THE STIMULUS SHOULD GO BACK TO THE DRAWING BOARD
The chances of deep sixing the stimulus monstrosity and starting over again are as near to absolute zero as you can get in politics. The reputations of Speaker Pelosi, Harry Reid, and the president himself are on the line and a defeat of the conference report in the senate (still a possibility after the House tries to restore many of the cuts made by the senate), would be very damaging to that triumvirate, especially the president.
But if ever there were a case where the leaders of the Democratic party should swallow their pride and take the hit on their credibility by tearing up this piece of legislation and starting over, this is it.
Not much of a chance of that happening what with Obama going on national TV tonight and a cloture vote scheduled in the senate tomorrow. So Obama will probably ratchet up the fear mongering to heights not seen since Democrats ran commercials accusing Republicans of wanting to kill poor children and force old people to eat dog food. It is one thing to tell us the truth about our dire economic straits. It is quite another to try and make people believe that only by passing his $900 billion panic panacea will we avoid “catastrophe.”
And what are the consequences of all these dark nostrums being purveyed by a candidate who usually spoke in optimistic and hopeful language on the campaign trail?
Brad Blakeman, a senior aide to Mr. Bush from 2001 to 2004, said the new president’s language is immature.
“It’s not presidential. An American leader needs to be hopeful and optimistic - and truthful. Everything he says is parsed; everything he says is searched for deep meaning. When he goes to ‘DefCon 5′ on the economy and says that we’re on the brink of catastrophe, it’s absolutely insane.”
With his fiery rhetoric, the new president runs the risk of terrifying consumers and investors, which could depress the economy even further. While the economy is bad, it is a far cry from Great Depression levels, when as many as 30 percent of Americans were unemployed, compared with the 7.6 percent now.
Every president must walk a rhetorical tightrope when talking about the economy, a lesson Mr. Bush learned quickly, being bashed just after taking office for delivering somber news. The United States was just entering a mild recession - it had been in one, it turns out, for about nine months - and the new president said so.
Liberals went berserk.
“Every time we turn around, this guy is bad-mouthing the economy. Is that lifting our spirit or dumping on it in order to sell his tax cut?” liberal comentator Bill Press said on CNN. Newsweek’s Jonathan Alter, in an article headlined “Thanks Ever So Much, President Poor-Mouth,” said, “Even if Bush turns out to be right in his predictions of gloom, that doesn’t mean he was right to make them.” The New York Times lectured Mr. Bush, saying that presidents were supposed to be “cheerleaders for the nation’s economy.”
Of course, when Bush began to tout his economic accomplishments in the lead up to the 2004 election, he was skewered for being too Pollyanish and for not being “realistic.” So much for being a “Cheerleader” for the nation’s economy.
I made this point in my PJ Media column today:
That’s right. The candidate of “Hope and Change” has decided to be a president who espouses “Fear and Loathing.” Fear of financial Armageddon unless we do as we are told and blindly give in to his $900 billion panic panacea for the economy and loathing of the opposition — an opposition Obama unfairly portrays as opposing him out of spite and because a popular talk radio host is telling them what to do.
It is a far cry from the way Franklin Roosevelt and Ronald Reagan handled economic crises that in some ways were more dire than what Barack Obama is facing today. Both men came to office at a time when the American spirit was limping and lost. Both men were confronted with unprecedented economic problems (double digit inflation and interest rates in 1981 were an impossibility according to the books).
And yet, both men eschewed fear mongering and sought to lift the people out of themselves in order to bring back hope and allow the natural optimism of the American people to come to the fore. Arguments rage to this day whether FDR’s massive spending helped or hurt the economy. And Reagan’s tax cuts began a spiral of deficits that, save for a brief period in the 1990s, fostered a climate of “let the kids pay for it” on Capitol Hill.
But few can argue that FDR and the Gipper didn’t succeed in changing the dynamics of the crisis they were facing by inspiring the people to believe in themselves again and that better times were ahead.
Obama does not want Americans to believe in themselves. He wants them to believe in him…”
Now let’s be realistic and grant President Obama some leeway in this matter. A leader uses every tool at his disposal in order to succeed in getting the public behind him. And fear mongering is one way - the dirty, easy way - to accomplish that goal. A much better way to is to inspire hope and optimism in the future, “lifting the people out of themselves” as I say in my column. But if Obama can’t find the words then he is left with trying to scare us into supporting him.
The problem is that if the stimulus doesn’t work - and there are many smarter than you or I who say it won’t in its present form - then the American people will feel betrayed. If catastrophe occurs after warning that the way to avoid it was to pass his stimulus bill, only the true Obamabots will stick with him because he will have lost everyone else. He has promised relief if the bill is passed and when it is not forthcoming, his credibility will take a hit from which it will never recover.
The risks for Obama are considerable. He and the Democrats will have no one else to blame if the package fails to boost the economy. Obama himself has said his first term can be judged on whether it succeeds, whether it creates or saves the 3 million to 4 million jobs he promises.
