At a gathering last night of intelligent young conservatives, I was defending the point that the TARP and some kind of fiscal stimulus had been absolutely essential last year – that otherwise the world economy might have plunged into Depression – and that conservative organizations like the Heritage were right and courageous to have supported the Obama administration’s actions at the time. We can criticize some of the details of those actions, especially some of the payoffs to Democratic interest groups embedded in the stimulus and the budget for the second half of 2009. But as an AEI colleague of mine put it, in those critical hours it was more important to be fast than to be smart. And it’s not like the GOP does not sometimes deliver payoffs to our interest groups too.
This defense met some resistance. The dominant view in the conservative world rejects the decisions of last year, and even questions whether conditions were really so very dangerous after all.
One attendee said something very thought-provoking. “Maybe it was a good thing we weren’t in power then – because our principles don’t allow us to respond to a crisis like this.”
My answer: If your principles don’t allow you to save your country when it needs to be be saved, then there’s something wrong with those principles.
John Guardiano offers an idea above about how conservatives might respond to today’s crisis. I don’t share his point of view exactly … given the extremity of the country’s fiscal challenges, I see no responsible way to sustain a defense budget over 4% of GDP. If that means winding up Iraq, Iraq is going to have to be wound up. If that means ending the Afghan surge by January 2011, the Afghan surge will have to end in January 2011.
What is clear to me is this:
* The world financial system nearly collapsed in September-October. It had to be saved. TARP was messy, TARP rescued a lot of people who didn’t deserve rescuing, but TARP was indispensable. We’ve lived through a 1929-31 type experience, but without TARP we might have rediscovered the horrible difference between a 1929-31 style severe recession, and a 1932-33 style economic collapse.
* Monetary policy had done all it could do for the US economy by January 2009. Fiscal stimulus was needed. I’d have preferred a payroll tax holiday to the spending measures put in place by the Obama administration, but I prefer those spending measures to doing nothing. Those spending measures, including cash for clunkers, cushioned the fall of the US economy in the second quarter of 2009, and they reduced the rate of decline to almost zero in the third quarter. They offered real (if expensive and inefficient) help when help was needed.
* The indications are that employment recovery will be slow and painful. (See the ominous words of San Francisco Federal Reserve board president Janet Yellen here: “The strength and durability of the expansion is in question. … The danger is that demand may grow at too anemic a pace to support vigorous expansion.” Republicans must – MUST – offer answers to this predicament, and our usual inventory of policies will not suffice. A capital gains tax cut will do little at a time when almost all investors are looking at huge accumulated capital losses.
* The Obama administration’s most serious economic policy failure has been its inability to devise a policy to remove the bad debts from the books of financial institutions and get them lending again. Let’s criticize them for that! But our criticism will only have bite if we have an alternative remedy to offer. How can we do that if any attempt to address the problem elicits only angry cries of “No bail outs!”
* There’s a big difference between addressing a systemic financial crisis and rescuing individual non-financial companies struggling with chronic economic failure of their own making. Condemnation of the GM and Chrysler bailout is a valid and useful bright line to separate Republicans from Democrats.
* No responsible governor could have refused the federal money on offer in 2009. States must balance their budgets. In the span of 12 months, tax revenues collapsed for most states: by 11.5% for example in Florida. What was Gov. Crist supposed to do about that? Chop state spending by 11.5% on six weeks’ notice? And what effect would it have on the nation’s economy if big states were laying off teachers, halting all road maintenance, and closing hospitals? If we make refusal of stimulus funds a litmus test of political acceptability, no sitting governor who cared about his or her job would be eligible for a Republican nomination for anything. We’d be left only with the governors who had physically or mentally checked out of their jobs: the Sarah Palins and the Mark Sanfords.
77 responses so far
1 DFL // Nov 12, 2009 at 9:15 am
Perhaps what is often called conservatism has degenerated into nihilism. Many conservatives oppose what modern America has become so the nihilistic drift shouldn’t be a surprise. In fact, it might be encouraged.
The United States government needs severe cutting, especially in the defense sphere. Having the Democrats do it can be pleasing.
2 sinz54 // Nov 12, 2009 at 9:44 am
During the debate over TARP in Congress, I actually heard conservatives in Congress saying things to the effect that: If TARP is truly the only way to save the economy, then let it burn!
Michelle Malkin and other conservative pundits invoked Atlas Shrugged: Let the economy collapse, then we conservatives will return to rebuild it!
I don’t agree with Pat Buchanan on a lot of things, but one thing he keeps hammering away at is that even before advocating capitalism, we conservatives have always been NATIONALISTS . We are diehard defenders of the United States, even before we defend Adam Smith or Freidrich von Hayek. We love this LAND that we’re standing on.
The problem we conservatives must now face, is that the global capitalism we fought for is now draining jobs and wealth out of the country that we love. Japan and India and China really can do heavy industry and high tech just like we can–perhaps even better? Where does that leave OUR country? Should we just say “Oh, well, that’s how capitalism and free trade are supposed to work”???
Additionally, even Adam Smith realized that capitalism can only work if its constrained by a strong sense of ethics. In the old days, a man made a shoe or an automobile and he stood behind his work. Today, we’ve got financiers who are little more than Ponzi scheme gamblers.
In our zeal to create free markets, we forgot about those two other problems: How to ensure that the players in those markets are ethical (or at least obeying well-considered laws), rather than Ponzi scheme crooks; and what to do when capitalist competition means that Japan and China and India can beat the pants off of OUR country, the United States.
3 Chekote // Nov 12, 2009 at 10:02 am
How in the world can anyone defend TARP is beyond me. Especially anyone who calls himself a conservative. The purpose behind TARP, as stated by Paulson, was to purchase toxic assets. We were told that unless said assets were purchased the global financial system would collapse. How many toxic assets have been purchased since TARP was appproved? NONE. Yet the financial system did not collapse.
Thanks to TARP and other interventions, the federal government has managed to obliterate “moral hazard”. Without that, capitalism cannot function properly. The reason so many large financial institutions took so many risks was because they knew they could tap into the federal coffers if they got in trouble. Have any of you heard of the Greenspan put?! An no amount of regulation is going to prevent future financial gambling as long as large firms KNOW that the federal government will bail them out.
4 Chekote // Nov 12, 2009 at 10:03 am
Hi Sinz! How are you feeling? I hope all is well with you.
5 sinz54 // Nov 12, 2009 at 10:11 am
Chekote:
$250 billion of TARP funds have been paid out. TARP had no hope of purchasing more than a fraction of those toxic assets (it’s estimated that there are some $40 TRILLION of them).
But TARP and τhe insuring of money market funds by the FDIC went a long way towards stopping an emotional financial panic, and restoring confidence to the credit markets.
This is a point that free-market advocates often forget: Market players aren’t always rational! They can be spooked by fear into paralysis, causing the market to freeze up. (Or, they can be spooked by greed, causing a speculative bubble.)
There truly was a financial panic, which accelerated after the Bear Stearns collapse and the collapse of a money market fund for the first time ever. Once people keep their money under their mattress out of fear, the economy collapses.
6 sinz54 // Nov 12, 2009 at 10:13 am
Chekote:
Thank you for inquiring about my health. I’m about the same as before–just wobbling along, day by day.
One physician I spoke with, likened my illness to surfing: Keep your balance and keep riding the Wave of Life! Don’t fall off!
7 balconesfault // Nov 12, 2009 at 10:26 am
But TARP and τhe insuring of money market funds by the FDIC went a long way towards stopping an emotional financial panic, and restoring confidence to the credit markets.
Experts claim that had TARP not been passed, it is almost certain that Goldman would have fallen within a few weeks, such was the panic going on. And had Goldman fallen, GE Capitol would have been next. With that, it’s likely that many businesses across the country would have been failing to make payroll by the next pay period.
Along with ramp-ups in federal spending, our deficit has been severely excaberted by the rapid decline in tax revenues – as reported in August, individual income tax receipts are down 22 percent from a year ago, corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever. Imagine the multiplier had companies quit making payroll last fall … to the housing market, to the employment picture, to everything.
