Has Barack Obama’s presidency already failed?

[Coopmv]

Ah. We would have been in NY at the same time, then.

Recession or hyper-inflation did not seem to affect me that much during those college years.  Pizza was only 50 cents a slice back then.

[drogulus]

Of all the people running for the White House last year, Ron Paul made the most sense.  The problem is there is only one thing the two major political parties can agree on: They hate a third party and will work in unison to destroy it.

     Third parties are co-opted, not destroyed. That is, the adoption of their ideas by one or both of the dominant parties destroys them.

     Ron Paul? What has he said that indicates he could be useful in this crisis? He opposes bailouts, doesn't he? And he favors radical deregulation of the kind that would make this kind of crisis occur every few years, just like it did in the 19th century when every burst bubble pauperized a substantial percentage of the middle class. No, Ron Paul is a more extreme version of what we're suffering through now, and if you think we need him, then you should think capitalism must periodically endure a calamitous failure.

     Are you a Doomer? Ron Paul appeals to a variant of the Doomer mind set. Everything is corrupt and deserves to die, and I deserve to enjoy watching it happen. You don't even need to be a Christian!

[Coopmv]

     
     Ron Paul? What has he said that indicates he could be useful in this crisis? He opposes bailouts, doesn't he? And he favors radical  deregulation of the kind that would make this kind of crisis occur every few years, just like it did in the 19th century when every burst bubble pauperized a substantial percentage of the middle class. No, Ron Paul is a more extreme version of what we're suffering through now, and if you think we need him, then you should think capitalism must periodically endure a calamitous failure.

But Ron Paul's depiction of the borrowing/spending binge that has been going on
for over a decade is something I can not disagree with ... The relentless outsourcing of jobs has led to a permanent decline in the living standard for the American middle class ...

[drogulus]

    I don't want a depictor-in-chief. Perot was good at that, too. What can these guys do without a party to do it? It reminds me of that great Onion headline:

     Giant poster of Mao seizes power in China - Enormous placard now controls world's most populous nation

[Coopmv]

    I don't want a depictor-in-chief. Perot was good at that, too. What can these guys do without a party to do it? It reminds me of that great Onion headline:

     Giant poster of Mao seizes power in China - Enormous placard now controls world's most populous nation

The political system is broken and the lobbyists, who are well funded by big corporations and even foreign governments such as China, have our politicians in their back pockets.  These days, anyone who preaches against protectionism should have their credentials checked IMO ...

[bwv 1080]

But Ron Paul's depiction of the borrowing/spending binge that has been going on
for over a decade is something I can not disagree with ... The relentless outsourcing of jobs has led to a permanent decline in the living standard for the American middle class ...

No, Paul is right to the extent that there has been a borrowing and spending binge

There is no data to support that in aggregate outsourcing has harmed the "middle class".  Global trade is a net benefit to everybody

http://www.pkarchive.org/trade/ricardo.html

[Coopmv]

No, Paul is right to the extent that there has been a borrowing and spending binge

There is no data to support that in aggregate outsourcing has harmed the "middle class".  Global trade is a net benefit to everybody

http://www.pkarchive.org/trade/ricardo.html

Check out this article reflecting the latest thoughts the best economic minds have about free trade.  They began to preach free trade long before there were any believers ...

Economists Rethink Free Trade

http://www.businessweek.com/magazine/content/08_06/b4070032762393.htm

[drogulus]

No, Paul is right to the extent that there has been a borrowing and spending binge

     So is everyone else who points this out. It didn't hurt us until we had a fatal deregulation combined with what would otherwise be a fairly common event, a real estate bubble. Borrowing and spending is just the way it works. Things are loose and then they are tightened up as they were in the late '80s and early '90s. There's nothing even interesting in that. We know how to handle budgets, taxes and spending and how to rein in excess. The problem is regulatory collapse, which means someone (like Greenspan, for instance) took this free market crap seriously. And the rot spread as everyone partied on. Did anyone see 60 Minutes last night? That banker told a hell of a story.

[bwv 1080]

     So is everyone else who points this out. It didn't hurt us until we had a fatal deregulation combined with what would otherwise be a fairly common event, a real estate bubble. Borrowing and spending is just the way it works. Things are loose and then they are tightened up as they were in the late '80s and early '90s. There nothing even interesting in that. We know how to handle budgets, taxes and spending and how to rein in excess. The problem is regulatory collapse, which means someone (like Greenspan, for instance) took this free market crap seriously. And the rot spread as everyone partied on. Did anyone see 60 Minutes last night? That banker told a hell of a story.