And if the economy fails to show marked signs of improvement — a possibility indeed — Republicans will have a megabillion-dollar “I told you so” in their pockets, just in time for the 2010 midterm elections and Obama’s own reelection bid in 2012.
Sen. John Cornyn of Texas, chairman of the National Republican Senatorial Committee, said the fallout from a Democrat-only bill will be “squarely in the president and the Democratic leadership’s lap.”
The flip side of that risk belongs to Republicans. The economy may very well create 4 million new jobs in the next few years. It would create 3 million in the worst of times anyway. Obama has set the bar so low that if he succeeds (even if the unemployment rate continues to go up) the GOP is toast in 2010.
But the real problem remains the rank cynicism of Obama in carrying on with business as usual despite his promises to change things in Washington. His personnel problems, his refusal to even listen to Republicans who pointed out some $150 billion in pure pork in the stimulus bill, and his ceding responsibility for the crafting of the bill to Nancy Pelosi and David Obey - two of the most far left liberals in the House - all show a leader both unsure of himself and a betrayer of the public’s faith in him. Couple this with his exaggerated rhetoric and dire predictions regarding the bail out measure and you have a president whose biggest boosters are even starting to ask questions about his competency.
After a distinctly rocky start to his presidency, he has admitted he “screwed up” and is returning to one thing in his political career that he has perfected – campaigning. In Elkhart, Indiana, today and Fort Myers, Florida, tomorrow, Mr Obama will try to seize back control of the political agenda with question-and-answer sessions with voters in two of the swing states that gave him victory.
Already, however, he is struggling, and the product he is now selling is not himself but a near-trillion-dollar economic “stimulus” package loaded with pet Democratic spending projects that has awakened slumbering Republicans in Congress and is now supported by barely a third of Americans. In between the Indiana and Florida stops, he will return to the White House for a prime-time press conference in which he will appeal directly to citizens and seek to rekindle the magic of his campaign.
Which President Obama will turn up remains to be seen. Last week, he began as a wide-eyed bystander buffeted by events as he lost his key confidant, Tom Daschle, amid an uproar over $128,000 in unpaid taxes for a chauffeur and limousine. Mr Obama and his advisers believed the oversight did not matter because the over-arching virtue of the new White House could not be doubted. He was wrong and seemed out of touch in believing that ordinary people would not notice the contrast between the practice of politics as usual and his campaign slogans against it.
The White House is now in damage-control mode. After Robert Gibbs, Mr Obama’s spokesman, was lampooned by Jon Stewart on The Daily Show as a non-answering automaton in the mode of President George W Bush’s press secretaries, former campaign strategist David Axelrod was dispatched to television studios to make the stimulus case. However, this was tinkering around the edges.
As Jimmy Carter found out to his detriment, these early weeks and months in the White House set the tone for the entire term of office. Carter spun his wheels for 3 months, causing even the Washington Post to ask who was in charge. Carter first tried an energy package which got bogged down in committee. He then tried a little stimulus of his own but he allowed the process to get so out of control that he eventually scrubbed the whole plan. In short, nothing was done. Carter had wasted the first three months of his presidency and could never get the momentum back. He was basically judged a failed incompetent before the cherry blossoms had bloomed in the tidal basin.
Obama goes before the press tonight to try and save his stimulus and perhaps even his presidency. He may eventually get his bill. But it will almost certainly be a straight party line vote with one or two Republicans in the senate jumping ship. And then?
More bailouts as Treasury Secretary Geithner will be forced to go back to Congress this week and beg for more TARP money to save our banking system. And then it will be the automakers turn again in the spring, and the the states again next fall, and who knows what other industries who are too big to fail or who are generous with their donations to Democratic candidates will be able to milk the taxpayer in this crisis.
Will every bailout bill be a “catastrophe” if we don’t support it? How often can Obama go to the well and drink from the cup of fear and loathing before the people simply tune him out and identify as him as just another partisan politician?
Sooner than he could possibly dream.
What’s really ironic is that the post right below about saving the banking system was completely terrifying. So reading these two posts one after another was like emotional whiplash. Obama’s in a tough spot. If he’s too optimistic then people will get complacent and start believing right-wing talking points. Because you tend to be honest blogger you cause your readers the mood-swing I just experienced. You’re not doing it right. You’re supposed to call things like climate change and economic collapse “moonbat” conspiracies.
I think we have two very different challenges; one is the stimulus and the other is saving the banks. The two are mutually exclusive and I believe (unlike most on the right who think the banks are holding on to the assets hoping for a bailout) that federal intervention is a foregone conclusion and necessary. To what extent, I don’t know. But the banks are salvageable that much is certain.
The stimulus is something different. I support some of it but not enough to recommend it. It’s about 300 billion too heavy in my opinion. And much of the tax cuts are misdirected.
I can see the need for assistanceto the states and even some of the health and education spending. But it is just too laden with obvious pork and needs to be tossed.
ed.
