This is Truly the Age of Mediocrity

For most of my voting life, the choices of presidential candidates have not been particularly inspiring. But has it ever been as bad as this? We have a President who claims to be a Democrat but whose policies are those of a fairly conservative Republican. It doesn’t look like there will be any primary challenger to drag Obama to the left, so it looks like the presidential race in 2012 is shaping up to be a battle between a conservative Republican and a far right wing lunatic. Even James Carville, who for a time tried to be supportive of Obama, agrees with me. He’s saying Obama can’t be distinguished from the Republicans who ran in 2008.

In 1992, Bill Clinton famously proclaimed himself to be an Eisenhower Republican. By that measure, I’d say President Obama is a pre-2008 John McCain Republican.

But this much is sure: The policies of the eventual Republican nominee, that is, anybody left running for it by the time of the vote, will be right in line with those of Sarah Palin. It’s pretty remarkable that the next election is going to boil down to a competition between the 2008 Republican presidential candidate and his vice presidential nominee.

It’s not that Obama is a socialist born somewhere other than Hawaii, or that he possesses a Kenyan anti-colonial mentality — but that some Republican needs to stand up and say, with some legitimacy, that Obama is taking all of the GOP’s ideas.

Well, Obama did say back during the 2008 primaries that the Republican party was the “party of ideas for the last 10-15 years.” Remember this?

Too bad so few people took him seriously. It’s almost as if Obama had been specifically chosen to destroy the Democratic Party and push the Republicans even further right. A number of potential Republican candidates have dropped out–Trump, Huckabee, Barbour, and Daniels are gone, thank goodness. So whom will we see competing in the 2012 Republican primaries? From what I can tell, those Republican debates are going to look and sound like bizzaro world.

Right now, the putative “front-runner” is dull-as-dishwater Mitt Romney. This weekend, Romney finally took the plunge and left New Hampshire to visit Iowa. Apparently it hasn’t gone well so far. He’s getting less than inspiring headlines like Mitt Romney: Underwhelming in Iowa and Mitt Romney finally shows up in Iowa. From the LA Times:

Fairfax, Iowa— Mitt Romney made a belated 2012 campaign debut in Iowa on Friday, dipping a brown-loafered toe into the state that casts the first votes in the presidential contest.

Romney, who will formally enter the Republican race next week, has largely shunned Iowa since falling short here in the 2008 caucuses. He spent much of the day bobbing and weaving around questions about his commitment to Iowa.

“My guess is you’ll have plenty of opportunity to see me. I care about Iowa,” he told a midday audience in Des Moines, after refusing to say whether he’d compete in a nonbinding straw vote this summer or go all-out in the caucuses next winter.

Mitt is pathetic, like most current and former Massachusetts Governors. I don’t think he’ll ever be President. But just look at the other possibilities!

Tim Pawlenty is trying to make himself a bit more exciting by going negative and insulting other candidates.

Following up on the cattiest tweet in the Presidential campaign so far (“sorry to interrupt the European pub crawl, but what was your Medicare plan?”), Pawlenty visited CNN’s American Morning to elaborate on his campaign issues and react to his current poll numbers. He appeared happy that, despite the fact that “half the nation’s Republicans don’t know who I am,” he was still a viable candidate in the running, as early polls are “name ID more than anything.” If the polls were reliable, he joked, “Rudy Giuliani and Howard Dean would be presidents.”

With that in mind, asked if Palin’s weekend bus tour was worrisome to him, he seemed militantly unfazed: “This country isn’t going to be about rallies or you know bus tours or anything else,” Pawlenty said. “This is going to be about a country that is sinking in debt and deficit. We want to have a leader who has actually tackled those issues and doesn’t just talk about it.” He also noted that, while the current “exploratory” phases of other campaigns that may pop up are necessary, “soon we have to have a debate on the issues.”

