Sunday, January 15. 2012
Some scattered links I squirreled away during the previous week
Steve Benen: Friday's Mini-Report:
It's a good thing Obama didn't listen to Republicans on the auto industry:
"Chrysler will add 1,250 jobs at two Detroit factories next year -- another
sign that the once struggling automaker appears to be making a comeback."
It's a good thing Obama didn't listen to his own advisers -- principally
Austin Goolsbee -- when they recommended that he let Chrysler fold. They
argued that doing so would help General Motors, and wouldn't be a problem
because General Motors would pick up the unemployed Chrysler workers. To
my mind, this was the single most craven revelation in Ron Suskind's The
Confidence Men. Obama was initially persuaded, but backed down after
someone pointed out how insane this was.
Henry Farrell: Lilla v. Robin: Count me among those who disliked
Mark Lilla's review of Corey Robin's The Reactionary Mind: Conservatism
From Edmund Burke to Sarah Palin. I picked up a copy of Robin's book
shortly after it came out. I haven't gotten around to it, but I understand
the central thesis is that conservatives (at least from Burke on) all
share one essential trait: their desire to defend the upper class against
any challenges from the riff-raff. The upper class may be capitalists or
slave owners -- or, if he bothered to look that far, Soviet commissars --
but the instinct is the same. Lilla made a big show of arguing that there
are differences between conservatives as if that invalidated Robin's point,
then dismissed the book with a flurry of invective. I had never heard of
Lilla before, so Henry's post helps frame my annoyance. Also includes this
Al-Ghazali, as quoted by Ernest Gellner, puts Mannheim's point more pithily --
"the genuine traditionalist does not know that he is one; he who proclaims
himself to be one, no longer is one." But what I don't know (and can't tell
from the book) is how much of this agonism is unique to conservatism's
intersection with liberalism, and how much is a generic product of the
competitive pressures of political conflict. The left and the right shape
each other as they fight. Conservatives read Saul Alinsky. Markos Moulitsas,
when he started trying to organize the netroots, was partly inspired by the
Goldwater movement (as depicted in Rick Perlstein's Before the Storm).
To really get at the questions that I think (perhaps I'm wrong) Robin is
interested in, you would need an intellectual history not of the left, or
the right, but of how they have shaped each other, and how each has
separately been defined by the struggle between them. This would allow
you better to figure out which parts of conservatism are uniquely
reactionary, and which parts are simply reactive.
It's certainly hard to think of any significant movement in US history
that has been more obscured and distorted than the New Left, in large
part because so much of the post-1970 right was defined by its hatred
of the civil rights, antiwar, women's, and environmental movements.
Still, such reaction wouldn't have gained any traction without aligning
with the class interests of the rich, which is again the key point.
Mike Konczal: An Interview with Josh Kosman on the Embeddedness of
Private Equity in the Tax Code: Related to the Romney/Bain stuff
elsewhere. Kosman's The Buyout of America: How Private Equity
Is Destroying Jobs and Killing the American Economy is one of
the first books to check out on how private equity firms work --
and given its scant attention paid to Bain won't be the last.
Private equity and buyouts started as a way to take advantage of tax
gimmicks, not as a way of saying "we're going to turn around companies."
And now it's out of control. I look at the 10 largest deals done in the
1990s, during ideal economic times, and in six cases it was clear that
the company was worse off than if they never been acquired. Moody's just
put out a report in December that looked at the 40 largest buyouts of
this era and showed that their revenue was growing at 4 percent since
their buyout, while comparable companies were growing at 14 percent.
In January -- so just in the past 12 days -- Hostess, the largest
bakery in the country, just went bankrupt. Coach, the largest bus company,
just went bankrupt. And Quizno's is about to go bankrupt. All of these
were owned by private equity.
Paul Krugman: Untruths, Wholly Untrue, and Nothing but Untruths:
I was deeply radicalized by the 2000 election. At first I couldn't believe
that then-candidate George W. Bush was saying so many clearly, provably
false things; then I couldn't believe that nobody in the news media was
willing to point out the lies. (At the time, the Times actually told me
that I couldn't use the l-word either). That was when I formulated my
"views differ on shape of planet" motto.
