A Recession Forty Years in the Making–Updated

This Great Recession  Didn’t Happen by Magic…My Rant

The Sniffer Returns. Photo Courtesy: Smith Detection UK

When last the Sniffer’s image appeared here on Extreme Thinkover, he (well, I think he’s a he) was celebrating the passage the the health care reform act, having sniffed out the “radiation” of American Health Insurance Providers and other members of Big Medicine’s failed assault against the legislation, spending undoubtedly hundreds of millions of their subscribers’ dollars in the process.  That money was intended by those who paid it, whether it was the funds directly from the insured or their employers, to pay for health care not to pay lobbyists and advertising to defeat every effort and piece of legislation devised to make it better.  Fortunes spent without consent.  A cruel form of taxation without representation.

We will probably never know how much money Big Medicine squandered in their complete and total defeat, as the benefits of health care for all Americans already taking effect, item by item, promises a future of access to medical care that for over two centuries we have never had the right and many have been denied by sheer accident of their socioeconomic status or a simple preexisting condition.

Now we have the right.  Obviously, we should be celebrating, right?  Right?

Political Memory Distortion

Some of our citizen sisters and brothers continue to snort and paw like an angry bull over the fact that they now have to participate in a society that cares for the medical needs of  all its citizens (joining finally nearly every other First World nation and many others), not just as country that rewards those who would hoard their worldly goods as if none of those around them had any role in the accumulation of that wealth.  In their anger, from distorted recollections of an earlier geopolitical battles, they call it socialism, an incoherent misunderstanding of that term in the history of political systems.  It is not socialism.

A Republic’s Highest Value

To the contrary, it is the highest value of a democratic republic: Sharing.  It is that simple.  In a democratic republic, one of the blessings of liberty is sharing.  To treat another as you would want to be treated.  We are now a large nation, over 300 million people and growing.  The day of a flat birth rate has passed.  It takes a lot of organizational structure to insure that the ideals and the order of a democratic republic are nourished over time.  It cannot be done by stinginess, or by isolationism.  The age of the Rugged Individualist has passed.  We now are connected in ways even those of us in our middle age could not dream of.  We now live in a shared world, a shared connectivity at the speed of light, the evolution of human ingenuity turned up on high, the 20th Century a platform for the 21st.

Equality consists in the same treatment of similar persons–Aristotle, 384-322 BCE.

Most of all it cannot be done by refusing to share in such a way that those with the most are continuously provided with more through no merit of their own, denying the dreams of those in the middle to improve their lot in life, it too a blessing of liberty, and effectively squelching the chance of those at the lowest rungs of life from ever daring to dream that those above them might welcome them to take those steps and dream those dreams out of their poverty.

The right to achieve prosperity in a democratic republic is not the exclusive right of those who have already achieved it through their own effort or inheritance.  At the same time, those who have achieved prosperity have no right to hoard their prosperity so that those who are trying to achieve it as well are denied their right to share in its blessings, regardless of their beginning station in life.  With all due diligence those who are prosperous must ensure that the efforts of those who desire to be so as well are rewarded and their growing prosperity welcomed.  But because human beings all have differing gifts, desires, capacities, and health, a democratic republic can exist living by its highest ideals when the prosperity of the whole also ensures the rights of the whole.

Rant complete.

An Unexpected Proof of Concept: 40 Billionaires’ Pledge

What I wrote in the previous paragraph is not just a flight of fancy or a theoretical construct that never would be tried by the very most prosperous people in our country.  On August 4, 2010, the foundation begun by billionaires Warren Buffet and Bill Gates announced that 40 billionaires have so far pledged to give away at least half of their fortunes during their lives or at their death.  Called The Giving Pledge, the list is available publicly online and, according to Buffet and Gates, this is only the beginning of their project.  For instance, the Wall Street Journal reported one of the pledger’s rational:

In an interview, Tom Steyer, founder of hedge fund Farallon Capital Management LLC in San Francisco, said he and his wife had planned to give away their wealth but decided to go public after Mr. Buffett called.

Mr. Steyer made the pledge to support what he sees as an effort by Mr. Buffett to show how those who profit from capitalism can help improve society.  “We want him to succeed in reshaping the way people think about the private enterprise system,” Mr. Steyer said.

