May 12, 2003

Mickey Kaus Is Wrong

Mickey Kaus says that the reason Paul Krugman isn't using his New York Times column to teach the American people about the dangers of deflation is that the topic isn't "partisan and dumbed-down enough":

Kausfiles by Mickey Kaus:

Now that the Fed is officially worried about deflation, Paul Krugman's Web-only explanation of his thinking about deflation and the "liquidity trap" seems like Essential Reading for All Concerned Americans. ... Why not make this a NYT column? [Not partisan and dumbed-down enough?-ed. You said that! I didn't.]...

He may be right about the difficulty of explaining the dangers of deflation and the liquidity trap in 730 words--God knows I couldn't do it, I'm going to take two hours this Wednesday afternoon. But if Kaus really does think that the liquidity trap is not a partisan issue, he hasn't thought about it for even five minutes.

After September 11 it was clear that there was some chance that the U.S. economy might fall into a liquidity trap. The answer to the question, "How do you deal with a liquidity trap?" is the same as the answer to the question, "What do you do in a sailboat if you are caught on a lee shore in a hurricane?" In both questions, the answer is, "You don't." You don't run any risk of getting caught on a lee shore in a sailboat in a hurricane. You don't run any risk of getting caught in a liquidity trap.

The right response to September 11--from a macroeconomic point of view--was therefore clear: a big short-run stimulus package to boost demand. If the stimulus turned out not to be needed, the Federal Reserve could raise interest rates to offset its effects. But if the Federal Reserve lowered interest rates to near-zero and still found the economy in recession, the lack of a stimulus package would prove very, very bad indeed.

But has the Bush administration pushed for large just-in-case stimulus packages over the past year and a half? You know the answer: the Bush administration's current economic proposals are a long-run tax cut for the rich that does little to stimulate demand in the next couple of years and a lot to increase the deficit and slow economic growth ten, twenty, thirty years in the future.

Why? Given that the need for stimulus for insurance in case things go wrong and a liquidity trap threatens has been clear for a year and a half--and given that the Bush administration has had some highly competent economists working for it--why hasn't the Bush administration tried to pump up demand?

Well, the answer is presumably the same as the answer to each of the following questions:

  1. Why didn't the Bush administration take steps to break up manipulation of prices in the energy market in 2001?
  2. Why didn't the Bush administration move more quickly and effectively to punish miscreants and restore confidence when it became clear that lots of people who worked for George W. Bush's friend "Kenny Boy" and lots of others were faking their corporate accounts?
  3. Why did the Bush administration impose a steel tariff?
  4. Why did the Bush administration push for a farm bill that reversed the progress toward agricultural subsidy reform that Newt Gingrich (in one of his few good deeds) and others had accomplished in the 1990s?
  5. Why is Afghanistan such a mess today, and the Bush administration so unwilling to "do nation building" in Afghanistan?
  6. Why were Saddam Hussein's weapons of mass destruction not where the Bush administration believed them to be?
  7. Why did we attack Iraq without sufficient forces to rapidly search for and secure weapons of mass destruction (if any) before they were carried off by bandits and others who might want to sell them to Al Qaeda?
  8. Why did we attack Iraq without the forces or a plan to keep civil order in the country?
  9. Why have we gone to such pains to annoy and alienate every single one of our allies? I mean, when the President of Mexico won't take a call from the President of the United States, something is very wrong.
  10. Why does Ariel Sharon feel that he can blow off every U.S. request designed to make the "roadmap for peace" more than a scrap of paper?
  11. Why has there been next to no progress on the Doha Round?
  12. Why do developing countries find that their access to the pharmaceuticals they need is still largely blocked?

Now none of these are cases in which the Bush administration's view of the national interest and national welfare of the United States is different from mine. These are all cases in which we agree on what would be good. All of these are cases in which the incompetence of the Bush administration is truly breathtaking. And its failure to prepare to deal with a liquidity trap is one more powerful and important reason why this particular bunch of bums should never have been elected, and should be thrown out as quickly as possible.

The liquidity trap is a fine partisan issue, as anyone who has done more thinking about Bush administration economic policy than simply taking Mitch Daniels's press releases and regurgitating them knows. Posted by DeLong at May 12, 2003 07:25 AM | TrackBack

Comments

If you're caught on a lee shore in a gale or hurricane, you take down all sail, point the nose to windward, throw down an anchor and pray. Or, you aim for a soft patch of sand and beach her.

If you're caught in a liquidity trap, you pay people money to dig up buried banknotes.

Posted by: dsquared on May 12, 2003 08:02 AM

I think almost all of this can be explained if if you think of BushCo as a rather incompetent mafia. Their raison d'etre is to hold political power for the purpose of handing out money to mafia family members. US national interest has no bearing on choices made, and in many cases, the desire to cash in now has undermined even their narrow longer term interests.

With this in mind, let's see if we can explain these events:

Why didn't the Bush administration take steps to break up manipulation of prices in the energy market in 2001?

Mafia members (Lay, etc) making lots of money


Why didn't the Bush administration move more quickly and effectively to punish miscreants and restore confidence when it became clear that lots of people who worked for George W. Bush's friend "Kenny Boy" and lots of others were faking their corporate accounts?

See above, Also, short term focus out weighing a longer term negative, if this keeps asset markets underperforming.

Why did the Bush administration impose a steel tariff?

Short term political gain in a blue state

Why did the Bush administration push for a farm bill that reversed the progress toward agricultural subsidy reform that Newt Gingrich (in one of his few good deeds) and others had accomplished in the 1990s?

same as above

Why is Afghanistan such a mess today, and the Bush administration so unwilling to "do nation building" in Afghanistan?

short term focus--one of the purposes of war is to distract from the economic actions of the mafia. Nation building doesn't accomplish that.

Why were Saddam Hussein's weapons of mass destruction not where the Bush administration believed them to be?

Several foci here. War served several purposes. Threaten a resurgent OPEC. Distract populace from economy. Create Bush CIC mantle for re-election capmpaign. Handouts for mafia members (Haliburton, Carlisle Group)

Why did we attack Iraq without sufficient forces to rapidly search for and secure weapons of mass destruction (if any) before they were carried off by bandits and others who might want to sell them to Al Qaeda?

Not a point of the war. WMD was just a handy excuse. Had nothing to do with why we were there.