Comment by Mike — 2/9/2009 @ 9:53 am
I agree with everything you say, but I doubt the bill will be reported as a failure (even if it clearly becomes one) and I doubt this media will hold Barry accountable. As I recall, FDR kept blaming the courts for the lingering depression and got away with it. I am also relieved that a real stimulus is already in the economy, namely the halving of fuel costs; unfortunately it may create all the recovery that Barry needs, and will cement pork as stimulus for woeful generations to come.
Comment by Mark30339 — 2/9/2009 @ 10:13 am
Here is the nut quote from you:
“The problem is that if the stimulus doesn’t work – and there are many smarter than you or I who say it won’t in its present form – then the American people will feel betrayed.”
I cannot for the life of me understand why Obama has become so invested in this monstrosity. Maybe it is his inexperience, maybe it is hubris, maybe he really believes this legislation will work, which I doubt perhaps because I don’t want to think him this gullible. Regardless, Obama seems determined to use all means at his disposal including the fear-mongering you cited. Maybe that is an attempt to avoid Carter’s fate. I don’t know but doubt it will work.
It is obvious the president will not back away from this bill. He appears ready to sacrifice his chances of success for reasons I cannot begin to fathom. It is tragic, not for Obama so much as for the nation.
When you have people like Krugman telling him its not enough, I think he believes he’s being reasonable. But he is being disingenuous with all that unrelated spending because he knows most of it could never pass if it was standing on its own. The only way about 300 billion of that spending could be passed if he attached to a bill that he could scare people into voting for.
ed.
Comment by jackson1234 — 2/9/2009 @ 10:40 am
There is not one word in your post — not one single word — that indicates you have a clue about how bad things are on Main Street.
Instead it’s artful political posturing, the immaturity of the president’s rhetoric and bemoaning the next special interests in line for tin-cup handouts.
As un-Republican as it seems, might I suggest that you actually get off your high horse and get out and about to try to gauge the depths of the malaise?
I’m going to suggest that if doing so is not a humbling experience, then maybe you will bring some down-to-earth perspective to your subsequent pontificating once you’re comfily back on that high horse.
I know how bad it is. But you’re running around like a chicken without your head when these are the times that dictate prudence not panic. We are in a helluva mess and a bill that is going to make things worse would be true “catastrophe.”
You would probably be surprised as to how much of that stimulus I support. I would even put back some of the stuff that was cut. But there is at least $200 and closer to $300 billion in that bill that should never have been put in there - that the only reason a lot of what is in there is included is because Obama and the Democrats wouldn’t be able to pass it unless they could attach it to a bill they could then scare people into supporting.
It is the worst kind of dishonesty to claim otherwise. I personally would prefer a little more tax cutting and a little less spending to green up the government - not that it isn’t a good idea but that it belongs in a separate bill. But I could live with a lot of the spending to help the states, health care, unemploymnet benefits, and the like. Education is fine but giving money to Harvard or any other rich school sitting on multibillion dollar endowments and building funds would be a slap in the face to taxpayers. Give money to Milwaukee to build schools when they have 15 vacant right now? That’s an example of “stimulus?” Please.
No - if we are going to be panicked into passing this monstrosity I would prefer to see it defeated and have the Congress and president start over. Not going to happen. Obama will get his money for the NEA and ACORN, for union only construction, for bailing out states above and beyond what I mentioned earlier because of poor management, and a host of other provisions that will not add one iota to the economy but reward Democratic constituencies while porking up the bill.
Instead of accusing me of - whatever - you should be asking yourself at least a couple of the questions being raised about this bill. Evidently, you prefer blind partisanship to intelligent citizenship.
ed.
Comment by Shaun Mullen — 2/9/2009 @ 1:16 pm
Republicans never fear monger. Never, I say!!
Don’t think they ever went quite this far although Cheney came close to saying that electing Democrats would mean another terrorist attack. It was crudely implied.
ed
Comment by bsjones — 2/9/2009 @ 1:59 pm
The economy will recover. The President just needs to stop made mouthing it.
Afghanistan will improve. The media just needs to stop bd mouthing it.
Border security will improve. The Republicans just need to stop bad…
Comment by bsjones — 2/9/2009 @ 2:03 pm
Rick,
The Banks caused the Banks to fail. Unfortunately, everyone I know (that is everyone not in Wall Street banking) are the ones suffering.
I do not support saving the banks until the crooks and liars that run them are in the unemployment line or in jail.
I do support unemployment benefit extensions for car salesman.
I do support cram downs for the banks that committed fraud and brought down the global economy in the process.
Summary: Many ordinary people are suffering because of the fraud and corruption of a minority of irresponsible Wall Street criminals. The criminals should suffer, not the retired Catipillar worker who lives three doors down from you in Indiana.
Comment by bsjones — 2/9/2009 @ 2:15 pm
It’s unfortunate that ‘just let the business cycle follow its normal course’ is not an acceptable answer to the American people.
