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Troublesome Creatures

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A recent piece by Glynnis MacNicol of The Business Insider website led me to the conclusion that Shepard Smith deserves an award.  You might recognize Shep Smith as The Normal Guy at Fox News.  In case you haven’t heard about it yet, a controversy has erupted over a 20-minute crank telephone call made to Wisconsin Governor Scott Walker by a man who identified himself as David Koch, one of two billionaire brothers, famous for bankrolling Republican politicians.  The caller was actually blogger Ian Murphy, who goes by the name, Buffalo Beast.  In a televised discussion with Juan Williams concerning the controversy surrounding Wisconsin Governor Walker, Shep Smith focused on the ugly truth that the Koch brothers are out to “bust labor”.  Here are Smith’s remarks as they appeared at The Wire blog:

It’s all political isn’t it?  Isn’t it just 100% politics? … Have you looked at the list of the top 10 donors to political campaigns?  Seven of those 10 donate to Republicans.  The other three that remain of those top 10, they all donate to Democrats and they are all unions.  Bust the unions, it’s over … . And this started when?  It started with the Koch brothers.  The Koch brothers were organizing…

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I’m not taking a side on this, I’m telling you what’s going on … The facts!  But people don’t want to hear the facts … let them get angry, facts are troublesome creatures from time to time.  The Koch brothers, and others, were organized to bust labor, it’s what big business wants to do … this isn’t a new concept.  So they gave a bunch of money to the governor’s campaign.  The governor’s campaign is over.  Now, away we go!  We’re going to try to bust this union up, and that’s what they’re doing … this is political and everyone in the middle is a pawn.

Those “troublesome creatures” called facts have been finding their way into the news to a refreshing degree lately.  Emotional rhetoric has replaced news reporting to such an extreme level that most people seem to have accepted the premise that facts are relative to one’s perception of reality.  The lyrics to “Crosseyed and Painless” by the Talking Heads (written more than 30 years ago) seem to have been a prescient commentary about this situation:

Facts all come with points of view
Facts don’t do what I want them to
Facts just twist the truth around
Facts are living turned inside out

Budgetary disputes are now resolved on an emotional battlefield where facts usually take a back seat to ideology.  Despite this trend, there are occasional commentaries focused on fact-based themes.  One recent example came from David Leonhardt of The New York Times, entitled “Why Budget Cuts Don’t Bring Prosperity”.  The article began with the observation that because so many in Congress believe that budget cuts are the path to national prosperity, the only remaining question concerns how deeply spending should be cut this year.  Mr. Leonhardt provided those misled “leaders” with the facts:

The fundamental problem after a financial crisis is that businesses and households stop spending money, and they remain skittish for years afterward.  Consider that new-vehicle sales, which peaked at 17 million in 2005, recovered to only 12 million last year.  Single-family home sales, which peaked at 7.5 million in 2005, continued falling last year, to 4.6 million.  No wonder so many businesses are uncertain about the future.

Without the government spending of the last two years — including tax cuts — the economy would be in vastly worse shape.  Likewise, if the federal government begins laying off tens of thousands of workers now, the economy will clearly suffer.

That’s the historical lesson of postcrisis austerity movements.  The history is a rich one, too, because people understandably react to a bubble’s excesses by calling for the reverse.  When Franklin Roosevelt was running for president in 1932, he repeatedly called for a balanced budget.

But no matter how morally satisfying austerity may be, it’s the wrong answer.

Leonhardt’s  objective analysis drew this response from Yves Smith of Naked Capitalism:

Did a memo go out?   Leonhardt almost always hews to neoclassical orthodoxy.  This is a big change for him.

Those “troublesome creatures” called facts became the subject of an opinion piece about the budget, written by Bill Schneider for Politico.  While dissecting the emotional motivation responsible for “a dangerous political arms race where the stakes keep escalating”, Schneider set about isolating the fact-based signal from the emotional noise clouding the budget debate:

Many of the programs targeted for big cuts by the House Republicans have a suspiciously ideological tinge:  Planned Parenthood, the Environmental Protection Agency, funds to implement the new health care reform law, National Public Radio, the Corporation for Public Broadcasting, President Bill Clinton’s AmeriCorps program, money for a White House climate change czar.  The Washington Post calls the House budget “an assault on bedrock Democratic priorities.’’

The public is certainly worried about the deficit.  But do people believe the deficit is a crisis demanding immediate and radical action?  That’s not so clear.

In a Pew Research Center poll taken this month, the public was split over whether the federal government’s priority should be reducing the deficit (49 percent) or spending to help the economic recovery (46 percent).  What economic issue worries people the most? Jobs tops the list (44 percent). Fewer than half that say the deficit (19 percent).

Yes, there is an economic crisis in the country.  The crisis is jobs.  So Republicans have to argue that spending cuts will create jobs — an argument that mystifies many economists.

Let’s hope that those “troublesome creatures” keep turning up at debates, “town hall” meetings and in commentaries.  If they cause widespread allergic reactions, let nature run its course.