Now, however, Mitt Romney seems determined to rehabilitate Bush's
reputation, by running a campaign so dishonest that it makes Bush look
like a model of truth-telling.
I mean, is there anything at all in Romney's stump speech that's true?
It's all based on attacking Obama for apologizing for America, which he
didn't, on making deep cuts in defense, which he also didn't, and on being
a radical redistributionist who wants equality of outcomes, which he isn't.
When the issue turns to jobs, Romney makes false assertions both about
Obama's record and about his own. I can't find a single true assertion
And he keeps finding new frontiers of falsehood. The good people at
CBPP find him asserting, with regard to programs aiding low-income
What unfortunately happens is with all the multiplicity of federal
programs, you have massive overhead, with government bureaucrats in
Washington administering all these programs, very little of the money
that's actually needed by those that really need help, those that
can't care for themselves, actually reaches them.
which is utterly, totally untrue. Administrative costs are actually
quite small, and between 91 and 99 percent of spending, depending on
the program, does in fact go to beneficiaries.
I'll add that it's private charities that have trouble delivering
a majority of what they raise to their putative recipients. (Part of
their problem is scale, most is the cost of fundraising, and some is
due to lack of accountability.)
For a top-ten list, see
Steve Benen: Chronicling Mitt's Mendacity.
Also see Krugman's column,
America Isn't a Corporation. The basic points should be clear to
anyone, but bear reiterating. As for Romney:
Now, to be fair, being a career politician isn't necessarily a better
preparation for managing economic policy than being a businessman. But
Mr. Romney is the one claiming that his career makes him especially
suited for the presidency. Did I mention that the last businessman to
live in the White House was a guy named Herbert Hoover? (Unless you
count former President George W. Bush.)
And there's also the question of whether Mr. Romney understands
the difference between running a business and managing an economy.
Like many observers, I was somewhat startled by his latest defense
of his record at Bain -- namely, that he did the same thing the Obama
administration did when it bailed out the auto industry, laying off
workers in the process. One might think that Mr. Romney would rather
not talk about a highly successful policy that just about everyone in
the Republican Party, including him, denounced at the time.
But what really struck me was how Mr. Romney characterized President
Obama's actions: "He did it to try to save the business." No, he didn't;
he did it to save the industry, and thereby to save jobs that would
otherwise have been lost, deepening America's slump. Does Mr. Romney
understand the distinction?
Romney probably likes the GM/Chrysler example because Obama's team
did in fact steal a few pages from the private equity handbook there,
so it's something he can understand in his own way: they did force some
executives out, close some plants and lay off workers, and cajole the
unions into reducing costs; but they didn't saddle the companies with
unsustainable debt, and they didn't pile on huge management fees to
instantly recoup their investment. Consequently, the industry emerged
from the process healthier, whereas had Bain or their ilk been involved
they would have been left off in far worse shape.
Let me add two arguments I have, not with what Krugman said but with
what he didn't. One is that Romney is not a typical businessman. Most
people who run businesses preside over organizations meant to produce
useful goods or services and try to make a comfortable profit doing so.
Romney, private equity investors like him, and their financial allies,
are fundamentally parasites and predators. They look for the margins
between what a company can be bought for and how much cash can be sucked
out of it how quick, and when they find one they devour it, reaping
quick profits and almost invariably leaving the company depleted and
often defunct. To such people, taking over the government looks like
a license to steal -- if not just for oneself, then also for one's
friends (e.g., with Bush père left office he landed at Carlyle Group,
one of the world's largest private equity firms).
The other question is whether government should be run
like a business. That's a big one I can't begin to do justice to
here, but the answer is no, and there are lots of reasons. One way
to look at this is that capitalism is necessarily unstable, so you
need some way of counterbalancing its excesses: to stimulate demand
when it slacks, to pop bubbles when they emerge, to keep businesses
honest, to protect workers, to provide services that businesses can't
(or shouldn't) because they can't (or shouldn't) be gated, or even
because we jointly want to do something without thinking of the
One more bit of Krugman on
Romney and the Bailout:
So what the story of Romney and the auto bailout actually shows is
something we already knew from health care: he's a smart guy who is
also a moral coward. His original proposal for the auto industry,
like his health reform, bore considerable resemblance to what Obama
actually did. But when the deed took place, Romney -- rather than
having the courage to say that the president was actually doing
something reasonable -- joined the rest of his party in whining
and denouncing the plan.
