Tag Archives: The Coming Anarchy

Contemptuous Governance

Economics of Contempt had this to say about House Republican Adam Putnam’s call for more oversight:

Sure, because all Paulson and Bernanke have had to do in the past few weeks is rescue Fannie and Freddie twice (including a nationalization the second time around), coordinate a frantic search for a buyer for Lehman, oversee Lehman’s bankruptcy, help save Merrill Lynch by strong-arming BofA into buying Merrill at the last minute, put together a bailout package for the largest insurance company in America (AIG), stop a potentially devastating run on money market accounts, and negotiate the largest government bailout in the U.S. since the Great Depression.

When, exactly, does Putnam think Paulson and Bernanke had all these opportunities to come chat with Congressmen?

On some level, I sympathize with Bernanke and Paulson. They were swamped, and briefing uninformed Congressional representatives must seem terribly tedious in the midst of a crisis. But my God – shouldn’t we make time for democratic oversight during an emergency? Isn’t that when accountability is most necessary? Or do we cede de facto authority to the Treasury Department whenever an economic meltdown looms?

Maybe House Republicans (and Democrats) are little more than petulant children, but there’s something to be said for making our economic response a bit more transparent and accountable. If nothing else, improving the process would help bring a lot of us on board who accept the necessity of some type of bailout, but otherwise feel like we were completely railroaded by the Administration.

Bernanke and Paulson would surely reply that the economic crisis is simply too complicated for effective oversight. We don’t have time for meetings, hearings, and testimony on Capitol Hill. But that raises a different set of questions. Has the complexity of our financial system rendered legislative accountability irrelevant? Is ceding de facto authority to the Treasury Department our only option during a crisis of this magnitude? What does that say about the need for democratic oversight in general?

UPDATE: Via Patrick Deneen, Representative Marcy Kaptur stands tall. I have to say that this segment perfectly encapsulates my own feelings on the need for greater legislative accountability:

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Filed under Economics, Uncategorized

As Ye Sow, So Shall Ye Reap

The bailout bill failed to pass the house. The Dow is collapsing. Wow.

UPDATE: Douthat: “If the defeat of the bailout is a victory for liberty, it’s a victory whose costs I’m not prepared to bear.”

UPDATE II: A sharp friend: “The government cried wolf too many times.”

UPDATE III: The usual suspects are blaming the other team.

Did Pelosi’s “partisan” speech really sway that many votes? I’m not sure if Republicans are petulant children or steadfast defenders of principle. There was a real case to be made against ramming through an irresponsibly-conceived bailout on such short notice, but Republicans, instead of offering a plausible alternative, voted against the legislation out of spite.

UPDATE IV: Perhaps the bailout isn’t as critical as we thought (emphasis mine):

“People are very seriously concerned that there’s no panacea from legislative action,” said Daniel Alpert, managing director of Westwood Capital, a New York-based investment bank.

“Fundamentally, none of the problems gets solved by the bailout. This may solve the freeze-up of the capital market but it doesn’t address the decline in housing prices,” Alpert said, adding that he expects to see more consolidation in the banking sector since there probably are many more mortgage-related writedowns still to come.

UPDATE V: Here’s the final vote tally.

UPDATE VI: Whatever happens, I found this piece from Daniel Larison oddly stirring:

It is easy to talk about principle when there is no crisis happening and no risk attached to standing on principle. The real test comes when holding fast may actually cost something. Holding to a principle, if it means anything, means that you value it more than mere self-interest, satisfaction or comfort. A lot of Americans want to have it all–the pretense that they are free, with none of the responsibilities or dangers that go with it. In reality, you can either have the latter and remain free, or you can cease being free and then be kept free (temporarily) from responsibility and danger.

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Filed under Economics

Losing My Cool

This dialogue on global warming between Ryan Avent and Jim Manzi is outstanding. It’s fairly technical, so I really recommend you watch the entire thing rather than jumping in for a particular segment.

To summarize, Manzi argues that aggressive steps to limit global warming are prohibitively expensive given their probable impact on economic growth. While he concedes that anthropogenic global warming is happening, he suggests our response should be limited to targeted R&D efforts.

