Galbraith on "Old Mistake" (Edit: And sociopathic jounalism)

James K. Galbraith talks about "Old Mistakes Die Hard".

I'm tempted to say that the United States is plainly unable to cope with the economic crisis in a serious way...

Technically it would have been fairly easy, 10 months ago, to get this bus back on the road. There could have been open-ended fiscal assistance to stop the budget hemorrhage of the states and cities. There could have been a jobs program and effective foreclosure relief. There could have been a payroll tax holiday. There could have been a strategy for sustained massive effort on infrastructure, energy and climate. There could have been prompt corrective action to resolve, instead of coddle, the worst of the banks.

I mostly don't blame President Obama; he and his team went as far as they felt they could. I blame the head-in-the-sand politicians in Congress, the over-optimistic forecasters, the half-educated press, and the power of the financial lobby. I blame the avatars of fiscal virtue, the public debt scare-mongerers, the astrologers for whom thirteen significant digits (a trillion) for the stimulus package was just too much. I blame the Senate, which hands the balance of power to small states at the expense of disaster areas like California, Florida and New York. I do blame the Bush-Obama financial policy team, who either believed that "credit would flow again" if you stuffed the banks with money, or knew that it wouldn't.

The Bretton Woods point deserves another word. According to the system established in 1944, the U.S. current account deficit -- and by extension our public budget deficit -- was limited by an obligation to exchange foreign-held dollars for gold. Richard Nixon abolished that arrangement. Since the early 1980s, the world has held the Treasury bonds that the U.S. chose to issue. The system is fragile. But so long as it lasts, it doesn't discipline our budget (and if it broke, we could replace it). Low interest rates prove this: despite all the dire predictions, there is no difficulty in placing Treasury debt. Hence, we are free to pursue high employment, if we choose to do it.

Can anything be done now? Well yes, technically: the same steps that could have been taken in January 2009 could be taken in January 2010. But they won't be, because for the moment we are seeing the inventory bounce, a productivity surge, real GDP growth, and other "good signs." So we'll be told to wait, to be patient, and to make sure we don't buy what we can't afford. And double-digit joblessness will linger on, breeding frustration and anger -- perhaps all the way through to the mid-term elections. After which, what will be possible is anyone's guess.

There's been a lot of sturm und drang about the deficit, and about debt, but the fact remains that joblessness is a greater threat to the American way of life and to the Democrats' chances in 2010 and 2012 than any amount of debt is. To be blunt, the people who are railing against deficits in the press have jobs. They have income. And (crucially) they have assets that deflation would increase the value of. Deflation and joblessness isn't their problem, and if it becomes their problem, they'll have lost their bully pulpit and nobody will be listening to them anyway. They'll be replaced by the guys who, again, have jobs.

Of course, the only way that makes sense is if the press and the politicians are so incredibly short-sighted that they can't even think about their personal futures, let alone the future of their nation. Fortunately for the Republicans...

In any case, as both Digby and Paul Krugman pointed out, doing something about the deficit is absolutely useless. That class of voter that values deficits over employment will think there's a deficit no matter what you do. If you tell them otherwise, they won't believe you, either because they're Republican drones who are just using deficits as a handy stick to bludgeon you with, or paranoiac nutbars who think that everybody from the Fed Reserve to the White House to the lowly statisticians are all lying to them, and that we can only trust in Almighty Gold (The Holies Of Holies! The One True Metal!) in the first place. Neither of which are worth trying to win.

So, honestly, Obama et al might as well do the right thing, since there's no way they can appease those who are counselling them to do the wrong thing. I know it may be a bit scary and unfamiliar—doing the right thing, that is—but it's certainly worth a shot.

Edit: Huh. I had read that ridiculous piece on American public debt in the NYT, and noticed that the name of the writer sounded familiar.

Then I realized. He's the guy who wrote the long confessional about how he had spent way too much money on his house and gone far beyond his means.

Figures. Let's leave aside that he's the worst person in the world to be judging whether or not America's public debt is unsustainable, since he's staked himself out as someone who both couldn't handle debt, and who now has a deep emotional aversion to it. I realize he's on the debt/deficit beat at the NYT. It's just that he shouldn't be.

No, instead, let us ponder empathy for a moment. What kind of near-sociopath do you have to be to go through all that crap and then—implicitly or explicitly—tell everybody who lost their job and have it worse that they can go screw? Andrews should know better: one of the reasons his family went into such disastrous debt is that his wife lost her job.

And yet, with unemployment beating 10% with no end in sight, he barely spares a word on why government spending might be necessary to prop up America's broken economy! Does someone being unemployed not matter unless they're sleeping in someone else's bed? Are they just statistics to Andrews? Do they even exist?

I swear, the only thing that's worse than "fuck you, got mine" is "fuck you, don't got mine". To be unable to envision that the pain you suffer might be shared by others, and to act on that understanding. To be so swallowed up in your own miseries that you can't see how they affect your perception of the world or your effect on the people around you. To be so deliberately ignorant about how shared action can help everybody—because you're too busy with your own obsessions—that you end up tearing down everything that might have made your situation better. Andrews shouldn't even be on this beat, but to write a story like THIS is unforgivable. I'm honestly amazed that it exist.

That's one of the worst things that may come from this Great Recession when it ends. IF it ends. "FUDGM" may become the law of the land, and will only further ensure that the people who put you there through their own ignorance and sociopathy laugh all the way to the bank.

THEIR bank.