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« Tory leadership - right and wrong reasons for regicide | Main | Krugman's pathology »

October 21, 2003

Comments

Chris Goodman

As a matter of interest what are your objections to supply-side economics?

Dan Goss

Great post, Olvier.

I too have been left scratching my head at what seems to be a creeping obsession with "neoconservatives" and their supposed intellectual progenitor, Leo Strauss.

I view this creeping infatuation as nothing but the latest in a long line of attempts to reduce complicated and multivarious political persuasions to a single (and sexily secret) connect-the-dots conspiracy.

Even the usually sober to a fault Christian Science Monitor has posted a quiz(http://www.csmonitor.com/specials/neocon/quiz/neoconQuiz.html) apparently designed to sniff out your sympathies with this sinister catch-all cabal.

While I'm not impressed by political reductionism, I _do_ think Leo Strauss's "gnostic" theories reveal a long-standing bias among academics in general.

For anyone interested in reading a little more about the unfashionable implications of Strauss, here's a perfectly apolitical post of mine on the subject:

http://solinvictus.typepad.com/solinvictus/2003/10/unmasking_the_r.html


Huw

The New Statesman piece is a smear, nothing more. It's a way of saying "everyone who backs the war is a neo-con", rather than the counterpoint "everyone who is a neo-con backs the war" - which makes far more sense. Aaronovitch a neo-con? That's a very foolish formulation.

Walzer's anti-war position is classic high Tory, or Bush senior, if you will. Stability for us at any price. Peace for us, war for them. I think Walzer's position is much more disagreeable than Berman's. Berman has a classic flaw, but it makes him more interesting. Walzer seems to shift around and give the appearance of being straight, when actually he contorts his own position a great deal. Berman's view is more honest - albeit wrong.

It is not an untenable position to say that you think Bush is awful but that the war was the right thing to do. Actually, that's what I think. I refuse to give my support to a President who panders to "that vast moth-eaten musical brocade created to pretend we never die", the religious lot. His domestic tax policy is a disaster, his vice-president is a rotted-from-within sinister individual and he is continuing the moral decline of US politics. But, his saving grace, he gave his backing to the right option, at the right time (for the wrong reasons). To paraphrase Orwell - "liberating Iraq is the right thing to have done, even if Bush says so too".

I disagree that Iraq started the war and not us. Nope, we started it and a very good thing too. It's pushing it a little to claim that hostilities never ceased. In that case India and Pakistan are still at war, as are the UN and North Korea. Whatever the law says, the truth is Saddam was adequately "contained" but that in the act of containment we were condemning thousands to a life of misery, death and torture. We weren't passive actors in that situation, so we had a moral impertive to act.

There is one clear sense in which Berman is right, by the way. The US is being made to pay for the fact that it was Bush who took his country into this war - he is the same president who has given enormous, unwarranted and damaging tax cuts to the richest in America just when he needs the money most. Let's speculate a little here, as to who will pay for the unforseen costs of this reconstruction. It will be ordinary Americans, and Bush at the polls - or I'll eat my jeans (don't have a hat).

Dave F

Berman must also have forgotten about Teddy Roosevelt, who certainly didn't need any excuse for a good war.

Colin MacLeod

Of course it was a great post.

I wonder on what basis Huw feels confident to proclaim Bush's tax cuts as a "disaster," not to mention "unwarranted" and "damaging." Has he or she checked the string of positive economic reports, noticed the move in the stock market (and not just the US markets), or compared US economic growth to, say, France's or Germany's?

By any rational standard, Bush is doing world history on the cheap. Going back a couple of years, to the immediate aftermath of the 9/11 attacks, a recessionary economy was struck with a massive shock. Instead of succumbing to the calls for "sacrifice" (higher taxes) in the face of the newly recognized challenge, Bush instead pursued a policy of protecting and restoring consumer and business confidence and re-accelerating economic growth. I'd say "at all costs," except that the tax cuts and their effect on the budget haven't really been so desperate or extreme. The U.S. is now projected to run a budget deficit well within the normal historical range as a percentage of GDP, and, if growth continues to accelerate, the deficit figures will likely decline. If this is a "disaster," then can I have a little more disaster, please?