Why did we attack Iraq without the forces or a plan to keep civil order in the country?

Oil is the only point of keeping forces in Iraq after the "war" ended. We defended the Oil Minstry quite adequately

Why have we gone to such pains to annoy and alienate every single one of our allies? I mean, when the President of Mexico won't take a call from the President of the United States, something is very wrong.

This was very short sighted. Ego is the only explanation I can think of, as well as short term political gain with "Bubba" style nationalist, who love to see us rub those "furriner's" noses in it.

Why does Ariel Sharon feel that he can blow off every U.S. request designed to make the "roadmap for peace" more than a scrap of paper?

Rove wants the pro- Israel vote tied up for 2004. Therefore Sharon knows that no pressure will be applied.

Why has there been next to no progress on the Doha Round?

Too long term. No immediate cash in it for mafia members

Why do developing countries find that their access to the pharmaceuticals they need is still largely blocked?

IP loss for campaign contributors. GOP gets no capmpaign $$ from African AIDs victims.


This is shockingly cynical. But it sure seems to explain some things.

-steve

Posted by: steve on May 12, 2003 08:25 AM

To put it another way, if you really want the rich to benefit, why are you supporting an administration that has thrown innumerable investment bankers and consultants out of work over an administration that made them richer than their wildest dreams?

Posted by: MattS on May 12, 2003 08:27 AM

The answer to allt hose questions being y'all got a fratboy in charge with no worries about the future of the country, aided and abetted by a cabal of crooks whose first and only worries are
filling their own and their firends coffers with government money, showing the rest of the world who's boss as well as putting the boot into anybody who's not their friend.

Posted by: Martin Wisse on May 12, 2003 08:39 AM

Great post, Steve. The only thing I would add -- which doesn't in any way undercut your central thesis, it simply expands its application -- is that the BushCo post-war failure in Afghanistan and the very problematic limits on what we are and will be doing in Iraq are both based in the interests in BushCo-affiliated corporations getting a piece of the action.

In Afghanistan, there are no major exploitable resources and no corporate interest in being there (other than maybe an oil pipeline from Kazakhstan, and I don't think anyone really thinks that's an economically viable idea with the certainty of long-run political instability in both Afghanistan and Pakistan).

In Iraq, BushCo does want to keep troops there, but for two reasons only: to protect oil and the potential rebuilding contracts of BushCo-affiliated companies (Halliburton, Bechtel, etc.). They have to get and keep things minimally functioning long enough for those two things to happen. So now -- per WaPo today -- they're going through the laughably shallow exercise of "de-Baathification" to bring back most of the previous administrators.

Posted by: Steady Eddie on May 12, 2003 08:40 AM

Great post, Steve. The only thing I would add -- which doesn't in any way undercut your central thesis, it simply expands its application -- is that the BushCo post-war failure in Afghanistan and the very problematic limits on what we are and will be doing in Iraq are both based in the interests in BushCo-affiliated corporations getting a piece of the action.

In Afghanistan, there are no major exploitable resources and no corporate interest in being there (other than maybe an oil pipeline from Kazakhstan, and I don't think anyone really thinks that's an economically viable idea with the certainty of long-run political instability in both Afghanistan and Pakistan).

In Iraq, BushCo does want to keep troops there, but for two reasons only: to protect oil and the potential rebuilding contracts of BushCo-affiliated companies (Halliburton, Bechtel, etc.). They have to get and keep things minimally functioning long enough for those two things to happen. So now -- per WaPo today -- they're going through the laughably shallow exercise of "de-Baathification" to bring back most of the previous administrators.

Posted by: Steady Eddie on May 12, 2003 08:42 AM

>> ... why this particular bunch of bums should never have been elected. <<

They weren't elected!

Posted by: Anon on May 12, 2003 08:43 AM

Great post, Steve. The only thing I would add -- which doesn't in any way undercut your central thesis, it simply expands its application -- is that the BushCo post-war failure in Afghanistan and the very problematic limits on what we are and will be doing in Iraq are both based in the interests in BushCo-affiliated corporations getting a piece of the action.

In Afghanistan, there are no major exploitable resources and no corporate interest in being there (other than maybe an oil pipeline from Kazakhstan, and I don't think anyone really thinks that's an economically viable idea with the certainty of long-run political instability in both Afghanistan and Pakistan).

In Iraq, BushCo does want to keep troops there, but for two reasons only: to protect oil and the potential rebuilding contracts of BushCo-affiliated companies (Halliburton, Bechtel, etc.). They have to get and keep things minimally functioning long enough for those two things to happen. So now -- per WaPo today -- they're going through the laughably shallow exercise of "de-Baathification" to bring back most of the previous administrators.

Posted by: Steady Eddie on May 12, 2003 08:43 AM

Great post, Steve. The only thing I would add -- which doesn't in any way undercut your central thesis, it simply expands its application -- is that the BushCo post-war failure in Afghanistan and the very problematic limits on what we are and will be doing in Iraq are both based in the interests in BushCo-affiliated corporations getting a piece of the action.

In Afghanistan, there are no major exploitable resources and no corporate interest in being there (other than maybe an oil pipeline from Kazakhstan, and I don't think anyone really thinks that's an economically viable idea with the certainty of long-run political instability in both Afghanistan and Pakistan).

In Iraq, BushCo does want to keep troops there, but for two reasons only: to protect oil and the potential rebuilding contracts of BushCo-affiliated companies (Halliburton, Bechtel, etc.). They have to get and keep things minimally functioning long enough for those two things to happen. So now -- per WaPo today -- they're going through the laughably shallow exercise of "de-Baathification" to bring back most of the previous administrators.

Posted by: Steady Eddie on May 12, 2003 08:44 AM

The answer to allt hose questions being y'all got a fratboy in charge with no worries about the future of the country, aided and abetted by a cabal of crooks whose first and only worries are
filling their own and their firends coffers with government money, showing the rest of the world who's boss as well as putting the boot into anybody who's not their friend.