I don't buy the regulatory angle.  It presupposes that wise government officials would have taken steps to prevent this when there is no historical evidence of this happening.  In many ways all of the abuses in ABS, CDOs, CDS etc.  were driven by Wall Street trying to circumvent existing regulations.  Sure it is easy to come up with regulations in hindsight that would have helped, but where were those proposals 5 years ago?  Stopping the lending binge back in, say 2004 or 2005 would mean throwing people out of work in construction and other industries, making it hard for low-income people to get mortgages, and leading to asset price declines for homeowners.  What politician or goverment official is going to take responsibility for that?

Now there is little need for regulation because who is going to fund a 110% LTV option ARM on a house that is 10X the borrowers annual income?

[bwv 1080]

Check out this article reflecting the latest thoughts the best economic minds have about free trade.  They began to preach free trade long before there were any believers ...

Economists Rethink Free Trade

http://www.businessweek.com/magazine/content/08_06/b4070032762393.htm

Despite the flashy headline, no one in the piece really questioning the basic theory. 


The meat of the article is here:

No one is suggesting that trade is bad for the U.S. overall. According to estimates by the Peterson Institute and others, trade and investment liberalization over the past decades have added $500 billion to $1 trillion to annual income in the U.S.

Yet concern is rising that the gains from free trade may increasingly be going to a small group at the top. For the vast majority of Americans, Dartmouth's Slaughter points out, income growth has all but disappeared in recent years. And it's not just the low-skilled who are getting slammed. Inflation-adjusted earnings have fallen in every educational category other than the 4% who hold doctorates or professional degrees. Such numbers, Slaughter argues, suggest the share of Americans who aren't included in the gains from trade may be very big. "[That's] a very important change from earlier generations, and it should give pause to people who say they know what's going on," he says.

Blinder warns the pain may just be starting. He estimates that eventually up to 40 million service jobs in the U.S. could face competition from workers in India and other low-wage nations. That's more than a quarter of the 140 million employed in the U.S. today. Many of the newly vulnerable will be in skilled fields, such as accounting or research—jobs U.S. companies will be able to move offshore in ever greater numbers. "It will be a messy process of adjustment, with a lot of victims along the way," Blinder says.

The rumble of academic debate is already having an effect on the Presidential campaign. In an interview with the Financial Times late last year, Hillary Clinton agreed with economist Paul A. Samuelson's argument that traditional notions of comparative advantage may no longer apply. "The question of whether spreading globalization and information technology are strengthening or hollowing out our middle class may be the most paramount economic issue of our time," her chief economic adviser, Gene Sperling, recently wrote. Barack Obama's adviser, the University of Chicago's Austan D. Goolsbee, is not convinced free trade is the culprit behind the squeeze on incomes. But he believes many U.S. workers aren't sharing in the gains from open markets and fears a political blowback unless something is done.

A CALL TO ACTION
What to do? Blinder argues for a big expansion of unemployment insurance and a major overhaul of the poorly performing Trade Adjustment Assistance program (TAA), which retrains manufacturing workers whose jobs disappeared

No economist named in the article is calling for protectionist measures, rather they want more social programs for those displaced by outsourcing.

Samuelson is quoted as saying in regard to the paper referred to as being against comparative advantage:

In an interview last week, Mr. Samuelson said he wrote the article to "set the record straight" because "the mainstream defenses of globalization were much too simple a statement of the problem." Mr. Samuelson, who calls himself a "centrist Democrat," said his analysis did not come with a recipe of policy steps, and he emphasized that it was not meant as a justification for protectionist measures.

http://gregmankiw.blogspot.com/2007/12/is-comparative-advantage-obsolete.html

Mankiw goes on to discuss how the Business Week article distorted Samuelson to fit its sensationalistic headline implying that somehow economists were now rethinking the benefits of trade

[Jay F]

Recession or hyper-inflation did not seem to affect me that much during those college years.  Pizza was only 50 cents a slice back then.

I used to go to the real, true, original Original Ray's, 6th Ave at 11th St. And yeah, it was .50.

[drogulus]

I don't buy the regulatory angle.  It presupposes that wise government officials would have taken steps to prevent this when there is no historical evidence of this happening.  In many ways all of the abuses in ABS, CDOs, CDS etc.  were driven by Wall Street trying to circumvent existing regulations.  Sure it is easy to come up with regulations in hindsight that would have helped, but where were those proposals 5 years ago? 

      They did, and it works. You correctly point out that the market migrates towards the unregulated fringe, so you have to move the regs back towards the targets. And if regulation rather than the failure to regulate is the problem, why is it the failure to regulate so obviously the proximate cause instead of regulatory excess, otherwise known as sound regulation. This is classics Republican thinking: "Government sucks, just look at us!". Well, yeah!

     What I'm saying is that the failure to regulate is not a failure of regulation. Regulation is only made difficult by the presence of ideologues who misread history in just this way. Sound regulation is "oppressive", and when it's weakened or removed the resulting disaster is blamed on....regulation!

