Tag Archives: humor

Recession Rant

Photo: caveman92223; licensed creative commons

By Marc Seltzer; originally published July 12, 2009, at politicsunlocked.com

. .

As I watch news coverage of the ongoing economic crisis and responsive stimulus legislation, I am constantly reminded of Abbott and Costello’s “Who’s on First” routine, where the comics discuss names of their team’s baseball players:

Abbott:  Well, let’s see, we have on the bags, Who’s on first, What’s on second, I Don’t Know is on third…

Costello: That’s what I want to find out.

Abbott: I say Who’s on first, What’s on second, I Don’t Know’s on third.

Costello: Are you the manager?

Abbott: Yes.

Costello: You gonna be the coach too?

Abbott: Yes.

Costello: And you don’t know the fellows’ names?

Abbott: Well I should.

In October 2008, when the sky was falling, and several of the biggest entities in the financial system collapsed, economists and journalists couldn’t bring themselves to say the “R” word.

We were deep in a Recession, as it turned out.  This recession started nearly a full year earlier, in December 2007.  But the National Bureau of Economic Research(NBER), which makes the call based on economic statistics over a period of months, allowed us to endure the near collapse of the financial system without an official proclamation.

Costello: Well then who’s on first?

Abbott: Yes.

Costello: I mean the fellow’s name.

Abbott: Who.

Costello: The guy on first.

Abbott: Who.

Costello: The first baseman.

Abbott: Who.

While economists and journalists did focus on the credit crisis, conveying the dire nature of what they were seeing, and making suggestions that we might be heading toward the unthinkable – a Great Depression Sequel – we still couldn’t use the word Recession.

Then, in December (after it was announced we had been in a recession all along), the press sought to make up for lost time.  Missing out on a full year’s worth of recession talk, they cut loose with a flurry of descriptors:  a deep recession, prolonged recession, economic crisis, catastrophe, financial disaster and what may turn out to be true, the worst downturn since the Great Depression.

Costello: The guy playing…

Abbott: Who is on first!

Costello: I’m asking YOU who’s on first

Abbott: That’s the man’s name.

Costello: That’s who’s name?

Abbott: Yes.

Costello: Well go ahead and tell me.

Abbott: That’s it.

Costello: That’s who?

Abbott: Yes.

750 banks fell within months of the 1929 stock market crash which began The Great Depression.  As many as 9,000 banks continued to fail during the 1930’s.  FDIC Insurance was nonexistent, so people simply lost their money when their bank ran out of funds.

13 banks have failed so far in 2009.  Another 25 failed in 2008.

The contemporary government response has been swift, if not altogether logical.  

Deposits up to $250,000 are now guaranteed by the federal government.  Under the TARP bailout program, banks may be given funds to keep them solvent and lending.  There is a fair amount of confusion over the purpose of the program and whether healthy banks or failing ones are actually seeing the government support.  Some initial money went to Citigroup, a behemoth multi-national organization considered “too big to fail” following the events in October of 2008, when investment bank Bear Sterns failed and cracked the confidence of the entire financial system.

Costello: Look, you gotta first baseman?

Abbott: Certainly.

Costello: Who’s playing first?

Abbott: That’s right.

Costello: When you pay off the first baseman every month, who gets the money?

Abbott: Every dollar of it.

The initial $700 billion bailout was passed in November of last year and was renamed a recovery package in December.  That was soon followed by a $789 billion stimulus bill.  And as furious as we all are at the cost of this crisis, be ready for toxic asset and real estate stabilization plans which will likely total even more than these first two.

Only $500 billion of the stimulus bill is true government spending.  The rest is tax relief or, in the case of the bailouts, investments in companies that should, in theory (it worked before in Sweden), allow the government to recoup the invested money in a few years.

Costello: All I’m trying to find out is the fellow’s name on first base.

Abbott: Who.

Costello: The guy that gets…

Abbott: That’s it.

Costello: Who gets the money…

Abbott: He does, every dollar. Sometimes his wife comes down and collects it.

Costello: Whose wife?

Abbott: Yes.

The original stimulus bill was designed to create 2-4 million new jobs.  Then, as the economy began losing a 500,000 jobs a month, the language changed to “save or create” 3-4 million jobs.

Politicians and pundits who say the stimulus bill will turn the economy around may overstate the case.  So too, those who doubt it will save or create a single job.

A more reasonable assessment is that it will soften the blow and make a long-lasting recession more tolerable.

Advertisements

Mayor Geithner, Sheriff Krugman and the Only Game in Town

Originally published March 24, 2009, at care2.com

569486_com_timothy_f_1

Imagine a terrible snow-storm brings a community to a standstill.  There is a grocery store, with plenty of supplies to keep the town going for a few weeks, but the power is out and the owner and staff can’t reach the store.  The townspeople are enlightened enough to realize that if everyone takes what they please, the supplies wont last and the owners will be bankrupt when they return.

Sheriff Krugman advises Mayor Geithner to open the store and charge a dollar for each item. The town will have provisions, the owner will have money, and the town council can pay the owner at a later date for losses where the sale prices were too low.  “What’s important is that we are making it happen now.”

Mayor Geithner agrees to open the store.  But he’s afraid of the effect of the $1 dollar price tag on the town’s liability for the store’s losses.  He decides to try to revive the store by getting the town involved in a public/private partnership.  “First, I want some of you to invest in the store goods,” he tells onlookers.  “Then you can sell them for a profit to the public.  You set the prices to get what you can for the goods,” he explains.  “Some of the profit will go to the store owner, some to the town and some to you.  Suppliers that can reach us will make an effort to do so and will get paid for their supplies, while we are waiting for normal conditions to return.”