And now he wants to claim credit for the very policy he trashed
when it hung in the balance.
Andrew Leonard: The Long Overdue Downfall of Gordon Gekko:
Of course, he means Mitt Romney:
Like Gekko, Romney made his fortune buying and selling companies; and
like Gekko, he believes that his "greed is good" version of rough-and-tumble
creative destruction is a positive force for America, weeding out the bad
performers and nurturing lean-and-mean profit engines. If you are looking
for the paradigmatic exemplar of the new style of capitalism mogul launched
by the Reagan revolution, Romney is your man. Michael Douglas' Gordon Gekko
is merely ersatz.
The shock is to see Newt Gingrich and his financial backers channeling
the Oliver Stone critique so passionately and wholeheartedly. If you have
not seen the three-minute advertisement "When Romney Came to Town," the
soon-to-be debuted documentary lambasting Romney as the enemy of the
American worker, prepare to be flabbergasted.
"Their greed was only matched by their willingness to do anything to
make millions in profits."
"This film is about one such raider and his firm."
"His mission: To reap massive rewards for himself and his investors.
"Romney took foreign seed money from Latin America, and began a pattern
exploiting dozens of American businesses."
And so on. Michael Moore doesn't sting this hard, and MoveOn isn't
this angry. If Romney, as expected, ends up winning the Republican
nomination, Obama's campaign team can relax.
Much is being made of whether Gingrich has broken some sort of
unspoken code of Republican primary collegiality by declaring class
warfare on Romney. As Jonathan Chait argues, you can question whether
a fellow GOP candidate is a true conservative, but to call him a
"plunderer" is, or should be, beyond the pale. Plundering is what
capitalism is all about! The free market is supposed to be built on
the principle of unrestrained plunderation. Or it would be, if
Democrats didn't keep getting in the way with their socialist-leaning
regulations. [ . . . ]
What the Wall Street Journal euphemistically calls "the rougher
side of American capitalism," in its Monday article examining the
legacy of Bain Capital, is suddenly no longer in fashion. And there
is no better proof of this than the spectacle of one of the great
culture warriors of our time, Newt Gingrich, defecting to the other
His treason won't help his sorry campaign, and won't deflect Romney's
path to the nomination, but it is still well worth our attention. Because
the power of its attack highlights Romney's biggest vulnerability. In the
32 years since Ronald Reagan was elected president, there has never
been more widely expressed antagonism and anger toward the practitioners
of corporate-raider, leveraged-buyout, excessively compensated CEO,
shareholder-value capitalism than there is now.
And that's Mitt Romney. That is who he is. He can flip-flop about
everything else, but there's no way to wriggle out of his essential
nature. He's the 1 percent -- even Newt Gingrich says so.
My emphasis added.
Leonard has another related piece:
A Romney Showdown: Krugman Versus Brooks: mostly on David Brooks,
since it's more interesting to talk about wrong than right:
With this column, Brooks settles, once and for all, the question of
whether he himself is an elitist. And not just any run-of-the-mill
elitist! No, Brooks is a heroic, truth-telling elitist, with the
courage to say what conventional wisdom about American discourse
In sum, great presidents are often aristocrats and experienced political
insiders. They experience great setbacks. They feel the presence of God's
hand on their every move.
Unfortunately, we're not allowed to talk about these things openly
these days. We disdain elitism, political experience and explicit God-talk.
Great failure is considered "baggage" in today's campaign lingo.
I wonder, why might Americans disdain elitism? Could it have something
to do with our history, our defining identity as a people who rebelled
against monarchy? Could it be that one of our core values, at least until
recently, is the idea that anyone, no matter what family they were born
into, or how wealthy they are, or what prep school they attended, has (at
least theoretically) the potential and opportunity to rise to the highest
office in the land?
