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Niall Ferguson Softens His Austerity Stance

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I have previously criticized Niall Ferguson as one of the gurus for those creatures described by Barry Ritholtz as “deficit chicken hawks”.  The deficit chicken hawks have been preaching the gospel of economic austerity as an excuse for roadblocking any form of stimulus (fiscal or monetary) to rehabilitate the American economy.  Ferguson has now backed away from the position he held two years ago – that the United States has been carrying too much debt

Henry Blodget of The Business Insider justified his trip to Davos, Switzerland last week by conducting an important interview with Niall Ferguson at the annual meeting of the World Economic Forum.  For the first time, Ferguson conceded that he had been wrong with his previous criticism about the level of America’s sovereign debt load, although he denied ever having been a proponent of “instant austerity” (which is currently advocated by many American politicians).  While discussing the extent of the sovereign debt crisis in Europe, Ferguson re-directed his focus on the United States:

I think we are going to get some defaults one way or the other.  The U.S. is a different story.  First of all I think the debt to GDP ratio can go quite a lot higher before there’s any upward pressure on interest rates.  I think the more I’ve thought about it the more I’ve realized that there are good analogies for super powers having super debts.  You’re in a special position as a super power.  You get, especially, you know, as the issuer of the international reserve currency, you get a lot of leeway.  The U.S. could conceivably grow its way out of the debt.  It could do a mixture of growth and inflation.  It’s not going to default.  It may default on liabilities in Social Security and Medicare, in fact it almost certainly will.  But I think holders of Treasuries can feel a lot more comfortable than anyone who’s holding European bonds right now.

BLODGET: That is a shockingly optimistic view of the United States from you.  Are you conceding to Paul Krugman that over the near-term we shouldn’t worry so much?

FERGUSONI think the issue here got a little confused, because Krugman wanted to portray me as a proponent of instant austerity, which I never was.  My argument was that over ten years you have to have some credible plan to get back to fiscal balance because at some point you lose your credibility because on the present path, Congressional Budget Office figures make it clear, with every year the share of Federal tax revenues going to interest payments rises, there is a point after which it’s no longer credible.  But I didn’t think that point was going to be this year or next year.  I think the trend of nominal rates in the crisis has been the trend that he forecasted.  And you know, I have to concede that. I think the reason that I was off on that was that I hadn’t actually thought hard enough about my own work.  In the “Cash Nexus,” which I published in 2001, I actually made the argument that very large debts are sustainable, if your borrowing costs are low. And super powers – Britain was in this position in the 19th century – can carry a heck of a lot of debt before investors get nervous.  So there really isn’t that risk premium issue. There isn’t that powerful inflation risk to worry about.  My considered and changed view is that the U.S. can carry a higher debt to GDP ratio than I think I had in mind 2 or 3 years ago.  And higher indeed that my colleague and good friend, Ken Rogoff implies, or indeed states, in the “This Time Is Different” book.  I think what we therefore see is that the U.S. has leeway to carry on running deficits and allowing the debt to pile up for quite a few years before we get into the kind of scenario we’ve seen in Europe, where suddenly the markets lose faith.  It’s in that sense a safe haven more than I maybe thought before.

*   *   *

There are various forces in [the United States’] favor. It’s socially not Japan.  It’s demographically not Japan. And I sense also that the Fed is very determined not to be the Bank of Japan. Ben Bernanke’s most recent comments and actions tell you that they are going to do whatever they can to avoid the deflation or zero inflation story.

Niall Ferguson deserves credit for admitting (to the extent that he did so) that he had been wrong.  Unfortunately, most commentators and politicians lack the courage to make such a concession.

Meanwhile, Paul Krugman has been dancing on the grave of the late David Broder of The Washington Post, for having been such a fawning sycophant of British Prime Minister David Cameron and Jean-Claude Trichet (former president of the European Central Bank) who advocated the oxymoronic “expansionary austerity” as a “confidence-inspiring” policy:

Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs.  Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.”  He then called on President Obama to “do a Cameron” and pursue “a radical rollback of the welfare state now.”

Strange to say, however, those warnings from economists proved all too accurate.  And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron.

Nevertheless, you can be sure that many prominent American politicians will ignore the evidence, as well as Niall Ferguson’s course correction, and continue to preach the gospel of immediate economic austerity – at least until the time comes to vote on one of their own pet (pork) projects.

