Call me cynical and predisposed to conspiracy, but I find the current outrage expressed by Obama and his administration over AIG a bit…Machiavellean. First, on Sunday, his technocrat underlings express frustration on the talk show circuit. We have Larry Summers saying that the AIG bonuses have to go through, lest we disrupt the rule of law. Then, from stage left, the New York Times runs a story about how angry the administration is with the scheduled payments, and further, how they fear a “populist” backlash. Finally, for today’s third act, the ultimate deus ex machina saves the day–forget the contracts! Obama has ordered his boy wonder, Geithner to block the bonuses.
Tag Archives: Obama
Summers outlines Obama’s stimulus plan in very broad strokes. One gobbit caught my eye:
Some argue that instead of attempting to both create jobs and invest in our long-run growth, we should focus exclusively on short-term policies that generate consumer spending. But that approach led to some of the challenges we face today — and it is that approach that we must reject if we are going to strengthen our middle class and our economy over the long run.
If by short-term policies, he means lowering interest rates to an all time low and stoking inflation, then that’s one thing. Strangely, part of the set of policies that created this mess may also help to solve it, as some have argued. But what I think Larry is really saying, is that the Obama spending spree will work because the government will spend your money more wisely than you will. Larry emphasizes transparency, but he’s not being honest. He should just come out and say people are stupid and tend to spend their money foolishly. Remember the statist boner for Keynesian multipliers is really a post hoc rationalization for the moral judgement that you’re stupid.
So says the always respectable, if heretical Steve Landsburg. He writes:
McCain is not Bush. This came as a surprise to me. I’d been assuming, in my ill-read, uneducated way, that McCain had been complicit in most of the great travesties of the Bush administration and the execrable Republican Senate. I’ve learned that’s largely untrue. He voted (to my great surprise!) against the prescription drug entitlement, against the Farm Security Bill, against milk subsidies, against Amtrak subsidies, and against highway subsidies.
Obama, by contrast, is in many ways a continuation of Bush. Like Bush (only far more so), Obama is fine with tariffs and subsidies. Like Bush, he wants to send jackbooted thugs into every meatpacking plant in America to rid the American workplace of anyone who happens to have been born on the wrong side of an imaginary line. Like Bush, he wants a more progressive tax code. (It is one of the great myths of 21st century that the Bush tax cuts made the tax code less progressive; the opposite is true. If you are in the bottom 38% of taxpayers, you now pay zero income tax—and therefore have an incentive to support any spending bill that comes down the pike.) Like Bush, he wants more regulation, not less.
On the underlying causes of the current crisis, Obama says in the New York Times:
“The problem that we have in part has to do with wages and incomes that have been flat. And so homeowners and ordinary families out there have been working very hard, but it’s tough for them to pay the bills and stay afloat with rising gas prices and health care.”
The moronic argument he is offering could be summarized in this way: because the government didn’t redistribute wealth over the last twenty years, subprime mortgages failed. A more progressive tax scheme would have prevented this. Now I can’t find one economist who has proposed this argument or finds it convincing.
Meanwhile, McCain’s perspicacity shines in all things economic. He intends to reward Attorney Generalissimo Cuomo with Cox’s job at the SEC. According to the same Times article:
Mr. McCain, who has been trying to distance himself from the Bush administration while proposing to continue many of its economic policies, tried Sunday to strike several bipartisan notes. In a separate interview on “60 Minutes” on CBS, he mentioned that he would like to seeAndrew M. Cuomo, a Democrat who is the attorney general of New York, take over as chairman of the Securities and Exchange Commission from Christopher Cox, whose ouster he has called for.
How wonderfully delicious! Only in American politics does a man who helped orchestrate a crisis get rewarded with a position to regulate it. Consider this graph from Russ Roberts. The Case-Shiller Home Price Indices measure the nominal value of the residential real-estate market in the US.
Roberts notes that during both the Clinton and Bush presidencies, the government intervened in the housing market to increase home ownership among low-income buyers and raise the overall rate of home ownership. And as he points out, the run-up in housing prices coincides with the government’s interventions led by the work of our man in Albany, Attorney Generalissimo Cuomo. (He served as Clinton’s Secretary of Housing and Urban Development.) Sez Roberts of the irrationally exuberant housing bubble:
“It may have begun in earnest in 1997 with Andrew Cuomo, at the time the head of HUD, encouraging the GSEs to become more active in the subprime market. Is that causation or just correlation for the graph? I am looking forward to reading and learning more this week.”
Fun game: without assaulting reason, try to find a way for Obama’s theory to fit the data on the graph. As a bonus, try to rationalize hiring Cuomo to head the SEC.