I originally assumed that a revenue-neutral carbon tax – modeled on, say, British Columbia’s recent approach – would be the most elegant solution to runaway global warming. If I was forced to choose between taxing carbon and an overly-complicated cap-and-trade scheme, I’d still choose a carbon tax, but I’ve begun to see the wisdom of a more cautious approach.

That said, one thing Manzi’s model doesn’t adequately account for is the human toll of global warming in the Third World. Given the extreme poverty of underdeveloped countries, climate change could devastate entire regions in Africa and Southeast Asia and still not exact an economic cost comparable to a prolonged recession in the United States. From a purely economic perspective, this may look like a favorable trade-off, but do we really believe that an impending Third World catastrophe is less important than slow(er) growth in the United States?

I don’t mean to downplay the positive effects of economic expansion in the developed world. Higher wages, more productivity, and better goods all have an appreciable impact on our collective quality of life. But in many respects, furthering the United States’ economic prospects will have only a marginal effect on humanity’s cumulative well-being. Our high standard of living is already unprecedented in history, and while further improvements are welcome, slightly retarding progress in the name of keeping Bangladesh above water sounds pretty reasonable to me.

Quantifying the impact of global warming on our planet’s cumulative well-being is a tricky proposition, but that doesn’t mean we shouldn’t at least try to assess the potential for human misery in the wake of massive natural disasters. And while I’m suspicious of unleashing a new regulatory infrastructure to curb CO2 emissions, I worry that a purely economic decision-making calculus may not capture the true costs of climate change.

See also the Cato Unbound debate on possible responses to global warming, as well as Manzi’s plethora of totally sweet posts on the subject.

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Filed under Economics, The Environment

The Word of the Day is “Absurdity”

I claim no great affection for either candidate. On any number of issues I care about, there isn’t much daylight between them. The economic crisis, however, has exposed McCain as a political charlatan of the first order. It has also done much to reveal the prevailing attitude of the American right, who evidently yearn for any man on horseback to lead them forward.

Consider this: McCain, despite his self-admitted lack of economic knowledge, has decided to parachute into Washington to save the day (via Slate, emphasis mine):

It’s not clear what, exactly, McCain is going to do in Washington. He doesn’t sit on any of the relevant committees, and everyone is already deep in negotiations. Still, he’s coming anyway. It doesn’t make much logical sense. The only way to understand it is politically: In a presidential campaign, the surest sign that a candidate is playing politics on an issue is when he claims not to be playing politics on an issue. The only way for McCain to convince everyone that his intentions are 100 percent pure is for him to drop out of the race completely. A campaign doesn’t end—and its distracting affects don’t disappear—just because one candidate says so.

In doing so, he will probably provide enough political cover for wavering Republicans to vote for the bailout. Nascent efforts at real Congressional oversight will inevitably fall under the weight of bipartisan asininity. And if the bailout wasn’t going to get passed in record time without McCain, it’s guaranteed to sail through now: Congressional leaders are apparently anxious to push something – anything! – through before Maverick swoops in and steals the whole show.

And “conservatives” – the same people who should at least feign suspicion over the whole ordeal – rush to praise McCain for his bold leadership. Any leadership will do – any leadership whatsoever! This gem of a post praises Hillary Clinton – Hillary Clinton! – for announcing her solution to our financial meltdown. The author candidly admits she disagrees with Clinton’s policy prescriptions, but at least she’s doing something, which is now touted as evidence of credible national leadership.

I’m not opposed to the bailout as a matter of principle. I understand our economic crisis is grave. But the process itself has been absolutely horrific. Rhetorical window-dressing has replaced legislative oversight as Congress’s primary function. The Treasury Department has apparently decided to wring as much cash out of the legislature as possible – the theory being that they’re just stupid and scared enough to fall for it. Prudence and caution are both in short supply, and McCain’s grandstanding promises to remedy absolutely nothing. This is leadership?

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Filed under Conservatism, Economics, Presidential Politics

More Reasons to Consider Binge Drinking

From the Washington Post, a Gitmo prosecutor quits over withheld evidence (Yes, you read that correctly – even the prosecutors think the game is rigged):

GUANTANAMO BAY, Cuba, Sept. 25 — A military prosecutor involved in war crimes cases here has quit his position, citing ethical concerns about his office’s failure to turn over exculpatory material to attorneys for an Afghan detainee scheduled to go to trial in December.