Posted by: Martin Wisse on May 12, 2003 08:45 AM

To clarify dsquared's last comment for non-economic-history students: Keynesian macroeconomic theory grew out of the so-called Great Depression of the 1930s when orthodox (neoclassical) economic theory was unable to either explain the causes of the severe economic collapse or to provide an adequate public policy solution. In particular, orthodox economic theory argued against the need for government intervention and in favor of a policy of laissez-faire. Keynes feared that a "do nothing" approach to the economic downturn and rising unemployment would only make conditions worse. (from http://www.mtholyoke.edu/courses/sgabriel/keynes.htm)

"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez faire to dig the notes up again . . . there need be no more unemployment. . . . It would indeed be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."
John Maynard Keynes, The General Theory, p. 129.

Posted by: M. Strowbridge on May 12, 2003 08:49 AM

Great post, Steve. The only thing I would add -- which doesn't in any way undercut your central thesis, it simply expands its application -- is that the BushCo post-war failure in Afghanistan and the very problematic limits on what we are and will be doing in Iraq are both based in the interests in BushCo-affiliated corporations getting a piece of the action.

In Afghanistan, there are no major exploitable resources and no corporate interest in being there (other than maybe an oil pipeline from Kazakhstan, and I don't think anyone really thinks that's an economically viable idea with the certainty of long-run political instability in both Afghanistan and Pakistan).

In Iraq, BushCo does want to keep troops there, but for two reasons only: to protect oil and the potential rebuilding contracts of BushCo-affiliated companies (Halliburton, Bechtel, etc.). They have to get and keep things minimally functioning long enough for those two things to happen. So now -- per WaPo today -- they're going through the laughably shallow exercise of "de-Baathification" to bring back most of the previous administrators.

Posted by: Steady Eddie on May 12, 2003 08:52 AM

I might add to Steve's excellent post that the record of Mr. Bush as governor of Texas supports his cynical interpretation. A lot of actions in Texas can be interpreted as paybacks to major campaign contributors.

Another problem with the Bush administration is their excessive secrecy and go it alone mentality. I heard Senator Lugar speak in February and he indicated even then that he was very concerned about post-war Iraq and administrations plans or lack thereof. Lugar indicated that he had been asking a LOT of questions but not getting answers. Had Bush better consulted with Statesmen within his own party such as Lugar, a reasonable plan for Iraq could have been developed and many pitfalls avoided. The turnover in the Iraq governing team is approaching the turnover level of the Bush economic team. This is not a good sign. It indicates poor planning.

One only hopes we can muddle through.

Posted by: bakho on May 12, 2003 09:12 AM

EDDY! Stop hitting the 'Refresh' button!!!

Posted by: TC MITS on May 12, 2003 09:56 AM

Well, actually, Krugman did write a column on deflation for the NYT. Here is the summary from the NYT site (you can buy the whole article). I know it was almost 6 months ago, but are memories that short?

Editorial Desk | December 31, 2002, Tuesday
Crisis In Prices?

By PAUL KRUGMAN (NYT) 797 words
Late Edition - Final , Section A , Page 19 , Column 6
LEAD PARAGRAPH - Some fuzzy math: In the first 30 days of December 2000, according to Nexis, only six articles in major news sources contained both the word ''deflation'' and the phrase ''United States''; none of those articles suggested that deflation in this country was a real possibility. In the same period last year there were 292 hits; this past month there were 566.

Will deflation be even more on our minds a year from now? About five years ago economists realized that monsters from the 1930's were once again walking the earth: Japan, the world's second-largest economy, was trapped in a cycle of falling prices and rising unemployment. But not many people in the U.S. cared about the woes of a faraway country. Like big-time corporate malfeasance, deflation didn't seem like something America had to worry about

Posted by: Herb on May 12, 2003 09:57 AM

You're all wrong, but the late, deeply missed Frank Zappa is (was) right:

"Never underestimate the power of stupidity."

Posted by: Brian C.B. on May 12, 2003 10:05 AM

The other answer to Kaus is, while the Fed may have just acknowledged that deflation is a potential problem in the last week, Krugman has mentioned it in columns on more than one occasion, explicitly comparing our situation to the Japanese economy. As I recall, he noted that he had done a considerable amount of academic work on the state of the Japanese economy and had various suggestions for what they should have done. He noted similarities in the United States but stated that he had always assumed it couldn't happen here. If Kaus had bothered to do five minutes of research on Nexis he undoubtedly could have found these columns. But probably he only had time enough to look at the last column.

Posted by: Kelly Cameron on May 12, 2003 10:05 AM

i am fascinated, just fascinated, that the regular righties have not posted a single response to any of these 14 points. Cruise around blogdom among readable righties (volokh, tacitus occasionally, few others) and you will see that many have conceded that bush is a terrible president for intl relations and economic policy, but a good president for natl security.

My question to the likely republican voters reading this post is: where is the tipping point? how much more harm to the general welfare are you willing to tolerate before you vote democrat? or do you disagree with any of BdL's 14 points?

Posted by: FDL on May 12, 2003 10:16 AM

Interesting. Everybody (except the weblog owner) just goes and assumes that the current administration is effective, just completely and cynically evil. I think it's way more complicated than that.

So the cynical/evil genius story I find most compelling is that the administration has precisely two purposes in life. 1) To reduce taxation of the wealthy to zero. 2) To maintain enough political popularity and control to get re-elected to promote (1). The problem with the Evil Genius theory, though, is that there is shockingly little evidence that they have done anything *except* pursue tax cuts in Congress, with any skill whatsoever. Brad DeLong is right: the administration has risked (and even blundered into) the kinds of catatrophes that simply could not have been part of the plan if Point 2 really was a goal being pursued by a bunch of geniuses. Indeed, there is a substantial risk that the re-election effort will go down in flames, since the current situation is chock full of potential down-side, with very little real upside possible.

So, does anybody think we are going to have seriously impressive GDP growth between now and November 2004? Does anybody think that unemployment will be lower then than in late 2000? Does anybody see an abrupt turn-around in state finances between now and next summer, when cuts to state services will go very deep into the "unpopular" range? And what about foreign policy: people in the US really don't care much about it, but will there be any positive spin to put on continued disorder in Afghanistan or an Iraq ruled either by any combination of "cleansed" Baathists, Shiite clerics sponsored by Iran, and Kurdish elements who see this as their one great chance to establish an autonomous Kurdistan? If these things would be unpopular, what exactly is the US policy going to be that will prevent them? (And it is just us right now, since we've told all our allies to get lost.)

