bad re-edits above. semi-dyslexia strikes again
Your core mistake, in my mind, is to start with the supposition that “that government isn’t able to fix the problem.” Government policy can be better or worse. I wish for it to be better, and I do not assume that better government policy always means less government.
As for “Who here has argued that [there is no economic crisis]?” I believe the initials you are looking for are SV.
Much of it is a crisis of confidence. Stocks and houses are worth what people will pay for them. Cries of “irrational exuberance” and “bubble!” are useful in sounding alarm bells but they also create a self-fulfilling prophecy.
I don’t doubt that AIG, Citi, and the rest were horribly managed and over-leveraged. But even prudently run banks and insurance companies are being trampled in the ensuing panic.
James, by some estimates $25 trillion dollars dropped out of the global equities markets as a result of the credit crisis.
The only way you can make this a naysayer’s crash, one that was purely psychological, it to take the opposite position, that houses (and the stock market) always go up. You have to take a “bubbles forever” flip side.
I get that some in the ideological binding of conservatism and free markets do that. Kudlow was famous for that, right? The government should do everything it can to keep the markets booming … never mind that such a treatment only makes bubbles more extreme, precarious, and when they finally crash, more damaging.
Shorter: As I’ve been saying “animal spirits” should not rationally lead to “tell me only good news.” Not for the thinking person.
We have had massive, unprecedented levels of foreclosure. This in turn has caused real estate prices to fall dramatically. This in turn has caused financial instruments that are based on real estate to fall dramatically. It has also wiped out financial instruments that are derivatives of that above. It has also left under-capitalized financial instruments that leveraged on the above. This under capitalization has left most large financial institutions under capitalized. This in turn has reduced credit enormously because financial institutions do not know who they can lend to safely _and_ because they need to increase their reserves to recapitalize. Because almost every company relies in some way on credit, this has been a gut hit to the broader economy.
None of the above takes into account whether politicians & pundits have said that this is or is not a large recession. Yes, consumer confidence is impacted by the statements of politicians and pundits. However, we clearly have substantial structural problems in our economy right now. I have seen no numbers indicating that “Much of it is a crisis of confidence.” In particular, that the crisis in confidence is driven predominately, or even substantially by pronouncements rather than by our factual economic problems.
Steve tends to argue against extreme takes on the economy. He was writing “the economy isn’t in nearly as good a shape as you think” posts back in 2003 and 2004.
That sort of thing is hard to search for but see this Recession in 2006/7? (8/05) and Housing Permits, Starts, Recessions and the Economy (9/06).
I did not say that Steve has always been wrong. I replied to your question. 🙂
Interesting, this old line from Steve was quite prescient:
Thing is, the spirit of your post above is very much “why can’t Obama fix it in 2 months?”
Not to mention this totally new invention that it is all psychological anyway (the economy “talked down” by the Democrats .. who said that?)
On August 27, 2005, anjin-san was also quite prescient:
Darn it Pilot, if you hadn’t talked us down we’d be fine right now!
“As for “Who here has argued that [there is no economic crisis]?” I believe the initials you are looking for are SV.”
“why can’t Obama fix it in 2 months?”
Lot’s of convenient – and BS – arguments here today.
The issue isn’t whether the economy was going to suffer a severe recession, or whether “Obama could fix it in two months.” The issue is whether this recession was to be a standard to severe issue U recession, like 1982 or somewhat worse………or a real debacle, driven by the Admin’s policies.
From where I sit the Administration is making precisely the same mistakes Japan made in the 90’s, and has now opened up the real possibility of an L.
Equity markets are taking note.
Drew, I think that is a pretty good response, and I’m closer to it than others. My two comments would be:
1) that the PREVIOUS administration shaped this trajectory more that Obama could, in those two months. (And anyone who squawks about Pelosi, look up who put Bernanke and Paulson in place, and tell me who took the lead.)
2) I first heard of the The Letter “Lâ€ back on December 27th, 2008, when we had another President on the watch.
Now on Japan, one of the interesting things in the last year has been to read th 1001 news articles looking at parallels and differences. The agreement seems to be that we are moving very much faster than Japan, but yes we face a similar problem.
Outcomes might be similar in the best case.
Just the same, it is a logical fallacy to say that since cases might be dire, my favorite solution is best.
(At this point we might insert the failure of macroeconomics as a discipline, and their split into the same party politics that plagues this and so many other forums!)
I should also mention that I think Drew and I agree on the principal mechanism for this bubble and then crash. It was a debt/leverage binge in all of the developed, market, economies. It was financed in good part by savings from the newly industrialized Asian nations.
We diverge on our opinions of the Bush administration. I think Drew is correct that Bush did not make the crisis, certainly not by himself. I fault him for being asleep at the switch (at best) and possibly fanning the flames (at worst).
Obama was elected, and arrived at the scene of the accident.
Many conservatives did indeed start by denying that there was an accident, and only now are getting angry that this clear accident has not been cleaned up.
Let’s fault the new guy, because markets have further to fall.
“1) that the PREVIOUS administration shaped this trajectory more that Obama could, in those two months. (And anyone who squawks about Pelosi, look up who put Bernanke and Paulson in place, and tell me who took the lead.)
2) I first heard of the The Letter “Lâ€ back on December 27th, 2008, when we had another President on the watch.”
I think our point of departure is that you seem intent on apportioning blame. I hold no brief for Bush. His spending habits were awful. His reaction in the Fall to events not to my liking.
But that is now ancient history. Now we must evaluate whether or not Team Obama is behaving in a manor that will help or harm. I say harm. The “stimulus” bill is his (and Pelosi’s), and a pitiful wreck. The regulatory framework is now his, and misguided. Tax policy is now his. Don’t get me started. Handling the banks is now his. When will he start???
They seem to be running Japanese FUp Part II.
I think if folk in certain social sub-groups find a way to hand this global economic contraction to our president of 2 months, I can remind them of the 8 years leading up to those 2 months.
FWIW, I’ve said I think the stimulus bill is more a “split the difference” than most people will admit. I also think it is smaller than most people admit.
Here was a headline today:
Pensions: Another Trillion Dollar Bailout?
Yes absolutely it hurts to see debt run up, but apportioning it and fractioning it so that this part is “bailout” so that another part can be “obamas” as some do … isn’t really capturing the big picture.
Some here like to only talk about “stimulus” so that they can play a certain kind of blame game, without engaging with the big picture.