Comment by gregdn — 2/9/2009 @ 2:17 pm
The economy will recover. The President just needs to stop bad mouthing it.
Afghanistan will improve. The media just needs to stop bad mouthing it.
Border security will improve. The Republicans just need to stop bad mouthing…
Sorry about the mistakes in the other post…
Comment by bsjones — 2/9/2009 @ 2:36 pm
Gauge the depth of the malaise by walking about? You’d think somebody would use, I don’t know, statistics maybe, to gauge the depth of the malaise. Or is this that new reality based science I’ve heard some talk about?
Any chance at the press conference tonight any unpatriotic, disloyal members of the press ask any difficult questions? As an example, now that O has said, as it applies to banks, that taking money gives the US the right to set employee salaries will he now expand that to all organizations that accept government money? And shouldn’t that be retroactive to apply to any items in the tax code that provide industry breaks? If you’ve already taken money, why should you get a pass that the newbies don’t get? I’m just dying to know how much O believes Sean Penn should get for his next picture.
Comment by EBJ — 2/9/2009 @ 3:07 pm
Shaun,
There are a lot of Main Streets in this country. Some are hurting more than others. States with powerful unions aren’t doing well. Texas is doing OK. California is not.
I think it’s fair to say California’s problems have been building for quite some time. Its citizens (think: Nancy Pelosi) legislated themselves into a hole; Texans legislated more like adults.
We agree that we need to help our fellow Americans out in time of need. That’s who we are as a people. We’re givers. But, we also aren’t fools.
The question that we’re trying to answer is: How much sacrifice should we ask Texans, and Kansans and Iowans and Alaskans to possibly suffer in the long term to help California, or Indiana, or Florida now? How much should a small business owner in Texas sacrifice to help Indiana build a water park with a slide?
Isn’t it logical to take the utmost care to make sure that whatever actions we take will help those who need the help (funding ACORN solves no problems and feeds no families)and that what we’re doing doesn’t send even more families into their own hole a year from now?
What in the world could be possibly wrong with deliberating such a basic question until a reasonable (not perfect) answer is found?
How can someone who believes in doing the least amount of harm be criticized as “sitting on a high horse?”
Comment by sara in va — 2/9/2009 @ 3:52 pm
I think it’s very generous of Republicans to ensure that when the recovery comes the Democrats will receive all the credit and Republicans none.
The recession will end eventually, almost certainly before the end of Mr. Obama’s first term. The GOP won’t even get credit for an assist.
GOP sets the economy on fire, refuses to call 911, then actively obstructs the fire department.
This is a good idea why, exactly?
Comment by michael reynolds — 2/9/2009 @ 6:58 pm
BHO is not going to cheer anything in the U.S. He’s determined to destroy it and has the retarded democrats to help him. Four years from this date Chavez will look like a reasonable leader. Two years from now it will be dog eat dog and the man with the most physical power/firearms wins.
Quit planning for the future, there will be none.
Comment by Scrapiron — 2/9/2009 @ 8:12 pm
Obama has never run as much as a popsycle stand. I’m not sure Rick Moran has either.
There should be absolutely nothing in this bill that does not create stimulous (jobs) in the next 24 months. We plainly cannot afford to waste anything. Money to help states with unemployment benefits, yes, because we are a caring people. And even poeple using unemployment benefits spend money.
Government payroll jobs cost taxpayers…they don’t produce. However, if we build power plants and modernize electrical grids, we can at least see something for our money 10 or 15 years from now.
We need to build confidence in our markets. Cut capital gains to 0 for 3 years, then ease it back up to 15% after 5 or 6 years. Cut corporate taxes to 15% for 5 years, raising it back to a maximum of 25% in 10 years. These things must be engraved in stone. Business loves certainty. Global corporations will come to the U.S. bringing good American jobs with them. We are still the largest, most important economy in the world. If the markets start to improve, people feel their wealth coming back. They will spend their cash. But we need to stress prudence. Borrow only for major long term capital, homes and home improvement…not flat screen tv’s. Pay for fun with cash.
As far as the banks are concerned, mark to market needs to be adjusted immediately. Just because the value of these securitized traunches can’t be readily determined, doesn’t mean they are worth nothing. There are homes and properties backing these derivatives. Let the banks value them at 50% on their books. the Feds can assume 25% collateralized by bank stock and the banks collateralize the remaining 25%. If they can’t even do that, they should fail.
Some of these percentages would be adjusted for accuracy, but this is a business way of helping our economy. What we have been given is a politicians boondogle. It is disgusting.
Comment by cdor — 2/9/2009 @ 10:10 pm
Sara,
Interesting post. If you are saying it is important to intervene in the economy, but, it is even more important to do so with careful deliberation, then, I agree wholeheartedly.
As the Speaker of the House, Nancy Polosi has more control over Federal Legislation than anything directly related to California per se. Like you say, the problems of California have been building over time, but the buck should probably stop with the chief of the Executive Branch of that state. I like to call him the Governator.