The Democrats tried Republican-lite, and lost ground in the '02 Congressional elections. Lately, they've been trying demagoguery and hatred. If the economy continues to recover smartly, and Iraqi re-construction continues to move forward, Bush is on the way to a landslide re-election victory.

Do you prefer your jeans roasted, boiled, or baked?

Huw

Raw Colin, always raw. I like "He or she". Pity I've no webcam really.

I'm no expert (every bit the economic amateur)- there, I've finally said it - but......

1) Cutting taxes at the same time as increasing spending - even as loans - will not do an economy any good (unless you've got a swingeing spending cut in another area in mind - oh dear).

2) How many Americans of average income can say that they're financially better off for these tax cuts? Um...... not many.

3) How do tax cuts for rich people increase economic output or efficiency? A cut in corporation tax, I grant you, but tax cuts for rich people?

4) Where will the deficit repayments come from?

5) I've no love affair with the democrats, quite a pretty few of them thought the tax cuts weren't such a bad idea either.

6) You make it sound as though all France and Germany need to do is cut taxes for rich people to see their economies reflate. Come again?


As for Iraq's reconstruction - there is no real time limit on how long the Americans stay. Personally I hope they are there for some time to come. Now that's going to cost money isn't it? With no observable return as far as I can see. The large contracts going out to US companies in Iraq are from the public purse. The companies themselves benefit from the work but, most crucially of all, does a Henry Taxpayer of Average County, Wisconsin? Erm, nope.

Colin MacLeod

Huw, you have various theories about what might be good for an economy. I would remind you that many of those so-called "rich people" are small business-owners, professionals, and entrepreneurs. The approximately 50% of Americans who have a stake in the stock market - through personal investment or through pension plan investments - have also already benefited, even setting aside the admittedly rather paltry tax refunds. It may take a while for the rest of the populace to experience the full benefits of a recovering economy, but in the meantime it is also fair to consider what an alternative set of policies - tax hikes in a slow-growth, destabilized economy for instance - might have led to.

Anyway, we both have theories. I think what I also have on my side, taking the longer view, is what US sports fans call "scoreboard."

As for the France and Germany and the rest of the EU, I'm not sure how many "rich people" are left in those parts, and whether tax cuts alone would do much good in a massively over-regulated economy, but, as a general proposition, I do think that the EU countries would very probably benefit from some not really very "far-sighted" supply side Reaganism. Or maybe some not really very far-sighted Thatcherism. Or some not very far-sighted Bushism, if you prefer.

Once upon a time, a backward-looking Democrat campaigned into the teeth of a successful if controversial domestic program that was accompanied by a resurgent economy, against a controversial but successful foreign policy, and against a congenial but polarizing, even hated Republican president. Said Democrat lost, as I recall, 48 states out of 50. Higher taxes, lower defense has rarely if ever been a winning program in the USA. Ditto for hatred, pessimism, and the-UN-knows-best.

Huw

Schroder has just passed a batch of quasi-Thatcher economic policy, so full marks to your above predictive comments.

We see things a little differently I think - that's to be expected, and I genuflect to your knowledge on things economic. I just reckon it's pretty rum that the rich guys, who don't need tax cuts (because they're rich), are getting exactly that. Most average income earners will still shoulder the lion's share of the tax burden - some won't apparently, see Krugman passim. - and that tax burden is now being further stretched by the Iraqi reconstruction. No doubt when the professional foot-draggers at the Elysee agree to join the redevelopment in the Gulf the burden will be somewhat alleviated. Until then though, what price a bouyant economy?

As I recall even the Fed broadly disagrees with you, they're warning of interest rate rises (which expands the deficit further doesn't it?).

Perhaps you're right about Bush. He's helped by the fact that the Dem crop are pretty miserable on the whole - by the way, anyone else here think John Edwards isn't too bad? - but who knows what will happen over the next year?

I think I've led this thread astray from Oliver's original post. I'll stand up and be counted as non-neocon, Bush-haiting, financially redistributive backer of the War.

marc w.

"Once upon a time, a backward-looking Democrat campaigned into the teeth of a successful if controversial domestic program that was accompanied by a resurgent economy, against a controversial but successful foreign policy, and against a congenial but polarizing, even hated Republican president."