[drogulus]

    Why don't we use this reasoning with food, OK? Poisonous food gets into the supermarkets because oh, let's say, regulation doesn't work, so the answer is to remove regulations. And in order to do this we will conveniently forget that we just removed effective regulations! No wonder there's no evidence regulation works. The only evidence that really counts is the calamity that doesn't happen when we're vigilant.

[bwv 1080]

      They did, and it works. You correctly point out that the market migrates towards the unregulated fringe, so you have to move the regs back towards the targets. And if regulation rather than the failure to regulate is the problem, why is it the failure to regulate so obviously the proximate cause instead of regulatory excess, otherwise known as sound regulation. This is classics Republican thinking: "Government sucks, just look at us!". Well, yeah!

     What I'm saying is that the failure to regulate is not a failure of regulation. Regulation is only made difficult by the presence of ideologues who misread history in just this way. Sound regulation is "oppressive", and when it's weakened or removed the resulting disaster is blamed on....regulation!

Now I am not the one being ideological here.  Regulation, if broadly defined to include a functioning system of tort and contract law is absolutely essential to a capitalist economy.  While one can imagine private organizations fufilling the roles of the FDA it is by no means clear whether the results would be any better.  My skepticism is more based upon the ability of a political system to sucessfully implement regulatory measures that do not get hijacked by special interests.   When the subject matter is not giving consumers poisoned food the goal is relatively easy to accomplish.   Discerning when a bubble is occurring in the financial  markets is an entirely different matter. 

[drogulus]

Now I am not the one being ideological here.  Regulation, if broadly defined to include a functioning system of tort and contract law is absolutely essential to a capitalist economy.  While one can imagine private organizations fufilling the roles of the FDA it is by no means clear whether the results would be any better.  My skepticism is more based upon the ability of a political system to sucessfully implement regulatory measures that do not get hijacked by special interests.   When the subject matter is not giving consumers poisoned food the goal is relatively easy to accomplish.   Discerning when a bubble is occurring in the financial  markets is an entirely different matter. 

     I guess it's ideological to agree with either side, but I'm not a super regulator, I'm in favor of avoiding disastrous abandonment of regulation. And the people who warned about deregulation impress me more than the budget/spending hawks who chirp the same tune no matter what and even now don't appear to be right.

     It's a little harder to regulate money and banks than food, but worth doing, as we can see now. You are doing just what I cautioned against, blaming the failures of deregulation on the idea of regulation. I note that you agree with me that a general adoption of this rationale would be a disaster. We won't do it, so not to worry. But the problem is not special interests, at least not the sort of problem we can't handle. Regulation works! The idea that a strong economy can be driven into poverty by the routine regs that used to prevail lacks any empirical verification. We know how to do this right (approximately), and we will prove it now by doing it again. This was a failure that could have been avoided, because we routinely have avoided it.

[haydnguy]

I think one thing that can be learned from the bailout is that capitalists can be no more depended upon to do the right thing than socialists.   

[Herman]

However it doesn't have to be one extreme or the other.

There's also a middle, where the vast majority of ordinary Joes live and work.

[ezodisy]

I think one thing that can be learned from the bailout is that capitalists can be no more depended upon to do the right thing than socialists.   

It depends who you ask. Schiff and Rogers (and Faber, and probably Roubini and Ron Paul too) will tell you that for years capitalism hasn't been allowed to operate in the US as Greenspan kept jumping in to bailout his friends instead of letting them fail. They give some pretty convincing examples too

[drogulus]

I think one thing that can be learned from the bailout is that capitalists can be no more depended upon to do the right thing than socialists.   

    I agree. So you have to regulate.

 

However it doesn't have to be one extreme or the other.

There's also a middle, where the vast majority of ordinary Joes live and work.

     I agree with this, too.

     

It depends who you ask. Schiff and Rogers (and Faber, and probably Roubini and Ron Paul too) will tell you that for years capitalism hasn't been allowed to operate in the US as Greenspan kept jumping in to bailout his friends instead of letting them fail. They give some pretty convincing examples too

    The worst thing is that by not being tough early on, we now have to do these bailouts, and we'll almost certainly do it wrong before we begin to get it right. I don't like the "fail your way to success" model, but it's the way really big things are often done because no one knows how to do it until some of it has been done.

[Coopmv]

I used to go to the real, true, original Original Ray's, 6th Ave at 11th St. And yeah, it was .50.

I used to go there too in the mid to late 70's during my college days when I lived in the Village.  I checked out the Solti's Tannhauser from the public library nearby (in some armory type of building on 6th) and the set was a mini fireworks.  Those were the good old days ...