The EU

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Wednesday, June 13, 2012


Kad Barma raised an interesting and important question about political competition, here:
It's an extremely important point to make—pouring money, time and energy into opposing any particular political party, by way of its apparatchiks, is a losing game for all of us.  I view the 100,000 people in the public square as an expression of their collective non-partisan frustration that the entire system (i.e. the endless D vs R vs D vs R downward spiral) is broken for them, and their government is not doing its job.  That its exploited by a political party as a crude cudgel to be used against another is not so much a surprise. But it is a disappointment for sure.
Law Professor Ann Althouse comments on the situation in Wisconsin in this post "Defeated in Walker Recall, Democrats Vow to Fight On"
Congresswoman Tammy Baldwin (from my district) urged Wisconsin Democrats to keep fighting "our fight for Wisconsin's middle class," which "isn't a political fight, it isn't a partisan fight, it is a moral fight." (Baldwin is the near-certain Democratic candidate for the Senate seat that Herb Kohl is declining to continue to occupy.)
For me the issue in Wisconsin was how unions would play in government, an issue we haven't addressed since the PATCO strike, back when Ronald Reagan was President.  And, this isn't just an issue in Wisconsin.  Governor Andrew Cuomo of New York is also taking it on—not all unions, just unions of state and local government employees.

Is the power of municipal and state employee labor unions worth having a fight over?  The Wisconsin unions seem to think so, given that they forced a recall on a sitting governor.  Was there a compromise position?  Yes, but not without a fight.  Or maybe there isn't.  There is that line from former US Senator Russ Feingold—"It isn't over until we win".

In the mean time, Governor Scott Walker managed to balance the budget and help towns and cities free up money for schools.

The area most obvious to me for no middle ground is how to fix the economy.  It is the battle between government spending and austerity to wring out the mal-investent in the economy.  It is summarized here, in this rap video ("Fear the Boom and Bust").  Or, look at The Euro and Germany vs Greece.

In the United States we have folks like Nobel Laureate Paul Krugman shouting that the Federal Government needs to spend more, to stoke the fires of the economy.  Opposite him are folks who believe that if we keep spending we (1) won't end the recession and (2) will get ourselves in a terrible economic pickle.  (Along with them are the folks who think there is a natural limit to Federal spending, something like 21% of the GDP.

Thus, when the House Republicans are cranky about the debt ceiling they are expressing their concern that Krugman and the other followers of Lord Kaynes will lead us to where Japan is today.  Japan has been in a recession for over a decade and a whole lot of Government stimulus spending has failed to end it.

So, how do we have Congress compromise between those listening to Paul Krugman and those fleeing from him?  Will a little stimulus be good, or a little austerity.  I fear not.  We have to go "All In" one way or the other, but which is the way?  In 2008 the People voted to stimulate the economy.  In 2010 they voted to not stimulate.

You are riding in a car that has started drifting into the oncoming lane.  Where is the good compromise point between going all the way into the oncoming lane and staying in one's own lane?

So, Gridlock in Washington is not just about politics and winning in November.  It is also an existential argument about the best way out of this recession (although maybe Jay Carney is edging up to calling it a depression).

Regards  —  Cliff

  I will grant you that the issue is dirtied up by the unwillingness of Greek citizens to play by tidy German rules.  That is to say, the Greeks don't pay their taxes and in other ways run an "underground" economy.  Thus, the Central Government has less to finance programs.  Further, the Greek retirement age is much younger than the German, putting more strain on Government social programs, financed by a smaller tax-paying population.  Think New Hampshire with the Massachusetts State budget, but a New Hampshire tax base.
  I am currently reading Dr Krugman's new book, End This Depression Now.  Report to follow.


Craig H said...

My objection is when the joint decision to be made, by and between supporters of two opposing choices, is put second to defeating the preference of ones perceived opponent. This doesn't mean that we don't each contribute our best effort towards what we feel is right in your example. What it does mean is that we don't reject and oppose the ideas and merits of our opponents' case simply because they are our opponents, as has turned the Wisconsin political sewer. (And the Republicans there are no better just because they "won").

This CAN'T be about partisanship. It has to be about good government.

JoeS said...

I think our economic problems run a lot deeper than spend vs. retrench. If we look at our economy as a tank full of water a few decades ago, it was at full capacity. Much of the rest of the world was a much bigger tank, running half full or less. Then we decided the time had come to be a world economy, and the two tanks were linked. As in physics, the water in the tanks drifted toward equilibrium, and the water in the small tank dropped much more than that in the larger tank rose. So we had a reset in our standard of living, while others rose a bit.

That water transfer is a reflection of our trade account deficit. That peaked at about $800 billion per year 4 years ago, and has mildly recovered to about $500 billion currently. The water is still flowing from the small tank to the big tank.

Putting more water in the big tank will do little to raise the level if the spigot remains open. That is why tax break stimulus does not work, as much of the extra money in the hands of consumers flows through that spigot.

Targeted spending may be blocked from that spigot and could help raise the level in the tank. But it is difficult for government to make wise decisions, especially with so many special interests competing for the money.

I believe that the only way to preserve the water level in the smaller tank is to set tax policy that rewards work and productivity, and properly reflects the true cost of consumption whatever the source of the material being consumed.

That is a smaller spigot to the big tank, and some productive input to the smaller one to keep pace with the drain.