That's fine as far as it goes, but we're not facing this dichotomy (at least not yet). While you may disagree with Huw's take on the economics of Bush's tax cut, it's incontrovertible that the budget deficit + current account deficit (certainly *not* within the historical range) + Iraq reconstruction costs add up to substantially less rosy economic picture than you've painted. I believe the Iraqi costs are a small price to pay for a chance at a transformed middle east and have no problem with them. But think of the political capital Bush could have grabbed by delaying the tax cuts on the richest 1%...
Yes, the economy really seems to be growing now, but the problems I've mentioned along with slower job growth mean that Bush actually is vulnerable. That's not to say he's sure to lose - I'm not going to offer to eat any items of clothing - but clearly, he's at a low ebb in the polls right now. Some of that reflects the failure to find WMD or the relentless stories of death and immiseration coming out of Iraq. Some of it reflects the continued losses in manufacturing jobs which has little or nothing to do with the admin.

But some of Bush's problems result directly from his domestic policies. No matter what side of the political spectrum you're on, he's done something that pisses you off (yes yes, as opposed to what Platonic philosopher king who's made the right choice 100% of the time? This is electoral politics and arguing 'but everyone does it' won't win you elections). As a free-trade believer, the steel tariffs were horrible, as is the on-going trade spat with Canada over soft wood lumber imports. If you're a liberal, the tax cuts and resumption of deficit spending trouble you (and as Oliver's alluded to, it's really strange seeing the GOP paint itself as the party of Keynes while the Dems preach fiscal stability and restraint). If the economy doesn't gain about 1M new jobs before the election (not just GDP gains or even real wage gains for the already employed), Bush could lose. It would have nothing to do with Bush hatred which rages only in a few very liberal cities and college towns, it would be about losing middle class votes over domestic issues.

Former Belgian

That quiz is a joke. You could be a hawkish socialist and come out neocon. At any rate, am I glad not to be in the company of Jimmy "I should be tried under the Logan Act" Carter...

Colin MacLeod

marc, what makes you say that the current accounts deficit is "certainly *NOT*" within the historical range? Relative to GDP? Please show me your figures and define your terms... I'm always glad to be enlightened.

The steel tariffs and the rest bother a few purists, and were quite possibly lousy policy, but I don't see them as influencing next year's election very much.

I don't agree that Bush would have gained any significant political capital from delaying his tax cuts and from accepting even provisionally the soak-the-rich argument, and so on. I suspect from your diction that you're not an American - please take no offense if I'm wrong - anyway, it's my impression that that stuff has a lot less political meaning here than over there. And, anyway, that's not who he is, what he believes, or even close to what he ran on. If he had given in, he would have lost a large portion of his base, and in my opinion have impaired the recovery scenario he's been building. After Howard Dean, Dick Gebhardt, and John Kerry had finished their brief statements congratulating Bush for his willingness to compromise, they would have gone in for the kill.

As they say in the American military, Bush is a lean-forward kind of guy: He's been leaning forward on the war and terror, and he's been leaning forward on the economy. Everything else is pretty much trivia. As for his poll numbers: They appear to have based and to have begun to bounce - very normal late 3rd year stuff.

It really shouldn't be difficult for you to accept that the Republicans stand as more Keynesian (with tax cuts replacing new spending initiatives) than the D's. The great historical memory for the R's was Reagan, who talked balanced budget but delivered major deficits and a charge card economic expansion that took hold. The more recent historical memory for the D's is Clinton, and the D's seem to have persuaded themselves that Clinton's tax hikes were responsible for the '90s boom. I don't think they're right, and, anyway, they forget that Clinton did not originally run on "tough love": He ran on promising everything to everyone.

marc w.

Colin, in % of GDP terms, the current-account deficit is remarkably high - higher than it was during the Civil War. The Economist's 'Survey' of the global economy, on Sept. 18th of this year discusses the problems: http://www.economist.com/displaystory.cfm?story_id=S%27%298%2C%29PQ%27%20%21%20%21T%0A (it's a subscriber deal, so it may not work).
Here are two quotes from the article if you can't view the link:
"America's rate of borrowing is high and rising. At just over 5% of GDP, the current-account deficit is the highest in the country's history. Even in the final decades of the 19th century, after the Civil War, America's deficit was generally below 3% of GDP (though Canada and Argentina ran deficits as high as 10% of GDP in that period). In the Reagan era, the current-account deficit peaked at 3.4% of GDP."