We need to demand much from ourselves as citizens and even more from those who represent us during this time of crisis. I for one do not think it is acceptable to hope for Democrat failure so we can capture the Presidency in four years. Instead we should do everything possible to fix our broken down democracy.
Comment by bsjones — 2/9/2009 @ 11:00 pm
We are already selling off my children’s future with these bailouts… why don’t we just cut to the chase and sell the kids right into slavery now? Let’s see, if we could get $20,000 each, with maybe 50,000,000 kids in the country, that’s a cool trillion right now! Unfortunately, we would flood the slavery market, and the price would go into the toilet. So let’s stick with bailouts. They’ll figure out how to earn those bucks somehow.
Comment by Simpleman61 — 2/9/2009 @ 11:15 pm
Anyone interested in a literate Democrat view on how the Republicans are handling the stimulus bill can look here:
http://robertreich.blogspot.com/
It is not for the weak of heart, but if you value diversity of opinion, or want to challenge your beliefs, check it out.
The title of the piece is:
Why Republicans Won’t Support the Stimulus
Comment by bsjones — 2/9/2009 @ 11:35 pm
I’ll grant you that the stimulus bill is far from a good bill (although I probably dislike other aspects than most people here). If time were not of the essence, I’d rather not see it passed at all.
Unfortunately, I’m led to the impression that time is critical in the present circumstances. I’m about as far from an ecconomist as a person can get, but ecconomist after ecconomist, Leftie, Rightie, Centrist, Communist, Fascist, whatever . . . all different philosophical bents keep repeating, again and again, how the American (and Global)economy is perilously close to a “tipping point” that’s going to lead to a period where no bill is going to fix it, no matter how well crafted. Maybe the spectre of food lines and “Brother, Can You Spare A Dime?” is far-fetched — as I said, I have enough trouble balancing my checkbook and paying the electricity bill, let alone being able to voice an informed opinion on such a complex topic. But IF the situation is as dire as experts claim, then a perfect bill too late is worthless.
Let’s see . . . it took (assuming all this bill-writing started at dead cold on Jan 1st, when it almost certainly started before that) 5 weeks to get to this current bill. If we scrap it and start over, why should anybody think it wouldn’t take another 5 weeks? Especially given how flexible both sides have been in this debate. Maybe more? So now we’re deep into March (maybe April, maybe May, June . . .). That’s before the bill even gets finished, let alone starting to implement it. Can the economy wait for medicine that long? As I said, I don’t know. And certainly there are “experts” claiming everything will take care of itself. As the voice advocating scrapping what’s there and starting at step one Mr. M., how long do you feel comfortable working on the bill before we gotta go with what we got? I’m not trying to be partisan (that’s below) or a smartass . . . I’m seriously interested in knowing how you see the situation. Life-or-death? Bad-but-it’ll-hold-for-12-to-18-months? Economies correct themselves? Obviously you don’t think it’s Defcon 5, but if this debate is happening under a ticking clock, how much time (you see) left on the clock vastly impacts the depth and quality of any possible debate.
*partisan Leftie fluff following* I gotta say, In terms of trying to scare the public into stampedeing over a cliff the Administration wants to take us over, I’m suprised you came up with Cheney claiming we’re gonna get attacked again unless the government keeps spying on American citizens. I’d have gone with “a smoking gun in the shape of a mushroom cloud”-so-we-need-to-overthtow-Saddam-trust-me-no-time-to-actually-justify-it-with-any-credible-evidence personally, but that’s just me. Or you-have-to-pass-the-Patriot-Act-right-now-with-no-debate-or-we’re-all-gonna-die-and-if-you-ask-questions-you’re-a-MooslimLover. Like I said, that’s just me.
Comment by busboy33 — 2/9/2009 @ 11:51 pm
Robert Reich is probably my favorite Liberal economist. In this video he is defending the stimulus bill to an Australian reporter from the Australian Broadcast Company. Reich gets a lot of softball questions, but I still think it is worth watching. Personally, I agree with about half of what he says. I like everything he says about corporate responsibility.
http://www.youtube.com/watch?v=tXrXujo-SXM
Enjoy!!
Comment by bsjones — 2/10/2009 @ 2:46 am
bsjones #17
I read the Reich column. Screw that.
How disingenuous to complain that Republicans are simply playing politics when the Democratic leadership has written into reality every single disgusting perverted plan they’ve been scheming for the past half-century?
And now it comes out that they’ve hidden a plan in the bill that would not only track our medical treatments, but determine what is appropriate and cost effective. I sure as heck don’t think that’s a federal government’s role. Do you?
I’m sorry, but I think Robert Reich is evil, and I don’t agree with hardly anything he says.
If things like this are hidden in the stimulus, our only solution is to scrap it, start with a bi-partisan panel and a clean sheet of paper. (I suggested the same in a post here last Thursday.)
