I read
this piece by David Frum. Actually, I forced myself to continue reading it, even after the blather about how the election could be/should be about Obama's "dismal" record. But the column gets better:
"Romney has instead chosen to bolt himself to the House Republicans."
There's plenty solid analysis after that. Then came this bombshell insight:
"Conservatives ardently believe that big future deficits are the cause of
today's unemployment. They feel it. They know it. And they don't want
to hear different."
I'm thinking, wow, maybe that really is the summation of the Republican stance. And the statement also shows how ridiculous the view is. Wow. Other impressions, anyone?
6 comments:
I think calling it either the cause of today's unemployment or that it is ridiculous and without any credence is inaccurate. Most of these things occur on a spectrum and not absolute stops.
Without question, the massive nature of our deficits and total debt, and the impossibly high barrier to anything being done about it are a cause of financial market anxiety. If that is true, why is it so hard to believe that the same uncertainty affects decisions about hiring and capital expansion, which are often rolled out over time lines that project far beyond the fiscal cliff abyss.
@truth, that's a reasonable possibility that people can study and have studied. It turns out that uncertainty isn't currently the biggest brake on business growth, it's lack of demand.
I bet that many of the politicians and pundits who repeat the "uncertainty" argument are aware that it doesn't hold up, but repeat nonetheless. But that's my guess--based on experience that talking points are more important than honesty to most politicians and pundits.
MP - I agree that demand is a bigger problem than policy uncertainty. But the drag caused by policy uncertainty isn't zero and it is human caused in a way that low demand isn't. Simply put, better policy makers doing a better job could remove the policy uncertainty drag. That much we know.
@truth, uncertainty isn't zero, and it isn't going down to zero no matter who's in Washington. Seeing as it is so hard to quantify, it doesn't make for a good argument for those who try to employ it. A convenient argument, maybe, but not a good one.
If you want to make a strong argument out of certainty, you need to drill down and find out the components of "uncertainty" and I bet they're pretty squishy. But a big one is likely to be the 2008 financial meltdown. That melted a lot of confidence and still causes uncertainty as to what are good investments.
So, how well can you quantify uncertainty?
MP - I am not sure there is something that would be able to measure the type of uncertainty caused by policy makers. Perhaps government borrowing rates make the most sense, since the policy maker decisions weigh on this risk calculation more than anything else that I can think of.
But, since the world is so interconnected and the US dollar is the global reserve currency, we benefit from instability even if we totter ourselves.
I suppose looking at the spread between the rates the US must pay compared to the rates other nations must pay might indicate some degree of this, if compared over time and effort was taken to isolate other variables.
To that end, it is possible instructive to note that while US rates have plummeted as a result of Fed policy, our borrowing rates have not declined as much proportionally as some other nations. Holland, Germany, Finland, Denmark, and Switzerland appear to have more investor confidence (in spite of Euro area problems) than does the US. Each has seen their borrowing costs decline more than the US has when set against a historic benchmark.
Again, MP, I am not sure that policy maker driven uncertainty can be quantified. It isn't zero and never has been. But I would be surprised, if it could be measured, if we were not currently significantly worse off than our trend line over the past several decades.
As an aside, let me say that I am expanding my business holdings despite the current conditions. I employ 4 full time and 1 part time workers, and am currently negotiating to buy a business with another dozen full and part time workers. So, anecdotally, I am not put off by the current condition. Go figure.
@truth, thanks for your contribution to this blog and to our economy. We both seem to know individual anecdotes have limited worth for understanding big issues, but they matter at a personal level.
I'm suspicious of explanations that don't have clear measures but are politically useful. This 'uncertainty' argument is one, 'American values' is another.
The use of the US dollar as a reserve currency certainly distorts the world economy in our favor. But I don't consider it dreadfully unfair because we have been largely a stabilizing force in the world for over 100 years now. If we had really mucked it up badly, we would have lost much of our influence and who knows what the global currency would be today. I'll have to think about it more sometime.
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