Regarding the current resident of the the White House, Pawlenty had this to say:

“Any doofus can go to Washington and maintain the status quo and that’s what we’ve got in the White House and in Congress in terms of their attitude about their willingness to tackle these issues,” Pawlenty said. “If we’re not going to have leaders who are going to say that and do it and tell the American people, look them in the eye … then we’re all wasting our time.”

I’m not sure that calling a sitting President a “doofus” is the best strategy for beginning a campaign, and I really dread the “debate on the issues.” The only issues this year’s Republicans seem to be interested in are about sticking it to the poor, the elderly, and women.

Pawlenty’s fellow Minnesotan Michelle Bachmann appears to be running also. {shudder} Get this, she “feels a calling” to run for President.

Bachmann, during the taping of a program for Iowa Public Television, said she “had this calling and tugging on [her] heart that this is the right thing to do.”

Bachmann’s statement comes on the heels of announcement Thursday night that she will be holding a June event to make her presidential intentions clear. The Minnesota Republican has been openly weighing a bid for the GOP nomination for months and been traveling to and staffing up in early-primary states.

“We already have hired staff in South Carolina, in New Hampshire, in Iowa,” Bachmann told reporters on a telephone news conference Thursday night. “We have people on the ground. We’re doing every aspect that we need to be doing in this effort because our main goal is make sure we can turn the country around.”

I’m really uncomfortable with people who think their gods are talking to them. I’m even more uncomfortable with the idea of someone who hears voices running the country. This woman is truly frightening, and her “first man” would be a guy who tries to “cure” homosexuals, including, perhaps, himself.

Also showing signs of jumping in the race is Sarah Palin. She is embarking on a “high-profile bus tour” on Sunday, beginning in Washington, DC.

The tour has an obvious — and presumably intentional — resemblance to a campaign jaunt. But many people on both sides of the political divide remain skeptical that she will run, or that she has a viable path to the Republican presidential nomination if she does so.

Ugh! Why can’t Quiterella (h/t Dakinikat) just go away somewhere and never be heard from again? In 2008, we had a woman candidate who was truly qualified–brilliant, knowledgeable, a policy wonk. She put 18 million cracks in the glass ceiling, and now one of these two horribly stupid and unqualified women might finally crash through? We’ve really gone from the sublime to the ridiculous.

Finally, have you heard that Rick Perry is now thinking about throwing his hat into the ring? According to The Daily Beast, Republicans really want him to run because he’s such a macho man.

One of the photographs that Texas Gov. Rick Perry keeps on his BlackBerry is a portrait of Aurora P. (“Rory”) Perry, the family’s black Labrador Retriever, who last year acquired a key role in local Perry legend. The governor and the dog were out for an early morning jog when a coyote suddenly appeared, growling at Rory. Perry, who carries a Ruger .380 handgun in his belt when he jogs, pulled the weapon and shot the coyote dead. When some Austin locals protested that Perry’s reaction was excessive, and dangerous, he shrugged it off. “Don’t attack my dog,” he said, “or you might get shot.”

Never mind that Perry is rumored to be gay. The Republicans don’t seem to mind that–as long as you stay in the closet.

What a sorry bunch of losers! Could it get any worse? Well, the LA Times suggests we might still hear from Jeb Bush and Chris Christie. I am not looking forward to 2012. What about you?

UPDATE:
Grayslady pointed out that I neglected to mention Ron Paul, probably because I don’t think he has any chance of getting the nomination. I left out Rudy Giuliani, too. Some people think he may run. As far as I’m concerned those two are just as nutty as the rest of the Republican field. We’re stuck with horrible and less horrible. I may not bother going to the polls.

Bill Clinton: “I hope Democrats don’t use [NY-26] as an excuse to do nothing.”

We’re back to what the meaning of is is, or rather what the meaning of “doing nothing” is.