American voters continue to place an increasing premium on authenticity when evaluating political candidates.  It would be nice if this trend would motivate voters to reject the “deficit chicken haws” for the hypocrisy they exhibit and the ignorance which motivates their policy decisions.


 

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A Question Of Timing

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May 11, 2009

Josh Kraushaar has reported for Politico that on Tuesday, May 12, Florida Governor Charlie Crist will announce his intention to run as the Republican candidate for the Senate seat being vacated by Mel Martinez.  Kraushaar explained that Crist would become the Republican Party’s “most high-profile recruit of the 2010 election cycle”.  He went on to point out:

Crist’s decision puts Republicans in strong position to hold onto the seat held by retiring Sen. Mel Martinez (R-Fla.).  Crist holds high approval ratings among both Republicans and Democrats, according to statewide polling, and has forged a moderate governing style that has won him widespread support.

His decision to run came as little surprise to political observers, with the governor and his allies hinting of his interest in running for Congress over the last several months.

The timing of Crist’s announcement is rather interesting, in light of the fact that he is prominently featured in Kirby Dick’s new documentary film, Outrage, which opened on Friday.  Andrew O’Hehir interviewed Kirby Dick for Salon.com.  This is what the filmmaker had to say about his new movie:

My film is not about outing closeted politicians.  It’s about reporting on the hypocrisy of closeted politicians who vote anti-gay.  That’s the bright line that I draw.  In many cases, these politicians would normally vote pro-gay.  But because of the rumors swirling around them, they run in the opposite direction.  Their votes not merely harm millions of gays and lesbians across the country, but they’re also voting against their own beliefs, solely to protect the closet.  That’s contorting the American political process.

Rumors about Governor Crist’s lifestyle have circulated here in Florida for many years.  Many of my conservative Republican friends have always believed those rumors, although the issue never stopped them from voting for Crist.  Once he became identified as a potential running mate for John McCain in the 2008 election, Governor Crist got married.  The timing of that event made many people suspicious.  With Crist’s imminent announcement of his intention to run for the Senate, the question of timing has come up again.  Will he distract attention away from the questions raised by the film, Outrage . . .   or will the timing of his announcement enhance the magnitude of those concerns?

Bob Norman is the writer for the Broward and Palm Beach County edition of the New Times who was interviewed by Kirby Dick for the movie.  The filmmaker retraced some of the reporting done by Norman about Charlie Crist back in 2006.  Norman’s reports were based on information provided by two campaign staffers for the infamous Katherine Harris:  Jason Wetherington and Bruce Jordan.  In his recent New Times article about the film, Mr. Norman was careful to point out that the claims concerning Governor Crist’s preferences remain open to question:

I’ll never shy away from that reporting.  There is no question that both Wetherington and Jordan boasted of having affairs with Crist and there is no question that both men had met the man.  One woman, Dee Dee Hall, even gave a sworn statement detailing Jordan’s claims about his relationship with Crist.

But the fact remains that it’s possible both men were lying.  It may not seem likely, but it’s possible.

*    *    *

As well-known outer Michelangelo Signorile put it, there is no “smoking dick” here.  But it’s compelling stuff that’s worth reporting.

Jason Bellini provided a video report on the release of Outrage for The Daily Beast, which included an interview with Kirby Dick.  Bellini also provided an analysis of the mainstream media’s reaction to the film’s focus on Governor Crist.  For the most part, the mainstream outlets wrote off the claims as unsubstantiated rumors.

Aaron Blake reported for The Hill, that Charlie Crist’s Senate campaign could threaten the Republican Party’s control in Florida because a “domino effect” would result if he were to vacate the Governor’s office.  The GOP managed to consolidate its power here in the 2008 election, despite the fact that Barack Obama won this state.  Blake provided this perspective from a Republican insider:

“It’s going to be a complete shakeup from top to bottom of the Florida political landscape,” said GOP fundraiser Ana Navarro. “The political season could be more active than our hurricane season.”

If allegations of hypocrisy and concealment of a secret gay lifestyle get serious attention in Charlie Crist’s 2010 Senate campaign, Ms. Navarro’s analogy might be very appropriate.

