In political blogging about the Great Recession it is a common thread to find someone or something to blame. Amidst all the mud-slinging and counter-arguing the easiest thing for the beleaguered voter to do is to blame the president. He is the most visible leader and the duly-appointed spokesperson for the country. But, any student of history is aware that economics is complicated and the root causes of its problems are hard to identify.
Columnist Morton Kondracke in today’s Globe (10/26/2010) injects some new thought on the issue by discussing the theories of one David Smick, a wealthy investor and editor of International Economy magazine. In a recent speech Smick sees the GR as a problem of historic proportions, one that is likely to cause high unemployment for many years to come. But what is really interesting is that Smick, a Republican by the way, blames BOTH parties for the mess. He says, “Since the economy collapsed in 2008, both Bush’s and Barack Obama’s administrations “caved into big banks’ power” instead of restructuring them, leading them not to lend.” He says that America may be “. . . the next Japan . . . lost in two decades of stagnation and pessimism.” Now why did Congress cave in to the banks? Could it be that their constituents wanted really cheap credit?
Smick says that there are “. . . up to $4 Trillion dollars sitting on the sidelines (i.e., in banks) waiting to invest in a new era of American confidence if the government changes policy and encourages small-business and start-up investment.” Exactly how to encourage that he doesn’t say, except that it would likely take a leader (also an Anson Burlingame theme) with the business acumen of a Michael Bloomberg and the political charm of a Ronald Reagan. Had I been asked to comment on Mr. Smick’s speech (like that could happen!), I would have noted that a good part of the much-maligned stimulus money has been directed that way, and the banks are sitting on that money too. After all, why should they risk so much as a penny until
the economy improves? And the economy won’t improve until they do. Thus the circular conundrum.
Smick does make one very interesting statement. “Had Americans not been able to take out cheap home equity loans to engage in hyper-consumption, the U.S. economy for the entire George W. Bush administration would have grown each year by an average of 1 percent.” That word, hyper-consumption, caught my eye as significant. I recall before the bust that there was actually a TV program, “Flip That House“. Hyper-consumption. It resonates with our culture.
Ask the 82% or so of people still fully employed what is meant by “the American Dream”
and I think they would say, a bigger house, an extra car, a newer truck, a swimming pool, a vacation home, a longer vacation, more expensive dinners out. Bigger, extra, newer, longer, more, more, more. Hyper-consumption is even built into the fast-food meme. “Gimme a triple bacon cheese burger with fries and extra sauce. Oh, and a diet Coke with that.” Such is our mentality.
To review, dear reader, a Republican says that BANKS NEED MORE REGULATION, NOT LESS. And I say, it’s not all the banks’ fault, a big chunk of it is ours for mistaking QUANTITY for QUALITY. IMHO, we need to do more than “get a life”. We need to redefine what’s important in life.
Let’s notify Bloomberg and start resurrecting Ronald Reagan. They’re going to have their work cut out for them.