Ironically, the free market idealists had their chance to try to create their model state in Iraq, and in their ideology-fed ignorance instead turned Iraq into a hellhole. It was good that Bush had the sense to reject their entreaties with respect to the American economy when we were at the edge.
8 Oldskool // Nov 12, 2009 at 10:34 am
I thought it was a given that conservatives aren’t interested in governing. Their underlying theme since Reagan seems to be “government is the problem”, so why bother to make it work? Why not chop it up and sell if off for your friends to exploit like the armed forces, Social Security, etc? Why not run up huge deficits in order to “starve the beast” so it can’t do much of anything.
The last time they were in power they mostly seemed concerned with keeping it. They know how to get their people angry enough to vote but it stops there. Remember how gay marriage was shelved after the ‘04 election?
The surprising thing about the Republican party is how few of it’s members realize they’re being emotionally manipulated.
9 balconesfault // Nov 12, 2009 at 11:46 am
I thought it was a given that conservatives aren’t interested in governing.
Depends on one’s definition of conservatives. I have no doubt that conservatives can govern quite well, but to do so means favoring principles of good governance over ideology.
I will provide two similar examples.
In the first, conservative ideology abhors the expansion of government entitlement programs. That is all well and good, and an principled conservative should always be ready to make the argument against expansive programs on both a microscopic level (specific problems with a certain program) and a macroscopic level (fundamental problems with respect to big government and personal liberties).
However, there are Conservatives who have come to believe that they can never win this argument in a democracy … that the majority will always vote to expand government services and entitlements, particularly if they can be funded by taxes on the wealthier minority. Instead of contesting these programs on the basis of the practical and ideological concerns noted above, the conservative movement decided a few decades ago to just underfund government to the point where sustaining entitlement programs was unsustainable. We saw this as recently as the 2001 tax cuts, when there was an attitude that given a budget surplus, rather than focussing on continuing to pay down the massive federal debt, instead we had to “give back” the surplus to the wealthy whose taxes had been increased under Clinton.
This was certainly in part to reward those who supported the Bush Presidency, but you can find Friedmanite supporters of the tax cut like Greenspan who simply wanted to reduce the amount of money available for government to expand its services and committments – the lack of faith that democratic processes could be relied upon to limit growth translated to an embrace of structural deficits as a curb on growth … “starving the beast”.
It became, essentially, a game of chicken with our economy. Which would happen first – the nation abandoning large entitlement programs as too expensive, or creation of huge deficits which threaten our long term status as the global currency?
I would argue that playing chicken with the US economy is hardly “conservative” … but those who wear the mantle of conservatism these days were the architects of this policy.
A second example is the battle between corporatist libertarians and those who believe that government should own and maintain critical infrastructure. There is a battle within conservatism itself which needs to be addressed here – because I see nothing “non-conservative” about government owning and operating the road system, water treatment and distribution systems, major electric generation and transmission infrastructure – the things necessary for the economy to be humming along, for the populace to be able to go about their everyday business. Others, on the other hand, look forward to a libertarian utopia where those infrastructure components are privatized, the market dictating levels of service and pricing rather than government planners and politicians.
Cutting taxes has been a key component of the libertarian/corporatist strategy here, as well – municipalities sold off once publicly owned power systems to raise capital, and now states are not only relying on private corporations (usually foreign companies) to plan and build new road systems that they can toll, but increasingly even selling off existing roadways for corporations to maintain for tolling rights. And corporations definitely have their eyes on our water supply systems – we will probably see more calls for this during the current recession as local governments find themselves cash starved.
Is it conservative to surrender assets critical to our economy to the private sector? Again, I believe not, since in the long run it guarantees that some portion of those assets will be owned by actors whose goals are not only agnostic as to the well being of the citizenry, but in some cases could even be interested in reducing America’s capabilities. Others believe more in the free market, that it will always provide the best, most efficient level of service.
Conservatism must address these two dichotomies … the external dichotomy as to whether conservatives really believe that their ideology can succeed in a democracy without the threat of economic collapse reigning in spending, and the internal dichotomy of whether governance includes any level of centralized planning, or whether planning should be a function of the marketplace alone, with government just defending the borders and keeping the peace. Until it really works those things out, any “conservative” administration is not going to be able to adequately manage the economy, because of its own inherent schizophrenia.
10 sinz54 // Nov 12, 2009 at 12:08 pm
balconesfault:
Well, I wouldn’t go that far.
We’ve had a lot of success with private power companies regulated as public utilities.
Would you really want “The Government” to be the only supplier of alternative energy from wind and solar? Even liberals admit that market competition is the only way to encourage innovation and drive down the price of those energy sources over time.
Do all those private companies building wind farms know that you intend to nationalize them eventually?
11 sinz54 // Nov 12, 2009 at 12:14 pm
balconesfault:
The road system is a good example of nationalistic endeavor, as I mentioned earlier.
President Eisenhower had pushed for the Interstate Highway System project, because as an Army general, he had seen how highways were important for national defense (moving armies and equipment quickly), and how they helped knit a nation together. In fact, the original name of the project was “The Dwight D. Eisenhower National System of Interstate and Defense Highways”.
There is a tension between laissez-faire capitalism and free trade, which crosses national boundaries, versus the needs of any one nation. When Ayn Rand wrote Atlas Shrugged, the U.S. economy was the freest on earth, so market advocacy could coincide with patriotism. Today, Singapore has a more free economy than does the U.S. with its mixed economy. The Botswana central bank has more conservative policies than does the U.S. Federal Reserve.
If Ayn Rand were alive today, would she renounce her U.S. citizenship and move to Singapore???
12 DFL // Nov 12, 2009 at 12:45 pm
I believe even Eisenhower would agree that his original vision of interstate highways has been perverted by a corrupt political process. I don’t think Ike supported by-passes around towns the size of Salisbury, MD and Elizabeth City, NC.
13 balconesfault // Nov 12, 2009 at 1:31 pm
sinz: Would you really want “The Government” to be the only supplier of alternative energy from wind and solar?
A legit question – which is why I used the term “major electric generation” facilities. Not a 20 MW solar farm, or even a 300 MW windfarm, but the big gas and coal and nuclear facilities. I really believe the public is best served when they control a base load of power generation.
There is a tension between laissez-faire capitalism and free trade, which crosses national boundaries, versus the needs of any one nation.
Exactly the dichotomy I was referring to, which I think current Republican rhetoric ignores to its own irrelevancy.
Today, Singapore has a more free economy than does the U.S. with its mixed economy.
And yet, they have a national universal healthcare system, as well as governmental controls on healthcare system prices. But I’m not sure exactly what your metric is for “more free economy” – I’d like to hear more.
14 NormD // Nov 12, 2009 at 1:58 pm
I worked for high tech companies where its not uncommon for revenues to drop precipitously. We survived and indeed thrived using some of the following:
1. Laying off some workers
2. Shutting down one day out of 10 (except critical functions)
3. Sometime shutting down for 1-2 weeks at year end
4. Cutting back on expenses
5. Outsourcing some functions
6. Eliminating some functions
7. Automating some functions
8. Moving some functions from higher paid staff to lower-paid staff (engineers to technicians)
9. Sometimes cutting salaries for senior management by 5-15% for a period of time.
The idea that Crist could could not adjust to an 11.5% income drop is just inane. Hell, I have seen a company survive a revenue drop of 25%.
15 balconesfault // Nov 12, 2009 at 2:20 pm
The idea that Crist could could not adjust to an 11.5% income drop is just inane. Hell, I have seen a company survive a revenue drop of 25%.
But private industry is usually not intertwined with the economic health of the local workforce the way a state government is.
For example – a large manufacturer might lay off a number of workers, and not significantly affect its marketplace, which usually is spread far beyond the region(s) where its plants are located. A large local retail chain, like a grocery store, might have a major layoff, but usually their workforce is a tiny component of the local economy so that layoff doesn’t significantly affect sales.