MSNBC reported that the United States has about 400 billionaires, some 40% of the world’s total, and their net worth is estimated at $1.2 trillion.

Some of the billionaires have a very specific goal in mind for their pledge.  George Lucas, filmmaker and creator of the vast Star Wars empire stated,

“My pledge is to the process; as long as I have the resources at my disposal, I will seek to raise the bar for future generations of students of all ages,” filmmaker George Lucas said. “I am dedicating the majority of my wealth to improving education.”

Finally, Warren Buffett co-founder, remains ever the optimistic example for First Citizen in our democratic republic:

“We contacted between 70 and 80 people to get the 40. A few were unavailable. We don’t give up on them. Every saint has a past, every sinner has a future. We’ll keep on working,” Buffett said.

Thank you, Mr. Buffett and Mr. Gates.  You get it.  But we are not done here…

So What Next: A Recession Four Decades in the Making

How bad is it?  Ironically, out of the past a major player has come to the horrified realization that the policies of the past forty years, in which he played a major role, beginning with the disgraced Richard Nixon, set in motion the recessionary calamity we are trying to survive.

David Stockman, who was the director of the Office of Management and Budget under the evangelist of  “trickle down economics” and the fomenter of the doctrine that all government is essentially bad, Ronald Reagan, wrote these words published in the New York Times:

Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.

This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.

Although I politely disagree with Mr. Stockman’s criticism of Keynes, arguing as would Paul Krugman, Nobel Prize winning economist, that had Keynes’ economics been followed, instead of Reagan’s supply side fantasy, we might have avoided some of the damage Mr. Stockman places right at the door of the Republicans, who claim they want more of the same.

As our nation moves along the unstoppable path of time toward the General Election in November of this year, Mr. Stockman’s accusations against his own party are even more troubling.  He continues:

But in the end it was a new cadre of ideological tax-cutters who killed the Republicans’ fiscal religion.  Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts. (Emphasis added)

Delusion or Voodoo Economics: Your Choice

Dr. Krugman, however, agrees with Mr. Stockman on one major point: tax cuts will not help our economy outgrow the deficit now, any more than they did by the time Ronald Reagan left office in 1989.  Earlier this  month, also in the New York Times, Dr. Krugman wrote:

Now there are many things one could call the Bush economy, an economy that, even before recession struck, was characterized by sluggish job growth and stagnant family incomes; “vibrant” isn’t one of them. But the real news here is the confirmation that Republicans remain committed to deep voodoo, the claim that cutting taxes actually increases revenues.

It’s not true, of course. Ronald Reagan said that his tax cuts would reduce deficits, then presided over a near-tripling of federal debt…

But we’re talking about voodoo economics here, so perhaps it’s not surprising that belief in the magical powers of tax cuts is a zombie doctrine: no matter how many times you kill it with facts, it just keeps coming back. And despite repeated failure in practice, it is, more than ever, the official view of the G.O.P. (Emphasis added).

Are we at an impass: Yes.  I have done a lot of counseling during my career and one thing I have seen dozens of times is that a person who is suffering a delusion is not aware of the distortion of reality that is affecting them.  Voodoo, and I will place it squarely in the Hollywood horror genre’ and not the religion of many who live in and around the Caribbean, and the image of zombies, plays on our deep fears of somehow having our dead bodies overtaken and made to do nasty things to, well, anyone, but, in this instance screaming attractive American teenagers.

In terms of economics, the accusation of either, is to say something is deeply wrong, but we know that.  What we are suffering from, is the gathering force of economic distortions that have gathered for forty years.  Forty years.  How many really smart people, in both parties, noticed this, and said exactly nothing?  Was it delusions or voodoo?  How could that be, though?  The delusional cannot recognize their delusions, and the zombie’s revivified by voodoo do not know they aren’t supposed to be in that very state.  Does that mean there are not any really smart people left in either party who can figure it out?  A tantalizing question to ponder, I admit, but the answer is no.

If the Answer is “No,” What was the Question, Again?

