Warning to sensible readers. Sometimes the state of the economic policy debate gets too depressing to take seriously. When this happens, there appears to be only one sane alternative: to take the mickey.
Class Neutral Policy and the GFC – An Appreciation
Main Street, and the celibacy of Solomon in their
dealings with Wall Street.
of the world.
This post represents something of a mea culpa. With the financial and economic upheavals of the last few years, I had expected the crisis to be used as a pretext to attack general living conditions and effect a massive upward transfer of wealth. See, for example, this post. Perhaps some of you had shared my cynicism.
In my case, the expectation grew out of a childhood full of apocalyptic wonder on the fringes of Protestantism, and was based on my reading of the Book of Revelation. In view of recent news events and natural disasters, I had gauged that we had arrived at Revelation 6:6:
Then I heard what sounded like a voice among the four living creatures, saying, “Two pounds of wheat for a day’s wages, and six pounds of barley for a day’s wages, and do not damage the oil and the wine!”
I thought I had heard that voice, and we were about to witness the application of a draconian set of economic policies designed to grind down the living standards of all but a privileged elite in the context of military conflicts over oil and other natural resources. It seems that I got ahead of myself. It was not a voice. Just my imagination. That voice must still be future.
I’m feeling rather silly now, of course. I haven’t felt this sheepish since 1844. So far, there has been no hint of capital or the government using crisis as a pretext for class-interested strategic manouverings.
There have been many fine examples of class-neutral economic leadership. Much has been said of the Christ-like compassion extended to Wall Street after some financial miscalculations were made, especially the Fed’s timely purchase of toxic assets, along with an array of gifts to US and foreign financial institutions. Those in charge have also responded even-handedly on Main Street to cater for an unusually healthy appetite for home foreclosures and the challenges these shifting consumer preferences present. The Obama Administration has expressed a benevolently laissez-faire attitude toward any falsified documentation that could expedite the foreclosure process and meet the rising demand for homelessness (still one of the few areas of private-sector strength). Ben Bernanke has done his part, ruling out reckless lending to the states, which would only distort markets, prop up inefficient public schools, and generally steal from the industrious to line the pockets of the undeserving. There is a fine line between Christ-like charity and Godless communism.
This laudable tightening of belts still has some way to go given how sharply preferences have moved in favor of leisure over work and the surprising sluggishness of rational expectations to adjust instantaneously on Main Street. Without more fiscal tightening, job terminations might rise insufficiently to offset the impact of labor-force exits on the unemployment rate. If this were allowed to continue, the unemployment rate, which has already stabilized dangerously, could fall, testing the supply limits implicit in the nine percent NAIRU and creating bottlenecks and skills shortages. Such are the pressures of high office.
Encouragingly, policymakers are sending out all the right signals along with comforting words for sensitive, and somewhat insecure, markets. There is still considerable trepidation and some hurt feelings, resentments that linger after the rocky courtship of Wall Street and President Obama during which some words were spoken that were later to be regretted. But good ground has been made in forming more cordial relationships, and things could improve even further if a Republican manages to win the presidency in 2012.
What may be less noticeable than the many high-profile accomplishments is that this kind of integrity in policymaking and problem solving is bearing fruit, even if on a smaller scale, every day of the week (even Sabbath, a day of rest – for the Lord said it is still right to do good on the Sabbath).
For example, only yesterday there were a couple of encouraging articles in the New York Times, one concerning the benefits of enabling the states to default on their unjust obligations to politically motivated interest groups (on Main Street) and another reporting some new and exciting Republican ideas for steeper cuts in government spending.
A more captured and corrupted government might countenance using its capacity as the monopoly issuer of its own fiat currency to let profligate states meet their unsustainable debt obligations with a stray finger tap on a key pad, thereby allowing, for example, outrageous entitlements to remain in place for unionists and the usual assortment of atheists who would then be enabled to wriggle out of employment responsibilities at a ridiculously young age on preposterous benefits like some satan-snake straight out of Genesis.