Again, it is possible that most or these potential disasters could be averted through the late application of skill or just dumb luck. But as the clock continues to tick towards November 2004 without any sign of significant economic strength, I am curious to see what the re-election strategy will look like. I guess the one big advantage Bush will have is the lack of any credible primary challengers (and if I'm wrong about that, then the administration is truly toast).

Posted by: Jonathan King on May 12, 2003 10:20 AM

"bush is a terrible president for intl relations and economic policy, but a good president for natl security."

How can a president be good on national security if he is bad on international relations and economic policy? Isn't that like saying the Detroit Tigers are a good baseball team that's just bad at pitching and hitting?

Posted by: rea on May 12, 2003 10:37 AM

"I am curious to see what the re-election strategy will look like."

It will look like W in a flight suit on the deck of an aircraft carrier, and a GOP convention in NYC as close to 9/11 as possible.

Posted by: Thersites on May 12, 2003 10:43 AM

Yep. They're arrogant, incompetent, short-sighted, venal, vindictive, and incoherent. Yet this is a very popular administration. How can this be? Well, it's because the only way to notice all these negative qualities is to be paying attention to the sorts of things that most Americans do not.

On the other hand, they do notice a bad economy, and they'll certainly notice deflation. I put less than even odds right now of Bush being reelected. Not much less than even, but, hey, we'll see.

Has the housing bubble burst yet?

Posted by: Keith M Ellis on May 12, 2003 10:46 AM

Afghanistan does have an exploitable resource.

Poppy fields.

No, really. Have you ever had a poppyseed muffin? Those things are *tasty* and I could eat two or three myself.

Not to mention the vast quantity of opiates you can get out of the plants as well.

The Bush regime's motivations are clear: to make money for the campaign contributors, and consolidate power for members of PNAC. Every single thing they do is driven by one of those two things, and most of what they do involves both (Invading Iraq, for example). The security of the American people, long-term economic growth, things like that are irrelevant to them.

Posted by: Seraphiel on May 12, 2003 11:05 AM

Afghanistan does have an exploitable resource.

Poppy fields.

No, really. Have you ever had a poppyseed muffin? Those things are *tasty* and I could eat two or three myself.

Not to mention the vast quantity of opiates you can get out of the plants as well.

The Bush regime's motivations are clear: to make money for the campaign contributors, and consolidate power for members of PNAC. Every single thing they do is driven by one of those two things, and most of what they do involves both (Invading Iraq, for example). The security of the American people, long-term economic growth, things like that are irrelevant to them.

Posted by: Seraphiel on May 12, 2003 11:09 AM

Oops. Sorry about the double post. I'll blame it on lag. Yeah.

Posted by: Seraphiel on May 12, 2003 11:25 AM

If one believes that monetary policy is ineffective (as in this liquidity trap), some sort of SHORT-RUN fiscal stimulus might be a good idea. But reading the writings of those who support this Bush tax cut agenda (as in the National Review), they don't believe monetary policy is ineffective. So why do they support fiscal stimulus that is not only not needed to restore full employment but also damaging to national savings and long-term growth? Ah using economic debates for partisan purposes can be quite dangerous - assuming one really thinks things through.

Posted by: Hal McClure on May 12, 2003 11:27 AM

They don't believe in government except as a way to loot the Treasury, so they couldn't care less about governing. If things fall apart, so much the better, as turmoil and chaos make people afraid and easier to control. The stuff coming out about Leo Strauss fits right in: Lie to the people, even the nominal rulers, and wage perpetual war in the cause of stability. Democracy bad—it just encourages dissent. Religion good—it keeps people stupid.

Posted by: gmanedit on May 12, 2003 11:38 AM

They don't believe in government except as a way to loot the Treasury, so they couldn't care less about governing. If things fall apart, so much the better, as turmoil and chaos make people afraid and easier to control. The stuff coming out about Leo Strauss fits right in: Lie to the people, even the nominal rulers, and wage perpetual war in the cause of stability. Democracy bad—it just encourages dissent. Religion good—it keeps people stupid.

Posted by: gmanedit on May 12, 2003 11:44 AM

Wow. North Korea didn't even make the list.

Posted by: bakho on May 12, 2003 11:57 AM

PK notes the Kaus oversight and links to previeous NYT article:

http://www.wws.princeton.edu/~pkrugman/liquidnyt.html

Posted by: bakho on May 12, 2003 12:03 PM

I guess it's too much to actually look at the facts, and easier just to throw accusations around.

For example, here's a timeline of the California "energy crisis":
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/06/state1705EDT0232.DTL

As is clear from the timeline, Bush did about what the previous administration did when faced with problems in 2000. Where's the scandal? Where's the incompetence?

And then there's the supposed lack of response to Enron. I suppose the sweeping proposals from the Harvey Pitt-led SEC aren't noteworthy, nor are the prosecutions of miscreants. I suppose they could have moved more quickly on the prosecutions, but then you'd complain that we live in some sort of police state.

And so on--that's how it goes with most of the rest. Confusion reigns.

Posted by: Thomas on May 12, 2003 12:27 PM

I guess it's too much to actually look at the facts, and easier just to throw accusations around.

For example, here's a timeline of the California "energy crisis":
http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/04/06/state1705EDT0232.DTL

As is clear from the timeline, Bush did about what the previous administration did when faced with problems in 2000. Where's the scandal? Where's the incompetence?

And then there's the supposed lack of response to Enron. I suppose the sweeping proposals from the Harvey Pitt-led SEC aren't noteworthy, nor are the prosecutions of miscreants. I suppose they could have moved more quickly on the prosecutions, but then you'd complain that we live in some sort of police state.

And so on--that's how it goes with most of the rest. Confusion reigns.

Posted by: Thomas on May 12, 2003 12:30 PM

I like Steve's incompetent mafia analogy. The mafia part is spoils system hardball politics. Why the incompetence? The incompetence is a product of a seriously flawed ideology and inability to empathize and understand much of the rest of the world.

1. Cheney, the administration and the media all blamed environmentalists and lack of power plants for California's energy crisis. Krugman even gloats that he was one of the few that suspected price gouging from the beginning. This is self delusion bred from the ideology that environmentalism is misguided and a drag on corporate profits and the economy.