But if a state government goes into layoffs, shutdowns, salary reductions, etc – it is immediately pissing in its own pool. A substantial portion of the state workforce can be affected, and if this corresponds to a slack in the general business cycle (as it usually does) this can translate into foreclosures and property value drops, too sharp declines in local business revenues, accelerated migration of workers out of the area – not to mention declines in service which otherwise have negative effects on the business community. And senior management at state bureaucracies don’t usually make 7-figure incomes and bonuses … so a 5-15% salary cut will often be enough to send the best ones packing for private industry, leaving you with the least competent remaining.
Meanwhile, FWIW, states have been pushing to outsource and eliminate and automate for years now in the face of declining tax revenues. I’d bet there’s not a lot of blood to be squeezed from that rock, particularly in the short term.
16 Reason60 // Nov 12, 2009 at 2:24 pm
When I was coming of age politically in the 1970’s, it was the leftists who seemed in my eyes to be doctrinaire, obsessed with theory and ideology, whereas the conservatives seemed more interested in empirical evidence and pragmatic managerial decisions.
The notion that a society must pay in taxes for what is received in services seemed to make sense then, and still does; too bad no one in the Republican Party seems to think so any more. I made this very statement over at RedState and nearly got my head bitten off (and my account may have been banned- I can’t seem to log on there any more.) When the conservative movement becomes hostile to the notion of balanced budget, you know they have truly gone flying off the rails.
Today I see the Tea Party right that seems extremely doctrinaire, seeing the battle between Capitalism and Socialism behind even the most mundane of decisions; They have a vehement hatred for all government organs except the Defense Department and the National Security apparataus. They don’t want the government agencies to work better or more efficiently, they want them to cease to exist.
What the Tea Party seems to want is a open pitched battle between Socialism and Capitalsm, Like the generals who want to fight the last war, they want to fight a war they have already won.
The trouble is, Obama is not a socialist, despite the most fervent wishes of his critics. And the Republican party is not the party of free and unfettered calitalism, despite their chanting of its slogans.
Both parties are altogether too cozy with private corporations and banks- read Taibbi’s articles on Goldman Sachs, or Simon Johnsons articles on the similarity to the US Government and 3rd world kleptocracies, and it is apparent that banks like Goldman have a near-stranglehold over the government.
This is neither capitalism nor socialism, it is 3rd World Corporatism. The fixation with abstract ideology, and chanting quotations from Hayek and Friedman as if it were Mao’s Little Red Book won’t help us make decisions.
What we need is a Teddy Roosevelt or Dwight Eisenhower who is capable of making pragmatic decisions in the public interest, rather than an ideologue who listens only to the moneyed voices at the Club for Growth or the Ayn Randian cultists.
17 James Cody // Nov 12, 2009 at 2:34 pm
Mr. Frum:
I agree with pretty much every single one of your bullet points. And as full disclosure, I am a registered independent who has voted for and against Bush, generally voted for Republicans when I lived in NY (because they were the more moderate party in NY), and generally voted for Dems when I lived in VA (because they were the more moderate party in VA).
So I guess I might be representative of at least part of your target audience. But my problem with your post is this: it seems to me that no more than 25% of registered Republicans would agree with most of your bullet points. And worst, I sincerely doubt that more than 10 Republicans in Congress (House and Senate) would admit to agreeing with most of your bullet points.
So is reforming the Republican party really possible? Isn’t the only true option a third party? If so, is forming a third party practical and possible? If not, isn’t the best second option is to generally support the DLC Democrats (as either an independent or registered Dem)? I.e., with respect to the last question, it seems to me that there is hope in the Dem Party for electing people who would take the position that you took in this post, but I just don’t see it coming even close within the GOP.
18 NormD // Nov 12, 2009 at 2:42 pm
“But private industry is usually not intertwined with the economic health of the local workforce the way a state government is.”
Huh? This statement is bizarre. So if fewer people are pulled over for speeding or there are fewer tax audits or government workers go to fewer conferences, the economy drops?
When, for example, semiconductor sales drop, they drop for most (all?) semiconductor companies, not just one company. The market drops. And companies respond … by cutting costs. The government responds by complaining, borrowing, threatening, etc.
19 NormD // Nov 12, 2009 at 3:29 pm
“When the conservative movement becomes hostile to the notion of balanced budget”
For years I supported a balanced budget, you know, the old jag, we should either raise taxes to cover what we spend or cut spending to match what we take in…
But….
Every time we raised taxes to cover what politicians were spending, they spent more!!!
I am not such a fool anymore.
Eventually we will have to balance the Federal budget, but I am convinced that this will only happen when the cost of borrowing is too high and all the tricks are exhausted. And I fully expect to hear screaming from politicians and public sector unions and the media will be full of stories of Bill who was laid off and became homeless and murdered his kids and … on and on, but, in the end, I have faith that
we will survive and indeed thrive. We will just do things differently and better. And at that time people will look around and say well that wasn’t so bad, I wonder why we didn’t always do things this way.
Been there, done that.
20 balconesfault // Nov 12, 2009 at 4:00 pm
Norm D illustrates my first dichotomy as to why any “conservative” administration is not going to be able to adequately manage the economy. An inherent distrust of democracy.
21 Oldskool // Nov 12, 2009 at 4:06 pm
[B]I made this very statement over at RedState …(and my account may have been banned- I can’t seem to log on there any more.) [/B]
Same here. No matter how reasonable your point, they’re not fond of people who disagree, just like the base of their party.
22 Reason60 // Nov 12, 2009 at 4:13 pm
NormD, you are correct, in that the more taxes are fed to the government, the more they spend.
But unfortunately we discovered that even when taxes were reduced, they continued to spend. and spend, and spend some more. Not the Democrats- the Republicans!
We need to accept the painful truth that the conservative movement loves government spending, as long as it is on defense- read John Guardinos thread on this very site. And unfortunately, defense spending is the most expensive kind with the least value.
This is why no President or Congress of either party has reduced spending; it requires painful sacrifice and difficult choices.
The Tea Party doesn’t seem interested in the notion of choices and sacrifice- they seem to want massive defense spending and zero taxes, massive corporate subsidies with no accountability.
23 Churl // Nov 12, 2009 at 4:58 pm
balconesfault, “Norm D illustrates my first dichotomy as to why any “conservative” administration is not going to be able to adequately manage the economy.”
I agree that no conservative administration can adequately manage the economy. That said, no administration can adequately manage an economy. We have a century-long, world encompassing set of examples to show that.
24 Churl // Nov 12, 2009 at 5:04 pm
Reason60, I admit to not being present at any tea party events, so my knowledge of them is limited to what I see on the internet, but it would surprise me to learn that there is much whooping for massive defense spending. And I don’t think they want zero taxes, just some assurance that we aren’t taxing ourselves to economic ruin.
I may be further wrong, but the tea partiers don’t seem too interested in massive corporate subsidies, either. On the contrary, they are hostile to the massive bailouts that their taxes will have to pay for.
25 Reason60 // Nov 12, 2009 at 5:59 pm
Churl-
I will go you one better- it is patently unfair of me to base a broad assessment of the Tea Party on just the short Youtube clips or snippets of soundbites from the news.
When I say Tea Party, I am referring to those who support and drive it- politicians like Dick Armey, Sarah Palin, Michelle Bachmann; Media figures like Limbaugh, Hannity, and bloggers like Erick Ericksson, the various commenters at Pajamas Media and Townhall.
Taken together, it is pretty fair to say that this group does want either more or at the very least, the same level of defense spending.
It is completely fair to say they want still further cuts in taxes.
It is completely fair to say agricultural subsidies and public leases to private mining companies and “no bid” deals to Blackwater and Triple Canopy have never been an object of scorn and scandal/expose at Breitbart’s site.
Aside from TARP, how a Palin/ Jindal administration of 2012 differ from the Bush/Cheney administration? All the figures I mentioned above enthusiastically supported Bush up until TARP.
For all the “Bush was not a conservative” rhetoric, I don’t see anyone making any substantial policy differences.