The question, in the end, is not whether there were smart people following the economy for the last forty years; there were.  The question is how over forty years did nobody get it?  Since Richard Nixon brought the Union to its knees politically and economically, hundreds of economic models have been built, hundreds rejected because they didn’t work.  Computer modeling has entered the 21st Century–Economists of all stripes have access to these computers and run probably terabits of data through them to test the accuracy of their latest theory.

And yet we wallow in the debris of a Recession still threatening our national prosperity and influence, whose roots are easily traced to forty years ago.  This is a topic that must be more closely examined in the months ahead as the election approaches.  I think the Sniffer has a new assignment.

Swimming through Boiled Okra: The American Political Stew, 2010

Swimming through Boiled Okra:

The American Political Stew, 2010

Some Background:

I lived in Texas for three years while attending seminary at Texas Christian University.  Being a native of the Northwest, I was exposed to a whole new cornucopia of foods: great Texas barbecue, Tex-Mex, and Southwest cuisine. I learned how to eat grits the right way (butter and salt and pepper, or cheese—none of this milk and sugar over Cream of Wheat stuff).  To this day I love grits.

My one culinary defeat was okra.  For those of you who haven’t experienced this little vegetable,

Okra--Secret Dispenser of Slime. Photo: FowlerNurseries.com

Okra--Secret Dispenser of Slime. Photo: FowlerNurseries.com

it certainly looks benign enough in its raw form.  It’s also as popular as broccoli in more northern climes and a staple vegetable in numerous countries around the world.  You can see from the photo, it can look quite appetizing.  Okra can be prepared in many ways.  It can be breaded and fried (of course, most anything in the South can be breaded and fried—and usually is).  It can be boiled with all sorts of other foods.  Many people love it pickled.  It’s a popular ingredient in a wide variety of soups and gumbos.  That’s all fine and good, except…

Boiled okra is slimy.  For those three years I tried my best to sample okra in its various gastronomic manifestations.  I discovered, despite all this experimentation, that the only way I could handle okra was fried.  Fried okra is not slimy.  It just doesn’t have much taste for my palette, other than an oily breaded mushy…well…veggie-something-or-other. Take a look at the crosscut round of okra.  It looks a lot like a crosscut jalapeño pepper.  Only the jalapeño has both flavor and zing.

Okra Seafood Gumbo. One of a thousand ways to create vegetative slime.

In fairness to the otherwise popular vegetable, I selected two of my friends (completely non-random, and no intent to be so), on separate occasions, and who don’t know each other, and asked if either liked okra?  Their responses were identical to mine: Okra in soup is slimy and I don’t really like it.  So, what’s the point?  There are at least two other males in the United States who, without prompting as to reason, agree that okra in soup is slimy.  And none of us like it because of that particular quality.  And that’s important because of what comes next.

A Test of Your Gag Reflex:

Back to slimy.  Not just slickish slimy, but stringy and slimy.  As for stringy: A hundred times

Ultimate Alien Slime, Aliens, 1979, Photo Courtesty MGM.

worse than my grandmother’s over-cooked rope-strength stringy asparagus.  And as for slimy: pure gaggy slimy: You start to chew the spoonful of boiled okra, which just seems to release this gelatinous goo, resembling the stuff that drips off of your typical movie monster’s tongue or, uh, snout. As you try to swallow the bite the goo elongates itself so that by the time the first half of your bite has traveled the length of your esophagus, reaches your cardiac sphincter, and dumps into your stomach the other half is still trying to get out of your mouth and down your throat.

Gag.  Retch.  Get me something to wash down this uck!  Now!

An Analogy of the Absurd—But the Bridge to the Topic at Hand:

Imagine stirring a pot of okra the size of an Olympic swimming pool with that potential for such slimy viscosity.  Imagine swimming through a pool filled with such.  Michael Phelps wouldn’t be pleased.  Michael, whatever his other imperfections, would have the good sense to avoid such an Olympic sized pool of mucousity.

Okra Stew--Imagine an Olympic Pool filled with this.

Now to the Main Dish:

On the other hand, that exact unpalatable characteristic makes for a good analogy of the current state of American politics.  The so-called melting pot of America has been emptied of its finest ingredients, civility, respect, loyalty, etc, and filled to the brim with okra soup.  The blogosphere is boiling over with okra slime, from both the right and the left, but all too often the temperature of rhetoric coming from the right is higher.  In this context, characters such as Limbaugh and Beck, Palin and the Miz Liz of Cheney are but spices in an otherwise noxious recipe of political okra gumbo.