Comment by sara in va — 2/10/2009 @ 6:09 am
Rick,
I am of the opinion that each and every one of the economists that didn’t have a clue, as far as seeing this thing coming, have ZERO credibility about the cause and recovery. Therefore, the ‘Chicken Little’ argument from these same economists holds about as much water as a sieve.
Something needs to be done, but NOT in such a rush to possible oblivion and especially NOT without more input from the other side. This “stimulus bill” appears to be a very short on the stated immediate help stimulus and long on special interest payback.
Comment by Belad — 2/10/2009 @ 9:07 am
At the end of the day, the biggest problem we’re having is agency problems and “ownership abstraction”. The more abstracted the ownership, the bigger the problem we’re having.
Case in point: credit unions. They’ve done far better than banks in this crisis, even though they’re portfolios are dominated by residential real estate and credit card loans. To this point, CUs haven’t cost the taxpayer a dime. The difference: they generally keep and service their own loans, so they know their loans and their customers well.
Another problem is Wall Street ownership models. The private partnerships of the “old” Wall Street would never have done the really weird stuff the public Wall Street has done. One aside: Goldman Sachs was the last of the partnerships to have an IPO, and it is the entity that has done best of any of them. When they went public, the traders went from using partner money for their trade to using “public” stockholder money, and the partners cared much less about it and didn’t watch them as closely as they once did.
At the biggest level, big corporations have become toys of their management teams, who have become quite divorced from any “owners”.
What do all these have in common: fewer “layers of abstraction” between business “owners” and management for things that worked well, more layers for things that worked badly.
As a programmer who’s been in the biz for 25 years, one of my pet peeves has been deep, expensive “abstraction pyramids” that tend to develop in big projects using “modern” programming methods. I’ve achieved amazing improvements in performance and quality in several projects by “flattening” these pyramids. This involves getting rid of intermediate abstractions and “magic code” that nobody understands.
My beef is our economy has developed the same sort of abstraction pyramids. Flattening them will be hard, but probably has to be done somehow.
This is an excellent analysis, thanks. We better pray that Geithner has it mostly right or we are going to be in a world of hurt.
ed.
Comment by Foobarista — 2/10/2009 @ 11:08 am
Foobarista,
Love the analysis about the levels of abstraction.
Question:
Should citizens ask banks politely to stop using all their MBA brain power and stop being the smartest man in the room?
In other words, what oversight does Wall Street need? What entity will provide that oversight? and Who will (or who did) create that entity?
Comment by bsjones — 2/10/2009 @ 1:57 pm
Foobarista,
One more thing….
I found a great slide show that illustrates vividly why “ownership abstraction” is such a bad idea. This is hilarious, informative and not partisan. (Sorry about the Robert Reich links.) It’s the real deal!!!
http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1&ncl=true
Comment by bsjones — 2/10/2009 @ 2:15 pm
Rick, you have the best blog on the web- not only because you are a good writer, but because you are read and commented on by very smart people. Even the guys that I disagree with regularly, I admire- they usually don’t spiral down into idiotic talking points. Guys like Michael Reynolds, who I have rarely agreed with, usually have cogent, original arguments. Guys like Chuck Tucson, who I think is an idiot, would probably kick my ass in a debate. Retire05 is long-winded, but capable. Sara-in-VA is clever occasionally. You’ve accurately pointed out other very insightful analysts in this post- and I agree.
I’ve pretty much stop commenting, since these guys say pretty much what I’m thinking (one side or the other).
What I haven’t seen are any comments on the amazing similarity between what is going on today, and the plot of “Atlas Shrugged”. I read this book about 8 year ago, and read it again recently, because the current economic crisis kept reminding me of something… the “banks” are to big to fail… the good of society supercedes capitalistic interests… even Obama’s election by the press reminded me of the State Science Institue’s blackballing of Reardon Metal… the demand of wider powers for government to protect us from the “greed” of capitalism.
I’m not sure that there is a John Galt or Dagny Taggart to save us. Jim Hussein Taggart might win this time.
Comment by lionheart — 2/10/2009 @ 4:58 pm
Lionheart,
Great observation about the similarities to “Atlas Shrugged”. There are hundreds of thousands of John Galts and Dagny Taggarts - they are just too busy trying to be at their productive best.
But they are all going to be forced into coming out in the open in the political arena - this could happen right around the time the twin terrors of Social Security and Medicare underfunding explode in the collective face of the people in this country.
Atlas’es may shrug in the next 15 to 20 years - just give them time.
Comment by Nagarajan Sivakumar — 2/10/2009 @ 9:04 pm
Salesman-in-Chief…
With an afternoon town hall meeting and his first prime-time press conference, President Obama kicked-off a roadshow to pitch his stimulus plan, claiming that only the federal government can pull us out of this “profound economic emergency”…
Trackback by shyspeak.net — 2/10/2009 @ 10:07 pm
lionheart,
I think the reason you don’t see AS comparisons all over the place is that there is really no need to comment on the obvious. And, truly, it’s depressing to talk about it, when you know what the end run probably is.