Via ABC News, Bill Clinton caught on a mic schmoozing with Paul Ryan after Hochul’s win:

“So anyway, I told them before you got here, I said I’m glad we won this race in New York,” Clinton told Ryan, when the two met backstage at a forum on the national debt held by the Pete Peterson Foundation. But he added, “I hope Democrats don’t use this as an excuse to do nothing.”

Ryan told Clinton he fears that now nothing will get done in Washington.

“My guess is it’s going to sink into paralysis is what’s going to happen. And you know the math. It’s just, I mean, we knew we were putting ourselves out there. You gotta start this. You gotta get out there. You gotta get this thing moving,” Ryan said.

Clinton told Ryan that if he ever wanted to talk about it, he should “give me a call.” Ryan said he would.

For more context, here’s a bit of the speech Clinton gave just prior to his backstage exchange with Ryan:

“It was about Medicare,” Clinton said during a speech to the debt forum minutes before he met Ryan back stage. Clinton was referring to Ryan’s controversial budget plan, passed by the House this year, which would transform Medicare for those under the age of 55.

“You shouldn’t draw the conclusion that the New York race means that nobody can do anything solve the rising Medicare costs,” said during his speech. “I just don’t agree with that.  I think you should draw the conclusion that the people made a judgment that this proposal in the Republican is not the right one.  I agree with that, but I’m afraid that the Democrats will draw the conclusion that because Congressman Ryan’s proposal, I think, is not the best one, that we shouldn’t do anything and I completely disagree with that.”

Well, as I’ve been saying, what NY-26 showed is that Democrat can win on being Democrats, in the reddest of red districts no less, but unless Dems actually govern like Democrats and make good on protecting the social safety net, demagoguery and running against the GOP and Ryancare will not actually change anything.

I agree that Democrats can’t just spout a bunch of heated campaign rhetoric and do nothing…but I’m not sure what Clinton was trying to communicate with Ryan or whether he’s got some kind of triangulating scheme up his sleeve.

What Democrats need to “do” (instead of just “say”) is to actually govern like Democrats.

Bill Clinton’s exchange with Paul Ryan no doubt reinforces all the criticisms progressives have of the Clinton presidency, though it is important to remember that Clinton is the president who in ’95 vetoed Newt Gingrich’s plan to cut Medicare:

“I am using this pen to preserve our commitment to our parents, to protect opportunity for our children, to defend the public health and our natural resources and natural beauty, and to stop a tax increase that actually undercuts the value of work,” Clinton said in an Oval Office ceremony.

To dramatize his point, he vetoed the bill with the same pen Johnson used to sign the Social Security Act amendments of 1965, which created Medicare and Medicaid. The pen was rushed to the White House by Federal Express from the LBJ Library in Austin, Texas.

Earlier that year in threatening the veto, Clinton had said the following:

President Clinton said today that he would veto the Republicans’ legislative package for Medicare and Medicaid. He said that their proposals for large savings in the Government health plans for the elderly and the poor would have “Draconian consequences” and would “dismantle Medicare as we know it.”

Speaking to elderly people at the White House just 24 hours after House Republicans outlined their proposals, Mr. Clinton said, “If these health care cuts come to my desk, of this size, I would have no choice but to veto it.”

[…]

Even while threatening a veto, Mr. Clinton urged elderly people to seek bipartisan support for changes in Medicare that would control costs without harming beneficiaries. “We ought to be here to build a bridge,” he said.

So in that sense, Bill Clinton is being consistent, albeit annoying, in rubbing shoulders with Paul Ryan the way he has.

But, as the Center on Budget and Policy Priorities graph below shows, it’s Tax Cuts and War that are driving the national debt (h/t Susie Madrak):

This is what Democrats need to start doing something about.

It’s the War and the Tax Cuts, stupid.

If the DC crowd really cared about saving Medicare and Social Security, they wouldn’t be pushing austerity before cutting defense spending, bringing our troops home, going back to the Clinton tax rates, and spending money here at home, where our own infrastructure is crumbling, instead of “nation-building” everywhere else.