26 Churl // Nov 12, 2009 at 6:12 pm
Reason60, there you go with Bush again. He’s gone. Left the building. Nowadays giving inspirational speeches in places like Saskatoon, Saskatchewan (which is in Canada). Bush bashing was quite a cottage industry back when, but its market potential wanes with each passing day. Liberals need another horse to flog. This one has joined the Choir Invisible.
Obama is in charge now. If he wants to, he can stop the evils you mention just as surely as he closes Gitmo and stops the Iranians from building nuclear weapons.
27 PracticalGirl // Nov 12, 2009 at 6:28 pm
The stimulus package wasn’t perfect, but it was necessary to cure a host of economic and non-economic ills. Unfortunately, we are living in a country where the desperate need to win has overcome common sense, and that’s why we have so many in the GOP who refuse-even now-to support any step towards reason, especially if it is put forth by “the enemy”.
“Nihilism” (DFM) , “emotional manipulation” (Oldskool)… They are alive and well in what passes for today’s populist Conservative, and are the reason that so many are turning away from reasoned arguments like Frum’s. That the younger conservatives have a hard time listening to him is no surprised. They have come of age within a nasty culture in which “No” is the main idea, brought forth by the loudest, stupidest, and most well-funded group of muckrakers our country has ever seen-the perspective media and their wealthy partners. I know the culture well. As a “perspective producer” on the national stage, I helped cultivate it. What a mess we created…
Frum lives where 80% of the country does, in the land of the solution-based idea. The Tea Partiers and the other willfull ignorants, unfortunately, are the loudest and most visible. And the politicians who have grasped on to ride this platform are forever in their debt for making “fringe” and “crazy” seem “populist”.
28 SpartacusIsNotDead // Nov 12, 2009 at 6:29 pm
Churl wrote: “Bush bashing was quite a cottage industry back when, but its market potential wanes with each passing day. Liberals need another horse to flog.”
I don’t think any Liberals are bashing Bush on this thread. The argument is that, despite the bashing of Bush by conservatives, they have yet to identify specific policy choices they would have made that differ from Bush’s policy choices (other than TARP).
When given the opportunity to support cuts in spending, such as the Medicare cuts Obama has advocated, conservatives strongly opposed. So, it’s unclear what policy choices conservatives would make that would improve things.
29 Bebe99 // Nov 12, 2009 at 7:02 pm
Before I became a small business owner I was an independent voter going with the “Responsible Republicans” 60% of the time. After 15 years in business, I no longer vote Republican. Reality from my point of view doesn’t stack up to what the Republicans have chanted about low taxes all these years. In the 90s business was growing by leaps and bounds-with no regard for the high taxes. So we kept hiring and the owners took less profit. Because it was an investment in ourselves. When Bush lowered our taxes, and the 2001 recession hit, we kept everyone on, and got by — maybe due to the tax break. When the economy picked up we didn’t need to hire anyone and didn’t. The tax savings went into my pocket. What I’ve learned is if a business is reasonably profitable they can hire more people by expecting less profits. The owner needs to make the sacrifice themselves and take less profits. THIS is the Responsible thing to do.
30 Reason60 // Nov 12, 2009 at 7:17 pm
I apologize in advance for being a one-note-jackie for hammering again and again on the budget deficit; But I keep hearing the same trope from conservatives, about this “fiscal conservatism” that they would supposedly practice if in power.
From FY 2009: http://www.wallstats.com/deathandtaxes/
We take in about 2 Trillion in revenue; we spend nearly 2 Trillion on Medicare and SS and debt service; We spend another 900 Billion on Defense; and another 500 Billion on every other thing the government does.
What would these numbers be under President Palin? Jindal? Romney?
There just isn’t any way to restore fiscal balance without cutting SS, Medicare, or defense. All of these are wildly popular, and nearly impossible to cut. Another option is to raise revenue- but Republicans have succesfully made taxes the third rail of politics.
This is why Bush had deficits; this is why Obama has deficits; this is why whoever wins in 2012 will have deficits.
The only message that has any chance of restoring sanity is a message of shared sacrifice and painful choices. If someone can do this without tax increases, great- but so far all we are hearing is vague platitudes and buzzwords about “strong defense” and “don’t tread on me” tax cuts.
31 SpartacusIsNotDead // Nov 12, 2009 at 7:47 pm
Reason60 wrote: “If someone can do this without tax increases, great . . .”
Unfortunately, the reluctance to raise taxes actually lessens the likelihood of cutting spending. As long as people don’t have to pay for government spending, they probably won’t be very judicious in their spending choices.
32 sinz54 // Nov 12, 2009 at 8:40 pm
Reason60:
The best option of all is vibrant noninflationary economic growth.
A growing economy can generate lots more revenue (taxes on income, taxes on capital gains) without the need to raise tax rates.
Figured as a percentage of GNP, the U.S. ran up a much bigger debt during World War II than we’ve run up now. We didn’t go bankrupt. Because the 1950s and 1960s were mostly boom times, and we paid down much of our debts.
That’s how every successful household grows out of its debts too: Earn more money and pay off the debt.
On the other hand, if we can only look forward to a decade of economic stagnation, our debts will pyramid much faster than revenue can be raised. And raising taxes sharply will depress the economy even further.
That’s why we should be more concerned about the rate of economic growth than anything else.
Obama has made the claim that health care reform is necessary to restore economic growth. He has also made the claim that cap-and-trade will have only a miniscule negative effect on economic growth. We’ll see if he’s right.
And we’ll fix his wagon if he’s wrong.
33 Frum-onomics « DBKP FLASH Headline News // Nov 12, 2009 at 9:11 pm
[...] Can Conservatives Govern?, David Frum offers some interesting [...]
34 Chris Balsz // Nov 12, 2009 at 9:17 pm
What did TARP fix? AIG is still too big to fail, we guaranteed Wall Street, two consecutive treasury secretaries used PR tricks that would land any CEO in Club Fed, taxpayers took an even BIGGER chunk of the housing market, student loans are nationalized, the auto industry is almost nationalized, we’re guaranteeing most credit card issuers, we haven’t done anything with regard to toxic assets, unemployment is beyond the worst case scenario in January, and we’ve dedicated something like a fifth of our GDP to what experts at the the IMF call “helicopter money”.
At the same time we declare openly that the world will continue to buy our paper, because they have nowhere else to go.
What problems have we solved? Oh, yeah, we can still get hyped about the Dow…
The primary social benefit of corporations is that they aren’t human beings, so it’s not a sin to kill them off. They could function like watertight compartments on a ship, to seal off destructive failure. Instead we’re all in one room, the Federal room. It is possible for national currencies to fail, and we’re doing what it takes.
That’s the bottom line for conservatives…look at the economic forecast for the next ten to twenty, not just the next election cycle. Yeah I’m a slave to “ideology”…I believe that green paper in my pocket can be exchanged for food and gas and electric power and services. And that’s just wishful thinking, not a law of nature. It works because its a shared delusion.
America is definitely being fast rather than smart, and that’s how people run off cliffs.
35 sir curmudgeon // Nov 12, 2009 at 9:34 pm
The better question, can David Frum get a grip?! Mr. Frum seems to operate on the notion that if it originates in his cranium, then it is gospel. He makes statements such as “It had to be saved” and “Fiscal stimulus was needed” which predisposes that in fact the whole shebang was going down for the dubious reasons he espouses… I wish I had his prescience. There are many, myself included, that respectfully disagree. Don’t get me wrong, the financial, monetary, economic system is on life support but not for the convention reasons put forth in this essay. Frum is reacting to symptoms… chasing windmills, and enjoying riding his favorite hobby horse – dumping on conservatives with which he disagrees.
What a wonderful thing.
36 CarbonDate // Nov 12, 2009 at 9:36 pm
SpartacusIsNotDead wrote: “As long as people don’t have to pay for government spending, they probably won’t be very judicious in their spending choices.”
Paying for current government spending is what we make babies for.
