Big Government and the Bailouts Saved the Day

Krugman:

So it seems that we aren’t going to have a second Great Depression after all. What saved us? The answer, basically, is Big Government.

Just to be clear: the economic situation remains terrible, indeed worse than almost anyone thought possible not long ago...

For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss...

So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government...

Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen...

In addition to having this “automatic” stabilizing effect, the government has stepped in to rescue the financial sector. You can argue (and I would) that the bailouts of financial firms could and should have been handled better, that taxpayers have paid too much and received too little. Yet it’s possible to be dissatisfied, even angry, about the way the financial bailouts have worked while acknowledging that without these bailouts things would have been much worse.

The point is that this time, unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed. And that’s another reason we’re not living through Great Depression II.

Last and probably least, but by no means trivial, have been the deliberate efforts of the government to pump up the economy. From the beginning, I argued that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan — a number that will grow over time — and that the stimulus has played a significant role in pulling the economy out of its free fall.

All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution.

And aren’t you glad that right now the government is being run by people who don’t hate government?

Yglesias points out that "“bailouts saved the economy” and “bailouts were structured so as to be very favorable to politically influential financiers” are not exclusive options."

I think that's right. The stimulus worked, but it could have worked better if it had been targeted solely at... stimulus, and less at, oh, say Goldman Sachs.

If there are any responsible Republicans left, please take lessons from this for the healthcare debate. You can't stop it, like you couldn't stop the stimulus. (In fact you shouldn't stop it, like you shouldn't have stopped the stimulus.) But if instead of fearmongering and holding your breath and throwing tantrums, you direct your opposition to things that actually should be opposed, you could affect positive change.

With regard to the stimulus, you could have held your fire, not smeared Obama as Stalin-incarnate, not ridiculed the very idea of stimulus, and instead insisted on making sure that the stimulus was as trim and directed as possible. Oh, you'll say you did argue against some of the waste and misdirected funds, and of course you did, but that was lost among the greater lunacy.

Now you have an opportunity to make sure that the health care plan does what it sets out to do rather than rewarding corporate interests at the expense of everybody else. But you've got to stop lying about everything, smearing Obama as a socialist, pretending that Obama's coming for grandma, insisting that government can never do good, and generally engaging in fearmongering. Instead, be a responsible opposition party. The Dems put forward a plan, respond with the same plan slightly improved. Stay on message. Say you support the plan, but you want to include tort reform. Or you want less money for X and more for Y. You can do that. If you put all your energy on making the plan better and none of it on insanity, you could not only cause a better health care plan, but take great strides in restoring a civil democracy.

Or you can scream "Socialism" and tear at your hair and have to live with whatever the Democrats manage to ram through without your help. Your choice.

The Ultimate Test of the Media

McCain and Palin are doing something interesting. They've apparently decided that if the media covers only controversy and that the media will not call people on lies, but dutifully report "both sides," then they're going to just lie and see what happens. They get to not only frame the debate, but take ideal positions having nothing to do with reality.

Ezra Klein wrote brilliantly about this:

The McCain campaign's decision to lie about, well, everything, really needs to be understood as more than the outcome of John McCain's consuming ambition. It is a rational and obvious response to the rules laid down by the media. Indeed, McCain's spokesperson Brian Rogers says this directly to The Politico's Jonathan Martin. "We ran a different kind of campaign and nobody cared about us. They didn’t cover John McCain. So now you’ve got to be forward-leaning in everything."

And it's true. Earlier this year McCain made poverty tours and offered policy speeches. No one cared, Obama retained his lead. It was only when he began offering vicious attacks and daily controversies that he began setting the pace of the coverage. The McCain campaign learned something important about the media: It's an institution that covers conflict. If you want to direct its coverage, give it more conflict than your opponent. And so they have.

None of this, of course, absolves McCain of what he has done. He has sacrificed his honor and dignity with astonishing enthusiasm. He has become much worse than "just another politician." He is a politician who was once more than that, and used that reputation to go lower than the rest. But the fact remains that he wouldn't be doing this, that no one would do this, if the media ignored or censured the behavior. If lies were covered as lies and an allergy to substance was treated as evidence of an unfitness to govern, the tenor of campaigns would lift. These are, at the end of the day, rational beasts, and they hunger for good coverage. The McCain campaign has found its best coverage comes from its worst campaigning. And so they are following the incentive structure laid out by the media.

I don't think it's going to work. There's too much time until the election and the evidence is too obvious.

Here's Andrew Sullivan on the Bridge To Nowhere lies:

In her speeches, Sarah Palin routinely and repeatedly uses the phrase: "I told the Congress 'thanks, but no thanks,' for that Bridge to Nowhere." In the McCain-Palin ads, the claim is that she "stopped the Bridge to Nowhere."

These are, again, demonstrable lies. Again I will cite Wikipedia, since it's the fairest summary of the facts of the case, and includes all the links for you to see for yourself:

In 2006, Palin ran for governor on a "build-the-bridge" platform,^[101] attacking "spinmeisters"^[102] for insulting local residents by calling them "nowhere"^[101] and urging speed "while our congressional delegation is in a strong position to assist."^[103] About two years after the introduction of the bridge proposals, a month after the bridge received sharp criticism from John McCain,^[104] and nine months into Palin's term as governor, Palin canceled the Gravina Bridge, blaming Congress for not providing enough funding.^[105] Alaska will not return any of the $442 million to the federal government^[106] and is spending a portion of the funding, $25 million, on a Gravina Island road to the place where the bridge would have gone, expressly so that none of the money will have to be returned.^[101] Palin continues to support funding Don Young's Way, estimated as more than twice as expensive as the Gravina Bridge would have been.^[107]

Your call.