Last summer, we were caught off guard by the sudden rise to the boiling point of the Town Hall Meetings held in August during the Congressional Summer Recess.  But this year, the pot is already bubbling resembling those gloppy mud pots in Yellowstone National Park, and it’s still over seven months until the November mid-term elections.  Itsa bubblin’, like they say.  I think.

This year there will be no surprises.  Members of Congress in both Houses and from both sides of the Aisle may find it best to attend their town hall meetings dressed in a heatproof full-body firefighter outfit.  The political okra soup pot likely will reach a rolling boil even before summer.  The slop-slinging will probably be fierce.

The question is can it be sustained?  My observation last year was that the Sturm und Drang of the Tea Party’s birth and its rapid rise to an ear-shattering keen burned out before the end of the month.  Part of that, in my opinion, was it was “newsed” into numbness.

Numb News—It’s the American Way:

The success of cable/satellite/internet news with its around the clock accessibility very quickly has habituated Americans (and most of the world, undoubtedly) to a very short news cycle.  Inside of two weeks last August, people at the Town Hall Meetings screaming the same rant over and over lost its punch if not its volume. Though the opponents of everything Obama were taking great delight in the attention and media coverage they were receiving, they missed an unintended consequence of that saturation.  They unwittingly became passé. Almost with the predictability of an autonomic response, the polls shifted subtly, but the shift was critical.  It was pro-reform.

Inside the shift was the data that kept Health Care Reform alive, passing the House in November and the Senate on December 24. Despite the loss of one senate seat in January messing up the Senate Democrats’ supermajority of 60 seats the rhetoric of the opposition from the elected officials, the right-wing pundits and the “angry” right-wing citizenry did not shift.  Their message, although loud, consistent, and vitriolic, became less and less influential as each day passed.

That message also offered nothing: the “Let’s start with a blank piece of paper gambit” failed, not because the Republicans were united but because they had nothing to counter with.  If at the great Health Care Summit, the Republicans had shown up with a bill that could have been plopped down beside the one that had already passed (since December 24th, remember) that was half the height of the Democratic bill, Americans’ attention would have been riveted to know what was in that piece of legislation.  Instead the Republicans brought a blank piece of paper and kvetched for seven hours about the size of the already passed bill.  The three best words for this colossal error are: stupid, stupid, and stupid.

The opponents did not recognize their strategic error. They thought they were being consistent and united.  The president and the Democratic leadership, on the other hand, correctly interpreted the message as dragging itself down: that the public sentiment in a shift of even one or two points in favor of reform was far more important than the actual percentage of support or opposition was being rolled out weekly by the multitude of pollsters.  TV, Internet, Radio, newspapers, magazines along with pundits of all stripes missed that nuanced reality, their focus locked on a depth of field most conducive to seeing their ratings and profits and not the meaning of the changes.

Health Care Reform passed, astonishing and infuriating the Republican leadership and all sorts of right-wing groups.

Elections 2010: Jump in, the Okra’s in Prime Slime!

What’s next?  More of the same: A big pot of slimy okra political soup we will be forced to swim around in between now and November.  The Republican formula of Stupid3 remains the strategy they are taking into the Fall under the illusion (or delusion) it will be different this time and they will snatch the majority status from the Democrats in a great uprising of voter rage, or a groundswell of secessionist sentiment threatening the fabric of the Republic, whichever comes first.

I almost hesitate to write this next section for fear of tipping off the Republicans and the Tea Party supporters to the actuality of the situation that the colossal error they made attempting to kill health care reform remains a colossal error as they plan for the mid-term elections.

Poster Advocating Revolution. But What Kind? Photo: Menifee Tax Day Tea Party

The emerging rhetoric calling the administration a “regime” accompanied by repeated less than veiled threats of revolution and civil war, marches with guns in plain sight are not the next phase they believe it to be; it is rather an escalation of the same message.  TV and the other media again will create the opposite intended consequence the Right Wing wants to convey.  Their agenda, antics, and demonstrations will be covered ad nauseum, giving them all the coverage they desire, but dulling the impact of their effort: Why?  Very simply, Americans want “new” news.  Every day.  That is what we have been habituated to expect from the media.  It’s not a matter of how it’s slanted or editorialized, or punditized.  It has to be new.