In all seriousness, Reason60 makes a salient point about the need for “shared sacrifice”. Something does need to give with regards to how much we spend on health care and defense. This type of sober realism is what I once expected from conservatives, but the Republican party has grown entirely too ideological to enact any changes which would have a chance of working. The Democrats are quickly demonstrating how limited their toolbox is, and the nation needs conservatives to contribute to the discussion in a constructive, meaningful way. Unfortunately, serious conservative thought, such as I am seeing at this site, is being drowned out by the ideologues in the Tea Party movement. It’s in the Obama administration’s interest and the Democratic party’s interest to make them the face of the Republican party, but it doesn’t serve the nation as a whole to exclude serious conservative thought from the discussion.
37 Reason60 // Nov 12, 2009 at 10:13 pm
Sinz-
You are correct that economic growth is the best method for raising revenue; and you are also correct in that during WWII we ran up even more staggering deficits, and that we paid them down during the succeeding decades.
And if I thought these deficits and this pattern of spending was a one time thing, a temporary change of course caused by never-to-be-repeated occurences, I would probably be ok with it.
But this is not a deviation- these colossal deficits ARE the pattern, they are the norm; a rare budget surplus (as was caused by the dot com bubble during Clinton’s term) is the deviation. Its one thing to go into debt to fix the roof; its another to use the credit card to buy groceries.
We can rein in spending by simple shared sacrifice- raising the eligibility ages for Medicare and Social Security Securityfor example, or closing some of our 1,000 military bases around the world. We could cuts Medicare costs through negotiating with drug companies.
However, when your party’s base is driven by radio entertainers and demagogues like Palin, serious nuanced positions like this can’t get footing.
38 NinjaPadre // Nov 12, 2009 at 10:27 pm
And what effect would it have on the nation’s economy if big states were laying off teachers, halting all road maintenance, and closing hospitals?
39 NinjaPadre // Nov 12, 2009 at 10:39 pm
Don’t know why that quote posted before I commented, so in reference to the above:
The ground truth is that, to a great extent, the money hasn’t been spent yet, and state and local government budgets are still being whacked. As of October 30th in Maryland, according to WaPo: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/29/AR2009102903015.html
In short, less than 10% of the state’s share has been allocated, and because it will be months/years until the funds REALLY make it to their final destination, hiring freezes are still in effect, department budgets are still being cut, and program managers are still planning to run their programs as if the money isn’t there.
40 Do Conservatives Want to Govern? | Republicans United. // Nov 12, 2009 at 11:34 pm
[...] Frum has a compelling blog post at FrumForum today entitled, “Can Conservatives Govern?” He is basically contending with idea that has floated around in some circles that the government [...]
41 Ag80 // Nov 13, 2009 at 12:16 am
I don’t know why this is so hard for “conservatives” or just old regular people to understand:
Capital is capital. Government may influence it’s movement, but the flow will continue, no matter the influence of government. To say that TARP was “indispensable” is a bit like saying that the the citizens of Johnstown shouldn’t worry about the flood after the dam broke.
“Conservatives” can govern as well or as poorly as any other political class. How they view or implement “economic stimulus” ignores the simple fact that money will flow regardless of any impediments.
Let me add that I do understand that government indeed has a role in market regulation, but it has to be aware that it’s role is limited to containing abuse, but not pretending that it can stop abuse.
42 SFTor1 // Nov 13, 2009 at 1:02 am
We have three oligarchies in the U.S. economy today: health care, finance, and defense/aerospace.
We are going nowhere until we break their power. Is there political will in the GOP to take them on?
Tax breaks for the rich have created a minuscule leisure class that has accumulated most of the nation’s wealth and garners most of the nation’s private income. Is there political will in the GOP to go back to Reagan’s tax rates?
43 Foobarista // Nov 13, 2009 at 1:13 am
Actually, there’s a fourth oligarchy: government, at all levels. Is there political will in the Democratic Party to tackle the biggest, most expensive interest group in the country? When the Dems crush government unions and get rid of government contracting laws that favor unionized entities, I may pay attention to their claims to be responsible stewards of our tax money.
Until then, they’re just shilling for Congresscritters and bureaucrats.
As for the question of governing, there’s an odd meme that if you don’t love the government as it exists, you can’t be trusted with running it. This is silly: would you as a CEO taking over a failing enterprise be expected to love the organization chart and compensation schedule? No, you’d study a bit, and then start firing, reorganizing, outsourcing, improving tech, repositioning products, etc.
If all goes well, you save the company, even if many employees get the axe. If not, you get fired. But nobody expects you to “govern” the company by keeping the failing structures in place and not questioning the inner workings of the corporate bureaucracy.
44 garyp // Nov 13, 2009 at 1:28 am
Frum, I gotta hand it to you, you got balls. Not a brain in your head, but a lot of balls.
First, stop calling yourself a “Conservative” you’re not. You’re a “moderate.” A “democrat/communist light. And your kind have proven that you CANNOT Govern. Hell, since you have that deal with Teddy Roosevelt on it so prominent on your site, I must call you a “progressive” which makes you a Big Government Statist, and just as dangerous as Obama and his communist party. Somehow I imagine you aren’t nearly smart enough to grasp that, or the fact that Roosevelt was a disaster, and NOT a Conservative, but a “progressive.”
Conservatives didn’t want to allow the economy to totally collapse. But being adults, with working brains, we certainly knew the world wasn’t going to end if a more measured approach was taken. TARP has been a disaster. It has achieved NOTHING, except to tee up Obama for all sorts of unconstitutional BS. But I know your type doesn’t understand that either, and have never seen a copy of the Constitution.
Conservatives, true Conservatives know exactly how to govern. They do it successfully. Look at states like Texas where Governor Perry, a Conservative, runs a tight ship. I live in Texas, we have about 1000 people a day move here, because our economy is strong, and quality of life is awesome. No income taxes, or other stupid “progressive” BS.
Seven out of every ten jobs created in America last year, were created in Texas.
Look at Sarah Palin’s Alaska. She inherited a nightmare. In two years she cleaned up massive REPUBLICAN corruption, balanced the budget, and got the state on strong footing. When she left office, she left Alaska way better than when she started, and fulfilled every single campaign promise she made, to boot!
Look, I love George W Bush. On foreign policy, he was the right guy, at the right moment in time. But domestically, he was no Conservative. By simply refusing to confront evil (the democrat/communists) head on, he allowed things to happen domestically that shouldn’t have.
Now look at the unmitigated cluster fark we have now! There has never been as big a disaster in human history as Obama. Forget the fact he is a communist marinated since birth in Marxist ideology, the guy is incompetent on top of that!
I will be so glad when the next set of elections get here and we finally get some actual Conservatives in D.C. ! 2010 will be a rout, and hopefully, as more seats are up in 2012, we can give Sarah Palin a solid Conservative majority when she is sworn in January 20, 2013.
45 Chekote // Nov 13, 2009 at 1:29 am
Market players aren’t always rational!
Markets are rational. The large firms knew all along that DC was going to bail them out. They had no downside so it was very rational for them to take high risks which could result in high rewatrdsf. What we have now is privatized profits and socialized losses. We are in deep trouble. And yes, I know that MM broke the buck. A situations that rectified itself in days. The only reason there was any panic was because of Paulson, Bernanke and Bush running around like chickens with their heads cut off screaming “The world is ending”.
46 SFTor1 // Nov 13, 2009 at 2:13 am
In most countries it would be rather sensational to see a discussion of whether the second largest party was fit to govern due to ideological hang-ups and a related stated intention to destroy government from the inside.
Think about it. Pretty crazy.
(Foobar, you could make the case that the political elite is now so beholden to special interests that the United States political system is an oligarchy, but as we still vote and start political parties as we see fit. It’s a pretty weak analysis.)
47 Foobarista // Nov 13, 2009 at 2:56 am
Voting is basically irrelevant in much of the country because districts are gerrymandered to the point where the only “election” that matters is the primary elections, or even earlier invisible political maneuvering. Sure, I could run as the candidate of the Dog&Pony party, and may even get a vote or two, but you can’t win without a ton of cash or at least “name recognition”.
