If you are still paying attention, you will see prescriptive policy analyses everywhere you look. Such views specify what we need to do to fix the economy & the coming fiscal crisis. Each analysis assumes, as it must, that strong, bipartisan political policies will be defined & implemented in the future.
None of the people offering these prescriptions are willing to admit that our political system is irrevocably broken. They must pretend—do they know they are fooling themselves?—that strong, concerted political action is still possible in the United States. During the first half of Obama's presidency, the Congress barely squeaked out financial reform that did not reform, health care reform that did not bend the disastrous cost curve, and a huge fiscal stimulus that did not stimulate. This is why I was so confident that regulating CO2 emissions to fix the climate would be postponed indefinitely—it was.
If you were asked to predict what policy actions will be taken in the future, and you are attuned to reality, you would likely say: none! It is very likely we will continue down the current path of huge fiscal deficits and an economy which at best will get no worse. This nothing-happens political outcome is virtually guaranteed by the dysfunctional nature of our two-party system and the upcoming elections, in which the Republicans may take back the House and make 60 votes in the Senate impossible.
A cynic might say that it's a good thing that further political action is impossible—Congress & Obama can't do anymore damage. But the way things are set up, our situation will get worse all by itself. The main danger for the United States is not that we might embark on a disastrous policy course. The real danger is that we are completely incapable of embarking on any policy course!
It is as though we're on a runaway Doom Train and nobody has a hand on the throttle. Everyone knows that the track runs right off a cliff, but nobody is able to take back control of the train. And unlike the movies, no Hero is available to crawl through the burning engine house to apply the breaks just in the nick of time.
This is how we fool ourselves. I've included a typical prescriptive analysis in a video at the end of the post to give you an idea of how such self-delusion works. But right now I will turn to a cynical, highly partisan analysis by Martin Wolf of the Financial Times called The political genius of supply-side economics—
The future of fiscal policy was intensely debated in the FT last week. In this Exchange, I want to examine what is going on in the US and, in particular, what is going on inside the Republican party. This matters for the US and, because the US remains the world’s most important economy, it also matters greatly for the world.
My reading of contemporary Republican thinking is that there is no chance of any attempt to arrest adverse long-term fiscal trends should they return to power. Moreover, since the Republicans have no interest in doing anything sensible, the Democrats will gain nothing from trying to do much either. That is the lesson Democrats have to draw from the Clinton era’s successful frugality, which merely gave George W. Bush the opportunity to make massive (irresponsible and unsustainable) tax cuts. In practice, then, nothing will be done.
I don't know if Republicans "think" per se, at least much beyond how to give their wealthy supporters a new round of tax cuts. But let's move on. The bottom line is that nothing will be done. Wolf's got this part right, however he arrived there.
Indeed, nothing may be done even if a genuine fiscal crisis were to emerge. According to my friend, Bruce Bartlett, a highly informed, if jaundiced, observer, some “conservatives” (in truth, extreme radicals) think a federal default would be an effective way to bring public spending they detest under control. It should be noted, in passing, that a federal default would surely create the biggest financial crisis in world economic history.
To understand modern Republican thinking on fiscal policy, we need to go back to perhaps the most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: “supply-side economics”...
There's another debatable reference to Republican "thinking" but again, I will ignore it. Wolf goes on to describe the sordid (silly?) history of supply-side economics, which I covered in my post Trickle Down Economics. Let's concentrate on Bruce Bartlett's speculation—the Republicans will intentionally forestall political action long enough to ensure that America's Doom Train goes off the cliff. This would, in turn, create the biggest financial crisis in world economic history.
Wolf's analysis is wrong only because of the way he frames it. His analysis assumes that strong, bipartisan political action to stop the Doom Train is still possible provided that some extremely radical Republicans do not run the Federal government into the ground. This is simply nonsense, as I described above. Bipartisan guidance of the Ship Of State died many years ago. However, and tragically, we are still left with the increasingly likely outcome Wolf suggests might occur—the biggest financial crisis in world economic history.
Notice that once one filters out the partisanship in Wolf's remarks, the frightening conclusion remains the same. That is the price we will likely pay for political paralysis.