This is an essential lesson the Democrats must keep in the center of their political radar screen, locked on like the Space Shuttle launching toward the International Space Station.  They have to remain disciplined in their own rhetoric as the campaign heats up.  The key: New talking points must be rolled out every week or so of what Obama and the Dems have accomplished and what they plan to accomplish after the polls close.  They don’t even have to counter what the Republicans are saying.  The Republicans will continue to tighten the trap they set for themselves in the broken record scenario they initiated upon Obama’s election in 2008, and the contrast between a constantly renewing fresh message and the broken record message will quickly create a gulf between the two in the Democrats favor.

Guns and Bombs Belong in the Movies and TV, Not in Real Life:

Why?  People crave the status quo.  The vast majority of U.S. citizens do not want revolution or civil war or any other highly disruptive political or social action.  We’re not talking about changes to health care—we’re talking about being able to go shopping or out to eat or on vacation, Friday night football, going to worship, school plays, and a thousand other everyday things we routinely do.

Domestic tranquility is what Americans want.  The news video of the bloody revolt and possible regime-changing coup in Kyrgyzstan is exactly the opposite of what Americans believe political change should be.  The more violent that situation becomes and the more coverage it will get because of American military interests in the country, the more nervous the typical American will be about the language in the okra soup.  They see suicide bombers belonging in Baghdad and Kabul, not valiant freedom fighters, 21st Century Minutemen here in the U.S. claiming they are wresting their constitutional rights from an oppressive and socialist government.  Regardless of how dissatisfied they may be about their taxes, Americans do not want bombs and blood flowing down the streets of their community.  The reason is straightforward: Americans make political change through ballots, not through bombs and bullets.

Tea Party Protester Advocating the use of Guns. But to Shoot What or Whom? Photo: TalkingPointsMemo.com

Swimming in the Soup of the Statistically Illiterate:

We can be certain that the media will continue to misinterpret the polls because they do not understand how to correctly interpret them to begin with.  Most political groups will continue to misinterpret the polls because they are always looking for an advantage for their side and a disadvantage for their opponents.  “Spin” is a set of heuristic blinders. Here’s why: Raw percentages are a flawed indicator of support.

We quote percentages as if they mean something absolute.  They do not.  Percentages provide information, just not what we typically believe it is.  The fundamental error in interpreting poll percentages is equating a final percentage of a vote with a pre-vote percentage.  The two are not equal indicators of support.  The better pollsters understand this and couch their questions with very precise language and report their results with statistical caveats that, for the most part, the media and the public ignore, and then they are surprised when the results don’t match the polls.  They blame the polls (some justifiably) instead of having the insight to realize they didn’t correctly read the data in the polls. We will see a lot of this in the next seven months.

Central Limit Theorem: One reason calculating percentage trends is complex. "In probability theory, the central limit theorem (CLT) states conditions under which the mean of a sufficiently large number of independent random variables, each with finite mean and variance, will be approximately normally distributed (Rice 1995)." Source: Wikipedia

Should we not believe the polls?  No, but be cautious about reading into the number what you want it to mean, rather than looking at the gap and vector of the differences between the two percentages.  That is where the real information is.  And understand there are ways to use the percentages that sound valid but are really nothing more than concoction and spin.  Second, don’t make the mistake of treating a final vote result with a pre-vote survey.  Even if the final outcome numbers are identical, they are two quite different metrics, almost to the point of being two separate statistical species.

Understand the spin-meisters of all the political parties and their various PACs are not going to give you the slightest bit of help in understanding any of this.  They are paid to convince you the numbers are always favoring their party or candidate, even if the most accurate interpretation suggests disastrous defeat.  They want the political okra pot to be as slimy as possible to confound your ability to squeeze the slightest bit of truth from the numbers.  No, it’s not pretty, and never will be, apparently, until the pot is emptied and a new recipe of soup, sans okra, is placed on the stovetop.

Is it November yet?  I can’t stand okra.

Okra: Abelmoschus esculentus. Photo: digthedirt,com