My “un-conservative” reform would not be term limits, which would simply empower the bureaucracy and government unions even more than they already are (as has happened here in California), but a national “Congressional ostracism” or “national no-confidence” vote, in which the citizens could vote – a supermajority required – to replace the entire Congress and ban the current members from running again for a period of several years. This would put some fear into Members that if they abuse the institution excessively, they’ll get tossed, even if they are in completely gerrymandered, “safe” seats.
One rule of democracy: turnover is good, and entrenchment is bad.
48 sdspringy // Nov 13, 2009 at 8:02 am
The financial pain from toxic assets is yet to be realized. Those bad debt or bad bets will be placed on the shoulders of our children. TARP did nothing but move the point of pain down the road.
Instead of allowing financial institutions to fail, thus wiping out the bad debt, the taxpayer will be made the patsy. If allowed to go bankrupt those financial institutions would have had the bad bets wiped off the books, assets being sold to cover those bad bets, and a new institutions rising from the ashes. The shareholder and gamblers would have suffered the loss not every American. Those especially hurt would be those like GE CEO Immelt, who would suffer the greatest. But Immelt is the sugar daddy for the Dems and Obama, so be prepared to see you children pay for his bad bets.
Cash for Clunkers is another fine example. Billed as a tool to remove old gas guzzlers off the road and support car manufactures. How did it work? Well cars were sold no doubt, but the most purchased vehicle, the Ford F150, not a hybrid, certainly not fuel efficient and from a company that did not receive bailout money. And when the cash ran out so did the sales. Moving car sales from Dec into Aug is not a road to recovery. Spending tax payer money buy new vehicles for people who could obviously afford to buy on their own is not a road to recovery.
49 phesoge // Nov 13, 2009 at 9:05 am
I still am having trouble grasping what type of political party David Frum wants the Republicans to become. From Bailouts to Stimulus its seems more and more Frum just wants the Republican Party to be the Deocratic Party Light. I agree with the defense budget comment. Frankly we should close pretty much all of our over seas bases seeing as they are pointless, but on the economic issues Frum offers essentially the same thing the Democrats offer with slight “conservative” insights.
50 phesoge // Nov 13, 2009 at 9:11 am
David argues for the Bails outs and Stimulus and Cash for Clunkers. SUpporting them by sighting the recent GDP numbers, but the GDP numbers when analyzed show very little productivity in the private sector. You can’t have an economic revoery with out the provate sector. Government doesnt produce wealth they merely take it from the provate sector and reallocate it or redistribute it. Furthermore Cash for CLunkers was economic insanity. It basicly took good assetts (used cars) that were still able to be used by the American consumer and said oh jsut get rid of it and go into some more debt and get a new car cause we will subsidize this. This is insane. We need to be paying off our debt. One of the reasons for the economic fiasco was the exeessive spending by the American consumer. We don’t need to be furthering our debt burden with economic dreams like Cash for Clunkers. We need to be paying off our debt and start saving again. T his is the only path to productiuon and prosperity. Furthermore had the banks been allowed to fail smaller banks and more sound banks would of picked up their assetts at true market value instead of the distorted price fix the government is attempting to put on them, and returned the companies to profitability under their new name. Instead we rewarded bad behaviour and have encouraged exessive risk taking.
51 phesoge // Nov 13, 2009 at 9:13 am
But we can thanks Bush for “abandoning free market principles to save the free market” probably the worse piece of legislation ever passed by quite possibly one of the worse presidents of the 100 years.
52 sinz54 // Nov 13, 2009 at 9:30 am
sdspringy:
If those institutions had failed, the commercial paper on which our entire economy runs would have suddenly lost its reputation as a temporary storehouse of value.
When one money market fund “broke the buck” and was in danger of folding (for the first time in the history of such funds), the danger was clear to EVERYONE except ideologues. A run on money market funds would have destroyed the market for commercial paper.
Commercial paper is used to fuel bank ATM machines. It’s used to make credit card payments. It’s used to make payrolls. It’s how large corporations work–on these ultra-short-term IOUs. If the market for commercial paper had dried up, ALL those transactions would have stopped cold. Your credit card wouldn’t be honored anymore. Your bank ATM card wouldn’t work anymore. And your employer, if it’s a large corporation rather than a small family farm, would be unable to pay your wages.
Finally, there was $40 trillion in bad debt–those notorious credit default swaps. It couldn’t be “wiped out,” because there isn’t enough money in the entire United States to pay it off, or to withstand the hit if it had to be written off. It represented more than three years’ worth of the entire United States GDP. If YOU ever go into debt representing triple your entire net worth with no hope of paying it off in your lifetime, you have no choice but to declare bankruptcy. Would you have liked the United States to declare bankruptcy?
ADAM SMITH IS DEAD.
We don’t have an economy based on atomistic transactions anymore, backed up by gold as a neutral storehouse of value. We have an interdependent economy based on the shared assumptions that dollars, commercial paper, and other ultra-short-term instruments are safe. If those assumptions are shaken, our economy goes into the toilet.
I’m tired of arguing this with people who don’t understand how our modern economy works. It’s based on shared assumptions, not gold. And those assumptions can be shaken.
53 sinz54 // Nov 13, 2009 at 9:31 am
Chekote:
What was rational about the “dot.com” bubble???
Why would markets bid up the stock prices of companies to astronomical levels, even though those companies had no earnings???
54 sinz54 // Nov 13, 2009 at 9:38 am
SFtor1:
It’s due to a combination of ignorance and ideological zealotry.
We live in a mixed economy, not a laissez-faire capitalist economy. We live in an economy where the “full faith and credit” of America is all that we have to back up our currency and commercial paper and the U.S. bonds that foreign countries buy. We live in an economy where the promises of the U.S. government (via the Fed and the FDIC) are “as good as gold.” We can get away with this because we’re a superpower, not a Third World banana republic. But if that “full faith and credit” is ever shaken (as it was in 2008 or as it would be in a global thermonuclear war), all of our money instruments would lose much of their value.
Some on the Right just don’t like this, so they pretend that we can have policies that pretend it’s not the case. And since they don’t like it, they don’t bother to learn how it works in practice. Many are unaware that payrolls, credit cards, bank ATM machines, etc., all work on ultra-short-term loans, called commercial paper (which is electronic these days rather than physical paper). If businesses start losing faith in such loans due to the credit markets failing, the whole structure collapses.
55 MI-GOPer // Nov 13, 2009 at 9:49 am
David, I think you’ve got a bad case of Obama-ism.
You question whether or not conservatives can govern based on their negative policy reactions to the marketplace and financial crisis of 2008-09.
Speaking yesterday, former President Geo Bush said it well: “I went against my free-market instincts and approved a temporary government intervention to unfreeze the credit markets so that we could avoid a major global depression. (H)istory shows that the greater threat to prosperity is not too little government involvement, but too much.” He went on to say, “As the world recovers, we are going to face the temptation to replace the risk and reward model of the private sector with the blunt instruments of government spending and control.”
Conservatives can govern. It might not be the way nor the policies that you and some of Obama’s Chicago Thugs would prefer, but they can govern with the right leadership. You have a penchant for reducing the conservative or GOP position on issues advanced by Obama to “Just Say No” –which is a theme and charge repeated just about every day at the DailyKos and the DemocratUnderground.
It doesn’t just doesn’t sell, David. GOP leaders have advanced many alternatives to the latest “perfect” solutions presented by the Democrats. It politically benefits the White House and Obama to ignore the policy recommendations and reduce them to “Just Say No”.
But why you? I thought you were interested in building a new majority of conservatives in America… and frankly, David, we all need to start by agreeing that digging these liberal holes deeper isn’t a good solution for the moment, for the day, for the quarter or for the next generation. Remember the Obama promise that if we passed the Stimulus Spending Spree, it’d keep inflation from going over 8%?