As Hillary said at the Brookings Institution, speaking for herself and not for the Obama Administration, almost a year ago today:

“The rich are not paying their fair share in any nation that is facing the kind of employment issues [America currently does] — whether it’s individual, corporate or whatever [form of] taxation forms.”

The FDR/LBJ social policy legacy is the closest thing to “American exceptionalism” that we have had.

From my first official post at Sky Dancing:

Peter Daou earlier this week: “It’s a nightmarish joke that Republicans and Tea Partiers want to assail President Obama for denying American exceptionalism, while doing everything possible to undercut it.” Perfectly said, but of course, on the other side of the mockery, the great DLC/Clinton Slayer That Never Was… wants to call himself a Blue Dog, not to mention do everything to undercut the domestic policy legacy of FDR and LBJ. Another sick joke for sure, though it is no surprise. (See Politico, March 2009: “I am a New Democrat.” –a newly inaugurated President Obama )

Obama won’t even mention Medicare in his congratulations to Kathy Hochul. He leaves that for Debbie Wasserman Schultz to do.

Is anyone detecting a pattern here?

Hillary, Debbie, Kathy, Kirsten… they fight like Democrats of old, like FDR and New Deal architect Frances Perkins.

They say the simple truths, be it Hillary saying the rich aren’t paying their fair share or Kirsten picking up where John Murtha left off in starting the call in earnest for an end to the war in Afghanistan.

As I asked several months back — What if this is as good as an Obama Administration gets?:

A huge part of the problem is that we have an empty suit in the White House from whom the best we can hope for is that he simply lets other people lead for him and make something good happen once in awhile, if we are even that lucky. It’s a victory if he lets other people throw us a bone and fight the fights of ordinary Americans for him. Woo hoo.

And, it seems like he increasingly relies on women to take the heat for him. Just look at what Liz Warren is going through right now.

So if progressives want to hate on Bill Clinton for hobnobbing with another policy wonk, albeit a scary right wing one, and sending weird triangulating signals to him, that’s fine… but if they’re going to do that, they need to come clean and address that their hero, Barack Obama, is not only the same, but worse.

At least with Clinton, there appears to be some genuine history of trying to protect that social policy legacy.

With Obama, there’s a photoshopped picture of him hearting Reagan.

I’ll leave you with Sophia Petrillo singing,”Thanks for the Medicare…”:

It can happen again

James Wood as the CEO of failing Lehman Brothers

Since I put up that thread last night on the HBO docudrama Too Big to Fail, I thought I’d look for some research coming out of financial economists on those events. I’m still reading “House of Cards” off and on which is a  more wonky version of  Too Big to Fail.  I’ve also done my share of reading various research articles that pop up in academic journals.  Mark Thoma had a link to a Minneapolis Fed paper by Robert Lucas and Nancy Stokey.  Lucas is one of the premier freshwater economists and the paper fit the bill.  You become very familiar with the Lucas Critique in graduate school. It’s seminal.

If you watched the HBO presentation, you may recall that Ben Bernanke explained that there was a liquidity or credit crisis that resulted from the downward spiraling financial market conditions. The director punctuated this by showing the head of GE on the phone saying that GE wasn’t able to do its regular business because it’s commercial paper wasn’t going to be renewed or rolled-over.  Commercial paper is the vehicle for borrowing short term working capital. The market is only available to high quality companies.  This was one of the first signs that the contagion was outside of the mortgage markets. There was no money to lend to high quality huge corporations in retail and manufacturing. All outstanding dollars were being brought back to lenders to cover their losses and up their capital in response.  You may have seen my earlier comment that it was rumored at the time that McDonald’s couldn’t get theirs renewed either and was about one week away from not being able to make its payroll.  Many businesses rely on short term borrowing for working capital and most of these businesses are sitting in your local strip malls.

