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David Goldman compares the lost decade of Japan with the economic mess here in our country.
…During Japan’s “lost decade” of the 1990s, everyone was working, everyone kept their homes, everyone maintained their lifestyle (minus some shopping trips to Paris), and life carried on more or less the same. America enters the second decade of the millennium with un- and underemployment around 20%.
Japan went through its great retirement wave in the 1990s, just as America must during the 2010s. But the Japanese for years had saved massively, and exported massively in order to do so. If a country’s population ages rapidly, the soon-to-retire cohort will shift from consumption into savings. Japan had insufficient young people to absorb the investment requirements of the 40- and 50-year-olds, and therefore had to invest overseas. Japan’s industrial genius made it the world’s premier exporter, and Japan was able to save successfully to fund the retirement wave–even though consumption remained weak and real estate prices fell and the stock market fell to a third of late 1980s peak.
How are Americans going to save? They can’t buy home mortgages; they could buy US Treasuries at 2.5% for a 10-year maturity; they can buy the junk bonds now flooding the market; or they can leave their money in cash at a fraction of a percent. As aging American shift from consumption to saving, they must do so by reducing domestic purchases. The Japanese could save by exporting and remain close to full employment. American’s savings requirement cannot be met in the same way, because Americans have forgotten how to export. There aren’t enough soybeans and corn to make much of a difference; with a few exceptions, America has lost its edge in capital goods as well as consumer goods, excepting commercial aircraft and a few other pockets of strength. …
James Glassman writing in Commentary on the failure of the liberal stimulus experiment.
… Perhaps a lack of stimulus spending would have made matters even worse. No one knows. You can’t do a controlled experiment. But you can understand the public reaction: We spent all this money, and got almost nothing.
Bastiat would have appreciated one of the obvious explanations for the impotence of the stimulus. In 1957, Milton Friedman argued that attempts to increase consumer demand through government spending are doomed. The reason, Friedman wrote, is that individuals make their decisions about consumption by looking at their likely income and wealth far into the future. (He called it the “permanent income hypothesis.”) If the government starts spending huge sums today, consumers foresee higher taxes and, by inference, presume that their lifetime incomes will drop because of the increased level of their tax burden.
If government spending is short-term or one-time-only, which is what the stimulus was supposed to be, then individuals might be expected to take a more benign view. But the 2009 stimulus did not take place in a vacuum. It was soon accompanied by other economic policies and proposals of the Obama administration and the Democratic Congress: health-care reform extending public coverage to 30 million new people, cap-and-trade energy proposals featuring vastly higher taxes, and the imminent expiration of the Bush tax cuts at the end of 2010.
Because of these policies, the “unseen” became “seen” in a fashion devastating to the politicians supporting them. Americans judged that the party in power intends the radical expansion of the size of government in perpetuity. That expansion will have to be paid for. There is no reason to expect very much good from the future if you are the sort of person who generates income and creates jobs. Your “permanent income” is going to decline, and your gut response will be to husband your resources. …
… For the public, the worry extends beyond the debt itself to the very role of the federal government. According to Gallup, by a margin of 57 percent to 37 percent, Americans say there is “too much” rather than “not enough regulation of business by government.” Big business is unloved, but more and more, government is seen as clumsy, venal, and self-serving.
There is no denying that the narrative about how greedy financiers caused the economic crisis still has currency. But another narrative now looms larger. It is that the government’s attempts to fix the problem through spending have been ineffectual at best and, more likely, dangerous to our economic health.
When the financial meltdown occurred, it seemed almost certain that Americans would judge that the conservative economic experiment of 1981-2008 had failed. Instead, they seem to be leaning in the opposite direction—toward a conclusion that it was the liberal economic experiment of 2009-10 that has failed.
This conclusion is not being warmly embraced so much as reluctantly conceded. Things could change. Conservatives will face a challenge later this year over whether to extend tax cuts that, at least from a “seen” viewpoint, will further increase the debt. Still, when you consider that a repudiation of free-market capitalism and what President Sarkozy called a “return of the state” appeared almost certain when the crisis broke, we should be both humbled by and thankful for this strange and constructive turn of events.
In Forbes, Richard Epstein advocates scaling back government to allow the economy to grow.