2. Bush and his SEC chair Pitt went into office from the ideology that the market was overregulated and the mindset to relax regulations. Racing down the freeway of deregulation at 100 mph, it is impossible to slam into reverse. First the dereg had to slow to zero before the SEC could go in reverse with a new chair.

3. The one time they should have stuck with GOP ideology, they blinked for political chits. Quite possibly, Bush does not share free trade ideology with others of his party.

4. As I recall, the red state reps started farm subsidies rolling through Congress and Bush did not want to spend political capital to stop it. Recall, this was a time of sinking polularity before the war bounce. Ideology was sacrificed for the sake of election.

5. Afghanistan was done on the cheap. Few of our own troops, mostly paid foreign mercenaries. Follow the ideology. Bush is not interested in nation building. Afghanistan can languish.

6. Self delusion. After 9/11, Rummy was not satisfied with intelligence and wanted his own outfit. He put together his own intelligence group that relied on Iraqi exiles for info. The CIA had gone through expatriots before and found them to be unreliable. The Pentagon sources lied to them telling them what they wanted to hear. Since Rummy & Co. already believed that Saddam had WMD, they were easy dupes.

7. Self delusion. The ideology was that Iraqis would welcome the Americans with flowers and praise. Rummy's Iraqi exiles misled him about the extent that Iraq would surrender peacefully. Rummy failed to anticipate the complete collapse of the government. However, the only thing holding the government in place was fear of Saddam by the majority. That is why South Africa was seen as such a difficult situation. How can a transition from minority rule to majority rule be made without a government collapse? It can be delicately negotiated but war is not delicate.

8. See 7.

9. Pure ideology. We have not gone to pains to annoy others. We have simply taken no pains NOT to annoy others. Have you ever known a frat boy to voluntarily turn down the volume at a party out of consideration for the neighbors? (as opposed to fear of the police?)

10. Pure ideology. The Jews are God's chosen people. God gave them the land and who is Bush to argue with God or his chosen?

11. See 3.

12. Ideology. Corporations and their interests come first. If there were no protection for the drug companies, the drugs would not be available to anyone. Again, it is far right ideology that takes an extreme position instead of finding balance.

Why no fiscal stimulus? A previous post nailed it. Ideology. The administration BELIEVEs that tax cuts are the best possible stimulus. That is what the ideology tells them. Why should they listen to economists that tell them otherwise? Why not move the economists down the street and follow the true blue ideology.

In summary, this is an administration that takes ideological prescriptions off the shelf and applies them to the problems that arise. They do not investigate the problems and deterimine their causes and the best solutions. They believe the solutions are already on the shelf. They have just to pull out the right potion and the problem will be solved. of course this strategy does not consider that a better potion may exist that is not presently on the shelf.

People address problems in different ways. There is the scientific method and numerous "religious methods". There are people who believe that all the answers are there, in the Bible, in the writings of Karl Marx or in other ideological or religious texts. These pre-Renaissance methods are still used today by many people. Not everyone works by logic and the scientific method.

Posted by: bakho on May 12, 2003 12:45 PM

If Krugman really believes the U.S. is facing a liquidity trap, then why did he lock in interest rates on his house and brag about it to everyone?

Look what he does, not what he says.

Some of your questions, and the unsaid implications, leave me breathless.

1. The California crisis is generally agreed to have begun in 2000, and there were already energy-trading manipulations in 1999 (if not 1998). Why didn't Clinton stop it?

5. Well, it may seem heartless to remind you, but Afghanistan has been a mess now for thirty-some years. What have the Democrats done? What do they propose to do? Didn't Clinton bomb a pharmaceutical factory in Somalia, leading to many people dying there? And the ex-Yugoslavia? And...? Oh well, never mind.

10. Ye Gods! What American politician in recent memory, outside maybe of Baker and Bush I, has ever pressured Israel? Are you saying the Democrats are going to? Really? Sign them up now!

11. Why was Seattle such a miserable failure?

And that's not to say that I think Bush has succeeded, just that the patent inability to self-reflect by a possible member of the next Democratic administration fills me with no great desire to see the same old Democrats in power again, either. It's frustrating and troubling.

Posted by: Andrew Boucher on May 12, 2003 12:48 PM

Completely off the subject, except that it has to do with the Bush administration - is Jerry Bremer going to replace Powell after the election, assuming Bush wins?

Posted by: K Harris on May 12, 2003 12:49 PM

"If Krugman really believes the U.S. is facing a liquidity trap, then why did he lock in interest rates on his house and brag about it to everyone?

"Look what he does, not what he says."

Duh. Pay attention.... Duh. There is almost no room for mortgage rates to move down, there idea is to lock in a 3o-year mortgage NOW. Corporate rates have been falling lately, mortgage rates are about at their lows. I suggest doing exactly what Paul Krugman did and locking in a long term mortgage NOW.

Posted by: lise on May 12, 2003 12:57 PM

(1) Governmental policy is established by people who have failed in every single enterprise to which they have devoted their attention. A wonderful anonymous quote about L. Paul Bremer, who has been appointed to replace Col. Garner in Iraq, was that '{w}hat he knows about Iraq could not quite fill a thimble. What he knows about any part of the world would not fill a thimble. But what he knows about Washington infighting could fill three or four bushel baskets.'" It is here that we find the policy makers.

(2) While in human affairs Occam's Razor may not have universal application it seems to me that it suggests incompetence ranks higher on the scale of believability than conspiracy. Please reveal to me the successes of Bush, Cheney, Perle, Rumsfeld or Wolfowitz in the "real" world apart from their ability to survive the "Washington infighting" mentioned in the previous paragraph.

(3) Nonetheless there are scam artists who have gained access to the White House who, for their own personal gain, convince a thoughtless, heartless, mindless (note: not brainless), soulless incredibly lazy and woefully self doubting person of the value of their schemes. I am reminded of the old Errol Flynn type movie where the wicked Grand Vizier manipulates the dimwitted prince who only just wants to not be bothered as the country sinks into despair and rebellion.

(4) The connivance of the media helps shield these people from a proper examination. Thus the Democrats who are reviled for their "failure" to confront the administration are shouting into the wind. There are many who try but their cries do not penetrate the howling gale of media incompetence. The "press" has the freedoms of the 1st amendment because it is supposed to act as a check on governmental incomepetence and malfeasance. It fails miserably.