I’ve been wanting to start a coffeehouse in an historic tavern here to try to foster activism locally. Particularly to provide a place for disenchanted GOP members who now have no place to call home. I see it as a haven for the John Galt types.
But, all my friends tell me I’d be insane to do it in this climate. Then, my husband suggested I take the money I’d probably lose the first two years and instead put it in a fund to pay high school students to read Atlas Shrugged. If the student proved it by passing a small exam, the fund would pay them $250 (or some other amount).
Small investment for incremental societal change…..
if only we could make it required reading.
keep the faith
Comment by sara in va — 2/11/2009 @ 6:12 am
Sara,
A.S. had a profound impact on my life. I only wish I had read it in my 20’s. Your idea is excellent.
You could also donate to the Ayn Rand Foundation, which provides scholarships as awards for an essay competition- that might be less expensive.
Comment by lionheart — 2/11/2009 @ 6:57 am
History will judge “The tainted One” badly, imagine farming out the biggest piece of legislation during your POTUS tenure to the likes of Harry Reid and Nancy Pelosi. You might as well have Cookie Monster and Sponge Bob Square-pants write it for you.
Comment by Neo — 2/11/2009 @ 8:06 am
When I went to Grad school, I managed to get all the way through without ever getting a student ID. I didn’t start out not trying to get an ID, but about half way through, I started to do my best to avoid actually getting one. It was a personal challenge.
The current Congress is no doing their best to avoid actually being bipartisan, especially the majority party. The current POTUS, a graduate from the Senate after not quite completing a single term, has now adopted the same strategy for the Executive branch, following the lead of the House Speaker. The Speaker who now claims to be non-partisan rather than bipartisan or partisan because to do so would be to admit that there is another party.
In the old days, a Democrat POTUS like LBJ would have the Minority Leader over for a few cigars and drinks and they would set the agenda for the next couple of weeks. Now we get “I won” .. enough said.
Comment by Neo — 2/11/2009 @ 11:33 am
Sara and Lionheart,
John Galt’s descendant testifies before the meddlesome Congress here:
http://crooksandliars.com/david-neiwert/peanut-gallery-mum-salmonella-republ
Download the clip and enjoy.
Comment by bsjones — 2/11/2009 @ 3:37 pm
#32
bsjones, what do you do for a living?
Do you move paperwork around in a basement office, along with 100 other brainless types waiting for lunch hour? Where is lunch today? Hmmm, the cafeteria sounds good.
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This is NOT the role of Congress, dude. They can call their little publicity forum the Congressional SubComittee on Oversight and Investigations or the This is the Easiest Job on the Hill, but it still reeks. If people are sick or injured from products, they can sue through the court system. The Judicial Branch is set up for such things.
The sight of Congress flexing its muscles into the business arena, bringing up every corporate exec under the sun who may have done wrong, is not something that should turn you on.
Comment by sara in va — 2/12/2009 @ 5:32 am
Congress flexing it’s muscles is something that should turn every American on. Unfortunately, a majority of those muscles have atrophied from lack of use.
Comment by Chuck Tucson — 2/12/2009 @ 12:41 pm
Sara,
While moving paper around in my basement office,I was listening to a radio program where a woman was discussing her new book about how the catalog business (think Ward or Sears) changed retail in the beginning of the last century.
In passing she mentioned the creation of the Food and Drug Administration. Its creation was a response to certain medicine being sold at the time. Apparently, you could purchase medicine for alcoholism that was 40% alcohol, headache medicine with cocaine in it, and other medicines containing opium and arsenic in these catalogs.
She did not go into specifics but I am guessing that some of these medicines caused addiction, birth defects and even death. Since the creation of the FDA, the need to sue for thalidomide-like injuries has been reduced but not eliminated. (A strong argument could be made that a more robust FDA could reduce these drug related problems further.)
A strong FDA might even be conservative. I remember Republicans saying we should not be able to buy inexpensive drugs from Canada (free markets) as they were likely unsafe, presumably because of insufficient standards. After all, these Republicans were arguing, Canada does not have the F.D.A.
I do agree with your point about Congress being publicity whores with little concern for the public welfare. My preference would be for the majority of both houses of Congress to be replaced with fresh blood. Maybe then they could conduct the oversight that I think is necessary in a beneficial and productive way, instead of posturing and pretending to care.
For the record, if I saw Congress flexing its muscles I would be in a state of shock and therefor unable to get turned on.
Comment by bsjones — 2/12/2009 @ 11:07 pm
Sara,
I do not want to beat on a dead horse, but, I have a question.
To paraphrase, you said that people who are harmed or killed by unsafe products should look to the courts for relief.
Questions:
What is your position on the trial lawyers who take these cases?
What would your response be if John Edwards won a big cash settlements for the families of the eight dead people who consumed the poisonous peanuts?
I’ve been a conservative for a long time and it seems we have had trial lawyers in our sights since Reagan.
I’m genuinely interested in your thoughts.