Paul told the Ephesians that slaves should obey their masters, which in a general-equilibrium framework would seem to extend without complication to wage laborers who think they are entitled to pensions. I think we can all agree that Paul was as wise as Solomon, also more celibate, and said a lot of socially progressive things.
Unfortunately, despite the fair-minded policies that have been such a hallmark of the Washington Consensus and which have really come into their own with the onset of crisis, many on Main Street are failing to live up to their end of the bargain. Whereas Wall Street has responded in good faith to the various incentives put in place to complement unbiased market forces, inhabitants of Main Street, in many respects, continue to drag their heels, succumbing to a moral and spiritual malaise.
Thankfully, there are politicians in Washington with the wisdom of Paul who dare to stand against the immorality infecting Main Street, especially on the East and West Coasts plus Chicago, but even in the Midwest, where many fall short of their own moral standards.
The latest inspired idea to enable state defaults on obligations and intensify spending cuts might seem optimistic at the present time, but given a few weeks to play in the media, I believe there is a good chance the public, even the left, is just about intelligent enough to see the wisdom in the move. After all, the public is, in the main, reconciled to the government budget constraint, the imminence of insolvency, the certainty of hyperinflation, yet also the Righteousness of Judgment, and understands the need for fiscal responsibility to pave the way for the Second Coming, after which Christ, a fiscal conservative from way back, can take austerity measures in amazing new directions.
It seems conceivable that even those on the left, at least the brighter and less promiscuous among them, will come to perceive the wisdom of this particular vision. After all, it follows with impeccable and pleasant-to-the-senses logic from their President’s prophetic warnings that the government is running out of money. The argument is difficult to fault, even on Old Testament grounds. It may well constitute the Good News that was to be proclaimed in the Last Days, spoken of in the Gospels.
Maybe some kooks on the fringes will refuse to see good sense even when its sweet kiss caresses them on their pinkened cheeks, but the movers and shakers of the left, such as they are, will surely side with their brothers and sisters in the honorable wing of the GOP.
In closing, I would like to clarify that it is not my usual custom to read communist newspapers, but my attention was drawn to the NYT articles at some crazy blog that I will only link to by accident. I occasionally glance at it myself as a reminder of the alarming ideas out there in the community. They give chairs to dangerous thinkers in some countries. Americans are fortunate to have N. Gregory Mankiw. He is a modern day John the Baptist, a voice in the Harvard wilderness, proclaiming Christ’s return to rule with a balanced budget for all eternity. (Or maybe just for a thousand years. That ending to Revelation is difficult.)
The thought occurred to me during the preparation phases of this mea culpa that the NYT articles mentioned above might have very little to do with what I would end up writing in this post, although my hope is that they are somehow related. I apologize if this subtracts from the reading experience. I imagine it could be annoying for sticklers.
In any case, I stand by the relevance of what I have written, even if its only relevance is its irrelevance. The truth is, being partial to a shot of fiscal conservatism followed by a chaser of prosperity religion – a combination served in the nightclubs of heaven – I prefer not to read if I can help it, and the NYT is no exception. If pressed, I’ll peruse the executive summary of a nonpartison fiscal study from the Concord Coalition or Peterson Foundation, or for spiritual growth, reflect on the tolerant messages of a Pat Robertson or Beverly LaHaye.
I don’t need to read the NYT to know that austerity’s the way to go and anything else is lunacy. Nothing any Modern Money expert could ever write will sway me from the Ten Commandments, the eleventh of which says, “Thou Shalt Not Print Money,” the fine print of which says, “Even if it only involves entering numbers in spreadsheets, that’s just semantics,” and the supplementary fine print of which says, “Don’t play word games, I am the Word!”
What’s right is right. If anyone adds to these words, plagues be upon them. If anyone takes away from these words, away with their livelihoods. If anyone fine-tunes these words to make them more readable, that would be copyediting, and wonderful in the eyes of the Lord.