…Our economic woes are so manifest that we have to look for an alternative strategy to getting out of the current hole. It will not do to take a fatalist attitude toward lackluster private demand. Something has to be done to revive it–now. Here is one agenda: reduce the level of economic uncertainty by getting government out of the stop and go business once and for all. What is needed are stable economic policies that work as well in good times and in bad ones, so as to remove the need to articulate and implement some nonexistent exit strategy.
There are only two ways to do this. The first is a set of permanent tax cuts on capital gains and high incomes, which will give our most productive individuals the incentive to invest and innovate that they so sorely lack today. The hostility of the Obama administration to these moves right now causes more harm than any public stimulus program can undo.
The second approach, on which Tyson and Krugman take a seeming vow of silence, is major deregulation to stimulate growth, while cutting wasteful government expenditures. No single regulatory program has the general pop of a sound fiscal or tax policy. But the cumulative effect of countless bad policies exerts a profound negative effect on both employment and growth. …
In the Economist blogs, W.W. in Iowa City, who we’ve heard from before, discusses different theories about the economic crisis, and then sums up the role that government played. What caused the credsis will be debated for decades, so we will keep highlighting items we believe add some clarity.
…I think it at least fair to say that it is very plausible that government policy played a central role in the crisis. If the combination of low interest rates, favourable tax treatment for residential capital gains, a web of heavily promoted initiatives to make it easier for lower and middle-income Americans to buy houses, regulations mandating the purchase of subprime loans, capital requirements goading banks into holding lots of “safe” assets do not “put government at the center of the crisis”, I can’t imagine what would. Which is not to say that the market did not fail. Indeed, it is impossible to specify what the market is in isolation from the rules that define the possibilities and terms of exchange. The market failed. And the market was what it was because government made it that way. …
The NRO staff post several of Charles Krauthammer’s remarks about the president. This one is accurate and bad news for the country:
…On whether ideology will keep Obama from changing his position on allowing the upper-income Bush tax cuts to expire:
“I’m not sure it’s entirely ideological. I think part of this is pure narcissism. I don’t think I’ve ever heard him say I changed my mind or I was wrong. …”
Daniel Hannan comments on Greenland’s criticism of Greenpeace, in the Telegraph, UK, blogs.
…The prime minister of Greenland – a socialist, no less – has attacked Greenpeace for sabotaging an Arctic exploration rig. Kuupik Kleist is plainly not a politician given to circumlocution:
The cabinet regards Greenpeace’s action as very serious and an illegal attack on the country’s constitutional rights. It is worrying that Greenpeace, in their hunt for media exposure, violate security rules made to protect human lives and the environment.
…Lefties have always liked the idea that they are speaking for those who would otherwise have no voice – which is, of course, a very creditable motive. The trouble is that, when the previously voiceless do find their tongues, they often say things that their erstwhile protectors find awkward. A hundred years ago, socialists presumed to speak for the proletariat. When the proletariat turned out to have some uncomfortably conservative views, they shifted their attention to the oppressed peasantry of the Third World. When these, too, turned out not to have the correct opinions, they moved on to more recherché communities: hunter-gatherers in rainforests and the like. …
In Newsbusters, Noel Sheppard highlights a surprising conversation on Hardball.
A truly astonishing thing happened on MSNBC Monday: three devout, liberal Obama supporters said the President is responsible for people thinking he’s a Muslim.
During the opening segment of “Hardball,” in a discussion about Glenn Beck’s “Restoring Honor” rally and how the host and attendees view Obama’s faith, Newsweek’s Howard Fineman said, “Barack Obama probably should have joined a church here…some things in politics you have to do at least for the symbolism.” …
The Economist reports on exciting new technology in a surprising place.
BIG crowds, strong surf and powerful rip currents are only a few of the obstacles that lifeguards must overcome to keep swimmers safe. Strong winds can pull many bathers out to sea simultaneously, overwhelming the guards if there are only a few of them. And, since average swimming speed is about 3kph (2mph) even a single rescue mission can take more than half an hour.
A profession ripe, then, for automation. And that automation is now at hand. Hydronalix, a marine-robotics firm based, rather surprisingly, in landlocked Arizona, has come up with EMILY—the Emergency Integrated Lifesaving Lanyard. This device, which is being tested at Zuma beach in Malibu, California, is a remote-controlled, 1.4-metre-long, 11kg buoy with a foam core covered by red canvas and surrounded by ropes. A human lifeguard can keep but a single person afloat. EMILY, by contrast, is buoyant enough to save five at a time. The ropes let swimmers cling to the device or climb on top of it until a lifeguard arrives on the scene. …