You claim that “TARP was indispensable”. Some trolls here claim that if we hadn’t done TARP, Goldman would have failed. So what? I watched Goldman “experts” sell all kinds of derivatives in the multifamily housing and bond markets for years… helping state agencies shave 35-80 basis points off a financial instrument here, shave another 55-75 basis points off another there… meanwhile, raking in the fees while telling the client that if the market goes north, you make money… if interest rates go north, you make money… if your exposure on this derivative doesn’t make you money, at least you’ll be held harmless from bond buyer speculation… blah, blah, blah.
Goldman was doing what Goldman does best: selling fear and speculation. And they made a ton of money off it all, too. In Michigan alone, with just one state agency, Goldman fees amounted to $3.9m in a 5 yr period from Oct 2000- Sept 2005. “Savings” to the state agency’s portfolio? About $6.1m. When asked in public testimony, the state agency director at the time quipped something like “You gotta spend money to make money”. Meanwhile, that $4m could have been leveraged to build an additional 280 units of housing for the poor in a state where the waiting list for affordable housing is 38-64 months in most places.
We all know well that liberals are quick to spend other peoples’ money, especially taxpayer funds. Just because conservatives don’t see the wisdom in that approach doesn’t translate into they can’t govern.
We have to stop digging these liberal holes. AIG and other TARP recipients are now a concern to the Obama WH because the Obama WH’s anti-executive compensation controls are resulting in a brain drain before the feds get TARP repaid. We reap what we sow. Stopping the insanity has to be the first step toward a return to responsible govt… for you to miss that and miss the lesson of your former boss is a shame. Understandable on your part, but still a shame.
56 sinz54 // Nov 13, 2009 at 9:51 am
garyp:
Teddy Roosevelt’s face is on Mount Rushmore.
History has made its judgment about him–he was one of America’s very greatest presidents.
We are conservatives, NOT reactionaries.
Stop fighting this losing battle to return our economy to the 19th century.
History has made its judgement there too: Antitrust laws, the income tax, the social safety net, the Federal Reserve and the FDIC are all good things. We instituted them for good reasons, not because we all went crazy or because were bamboozled by Commies.
57 MI-GOPer // Nov 13, 2009 at 9:57 am
phesoge @51 says: “But we can thanks (sic) Bush for “abandoning free market principles to save the free market” probably the worse piece of legislation ever passed by quite possibly one of the worse presidents of the 100 years.”
Not true.
Carter was the worst president in the history of our Republic. He beat out Andrew Johnson, the hapless Southerner who followed Lincoln.
As for the worst legislation ever passed by a president… I’d recommend you get a community college in Wisconsin for a fast course in civics, phesoge. Presidents don’t pass legislation; that’s Congress’s job. Presidents either sign ‘em or veto ‘em. I thought libertarians were a smarter bunch? You’re letting your team down, dude.
58 NormD // Nov 13, 2009 at 10:46 am
“Stop fighting this losing battle to return our economy to the 19th century.”
Stop fighting this losing battle to keep our economy mired in the early 20th century.
“History has made its judgement there too: Antitrust laws, the income tax, the social safety net, the Federal Reserve and the FDIC are all good things. We instituted them for good reasons, not because we all went crazy or because were bamboozled by Commies.”
“Good things” Huh? Good is a moral word. The question should be are these effective things. If so, keep them, if not, update, discard or replace them. And of course beware unintended consequences. Every one of these “good” things has had “bad” side effects.
59 Churl // Nov 13, 2009 at 11:17 am
Sinz54 asks, “What was rational about the “dot.com” bubble???”
The rational part was when reality showed up and the bubble popped. Markets may be rational, but nobody says they’re perfect.
60 KL7212 // Nov 13, 2009 at 12:01 pm
Sinz said:
>History has made its judgement there too: Antitrust laws, the income tax, the social safety net, the Federal Reserve and the FDIC are all good things. We instituted them for good reasons, not because we all went crazy or because were bamboozled by Commies.
Good point. Conservatives shouldn’t go back to the 19th Century. They ought to take a page from the mid-2oth.
The Republican Party and, by extension, the Conservative movement, needs to accept that Americans, by and large, like Big Goverment. The Republican Party needs to be about consensus building and competent governance which acknowledges the role of government in peoples’ lives while excercising prudence and good judgement about its reach.
61 Oldskool // Nov 13, 2009 at 12:07 pm
“The Republican Party needs to be about consensus building and competent governance which acknowledges the role of government in peoples’ lives while excercising prudence and good judgement about its reach.”
That’s worth repeating. But, it would leave the ranters and snarlers with nowhere to go… another good reason for it.
62 KL7212 // Nov 13, 2009 at 12:24 pm
>“I went against my free-market instincts and approved a temporary government intervention to unfreeze the credit markets so that we could avoid a major global depression. (H)istory shows that the greater threat to prosperity is not too little government involvement, but too much.”
This, to put it mildly, is an utter crock spewed forth by a man who is, arugably, the worst President of the last 80 years.
Has any administration since the mid-1960’s extended the reach of government in scope, size and cost more than the second Bush Administration? (Hint: the answer is the opposite of yes)
President Bush lavished all sorts of favors, perks and subsidies on favored industries and wealthy individuals at the expense of the American taxpayer. He enacted, with majority support from his party, a wasteful set of tax cuts, a huge expansion of Medicare, two costly, open ended foreign wars all while giving us the largest expansion of the powers of Federal law enforcement agencies in history.
Free market? Small goverment? By what standard?
63 KL7212 // Nov 13, 2009 at 12:27 pm
Besides, I’m still waiting for someone here to tell me what exactly the phrase “free market policies” means.
I mean, Scandanavian countries are “free market” societies. So is the rest of Western Europe. And Australia. And New Zealand. And Japan…etc.
64 Reason60 // Nov 13, 2009 at 1:31 pm
Echoing some of what KL7212 mentioned:
It is a fantasy to pretend we are seeing a battle between true “free market” capitalism, and socialism. What we have now is corporatism, whereby private interests have a near-stranglehold over the government, regardless of which party is in power.
Goldman Sachs, McDonnell Douglas, Blackwater; these companies do not want free market capitalism, they want to become teat-sucking favorites of the government.
The best way to restore freedom to the marketplace would be to shut off the spigot of money to these entities, forbid them from lobbying, and break them into smaller pieces so whatever damage their failures cause, it would not be systemic.
65 dragonlady // Nov 13, 2009 at 1:58 pm
Frum, I was about to chalk up this article to opinion differences of policy until you defended the cash for clunkers program. I mean—seriously?! If you’re going to take aim at conservative policies, at least do so from an empirical basis. Or perhaps you can’t because it would defeat your own arguments. Edmund’s study on this shows that car sales would have more or less been the same without it, and all it did was shift purchases by a few weeks, compressing sales of a few months into a few days as folks waited for the $4K rebate which really translated to $24K of tax payers $/car. It’s not clear at all this program increased car sales over the year from what is normal, nor boosted car production from the norm. Not to mention the unintended consequences of hurting used car dealerships, and destroying real capital—that is, used cars that someone else can use or sell. Morgan Stanley economists actually think this program hurt non-auto consumption which fell from a rise the month before the funds from this program were dispersed. At best, this was an unnecessary program.
As a pragmatic conservative, I was neither against TARP, nor a targeted stimulus per se, but I was against the porkulus bill that did very little to stimulate anything. The WSJ shows data– the stimulus bill did squat: http://online.wsj.com/article/SB10001424052970204731804574385233867030644.html
Consumption declined after passage of the stimulus bill, and gov’t spending that directly did contribute to GDP growth between the 1st and 2nd quarter was mostly defense spending. So if you ask whether conservatives could govern, I think they could have come up with less costly and more targeted stimulus bill. And it’s just not those extreme right wing conservatives yahoos David—the majority of people polled do not believe the stimulus has worked either, and are against any type of second stimulus package. I can only conclude you drank the Obama-media kool-aid long ago.