Posted by: Wayne on May 12, 2003 01:15 PM

Lise

Right you are. Liquidity trap or none, there will continue to be a premium to mortgage rates and there is every reason to lock in rates now. No matter what the Fed hopes for, longer term rates may rise simply because of the internal or external deficit impact. Mortgage rates have been very sticky in Japan, no matter the policy of the Bank of Japan.

Suggest you catch your breadth AB....

Posted by: jd on May 12, 2003 01:21 PM

By the by. Mickey Mouse never makes economic sense unless there interests of Cato and American Enterprise and Hoover fat cat hacks are to be favored.

Posted by: dahl on May 12, 2003 01:24 PM

jd - There I caught it. No problem with the idea that you should lock in rates now, or the idea that there will be an inflation in the next ten years (as again Krugman said). Just a problem that you need to lock in rates *now* if you think that we're about to get into a liquidity/ deflationary trap. Duh...Lise...duh.

Posted by: Andrew Boucher on May 12, 2003 01:41 PM

Okay, a dumb response to an interesting post. First, I've been reading PK's columns for sometime, and I bet MK has been too. PK has many times discussed deflation and compared the US to Japan.

Second, grey/blue fonts look cool and make for an attractive design at first glance, but they are extremely difficult to read. Form follows function. Ugly human factors design decision.

Third, what is it with MT and Blogger et al and their love for double posts? There is no reason for a double post to occur. Web programming 101 protects forms against unintentional (non copy/paste) double posts.

Fourth as I am told the comment submission failed, demanding from people an email address is also pretty weird. Oh yeah, I'm jerry@123fakestreet.com. That proved a lot. I think you go either slashdot or fark and ask people to register for the site, or you go atrios and just ask folks for "a" name.

I'm with dsquared, assuming there is a soft patch of sand (not easy to find in the east bay due to development and the historic stealing of sand off the Berkeley beaches), I'd beach her and jump ashore. But I'm a landlubber chicken sailor at heart. Call Ishmael, not me.

Say yes to fonts and colors that encourage people to read. Say no to double posts.

Posted by: jerry on May 12, 2003 01:52 PM

Re :Thoms said "I guess it's too much to actually look at the facts, and easier just to throw accusations around. (...) As is clear from the timeline, Bush did about what the previous administration did when faced with problems in 2000. Where's the scandal? Where's the incompetence?"

Actually, one of the first decision of the Bush administration was the announcement that they were going to revoke the executive order (taken in december 2000 by the Clinton administration) which put an obligation on generators to sell electricity to the Californian distributors.

Without the intervention of the State of California to buy wholesale electricity from generators (at very expensive prices), this decision would probably have resulted in a total black-out.

All of this does not exonorate the Clinton administration for the situation in January 2001 bu in fairness, many actors share some responsability in the electric disaster (Californian legislators in 1996, the FERC for ignoring the increasing abuse of market power by generators, the Californian PUC for failing to raise retail tariffs, consultants and journalists who have hyped electricty deregulation...).

Posted by: fberthol on May 12, 2003 01:52 PM

The notion that Clinton could have done much about the CA energy crisis is laughable as the timeline posted by someone trying to debunk the Bush regime’s efforts in aiding and abetting makes clear. When was the FIRST indication that there were supply problems? May 22, 2000. When were the first rolling blackouts? June 14, 2000. Now, when the power companies tell you that the reason there isn’t any power is because of shortages, do you A) Instantly assume they are lying and launch a full-scale investigation, or B) Rely on the expertise of those who run energy companies for a living? Indeed, by August of 2000 Davis had discovered that there was something seriously amiss and called for an investigation – next question: when an investigation is started by a state do you, as President, A) instantly assign blame and begin drastic measures to punish those not yet known to have committed any wrongdoing, or B) wait until there is some evidence to act on?

When does the timeline indicate a real ramping up of the energy companies’ fraud? Dec 13, 2000 – AFTER THE ELECTION. When does Clinton’s FERC take action? Dec 15, 2000.

Those attempting to use this timeline to attack Clinton and Davis should actually read the damn thing first.

Posted by: Lori Thantos on May 12, 2003 01:55 PM

Andrew Boucher

I need a better sense of humor. Seriously, what is wrong with worrying about stable or rising long term interest rates even as the Fed is keeping the Federal Funds rate at 1.25% or below? Is there no worry here?

Posted by: Lise on May 12, 2003 01:57 PM

Perhaps I am needlessly concerned about internal and external deficits, but at least Japan had and has a trade surplus.

Nice reply AB.

Posted by: lise on May 12, 2003 02:00 PM

Just to make it clear to all eight of us, when I write that "I bet MK has been [reading PK] too", I am saying that MK is being disingenuous to claim that PK has not been writing about deflation.

Posted by: jerry on May 12, 2003 02:02 PM

"I am saying that MK is being disingenuous to claim that PK has not been writing about deflation."

What bothers me is that MK and ilk are always disingenuous. These guys have endless deep pocket support from the far far far right and care nothing for truth. These guys [gals] are not conservates but radicals bent on truly turning back the times to whatever they think Happy Days might have really been like.

Thanks AB.

Posted by: jd on May 12, 2003 02:09 PM

I want to advance a proposition that relates to what Keith and Wayne have said here. The real problem we face is the rottenness at the core of the republic. Like an opportunistic infection, the rise to power of crony capitalists and extremist ideologues is merely a symptom, not the underlying cause, of our problems. An electoral change in 2004 may only provide temporary respite.

When it comes to pinning down the etiology, I have some difficulty. The proximate cause seems to be a decline in concern with the public interest among both elites and the general population, along with the overwhelming apathy of the latter group. No doubt factors such as affluence and the growth of individual freedom have played a role in this, but it’s hard to suggest an obvious causal chain for such a cultural phenomenon. I tend to downplay the general lack of scientific thought identified by other posters only because I see it as a historical constant. Actually, I don’t see much that is historically unique about this state of affairs, but I’m uncertain whether earlier threats were managed through a sort of self-righting mechanism (incompetence eventually spurs public action) or just dumb luck coupled with strong institutional constraints on power.

