Wednesday, March 11, 2009
From A Slightly Different Angle
Yes, free the president from his flacks, fixers and goons -- his posse of smirky smart alecks and provincial rubes, who were shrewd enough to beat the slow, pompous Clintons in the mano-a-mano primaries but who seem like dazed lost lambs in the brave new world of federal legislation and global statesmanship.She still supports Obama:
Heads should be rolling at the White House for the embarrassing series of flubs that have overshadowed President Obama's first seven weeks in office and given the scattered, demoralized Republicans a huge boost toward regrouping and resurrection. (Michelle, please use those fabulous toned arms to butt some heads!)
President Obama -- in whom I still have great hope and confidence -- has been ill-served by his advisors and staff. Yes, they have all been blindsided and overwhelmed by the crushing demands of the presidency.This is a remarkably odd take.
- How does Camille think the president got his staff? Didn't he pick these smirky smart alecks?
- Is Michelle, the person whose only substantive experience was the $300,000 hospital job that was so important it isn't being filled, really the person who would know how to pick the right advisors?
- Can any president-elect truly be "blindsided" by "the crushing demands of the presidency?" If his advisors are, doesn't that indicate that he picked a slate of advisors who exemplify the Dunning effect?
- Isn't Camille calling Hillary a provincial rube as well as a slow, pompous Clinton? We know that Hillary's Russian-language skills aren't that hot, but isn't this a low blow?
There is no more appropriate metaphor for the way the Obama administration has mishandled affairs than the fact that our Secretary of State went over to Russia, a state in crisis, with a cute little gesture like a reset button that said "Overcharge". Not only is this kid stuff, it's just plain wrong.
For something that is emphatically not kid stuff, see James Galbraith's testimony before the House Financial Services Committee on February 26, 2009. I heartily agree with many of the points he makes here.
I have cited and discussed economic analysis from the Levy Institute before, and Galbraith also did so in his testimony. The bottom line is that the US economic difficulties are rooted in fundamentals rather than ephemerals, as explained in the Levy Institute's December 08 Strategic Analysis:
As early as 2004, in a Strategic Analysis subtitled Why Net Exports Must Now Be the Motor for U.S. Growth,2 we argued that continued growth in net lending to the private sector was an impossibility, and that at some stage there would have to be a collapse both in lending and in private expenditure relative to income. We also argued that it would not be possible to save the situation by applying another fiscal stimulus (as in 2001) because that would increase the budget deficit to about 8 percent of GDP, implying that the public debt would then be hurtling toward 100 percent of GDP, with more to come. These processes were allowed to continue nonetheless, and we perforce had to bring the short-term prospect into sharper focus. As the turnaround in net lending eventually became manifest, we predicted in our November 2007 analysis3—without being too precise about the timing— that there would be a recession in 2008.That is the depression-like event I have been writing about. For what it's worth, I use a drastically different methodology than these economists, yet I come up with very similar results.
As illustrated in the extreme right-hand section of Figure 1, the implication of these assumptions, taken together, is that GDP will fall about 12 percent below trend between now and 2010, while unemployment will rise to about 10 percent.
The only ways out are dollar devaluation (which will happen automatically soon enough), a sharp rise in domestic output for baseline consumption (food, energy), destruction of the private debt overload, and recovery of domestic incomes, because what has changed in the international economic outlook is the ability of the world to hike consumption of US-produced goods. Thus, we cannot hope to adjust our output gap as elucidated by LI through significant growth in US exports. We can only adjust that gap through enhanced production for our own consumption.
The problem with the Obama administration's plans as they now stand is that the energy tax will not reduce petroleum imports significantly. Instead, it will continue to move production offshore, thus making the output gap worse. This in turn will lower US incomes and raise baseline inflation, which will also lower US incomes. That will give unemployment another kick up.
The only way out is to open up domestic and near offshore drilling, build nuclear power plants, and develop the shale oils, which are economically competitive at current price levels with some very small guarantees.
Next up, insurance, which will bring me back to address Carl's arguments about the need for Glass-Steagall.