66 Chris Balsz // Nov 13, 2009 at 4:19 pm
By guaranteeing to rescue the top banks in America no matter what, the Federal Government is now the entity that is overextended. We are now going to have lethal inflation. And the next slump or crash is going to be brutal, because no commercial lender is going to put their neck out when the Feds will have to take the burden. And we will have one, and we will have one before we can recover the splurge of this failed bailout program.
When a currency collapses the only proven way out is to scrap the government that issued the paper.
67 WillyP // Nov 13, 2009 at 5:56 pm
As usual, this is a false debate between passing TARP and the collapse of America.
Closer to the truth is the assertion that TARP has made America significantly weaker. It has hurt our economy massively through creating a moral hazard and furthering embittering the middle class to the capitalist (i.e., banking) establishment.
TARP, and the entire central planning mentality behind it, is what will ruin America if anything will. Those purported “conservatives” who do not understand this plain fact will lead us down the path of destruction, with all good intentions.
68 CO Independent // Nov 13, 2009 at 6:39 pm
David, you really should move this blog over to HuffPo. There is nothing remotely conservative about your positions.
TARP as it was structured is indefensible to anybody but an unprincipled banker, who favors privatizing gains and socializing losses, or to a big government liberal, who sees TARP as a necessary price to pay to take over the finance sector.
The notion that America would have collapsed if Goldman failed is a fallacy. The banking crisis could have been averted by providing liquidity on a temporary basis, then liquidating the insolvent institutions. As a result of leveraging the Treasury to save Goldman and other big banks, America now faces at least a decade of economic stagnation, zero or negative returns on investment assets, deflation of leveraged assets like housing, an anemic job market, and a declining currency. The middle class is going to watch their wealth and purchasing power evaporate, while bankers on Wall Street will collect billions of dollars in bonuses, courtesy of the U.S. Treasury.
There is nothing conservative about this plan. This is anathema to a conservative.
69 KL7212 // Nov 14, 2009 at 7:52 am
“TARP as it was structured is indefensible to anybody but an unprincipled banker, who favors privatizing gains and socializing losses, or to a big government liberal, who sees TARP as a necessary price to pay to take over the finance sector.”
What if it’s not either of those things, COI? What if it was simply an extraordinary measure to prevent a great calamity?
I supported TARP but I hate it. I hate the fact that the bankers who got us into this mess now view themselves as survivors rather than perpetrators. I hate the fact we’ve poured $750 billion into rescuing large businesses from their own errors in judgement while continuing to lobby in Congress against the sort of regulation that would have prevented this mess in the first place.
I hate the fact that these p****s have reduced credit lines and jacked up interest rates on people like me who’ve managed their credit wisely and always paid their bills on time after taking MY TAX DOLLARS. Just when I needed my lenders the most–my income has been cut in half since 2007–they’ve piled on and made my life far more difficult while continuing to pay lavish bonues to themselves ON MY DIME.
But I still supported TARP because I think this awful recession would have been a depression without it.
70 SFTor1 // Nov 14, 2009 at 1:47 pm
Churl sez: “The rational part was when reality showed up and the [dot.com] bubble popped. Markets may be rational, but nobody says they’re perfect.”
The free market created the bubble, Churl. We can agree on that, right?
Now the supposed benefit of a free market is that it allocates resources effectively, or at least more effectively than other systems. The free market system failed to allocate resources effectively during the dot.com and real estate bubbles, and will continue to behave in exactly the same way going forward.
Now I leave it to you to figure out whether anyone stands to gain from bubbles, and whether we will have more bubbles in the foreseeable future.
71 ottovbvs // Nov 15, 2009 at 11:43 am
“One attendee said something very thought-provoking. “Maybe it was a good thing we weren’t in power then – because our principles don’t allow us to respond to a crisis like this.”
…………This alas is the position of much of the conservative movement today……….every day their reps elected and unelected stand up and voice opinions that are basically nihilistic and antideluvian in 21st Century America……and the soundbites get replayed at venues like this……..The GOP is simply unfit for government at present……..and the country knows it whatever the latest opinion poll says about some aspect of policy about which most of those polled have skimpy knowledge at best.
72 sinz54 // Nov 15, 2009 at 12:58 pm
Reason60:
I agree to this extent:
Any corporation that is “too big to fail” is too big to exist in its present form.
Unfortunately, it’s gotten out of our hands. The Credit Default Swap (CDS) market was an international market of speculators. AIG, the giant insurance firm that got bailed out, is a multinational firm with headquarters in New York, Europe, China, and the Middle East. I don’t know how to break up a firm like that with unilateral U.S. action.
It seems to me that the “too big to fail” problem with multinationals will require negotiating some kind of new international agreement.
73 sinz54 // Nov 15, 2009 at 5:51 pm
WillyP:
There was no alternative.
In September 2008, the economy was crashing into a depression. The collapse of the market for commercial paper would have caused the entire economy of the United States (except for some isolated farm markets) to grind to a halt.
How high would unemployment have to go before you would modify your free-market ideology with government action? 12%? 15%? 20%?
What I did not see from congressional Republicans in the fall of 2008, was any recognition of the severity of what we were facing. They reminded me of the crew of the Titanic, assuring the passengers that “this ship is unsinkable,” even while the ship was listing badly and sinking into the water.
We were headed for a depression. Really. Not quite as bad as the one in the 1930s (because today we do have a social safety net), but certainly as bad as some panics in the 19th century (in which unemployment rose to some 15%).
74 WillyP // Nov 16, 2009 at 9:04 am
Sinz, your history is wrong, as well as your theory.
The crash of 1929 led to a mild recovery shortly thereafter:
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20091018/REG/310189995/1011
We’re at about the same point.
What was it again about that “stimulus?” Unemployment won’t go over 8%? We’re at 10% and climbing. You just wait until the commercial real estate market collapses. It’s coming. Then we’ll hit 12%, at least.
You cannot plug bad paper by printing more money. There M-U-S-T be liquidations. I’d rather liquidate all at once and then rebuild. Putting it off further and further serves only to dispirit the population. Wages must fall. We all must consume less and save more to repay debt. There’s no ready-made solution.
75 sinz54 // Nov 16, 2009 at 4:48 pm
WillyP:
OK, fine.
What would YOU do about it, if YOU were the POTUS today? Just sit back on your laurels and wait for the economy to self-correct?
Conservatives were recommending payroll tax cuts and other tax cuts. Even Larry Kudlow, who’s no liberal. Kudlow knew that government action was needed; he just disagreed with Obama as to just what action.
You suggested providing “temporary liquidity” to the financial institutions before phasing them out. Well, there was some $40 TRILLION dollars in Credit Default Swaps–that’s triple the GDP of the entire United States for a whole year–which were feared to be worthless, since they had been tied to securitization of subprime mortgages. There was no way for the U.S. to liquefy that market–we don’t have the money.
All we could do is prop up the system and let it keep running, rather than having it fail and having the entire rotten structure of derivatives collapse.
76 WillyP // Nov 17, 2009 at 9:38 am
First of all, tax cuts are not what any normal person calls “intervention.” It’s the abatement of intervention.
$40 trillion which was never there. So let it default. Ask yourself the question – what does having worthless paper retain a huge nominal value do for anyone? I can write “$40 trillion” on my napkin, and it remains a napkin, valueless as any other napkin. If you say, Loans are made against that napkin!, well, yes – that’s the whole problem.
I never suggested temporary liquidity. If I did, I’d like to know where. I am for liquidation, so that assets reflect their real market prices, and we can rebuild in a sustainable (unrelated to the sentimental “green” use of the term) manner. We need to reform entitlement programs, and slowly phase them out before they crush my (future) children’s generation.
“All we could do is prop up the system and let it keep running, rather than having it fail and having the entire rotten structure of derivatives collapse.”
That’s the Frum line, to be sure. Can’t say I consider him a leading light. In any event, the engine will seize up, whether you like it or not. I’d rather have a 4 cyl. stall than a 12 cyl; it’s less complicated and cheap to fix.
77 WillyP // Nov 17, 2009 at 9:41 am
err, that is, cheapER to fix.
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