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Listening To Smart People

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As the mid-term election cycle reaches its climax, we find ourselves exposed to an increasing amount of stupid pronouncements by desperate politicians, overworked commentators and plain-old idiots, who managed to attract the interest of television news personnel.  I was particularly amused by the recent outburst from Juan Williams about the fact that he gets nervous when he sees people in “Muslim garb” boarding a plane in which he is a passenger.  NPR saw fit to fire him for making a remark described as “inconsistent with our editorial standards and practices”.  Despite the widespread hand-wringing over the “bigoted” nature of the statement, I was more focused on its stupidity.  Does Juan Williams seriously believe that terrorists would board a plane dressed in Muslim garb?  I would assume that all terrorists learn in Jihad 101 that the traditional garb for airborne martyrdom is the Adidas warm-up suit.  Wearing “Muslim garb” for such an occasion would serve only as an offer to be waterboarded.

Another example of election year asininity is the thought that someone could get elected to the Senate by claiming that the incumbent opponent of said candidate “actually voted to use taxpayer dollars to pay for Viagra for convicted child molesters and sex offenders”.  It was beginning to appear as though stupid has become the “new normal”.

Finally, some fresh air came along when a few news outlets reminded us that there are still some smart people among us.  The Los Angeles Times was kind enough to publish an interview with Elizabeth Warren, conducted by Jim Puzzanghera.  President Obama decided to appoint Professor Warren to launch the newly-created Consumer Financial Protection Bureau out of fear that a protracted confirmation battle would ensue if he appointed her as director of that agency.  With non-stop news coverage currently focused on the recent disclosures of fraudulent conduct extending from the mortgage origination process right through the foreclosure process, it would seem that the election-eve interview would provide an opportunity to assail the targets of the new agency.  When asked whether she would support the scattergun approach of seeking a nationwide foreclosure moratorium “while bank paperwork problems are being worked out”, Professor Warren gave us a glimpse of some traits we haven’t seen in a while:  restraint and common sense.  Here is her response to that tough question:

This agency will not veer from its support of American families, whether it’s in the foreclosure crisis or elsewhere.  But no one would want this agency … to act before it had collected all of the necessary data and thought through the options.  The (state) attorneys general are moving fast, and at this moment, I think that’s the right response … with emphasis on “at this moment.”

Professor Warren wasn’t the only smart person to draw some curiosity from the ADD-addled news media this week.  My favorite stock market guru, Jeremy Grantham, released his latest Quarterly Letter on Tuesday.  Its Halloween-based theme made it impossible to overlook.  As usual, Mr. Grantham gave us his unique, brilliant perspective in exposing how the Federal Reserve’s reckless (if not actually criminal) monetary policy helped cause the financial crisis and how Chairman Bernanke’s anticipated move toward more quantitative easing could make a bad situation worse.  Here are a few gems from Grantham’s must-read essay:

And these are most decidedly not normal times.  The unusual number of economic and financial problems has put extreme pressure on the Fed and the Administration to help the economy recover.  The atypical disharmony in Congress, however, has made the Federal government dysfunctional, and almost nothing significant – good or bad – can be done. Standard fiscal stimulus at a level large enough to count now seems impossible, even in the face of an economy that is showing signs of sinking back as the original stimulus wears off. This, of course, puts an even bigger burden on the Fed and induces, it seems, a state of panic.  Thus, the Fed falls back on its last resort – quantitative easing.  This has been used so rarely that its outcome is generally recognized as uncertain.

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And of all of the many mistakes of the current Administration, the worst, in my opinion, are directly related to this fiasco:  the inexplicable choice of Geithner, who was actually placed at the scene of the crime in New York and whose fingerprints were on the murder weapon, and the reappointment of  … gulp … Bernanke himself, about whose reappointment much juicy Republican criticism was made, all of it completely justified in my view.  There may, however, be a small ray of hope.  The recent Fed appointee, Vice Chair Janet Yellen, said not long ago, “Of course asset bubbles must be taken seriously!”  She also said, “It is conceivable that accommodative monetary policy could provide tinder for a buildup of leverage and excessive risk taking.”  Yes, sir!  Or rather, madam!  A promising start.  These sentiments, of course, are completely contrary to the oft-repeated policies of Greenspan and his chief acolyte, Bernanke.  Perhaps she will slap some good sense into her boss on this issue.

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Since it is customary in polite society to apologize for causing distress, on behalf of the Fed, let me apologize for the extraordinary destructiveness of its policies for the last 15 years.  Bernanke’s version of an apology, delivered in January this year to the American Economic Association, was to claim that the Fed’s monetary policy during the 2000-08 period was appropriate, and that there were no major failings, such as missing the housing bubble completely, that were worth mentioning.  This stubbornness in the face of clear data is right up there with efficient market believers.  And very impolite indeed.

Now I have to go back to waiting another three months for Jeremy Grantham’s next Quarterly Letter.  As always, the current one will be tough to beat.  In the mean time, it’s nice to know that there are some smart people around, capable of providing solutions to our most pressing problems.  If only those vested with the authority to implement those ideas were paying attention   .   .   .