Comment by bsjones — 2/13/2009 @ 3:24 pm
bsones,
You are a conservative? Really.
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:
Several years ago, my husband was sued for nearly $60 million. We are not worth anything remotely close to that - trust me. He was a salesman for a distributor of a certain medical product.
The product was found to have oil residue on the implant left during the manufacturing process that, in some cases, resulted in the implant being unable to secure itself in the body. It was an error made in the manufacturing process, and in only some of the many implants produced and sold. My husband, of course, had nothing to do with the error, besides consulting during the surgical procedure.
However, lawyers for plaintiffs sued my husband (along with the surgeons and the manufacturer) so as to try to keep the suits in the local court (in order to obtain a larger jury award).
There were patients who had no problems -none, zilch-with their implant whatsoever, but they were suing for removal anyway so as to try to get money for “pain and suffering.” They had perfectly good implants removed just for money. (And believe me, ripping out a perfectly good, secured implant probably did more damage in the long run.)
My husband and our family suffered a great deal over this, nearly lost all that we had worked for and sacrificed for, overnight. This incident only solidified my view that there are many people who will do anything - even the most irrational of things - in order to get a bigger piece of the pie.
There are those who deserve our help, and those who rape the system. I don’t believe in making things easier for people to rape the system.
And, to tie this in to our discussion. What purpose would it have served to call up the President of the company who manufactured the implant to berate him publicly? The company was sued and ended up having to put itself up for sale. Justice served.
To make a point to bring up business owners to threaten them and humiliate them is nothing but a freakin side show. Congress is NOT the FDA. Congress is a bunch of grandstanding politicians, eager for a popular cause to use to score political points.
Comment by sara in va — 2/14/2009 @ 11:41 am
Sara,
Thanks for the response.
I agree with much of what you said. Specifically, there are many frivolous law suits and they cause needless suffering to people that get dragged into the process. (It happened to my wife once, but, I won’t bore you with the details.) I agree that lawyers have a strong monetary motivation to file frivolous lawsuits. I also agree that congressmen are show boating media whores. Finally, I agree that Congress is not the FDA (they did create and have oversight over the agency, however).
My problem is this: Sometimes businesses and their owners or employees are negligent. The man processing and selling poisonous peanuts is a pretty good example of this. My evidence for this are the conditions in his facility and the eight dead people.
If Congress should not regulate products for safety because of too much onerous regulation, then it is up to individuals to find relief in the court system. If the lawyers who pursue the cases in court are the Darth Vader’s of our justice system (thanks Rush) and must be stopped, then there is no accountability for the business owner who is negligent. Remember, I AM NOT SAYING ALL BUSINESS OWNERS ARE NEGLIGENT. Some are. They need to be held to account.
If we accept that Congress should not regulate AND we accept that the lawyers who sue on the behalf of people who are harmed or killed by negligence should be stopped, there is no accountability.
I believe we must drop one of the premises. Either we accept the trial lawyers as the remedy for negligent business practice OR we accept that regulations are needed to keep our food supply safe. Liberals think we need more of both.
Regarding the peanut man:
If the man who sold the poison peanuts has to sell his business, justice served.
If he has to give the money to the families of the dead, justice served.
If he does jail time, justice served.
If any of the above happens it will be because of a trial lawyer who may have an expensive hair cut.
Do you agree that in some cases a business owner needs to be held accountable?
How should it be done?
Comment by bsjones — 2/14/2009 @ 1:50 pm
bsjones,
I think you are very amiably exposing yourself as a J.D. and I am bound to be found lacking in cerebral heft, but let me try answering your question.
I really don’t recall saying that “Congress” should not regulate. Its role is to appoint and oversee regulating agencies, while it makes laws referred to by and dealing with issues coming out of those agencies. The FDA can make its determinations away from the spectacle of Congressional “hearings”.
What I do not want to witness is an attempt by this administration to portray business as an antagonist. The sight of Congressmen behind long stretches of tabletops with nameplate IDs, making threats via microphones, holding up a jar of peanut butter and asking someone to eat it, is sending a message.
To business owners: We are the ones in power now, do not cross us. To average Joes: Government is here to protect you from the business owners. Corporate America is the evil thing out to destroy you. Government is your friend, big government is a bigger friend.
Is that the end run of this administration? Making the average Joe believe that his interest is served by government and not the private sector? I think so. So, when I spoke of Congress flexing its muscles, I meant for show, for public spectacle, because it had no power anyway. Just the power of the TV camera and the message.
For the record, I think John Edwards is a disgusting human being. It would not be fair of me to lump every trial lawyer in with Edwards, just as it would not be fair for all companies to be lumped in with the Peanut Co. of America. But, that’s what Congress appears to want to do.
Comment by sara in va — 2/14/2009 @ 5:36 pm
Sara,
I think I understand your position now. I apologize if I mischaracterized your position on government regulation of industry. Thanks for keeping the discussion going.
Comment by bsjones — 2/15/2009 @ 12:54 pm