In the video below, Mark Dow argues that the United States (currently) has "policy credibility." You'll have to take that with a grain of salt. His subsequent analysis goes on to assume that strong bipartisan action to fix "structural deficits" and the economy is still possible. Watch this video critically. Are Dow's arguments credible?
Much has been made of the similarities between the current situation with that of the 1930s, Bush as Hoover, Obama as FDR, etc. with maybe conflict with China instead of Japan/Germany over resources.
However the USA is divided internally very similarly to the antebellum period of the 1850s. Slavery had been limited to natural growth since 1808 and slave states /free states were limited along geographical lines. As the USA expanded westward the argument was slave or free state. Eventually war broke out.
The modern slave is oil, which peaked in 1970, exports becoming ever more expensive(like slave trade limitations after 1808). Geographical expansion is into the suburbs due to cheap driving and into the Southwest and previously sparsely settled parts of the south through Air conditioning units. Whereas the antebellum North relied on ingenuity and inventiveness, own hard work on farm, i.e. industrialism through technology, the south relied on a simple culture of slave agriculture and simple religious and cultural values.
The modern democratic base is urban, more immigrant and educated in areas mostly not in the exurban or southern solely A/C liveable areas. This democratic base is on the upscale, believes in technological advance through alternative energy and smart urban living, energy conservation, and is more liberal to agnostic and less prowar/expansionist.
The current Republican party relies on expansion of suburban/rural/southern constituency with a strong religious, even racist, xenophobic tinge and is warmongering jingoistic.
As local oil and all energy production is going backwards and external production is peaking and is only attainable through warfare the expansion of the republican demographic has stopped. A/C will fail in southern edge areas and exurbs /suburbs everywhere will become unliveable / inaccessible by current means. The simple promise of constant expansion of lifestyle without apparent costs is over. The slave trade allowed similar to southerners. The dispute between the two modern political parties is over what lifestyle can the country afford into the future. Both sides are arch enemies. Can the country expand endlessly at cost to others with strong, simplistic conservative jingoistic values, without technical change espoused by democrats which would allow a limited more urban, less materialistic lifestyle. Even without imminent climate change this choice would have to be made due to peak energy. The constituents of the republicans will shrink in number due to peak oil and moderate northern urban locales will become repopulated due ot immigration form depopulating areas. As people live closer together and must rely on their ingenuity they will become more moderate religiously and politcially.
To sum up - the Republican base is unwilling to give up his slaves and plantation (oil based life and suburban home). He justifies this with inborn rights from Bible or empire (manifest destiny, white man’s burden).
The democratic is more urban and international. He looks to a more European way of life where quality of life depends on consumption of intellectual goods not just more plastic. God’s will is, as far as is believed in religion in a vague sense, to care for the creation, and Asian religious thought is not strange (balance with nature). Foreigners are to be welcomed with foreign ideas. Growth is to be in balance with nature, in terms of energy saving devices to eliminate dependence on Fossil fuel slaves and with more natural agricultural methods where possible to improve health of individual and environment (less chemicals, pesticides, runoff).
A physical civil war will not occur. There will be no positive resolution a la FDR, 1930s. It seems by avoiding or postponing a decision on purpose the republicans are forcing US default and inability to transition. The civil war then is now occurring in congress. Only as the republicans do not believe, or deny Peak Oil and Global Warming, when the US has defaulted and is in a major downslide, with less oil and electricity, and no way to adjust, only the republicans can lose. The suburbs and southern conservative areas will shrink as energy availability shrinks quickly. So congressional stalemate leads to disintegration of current party stalemate and arrogance of republicans. Slavery became untenable over time as northern industrialism won advantage. PO /GW denial will become untenable and the only solutions will be those offered by current progressives. I do not mean old style democratics/keynsians with ideas of redistribution of wealth. I mean hard working powerdown “industrialists” and localizer farmers, creatives of all sorts ready to roll up their sleeves to change the status quo and not attack other countries and be religious or national bigots. However it seems before that happens the USA must fall a long way. The internal struggle/ civil war must be won to save the country from worse.
Posted by: Edward Boyle | 07/27/2010 at 12:07 PM