Probably much more important is this picture:



Unfortunately, I think the "lipstick on a pig" lie and the "Obama voted for comprehensive sex ed for kindergartners" lies won't hurt them. McCain can simply stand by the "Lipstick on a pig" lie, as he did on The View, and it's not something one can really prove to be false. The sex ed one won't hurt him, because the refutation doesn't make a good sound bite. Any day talking about "sex ed" and "kindergartners" is a win for McCain.

If he is brought down by his lies, it'll be the lies about Palin. The bridge, the earmarks, and McCain's and Palin's standing by them long after they'd been revealed as lies. The Obama campaign must frame the issue: "Is John McCain a liar?" The contrast between the honorable soldier he presents himself as and the dishonerable campaign he's leading represent a great opportunity for Obama. Rove took Kerry's greatest strength and turned it into his greater weakness, and Obama has the opportunity to return the favor with the message "John McCain is dishonest and dishonerable."

OMG: A Democrat Fights Back

Man that is nice to see after Gore and Kerry let the opposition demolish their characters. The Republicans have no chance if Obama makes them stick to the issues.

The Human Toll of Republicanism

Ezra Klein writes about the real-world ramifications of a McCain victory:

It's almost inarguable that a McCain presidency will push policies leading to an increase in illness and homelessness. Last year, McCain voted against expanding S-CHIP, which would have extended pubic health insurance to millions of currently uninsured children. Many of those children will become sicker than they would have if they'd been able to access a doctor early in their illness. Some may well die. In 1995, McCain voted for a GOP plan to balance the budget by cutting Medicaid by $182 billion over 10 years. Many adults would have been tossed off the rolls, been incapable of accessing a doctor, and fallen ill, or even died as unchecked hypertension led to cardiac arrest or a small lump grew into a full-body cancer. You can find similar examples of McCain trying to chop apart the safety net in almost every year of voting since.

...

There's a tendency to want to sugarcoat the outcomes of elections. You can say you disagree with McCain's policies because universal health care is important and humane and social programs are just and decent and upper-crust tax cuts are regressive and shameful and he's on the other side of all those opinions. What you're not supposed to say is that if John McCain is elected, the policies he has signaled he will pursue will harm the country's health, defund its safety net, lead to untreated illnesses, reduce mitigation of the ravages of poverty, and, in many cases, the outcome will be sickness and death and homelessness and, for those cut off from health coverage and help, probably hopelessness, too. McCain, for his part, would argue that even so, tax cuts are a matter of fairness and it's more important that health insurance is primarily private than that health insurance is actually accessible. And fair enough. But no reason we should ignore the implications of that philosophy.

It's easy to forget the real human cost of the right's political philosophies. They have a rationalization for everything -- progressive taxation is a priori immoral, higher taxes will kill the economy, universal health care will kill the economy, etc. -- but when you put their rationalizations on one side of the scale and the reality of those who will suffer as a direct and inevitable result of their policies, you've got to be awfully confident in the rationalizations for it to balance out.

When they make predictions that fly in the face of experience -- such as the claim that returning the tax code to Clinton's levels will kill the economy -- you really have to question their calculus.

Michelle Obama

Wow, she was great.

Best Line of the Debates So Far

"Hillary, I'm looking forward to you advising me as well."



You can donate to Obama here.

Links for the Day

• littlefoxling has been blogging up a storm: he tells his story in parts I, II, III, IV, and V. He also has a handy list of Biblical anachronisms.


• At Obsidian Wings, a conservative case against torture.


• A commenter at Andrew Sullivan's links to this poll from before the 2004 Democratic primaries.


• Bitter about being circumcised without your permission? Ever wanted to know what having a foreskin is like? You're in luck. (Warning: besides being a website about artificial foreskins, music plays.) For the alternative Christian, a Jesus tongue piercing.


• Finally, these are 9 cool sets of stairs.

Greenspan Criticizes Bush, Praises Bill Clinton

Stating the obvious, but it's nice to hear a lifelong Republican with Greenspan's reputation say it:

Alan Greenspan, who served as Federal Reserve chairman for 18 years and was the leading Republican economist for the past three decades, levels unusually harsh criticism at President Bush and the Republican Party in his new book, arguing that Bush abandoned the central conservative principle of fiscal restraint.

While condemning Democrats, too, for rampant federal spending, he offers Bill Clinton an exemption. The former president emerges as the political hero of "The Age of Turbulence: Adventures in a New World," Greenspan's 531-page memoir, which is being published Monday.

Greenspan, who had an eight-year alliance with Clinton and Democratic Treasury secretaries in the 1990s, praises Clinton's mind and his tough anti-deficit policies, calling the former president's 1993 economic plan "an act of political courage."

But he expresses deep disappointment with Bush. "My biggest frustration remained the president's unwillingness to wield his veto against out-of-control spending," Greenspan writes. "Not exercising the veto power became a hallmark of the Bush presidency. . . . To my mind, Bush's collaborate-don't-confront approach was a major mistake."

Greenspan accuses the Republicans who presided over the party's majority in the House until last year of being too eager to tolerate excessive federal spending in exchange for political opportunity. The Republicans, he says, deserved to lose control of the Senate and House in last year's elections. "The Republicans in Congress lost their way," Greenspan writes. "They swapped principle for power. They ended up with neither."

Read the rest.

Update on the Trend in Iraq: Bad News

Last week, I posted this picture:



A few commenters focused on the fact that there seems to be a slight downtrend in the last few months and suggested that maybe the surge is starting to work. Unfortunately, it turns out that they were wrong. April and May were the deadliest two months for American troops since the start of the war.

Let us hope that Bush gets over his denial and the Democrats find their balls.

(HT: Stephen Pelz)