"In fact, America's current-account deficit is becoming worryingly large. Several studies suggest that economies hit trouble when their current-account deficits reach 4-5% of GDP. Caroline Freund, an economist now at the IMF and before that at the Federal Reserve, looked at 25 episodes of current-account adjustments in rich countries between 1980 and 1997 and found that the current account typically begins to reverse after the deficit has grown for about four years and reached 5% of GDP."

I'm not a Krugmanite, and I'm not going to argue this points to an imminent collapse. what it does say is that the admin's economic policies have taken us into uncharted waters. Maybe we'll get another huge boom. Maybe none of this matters - that it merely reflects the simple fact that Americans invest more than they save. But you don't have to be a frothing-at-the-mouth Bush hater to worry about these things. I'm an eternal optimist, but I look at the overall economic picture and think I'd be just fine with someone else in the white house. Your results may vary.

True, the GOP loves them some Reagan, but don't forget that other legacy of the 1980s GOP: The Gramm-Rudman balanced budget amendment. Keynes rolls in his graves as I type that name...

Colin MacLeod

Thanks, marc. You've inspired me to do my own private refresher on current accounts deficits.

As I understand it, the present out-of-balance situation is in large part a result of the fact that foreigners still find the U.S. a more attactive place for their money than their own countries. In short, the current account deficit to some extent reflects the relative health of the U.S. economy. If the fear is of economic dislocation at some future point, one mode of adjustment would be measures in the U.S. to increase savings or to reduce the budget deficit. Another mode of adjustment, far preferable I believe, would be for the so-called surplus countries to take measure to increase rates of return on capital within their own domestic economies. In the meantime, these waters may be, as you say, uncharted, but it's not clear to me that they're particularly turbulent.

I found a speech by U.S. Federal Reserve Gov. Kohn on the subject that was delivered late last year. You might find it interesting, or you might find it unutterably boring. Here it is, anyway:

http://www.federalreserve.gov/boarddocs/speeches/2002/20021122/default.htm

I could be wrong, but it is my impression from earlier posts (such as the Monbiot-on-the- dollar discussion) that Oliver is quite conversant on these matters. Maybe someday we'll see whether he believes this particular issue should be of much concern to U.S. citizens, President Bush, or anyone else.

marc w.

Well as Huw said long ago, we really went off topic here. Sorry about that.
The original topic of the misapplication of the 'neocon' label. So uh... I'm struck by how imprecise the definition is as long as it's used pejoratively. You'll find attacks on neocons that define the enemy in myriad ways:
It's the cobbled-together ideology that seeks to defend Israel at all costs.
It's garden-variety anti-communism mixed with liberal social spending.
Or it's limited social spending mixed with an agressive defense of liberty abroad.
It's the same thing as 'National Greatness' conservatism.
It's somehow Straussian, whatever those freaks believe.

People can't agree what it actually means, which is why it's attacked so often: people project their view of an incorrect political philosophy onto this suddenly meaningless term. It means the same thing as 'hawkish' now.

Salamantis

I consider myself to be a social liberal/libertarian, a fiscal conservative, and a foreign policy realist. Do I qualify as a 'neo'?

Colin MacLeod

It seems to me that internationalism vs. isolationism is the main line of demarcation separating neocons from paleos. Separating the neocons from militant liberals of Mr. Kamm's sort would probably be degree of skepticism about the ability of government to engineer positive social and economic change, as well as degree of comfort with supporters of "traditional values."

furious

"Neocon" is a synonym for "Jew" -- used by high-minded Bush-hating Liberals mask their bigotry toward Jews who belong to or are members of the Bush Administration.

Let's look at the roster, shall we? Wolfowitz ("Vulfovitz" to the BBC), Perle, Kristol Elder and Junior, Feith, Rebbe Strauss, himself...am I leaving anyone off the list?

The nomenklatura of the former Soviet Union indulged in similary euphemisms, substituting the word "cosmopolitan" for zhid.

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