Posted by: crumudgeon on May 12, 2003 02:09 PM

Yes, but what about the fonts? Kidding.

jd, part of me agrees but a large part of me disagrees. Do these folks truly care nothing for truth? Do they all have endless deep pocket support? Are they really always disingenous and know they are being selective, lying, or manipulative?

Do they think that of the left?

Is it the Hegelian dialectic deevolved, or evolved to the highest degree? Are they just being extreme because to not be extreme is to be ignored?

I can't accept, much as I want to, that all these guys are always being disingenous.

Posted by: jerry on May 12, 2003 02:36 PM

crumudgeon,

If you want some validation for your cultural thesis, read Robert Putnam's Bowling Alone.

Posted by: MattS on May 12, 2003 02:38 PM

Thanks, Ralph.

Posted by: MattB on May 12, 2003 05:11 PM

How about lying as a strategy?

Without trying to document (which I believe could be done), we seem to be faced with an administration that has adopted lying as a fundamental political strategy.

Once one recognizes this strategy, whether it is WMD (whatever that is which obviously does not include cluster bombs) or the impact of tax cuts (if you can't do the math, you are part of the lie), or "the liberation of Iraq" for which we were totally unprepared, makes little difference.

Never in my memory (which includes F. D. Roosevelt, Truman, Eisenhour, Nixon, Carter, Reagan, Bush, Clinton and Bush) have I felt so consistently lied to by an American President, particularly with so little call to account by the press (or now the media).

In such an environment, it is virtually impossible to intelligently address economic issues. There is no rational debate, only lies to support ideology.

Does anyone really expect more from this Administration?

Sam Taylor


Posted by: Sam Taylor on May 12, 2003 06:17 PM

But Keynes did nothing to get out us out of the Great Depression. Following the election of FDR in 1932, the country continued to flounder economically right until World War II began some 9 years later.

The only thing that saved us in the Great Depression was the destruction of our manufacturing rivals in Europe and Japan.

Posted by: Todd Bandrowsky on May 12, 2003 07:09 PM

Inmidst all of these theories, I will inject another, which I truly do not think is the most absurd of the lot:

The Bush administration is hitting the reset button on the American economy.

They are, quite deliberately, knocking over the whole g0ddamned house of cards, in order to build it over again, according to some nostalgic blueprint of what might have been.

NOW: Brad or whomever, find the trail of breadcrumbs leading to that nostalgic blueprint. It shouldn't be too hard; remember PNAC? These people don't (above a certain level) dissemble. They don't have to; there is no danger that anyone will take them seriously.

Posted by: Frank Wilhoit on May 12, 2003 07:29 PM

http://www.washingtonpost.com/wp-dyn/articles/A42884-2003May11.html

http://www.washingtonpost.com/wp-dyn/articles/A47291-2003May12.html

Baghdad, and Iraq, is coming apart at the seams, in spite of President Tailhook. These stories ought to make you even more skeptical about this war, and the remarkable incomptence of this administration.

Posted by: Brian C.B. on May 12, 2003 08:27 PM

http://www.washingtonpost.com/wp-dyn/articles/A42884-2003May11.html

http://www.washingtonpost.com/wp-dyn/articles/A47291-2003May12.html

Baghdad, and Iraq, is coming apart at the seams, in spite of President Tailhook. These stories ought to make you even more skeptical about this war, and the remarkable incomptence of this administration.

Posted by: Brian C.B. on May 12, 2003 08:27 PM

Apparently Mickey Kaus is such a hack that he cannot even remember that he has mentioned and linked to a NY Times column by Krugman on deflation. (Kausfiles, October 4, 2002, http://slate.msn.com/id/2072066) Kaus criticized Krugman on that occasion for failing to mention the short-term stimulus of Bush's tax cuts.

Posted by: RSP on May 12, 2003 08:41 PM

Lori's comment on the California energy crisis is accurate. In fact, if anyone wants a case study on how rightwingers will distort and misinterpret evidence this is the perfect example. There is not a clearer case of misdeed than what the energy trader's did, nor a clearer case that the Bush administration aided and abetted their actions (evidence? Start with Cheney's press interviews the day after his visit from Ken Lay in early 2001).

It's worth adding to Lori's comments that the rolling blackouts in the summer of 2000 occurred, as one would expect, on days of extremely high energy usage. Summer heatwaves, during a year when overall energy usage was far higher than anyone had foreseen (due to the economic boom).
No conspiracy behind those blackouts.

By contrast, the rolling blackouts of December 2000 started two days after the Scalia 5's infamous decision, on a day of mild weather and with energy usage less than 2/3rds of where it was on previous blackouts. Furthermore, there was no advanced warning, unlike the summer blackouts, yet given that energy usage was as expected, if the blackouts had been due to innocent supply problems they would have been predictable. But, no explanation for the blackouts was ever offered except unsupported comments that "some plants were off-line for maintenance". Sorry, if a few plants suddenly went down due to problems, that might be a reasonable explanation. But if plant A's maintance is taking too long, you don't take down plant B and cause blackouts. Besides, as we later found out, the shortage was not intra-state, but due to sudden supply cutbacks from out-of-state energy traders.

Of course, the documents uncovered after Enron's crash prove that the Dec. 2000 crisis was caused by conspiring energy traders. But wingnuts continue to pretend Enron and the Bushistas were innocent. As I say, a case study of right wing behavior.

Posted by: Z on May 12, 2003 09:27 PM

Talk about coming apart at the seams. Has the situation in this country come to absurd extremes when 90 percent of the Texas House Democratic legislators have gone into hiding to keep the Republicans from gerrymandering them out of existence?

Over 50 representatives have gone on the lam to prevent a quorum and have basically halted the legislative session. Tim Craddick, the Texas Speaker of the House has sent the Texas Rangers after them (I kid you not!) so most of them have skedaddled out of state. He's also put out an APB to surrounding states, but the New Mexico State Attorney says thats not her job.

Is this crazy or what?

Posted by: Rebecca on May 12, 2003 09:27 PM

To bakho,

"10. Pure ideology. The Jews are God's chosen people. God gave them the land and who is Bush to argue with God or his chosen?"

Every time I see this kind of vicious anti-Semitic crap it makes me realise a number of things:

1) How Jews are no safer in the U.S. than they were in Germany or Austria.

2) How little the gentile has learned since the Holocaust.