The prime commercial paper market  seems like a gigantic leap from the mortgage repurchase (repo) markets where the contagion started as real estate prices plummeted and troubles in sub prime mortgages became apparent.  The problem is that well diversified shadow banks–like insurance companies, investment banks, Money Market funds, and Hedge funds–are invested all over the place.  If they start losing big in one area, they have to pull their money back to cover it.  They pull the short term money first to avoid penalties and loss of higher yielding assets. Institutions’ exposure to the real estate markets and the repo market was so huge that it started sucking the money out of every other credit market.  They needed the money to cover the losses. Some of the banks were more than able to cover themselves and their capital requirements by doing this.  You also saw this at the end of the show.  The deal is that wasn’t the only problem at that point.  If banks continued to draw funds down from other markets, it was bound to start taking other US businesses and consumers down.  The banks needed to shove more money out the door and not pull it back in according to monetary policy theory as shown by empirical evidence during the Great Depression. The phenomenon is called a liquidity crisis, a credit crunch basically represents a nontraditional bank run.

There are many markets unfamiliar to most people that could set off contagions that impact the real economy.  They are still out there. Reliance on capital creates this situation.  Trying to wring every last penny out of every last dollar through sophisticated cash management programs exacerbates it. A lot of what happens with liquidity crises is that people and business start holding on to money because of panic and uncertainty.  They want to overprotect themselves. This makes the situation worse.  Keynes referred to this as animistic spirits.   Lucas defines it like this.

Liquidity crises that induce or exacerbate deep recessions, as in 1930 or 2008, are situations in which individuals and firms want to build holdings of liquid assets. Heightened risk, or a perception of it, substantially increases demand for these assets. This reduces the supply available for normal transactions, leading to production and employment declines.

What happened in September 2008 was a kind of bank run. Creditors lost confidence in the ability of investment banks to redeem short-term loans, leading to a precipitous decline in lending in the repurchase agreements (repo) market. Massive lending by the Fed resolved the financial crisis, but not before reductions in business and household spending had led to the worst U.S. recession since the 1930s.

Lucas looks at the moral hazard created by deposit insurance as well other risk tools like swap and reinsurance markets using models that were developed in the 1980s that still stand today.  You may remember the huge role of AIG in all of this.  All the banks thought they were safe because they had insured their positions with AIG (credit default swaps, reinsurance, etc.) so therefore they thought they could take on more risk as they increased their volume of stinker loans.  What no one knew at the time was that AIG had pretty much insured the majority of the market. It was betting that real estate prices would never go down.  If AIG would’ve tanked, those insurance policies were dead and so was the rest of its line which included folks’ pensions and life insurance policies.  The AIG exposure was the Rubicon.

If you think you’re insured against a risk, you will take on more risk.  The banks thought they were insured.  Thus, the moral hazard is created.  The best way to explain it is using safety belts in cars.  People actually tend to drive faster when wearing seat belts and engage in riskier behavior because they feel safer. Deposit insurance creates a feeling of safety in both depositors and lenders.  There were never runs on checking or savings accounts during the entire crisis. It happened in Money Market Accounts which are close substitutes but not insured as people wanted to move their funds to their safer accounts.  Money Markets lend big time to the repo markets.

You may recall that TARP switched midstream from a program of buying toxic assets to a recapitalization venture.  The liquidity/credit crisis was basically the reason.  Bernanke told Paulson that it would take several months to value and clear out toxic assets.  They did this later through the QE program where they allowed almost anything as collateral for cheap loans for almost any one at the Fed’s discount window. What they did with the TARP was force the big banks to sell them none-voting preferred stock in exchange for a given amount of capital.  It was a form of nationalization without completely taking over banks.  The banks were supposed to create loans with this and replenish the credit markets.  That happened to a limited extent.  It didn’t replenish all of the credit markets.  Most notably credit for small businesses and consumers remained tight for some time.  They still are quite tight.

Read the rest of this entry »