Because one bailout is never enough (emphasis mine):

With Congress preoccupied with the massive, $700 billion bailout plan for the financial industry, General Motors, Ford, and Chrysler have finally secured Part One of their own federal rescue plan. A bill set to be passed by Congress and signed by President Bush as early as this weekend—separate from the controversial Wall Street bailout plan—includes $25 billion in loans for the beleaguered Detroit automakers and several of their suppliers. “It seemed like a lot when we first started pushing this,” says Democratic Sen. Debbie Stabenow of Michigan, one of the bill’s sponsors. “Suddenly, it seems so small.”

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Filed under Economics, Libertarianism, Uncategorized

Our Brand Is Crisis

“Better to be strong and wrong than weak and right.” – Bill Clinton

Say what you will about Bill Clinton, but he remains a shrewd observer of American politics. His aphorism aptly characterizes the approach of many on the Right, who evidently feel that McCain’s decision to suspend his flailing campaign is a sign of masterful leadership.

Never mind the fact that he brings no economic expertise to our current crisis. Never mind the fact that his decision will probably accelerate the passage of what already looks like a massive government boondoggle. Never mind the fact that Treasury officials have admitted they literally pulled the $700 billion bailout figure out of a hat (“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number”). Never mind the fact that our government doesn’t exactly boast a sterling track record when it comes to crisis management.

Conservatives, once apostles of humility, have embraced an approach to governance that can only be described as the Admiral Farragut Doctrine of Crisis Management. “Damn the torpedoes – full speed ahead!” is now the default setting for Republican political posturing, whether the “emergency” is foreign or domestic.

On Iraq, containment was jettisoned in favor of a poorly-planned invasion that can only be described as disastrous. Once our mistake became clear for all the world to see, the lock-step response of the Republican primary field was to double-down and hope for the best. Strategic considerations went out the window. Mentioning the massive humanitarian costs of our blunder is akin to “blaming America first.” Anyone who suggests that our misdeeds inflame Islamic terrorism may as well be in league with Al-Qaeda.

Our approach to civil liberties is tarred with the same brush. One moment we castigate the Department of Homeland Security for incompetence; the other we praise the Administration to the Heavens for keeping the barbarians at bay. The evident contradiction between these two articles of Republican faith goes unmentioned – the very idea that the terrorist threat has been exaggerated is treasonous.

Now the Republican approach to crisis management is being extended to the domestic front, and its results are entirely predictable. McCain has decided that – come Hell or High Water – he will single-handedly ram home an unprecedented legislative grant of federal largess. The particulars of the bill are irrelevant – all that matters is that he’s displaying “leadership.”

Obama is hardly a paragon of restraint, but at least he has the good sense to take a deep breath and not commit to anything foolish. For this, he is compared (with a supreme lack of self-awareness) to Bush, because we all know the present administration is nothing if not restrained in its approach to policy-making.

“Country first” rings hollow when the core of your political strategy is to sacrifice every reasonable precaution for a shot at the White House. McCain is not a conservative. He may well be an ego-maniac. He is certainly not getting my vote.

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Filed under Conservatism, Economics, Foreign Policy, Presidential Politics

Under Pressure

Megan McArdle writes:

There is, as far as I can see, no actual harm in postponing campaigning, or the debates; we can just as easily learn McCain’s terrifying plans for the country next week.

On second thought, postponing the debates may not be the biggest problem with the proposed timeout. But consider the political situation McCain has put himself in. He has, in effect, committed himself to getting something done as soon as possible. Can you imagine McCain suspending his campaign only to announce that there won’t be a bailout, or that Congress needs more time to evaluate its options? Of course not, which means the resulting legislation will feature minimal oversight, lots of really bad compromises, and a possible carte blanche for the Treasury Department. Granted, silly legislative compromises are the sort of thing McCain specializes in, but can we really afford his approach to our current financial mess?

What’s worse, McCain won’t be politically penalized for urging rash action. He’s already providing political cover for Republicans skeptical of the proposed bailout, and at this point, any solution will probably reassure nervous investors (at least temporarily). By the time we begin to feel the unintended consequences of a poorly-conceived bailout, McCain will already be installed in the White House, which is probably the only carefully considered after-effect of the campaign’s decision to suspend operations.

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Filed under Economics, Presidential Politics