3) How the massive contribution Jews have made to Western society has for the most part been a case of pearls before swine.

Posted by: Jabotinsky on May 13, 2003 01:56 AM

Jabotinsky: I think you misunderstand his comment. It wasn't anti-semitic. It's a reference to GWBs religious beliefs. As a fundamentalist Christian with a particular brand of eschatology, GWB and his ilk believe that Israel's existence in the Holy Land is a crucial part of their "End Times" beliefs. I say this as someone with some knowledge of these things, as, for example, my sister is an evangelical minister, who used to live here in Texas and has many friends in common with George and Laura Bush. I don't think that you can decouple GWB's religious beliefs from his handling of Israel.

Posted by: Ketih M Ellis on May 13, 2003 02:35 AM

"Jabotinsky: I think you misunderstand his comment. It wasn't anti-semitic. It's a reference to GWBs religious beliefs"

I understood perfectly. It was said with all the biting hatred of the secret Jew hater who uses a political ideology as cover for his real feelings. His use of "chosen" in the final sentence gives him away. It reeks of Jew hatred.

And Ariel Sharon is quite correct. We've been down this road before with Oslo and it resulted in nothing but the murders of hundreds of Jews; murders that many in the West, particularly on the left, applauded.

There can be no peace while the goal of the Arabs is not just a state in the West Bank and Gaza but the destruction of all of Israel. The countless public pronouncements to this effect, the insistence of the right of return, the rejection of the generous terms at Taba, all prove beyond a shadow of a doubt that it's the Jewish presence as such that is the real issue and not the settlements.

In any event I think it laughable that we Jews should be expected to put our collective fate in the hands of an agreement cobbled together by such viciously anti-Semitic countries as France, Belgium, Holland and Russia. And before you throw your hands up in horror let me state quite clearly that the German/Austrian armies couldn't have achieved the almost complete destruction of European Jewry without the co-operation of the great majority of the peoples of Europe. And nothing at all has changed. The nations of France, Holland and Belgium, for example, who rounded up their Jewish citizens and shipped them to Auschwitz have not altered a jot, and given the right conditions they would do the very same thing again. One only has to observe their almost insane hatred of Israel to see that.

And who are you Americans to talk of occupied territory? Your entire nation was acquired through theft and genocide. At least we Jews have a historical connection to the land of Israel; the white man in North America has none whatsoever. When you hand the land back you have stolen to its rightful owners then we can talk about the West Bank and Gaza.

Posted by: Jabotinsky on May 13, 2003 03:29 AM

To echo Ariel Sharon while imagining a swath of pro-murder lefties is, perhaps, the very depth of hypocrisy. As if Sharon isn't as much a war criminal as Arafat.

I hang out with a lot of liberals, and I've never heard a single one of them cheer for a suicide bombing. Since most of us actually value human life, we tend to be opposed to murder, war, the death penalty, suicide bombings, and reckless use of helicopter gunships.

And finally, the comment you originally responded to wasn't about Judaism; it was about Georgie's fundamentalist-colored perception of Judaism.

Posted by: Seraphiel on May 13, 2003 08:49 AM

I too was a bit troubled by Bakho's statement. Among other things, he seems to assume that all Jews support Sharon.

Perhaps the best thing is to ask (not demand) that he clarify his meaning before we draw too many conclusions.

Posted by: Bernard Yomtov on May 13, 2003 10:02 AM

"... especially the devotion of a unique people chosen by God. Through centuries of struggle, Jews across the world have been witnesses not only against the crimes of men, but for faith in God and God alone. "

-GW Bush
From Day of Rememberance Speech 2001

http://www.christiansforisrael.net/articles/e-u-01-2-bush-presbushremem.htm

Jabotinsky, My 1-12 is not my view at all but those of Mr. Bush. If you have an issue with people using language about "chosen people" and Israel, then you should take it up with Mr. Bush, who as you can see from the above quote, uses such language and views the situation in the Middle East through a fundamentalistc Christian religious lens.

Posted by: bakho on May 13, 2003 10:44 AM

Clarification

My post was not clear and too abbreviated and obviously misinterpreted. I apologize for the poor writing.

Brad wrote:
"Why does Ariel Sharon feel that he can blow off every U.S. request designed to make the "roadmap for peace" more than a scrap of paper? "

My response was "Pure ideology (on the part of Mr. Bush)". Mr. Bush considers himself to be called by God to lead America in a war against terrorism. Mr. Bush considers Mr. Sharon to be a kindred spirit in the war against terrorism. As such Mr. Bush will not criticize anything that Mr. Sharon does in his fight against terrorism because Mr. Bush believes it is God's calling.

http://www.freerepublic.com/focus/news/6589

You may not like it that Christian fundamentalists talk and write of the Jewish people as God's chosen people and the land in the Middle East given to the Jewish people by God, but they do. Like it or not, such religious views are the foundation of much of the support for Israel among conservative Americans. These are beliefs that are shared by Mr. Bush. These beliefs can be an impediment in trying to reach a settlement to a very difficult issue.

I recognize that not all Jewish people agree with Mr. Sharon. In fact, Ha'aretz has been very vocal in opposing Mr. Sharon because they believe his policies will not work over the long term.

http://www.haaretz.com/hasen/pages/ShArtWar.jhtml?itemNo=284934&contrassID=33&subContrassID=0&sbSubContrassID=3

Jabotinsky has an us against the world view and probably puts Ha'aretz in the category of the enemy within. For Jabontinsky, any criticism of Sharon, the settlements or Israeli government policy is antisemitic. This is not helpful because it prevents reasonable solutions to the Palestinian problem from even being discussed. Taking of land from Native Americans, the Mexicans, etc. and policies in the US in no way justify current policies instituted in Palestine. He read into my remarks that Israel has no legitimate claim on its territory. That is not what I wrote. There are no easy solutions to the Israeli Palestinian issues.

I do not believe that Israel can have peace until there is a just settlement with the Palestinians over land issues. The alternative is removal of Arabs from Palestine and I do not think the world opinion would support that. The current policy of expanding settements and heavy handed tactics is counterproductive and breeds cycles of violence. Such cycles are extremely difficult to break. Had the agreement in 2000 been accepted, both the Palestinians and the Israelis would be better off today.

Posted by: bakho on May 13, 2003 03:11 PM
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