Sheriff Krugman warned, “This is complicated and depends on strong participation.  Meanwhile the food is perishing and may not be sold and resupplied in time,” he said.  “My plan gets the goods moving now so the supplies aren’t wasted. If your plan takes time and fails we will still have to get the food to people and we wont be able to charge much for it then. Too risky, when what we need is certainty.”

The Mayor then made his best case, “Here’s what I will do.  The town will lend you all the money to invest, since you don’t have access to the bank.  If you lose money the town will insure most of your losses, using the town’s share of profits when you succeed.”  “If you take an interest in the supply and demand of these goods, we should have prices that are as close to real prices as the conditions allow,” he said.  “Thus, no awful surprises when the owner comes back.”

Many people had stopped listening or fallen asleep.  Others were clueless. But a few were guessing the price of soap, thinking of the deals they would have to make in order to move the produce before it went bad andimagining that a run on canned sardines and the like could give them a chance to save for a new car.

No one wanted to lose money, but the terms weren’t bad.  

The people turned to the wise elder, Gergen, for his opinion on whether to follow Krugman or Geithner.  “It depends on you,” Gergen said.  “If you buy into the Mayor’s plan it may work.  If it fails, we will end up with the Sheriff’s plan whether we like it or not.”

You can stop imagining now.

Barack Obama’s Political Philosophy

Photo by Aaron Muszalski; licensed http://creativecommons.org/licenses/by/2.0/

By Marc Seltzer; originally published on December 15, 2008, at politicsunlocked.com

. .

A new political party has appeared on the American scene. It is the Pragmatic Party and Barack Obama is its leader. The platform is so new and disconcerting that many have not yet wrapped their minds around the implications.

What his critics fail to understand is that Obama is not just about be-nice politics.  He’s about practical solutions rather than simplistic party ideologies.

After two years in the national spotlight as a transformational candidate – captivating audiences, filling stadiums and talking straight about his priorities (the middle class, economics, health care, education) people are still asking if he has been clear and upfront with his politics.

One month into the transition, carrying references to Lincoln, FDR and Ronald Reagan, people are showing surprise with his cabinet picks.  In despair, some suspect a closet conservative, while others are hoping for a liberal double agent.

Some Republicans are calling him a socialist, while Fred Barns in the Weekly Standard observes “he’s pragmatic so far in one direction, rightward – who knew?”

The public went along with the old-style reporting it seems. 68 percent of Americans polled expected Mr. Obama to be liberal. They have their reasons. Mr. Obama ran as a Democrat, after all. In our essentially two-party system, if Obama had run on a new third-party platform, he might have received 4 or 5 percent of the vote, or because he sounds remarkably intelligent, 12 percent tops. Obama ran instead as a Democrat, a pragmatic choice it seems, since he won 53 percent.

It’s also true that minority candidates are often champions of more progressive political parties and organizations, which traditionally labored to advance rights and protections for disenfranchised groups. True, but Colin Powell and Condoliza Rice, not to mention Clarence Thomas, were all Republican administration appointments.

Jessie Jackson ran for President in 1984 and 1988 on a rainbow coalition for a new kind of inclusiveness. He may have paved the way in part for the Obama presidential bid, but in sharp contrast, Barack Obama, ran on behalf of the middle class.

On the other hand, the University of Chicago, where Obama taught Constitutional Law, is a center of free-market economics.  Note too, that Obama’s selections for his cabinet and crew in economics and foreign affairs are centrists.  Centrists can adopt policies from, and forge policies which appeal to, both sides of the political spectrum, without being called traitors.

There is still no approved vocabulary for describing pragmatism in politics.  What’s that Berkeley’s Professor Lakoff said, until there’s a metaphor, there’s no word and no thought?

It’s about time that someone described this new party to the pundits so that they can start using its lingo in their coverage. Not that the President Elect has been hiding anything. He has said on more than one occasion, that he is looking for “what works,” or, when things look really bad, “whatever works.”  Let’s start describing policy, not for its political effect, but its accomplishment on the merits.  The words “results oriented” and “consequences” come to mind.

“Pragmatic,” in this context, is the opposite of ideological. Democrats and Republicans aren’t always ideological, but often are, with important consequences.  The mantra “Government regulation is a drag on the economy” rings a bell.  The notion of raising taxes to balance the budget during a recession is not quite ideology, but it is cured by pragmatism, none-the-less.  Pragmatism works against ideology and lunacy, it seems — an added benefit.

What should we expect from the Pragmatic party? It’s hard to say, but we should expect an Obama administration to look to the facts and circumstances of the problems we face, rather than applying ready-made doctrines from yesteryear. Obama doesn’t seem to care whether a policy is liberal or conservative; he seems to believe it is more important to talk about whether it will accomplish its goals. It turns out that many of the liberal v. conservative debates have already been, well, decided.

Take, for example, raising taxes.  This is done to balance budgets, but also to fund entitlements and spending programs.  Obama’s appointment to head the Economic Council of Advisors, Christina Romer, recently published a serious historical analysis showing that tax hikes measurably retard economic growth.  A pragmatist will have to weigh how much the revenue is needed in the short term against the eventual harm to the economy and resulting loss of revenue over the long term.  Not very exciting in a televised debate, but logical, maybe even “good government.”

Better let the economists calculate the optimal results, rather than have politicians debate raising taxes vs. lowering taxes, without really knowing what they are talking about. Politicians with ideology don’t actually have to know what they are talking about, but pragmatists do for they are only as good as the results obtained by solutions they propose.