The Republicans Have No Choice

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March 2, 2009

Republican pundit Mike Murphy drove the message home on the March 1 telecast of NBC’s Meet The Press.  Demographics have changed since the Republican heyday of the Reagan era.  The Republican mission, message and strategy must adapt to our changing world.

On the other hand, last week brought us the CPAC (Conservative Political Action Convention) with its unique focus that has no relevance to current reality.  The Democratically-inclined pundits on MSNBC were delighted by the CPAC festivities. These commentators were left with visions of Sarah Palin as the 2012 Presidential candidate, dancing in their heads.

We’ve seen and heard plenty of opinions about the current leadership vacuum within the Republican Party.  Almost by default, he who makes the most noise, Rush Limbaugh, has found himself as the new, de facto leader of the Republicans.  Although he is not a candidate for anything, he enjoys more of a papal role with the diehard Republicans.  His message is amplified by people like Chris Matthews on MSNBC (who regularly discourses about how the Republicans always swing back to the “hard right”, when a moderate Presidential candidate fails).  Matthews then describes John McCain as the failed “moderate” and proceeds to (hopefully) set the stage for a “wing nut” Presidential candidate such as Sarah Palin or Bobby “The Exorcist” Jindal.  In either case, Obama gets re-elected — even if unemployment is at 42 percent and the Dow Jones is at 369.

The problem with Chris Matthews’ logic is that McCain pandered to the hard-right “base” in his quest for the White House and could not really be considered as a truly moderate candidate.  The Republicans could wise-up and move toward the center by 2012.  Besides:  They have no choice.

Here in Florida, we have a fait accompli.  Our next Senator, replacing the retiring Republican Senator Mel Martinez, will be our current Governor, Charlie Crist.  Governor Crist is a moderate Republican who enjoys a 73% approval rating.  Crist’s support of President Obama’s stimulus bill resulted in his appearance in Ft. Myers on February 10, to introduce the new President to an adoring crowd.  Governor Crist took lots of heat for that, from know-nothing conservative pundits.   Charlie Crist is laughing all the way to the Senate.  As the February 24 article by Aaron Blake on The Hill website pointed out:  the Democrats don’t have any strong challengers.  It’s a lost cause.  Here, “on the ground”, everyone knows it.

Meanwhile the “liberal” media are busy snarking at Crist, repeating the “gay” rumors that circulated prior to his recent marriage.  This hostility is probably due to the fact that Crist is on the record as opposing any change to Florida’s existing ban on gay adoption.  Any useful resemblance to former Republican Senator Larry Craig’s hypocrisy on gay issues would be a convenient “G-bomb” to throw into an election campaign.   The Huffington Post is big on these “gay” rumors, as is the current incarnation of Wonkette.  What those people don’t know is that the rumors never seemed to matter.  For example:  I’ve known and worked with many conservative Republicans who assumed those rumors were true.  Nevertheless, they still supported and voted for Charlie Crist.  It didn’t matter to them, nor did the issue ever matter to any significant number of people in this State.  Governor Crist had been married to a woman named Amanda Morrow in 1979.  That marriage lasted one year.  On December 12, 2008 he married Carole Rome.  Many of the rumor-mongers claim that this was a “staged” marriage, to advance Crist’s political career.  Nevertheless, you can trust my opinion, as a heterosexual bachelor of approximately the same age as Governor Crist …  If he is trying to “fake” a marriage at this point in his life … You will see him running out of the Governor’s mansion within a very short time, yelling:  “All right!  I’m GAY!  I CONFESS!!!  I’m GAAAAAAAAAYYY!!!”

I don’t believe we will see that happen.  Beyond that, I’m really disappointed that purportedly “gay-friendly” media would be taking these cheap shots at Charlie Crist.  He is going to be our next Senator and he will win because a majority of Democratic voters will support his candidacy.  Deal with it.

The next question is whether the Republican party will finally figure out, after the 2010 election, that there is a trend here.  Republicans are faced with the likelihood that future campaign strategies will nullify the efforts of extremists whose political ambitions have been based on the existence of the political primary system.  As Newsweek‘s Howard Fineman has often discussed, the political primary system, by its nature, results in extremists from both sides getting much better traction than they would have in an open election.  Politicians are on to this.  Watch for more centrists running as independent candidates — and witness the disintegration of the “wing nut” dominance within the Republican Party.