Like a rat leaving a sinking ship, Barack Obama's economic adviser Austan Goolsbee has bailed. He will go back to the University of Chicago, where there's some hope of actually accomplishing something. The Huffington Post tells the story.
Austan Goolsbee, one of President Barack Obama's longest serving policy advisers and the chairman of his Council of Economic Advisers, leaves his post pretty much as he inherited it: with the economy moribund, no clear path to vigor in sight and the unemployment rate stubbornly elevated.
More than ever, the atmosphere in Washington seems so laced with toxicity that policymakers have largely given up merely debating how to spur the economy, cognizant that any approach will be deemed politically impossible.
This, suggest policy-watchers, appears to have played at least some role in prompting Goolsbee to finally throw it in and head back to the University of Chicago to resume his academic career. He felt frustrated and tired of seeing what he viewed as necessary policies sacrificed to the imperatives of political positioning and compromise.
What follows is a lot of "inside baseball" stuff about Goolsbee's frustrations, his experiences inside the White House, and so on. But there is a larger question here few are willing to consider. How relevant is politics to our fate?
To answer that question, I have divided our problems into two categories: 1) those that are Baked Into The Cake; and 2) those that are Amenable to Political Solutions. I'll present both lists, and then make some additional comments. Let's set the time frame to be the next decade.
Problems Which Are Baked Into The Cake
- a moribund housing market
- an eroding Middle Class (measured by household wealth & discretionary income)
- persistent high unemployment
- falling wages for American workers
- household debt de-leveraging
- higher health care costs (aging Boomers, no single-payer option)
- higher (though volatile) commodity prices, including oil and food
- higher interest rates
- high poverty rates among the bottom 20% (sorted by income)
- decreased spending (consumption) by the bottom 80% (sorted by income)
- rampant political corruption (no campaign finance reform, term limits, etc.)
Problems Which Are Amenable To Political Solutions
- the growing debt to GDP ratio (huge yearly deficits combined with mediocre GDP growth)
- crushing entitlement obligations in health care (Medicare & Medicaid)
- future shortfalls in social security funding
- too-big-to-fail banks
- growing income & wealth inequality
- out-of-control defense spending
- crumbling infrastructure
I'll leave it at that, knowing that such lists are bound to be incomplete, or could be reorganized along different lines using different criteria. Let the arguments begin!
It is a useful exercise to make these lists. Try it yourself. Consider persistent high unemployment, which might be defined as a jobless rate above 7%. Most observers (including me) understand that it will take many years of steady, robust job growth to get back to the employment level (the number of working Americans) we enjoyed in 2007. The problem appears to be baked into the cake. But those on the left would suggest we increase Federal stimulus spending à la Roosevelt (the WPA, the CCC, etc.) to create jobs to fix our crumbling infrastructure or clean Paul Krugman's bathroom. (What would such jobs pay?) This might eventually reduce unemployment to some level below 7%.
But this is where the rubber meets the road. Do you have faith that our dysfunctional 2-party political system would fund and authorize work programs to repair America's water supply, its bridges and the rest? Of course you don't. The chance of this occurring is effectively zero. That's why Austan Goolsbee quit. Spending a couple trillion dollars on our infrastructure would increase the debt to GDP ratio, require us to borrow (or print) those two trillion dollars, and increase Federal interest payments on the growing debt. Some say the benefits would outweigh the costs, but I'm not so sure. In any case, it ain't gonna happen.
If we look again at those problems Amenable to Political Solutions, we keep running into the same obstacles over and over again. Take growing income & wealth inequality. The president and the Congress could enact measures to tax the wealthy and redistribute the income over time through policies designed to boost Middle Class incomes, which is why I didn't include it in the first list. But rampant political corruption prevents the implementation of any such program. The same is true of fixing our too-big-to-fail banks problem.
Or consider crushing entitlements obligations in health care. If we fix this problem, somebody is going to get hurt. Will it be the thriving health care industry, which creates more jobs than any other sector of our economy? Or will it be the elderly, who will no longer have access to the health care services they enjoy today? The latter outcome seems more likely, due in no small part to rampant political corruption. The bottom line is that fixing this one problem will create a host of new problems. This is a lose-lose situation, as with most of the others.
Similar remarks apply to reining in out-of-control defense spending, which has been little more than a defense industry jobs program for as long as I remember. Now you can add in Homeland Security, which is a jobs program for the paranoid and other enthusiastic passengers on the Imperial Gravy Train.
If we look at the problems that are still Amenable to Political Solutions, we see that politicians have the opportunity to do nothng, which will make the problem worse, or they have the opportunity to do something, which will make life miserable for somebody, and that somebody is likely to be ordinary Americans. So far, they have demonstrated their overwhelming proclivity to bicker among themselves while doing nothing. These politicians are not entirely stupid. They know what will happen if they really attempt to fix these problems.
It is in the sense above that I say that politics is irrelevant to America's fate. America's fate was determined through policies enacted over the last 30 years. The problems that really affect your standard & quality of living are Baked Into The Cake. In solving those problems which are still Amenable to Political Solutions, all that can happen now is that your day-to-day problems will mount, or get worse.
If American citizens want to waste their lives engaged in political wrangling, that's their business. But they shouldn't pretend there's an upside if one side or the other "wins" some political battle. For the vast majority of Americans, there is no upside.
All of our socio-political and economic systems depend on exponential growth to stay out of trouble. With peak oil and resource scarcity in general, continuing on the growth path much longer is becoming impossible. There is no political fix that will get us out of this predicament, short of overhauling global political, economic, and value systems. Such an overhaul won't come overnight, and won't come without serious hardship with existing elites holding on to their power as long as they can.
The above is just considering resource scarcity. Consider climate change and our already destabalized climate. To mitigate climate change will require coordinated global efforts to overhaul our global political, economic and value systems...
I think there's a lot more baked into the cake than we like to admit.
Posted by: Remi | 06/09/2011 at 10:56 AM