| Here's a quick rundown of the first three points, before turning attention to the main focus.
(1) Obama's popularity. The big news here is not so much Obama's own personal popularity, but the fact that the "right track" numbers
have returned to a positive plurality for the first time since 2004. That is nothing short of amazing, and if it were the only thing on our plate, I'd be as giddy as any Obamaphile you'd want to meet.
(2) The GOP's incoherence. I've already written about Joe Barton today. Tomorrow I'll write about Michelle Bachman. I'll have some more to say about Tea Party apologetics from the likes of Ross Douthat, and I'd like to squeeze in something about Newt Gingrich, too, if there's time. Get the picture?
(3) The Dems' inability to capitalize on GOP incoherence. It's the Dems who can't even get their 59th senator seated. That just about says it all. And what party is Ben Nelson in, anyway? Does he think John McCain won in a landslide? Does Harry Reid?
Well, I told you that part would be short. Now to the tough stuff, some of which ties back into #3.
(4) Gathering storm clouds.
(4a) Global Warming. This past fall, George Soros appeared on Bill Moyers Journal and said that American consumer demand could no longer be the engine of the global economy, instead the new engine needed to be investment in green technology to avoid catastrophic global warming. This was precisely right, but Obama has failed to make this connection, which should have put transition to a green economy at the center of the stimulus bill, including the restructuring of the auto industry into a more diversified transportation/green energy sector. The continued fragmentary nature of Obama's approach to global warming, failure to make robust connections to other policy areas, and willingness to embrace corporate-backed half-measures and blind alleys ("clean coal", nuclear, etc.) all add up to falling far short of what's needed.
(4b) A law-based, "beyond war" foreign policy. Continuing the military/imperialist foreign policy model, disdaining international law when it proves inconvenient, with the "long war" in Afghanistan as a central feature, rather than definitively transferring to a cooperative law-based model.
ZP Heller's series of posts on Afghanistan from Brave New Films goes right to the heart of this failed policy. The Democrats have been playing military policy on rightwing terms since the Truman Administration, and they're still surprised that they keep on losing. As long as they remain that stupid, they will continue to lose, because it's a no-win game.
(4c) Sacrificing the rule of law for "political peace" will leave us with neither. This has been a failed calculus ever since Watergate. There's no reason to expect this work any better this time than it did in the past. "Looking forward, rather than backward" is a brilliant slogan--for Karl Rove. Failure to prosecute torture-related crimes is not just itself a crime, it is a death-warrant for American democracy.
(4d) Universal health care as a human right. Accepting the corporate capitalist definition of the problem and acceptable solutions dooms Obama's efforts to partial success at best, which will do more to enhance the long-term position of the corporate health care/insurance sector than it will do to provide improved health care for the American people. Obama's variant of Jacob Hacker's "Health Care For All" model was never clearly adequate to realize the promised dynamic of establishing a robust public option that could become universal over time. Now things are only looking worse, as Obama continues to exclude single-payer advocates, whose influence would, at the very least, serve to strengthen and protect the essential logic of Hacker's original proposal. To the extent that corporate players may eventually allow a public option under the current dynamic, it will only be as a dumping ground that's less attractive than private options, even with all their excessive costs.
(4e) Employee Free Choice Act. This is crucial for any sort of long-term political realignment, as well as reversing the 30-year economic polarization trend. Democrats have repeatedly failed to pass major labor law reform every time they've had the chance since the GOP & conservadems passed Taft-Hartley over Truman's veto. Obama's lack of urgency and focus on this signals a tremendous lack of long-term strategic focus.
(4f) A myopic economic policy that fails to take seriously the true magnitude of the crisis we're in. This is a theme that economists such as Krugman and Stiglitz have harped on repeatedly. I'd like to offer a few different charts to drive home the point.
First is this series of charts from "The Aftermath of Financial Crises" (Dec 19, 2008 draft) by Carmen M. Reinhart (University of Maryland. NBER and CEPR) and Kenneth S. Rogoff (Harvard University and NBER). It consists of an analysis of a set of severe banking crises, in order to provide a reasonable framework for understanding what we are currently going through. At the beginning of their paper, the authors say:
A year ago, we (Carmen M. Reinhart and Kenneth S. Rogoff, 2008a) presented a historical analysis comparing the run-up to the 2007 U.S. subprime financial crisis with the antecedents of other banking crises in advanced economies since World War II. We showed that standard indicators for the United States, such as asset price inflation, rising leverage, large sustained current account deficits, and a slowing trajectory of economic growth, exhibited virtually all the signs of a country on the verge of a financial crisis-indeed, a severe one. In this paper, we engage in a similar comparative historical analysis that is focused on the aftermath of systemic banking crises.
Here are the charts illustrating their principal findings. As can be seen, the recovery periods--though they differ significantly for different metrics are substantially lionger than our myopic political class seems capable of grasping.
Here are their findings, with the accompanying chart:
Broadly speaking, financial crises are protracted affairs. More often than not, the aftermath of severe financial crises share three characteristics. First, asset market collapses are deep and prolonged. Real housing price declines average 35 percent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years.
Housing Cycles
Equity Price Cycles
Second, the aftermath of banking crises is associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls (from peak to trough) an average of over 9 percent, although the duration of the downturn, averaging roughly two years, is considerably shorter than for unemployment.
Unemployment Cycles
GDP Output Cycles
Third, the real value of government debt tends to explode, rising an average of 86 percent in the major post-World War II episodes. Interestingly, the main cause of debt explosions is not the widely cited costs of bailing out and recapitalizing the banking system. Admittedly, bailout costs are difficult to measure, and there is considerable divergence among estimates from competing studies. But even upper-bound estimates pale next to actual measured rises in public debt. In fact, the big drivers of debt increases are the inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged output contractions, as well as often ambitious countercyclical fiscal policies aimed at mitigating the downturn.
Increased Public Debt
These figures suggest a profound disconnect between the Versailles discourse about the economy and actual historical reality we are facing. By trying to conform to the Versailles discourse, and defining "pragmatism" in terms of its limitations, Obama may very well be setting himself for a huge fall, in light of how things are likely to play out, through no fault of his own. This is, in fact, the common pattern that could be used to describe his timid approach to most of the items cited in this section.
To further substantiate the seriousness and credibility of this outlook, we should note that this is not just a single-country problem. Indeed, the IMF just announced a predicted 1.3% world-wide contraction for this year, the worst since the Great Depression.
Refelcting the systemic nature of the downturn, consider these most recent indicators from the OECD, released on April 10 ("Composite Leading Indicators continue to signal deep slowdown in OECD area" (pdf)):
And:
In short, it seems highly unrealistic to expect a strong recovery--or even a modest one--prior to the 2010 mid-terms. How long can Obama's popularity hold up under such circumstances? The view for the first 100 days may look pretty good looking only at (1) to (3), but with this view of the global economy in mind, it's very hard indeed to be optimistic about (4), which is much more about how history will judge these 100 days in the long run. |