Brooks doesn't weigh in on whether Romney qualifies as a true blueblooded
aristocrat -- although, given the fact that his father was a governor and
car company CEO, the implication is obvious. What's equally obvious, however,
is the slam at Obama, who was raised by a single mother and enjoyed none
of the advantages that were mother's milk to Romney.
Alex Pareene: Romney's Rivals All Become Socialists, to Horror of Conservatives:
Subtitle: "GOP candidates trash capitalism, and good on them."
Perry added that "there is something inherently wrong when getting rich
off failures and sticking it to someone else is how you do your business,"
which is basically a wholesale rejection of the free market system.
(Even the reasonable Jon Huntsman got shrill: "Governor Romney enjoys
firing people. I enjoy creating jobs.")
Sarah Palin is among those attempting to stanch the bleeding by blaming
the bad old liberal media for attacking Romney for his success, but everyone
can plainly see who's actually responsible.
National Review's Jim Geraghty complains that the candidates now all
sound like Occupiers. The Club for Growth is pissed at Newt for his
anti-Bain Capital attacks. Phil Klein accuses Romney's rivals of Marxist
rhetoric. Avik Roy diagnoses Romney derangement syndrome. (The American
Spectator literally calls for Gingrich to be investigated for violating
campaign finance law for perhaps coordinating with a Super PAC. What
happened to the absolute defense of campaign funding as speech?)
It looks like Republican opinion leaders are beginning to coalesce
around Romney due in part to disgust over anti-capitalist attacks being
levied against him. Of course, his rivals wouldn't be pushing this line
if they didn't think it was effective. The irony is that the Republican
candidates are shameless enough to embrace the exact arguments
conservatives and centrists have successfully shamed liberals out
John Quiggin: Blogging the Zombies: Expansionary Austerity -- After the Zombies:
A draft chapter to append to the forthcoming paperback edition of
Quiggin's fine book, Zombie Economics: How Dead Ideas Still Walk
Among Us. Key paragraph here (my emphasis added to key line):
Expansionary austerity is not simply a zombie economic idea. It
forms the basis of a political strategy of class war, undertaken by
the financial and political elite (the "1 per cent") to hold on to the
wealth and power they accumulated during the decades of market liberalism,
and to shift the costs of their own failure on to the rest of the
population. An effective response must similarly combine an
economic analysis with a policy program and a political movement to
mobilise resistance to the push for austerity.
In other words, it is a political ploy disguised as economics.
The problems with writing a chapter which tries to treat it as a
matter of economics is that without its politics there is no idea
there. Simply put, recessions occur when large numbers of people
stop spending, either because they don't have and cannot borrow
the money, or because they have a liquidity preference not to do
so. Recessions end when people start spending again. Governments
can help mitigate or even end a recession by deliberately making
up the missing spending. Austerity is the argument that government
should not do so, and in fact should contract like the private
sector. By further reducing spending, the only thing austerity
can do in the short term is to deepen and prolong the recession.
So how can anyone think austerity can ever be expansionary? As
best I can reckon, the answer depends on three highly implausible
assumptions, each having more to do with political interests than
with economics. First, austerity can only be expansionary in the
long run: since by any analysis you're digging a short term hole,
you're expecting something so good to happen later that it will
more than make up for short-term sacrifice. (Keynes, you should
recall, was notoriously dismissive of such arguments, reminding
us that in the long run we're all dead.) Second, you assume that
all economic growth results from investor confidence: that the
economy can't grow until the rich are ready to invest again, and
that as soon as they are it will grow spectacularly without any
of the distortions government intervention would inject. And third,
you assume that no permanent harm will come from prolonging the
recession: for instance, you assume that idling workers won't
cause their skills to atrophy, that education cuts won't reduce
the skill levels of the workforce, that reduced health care won't
undermine public health, that neglecting infrastructure won't
reduce its value, that prolonged hardships won't kick back in the
form of crime or revolt, and so forth.
I can't see any way for austerity to prove its benefits, but
I'm handicapped by viewing people as having both substantial needs
and a democratic claim on the nation's wealth, and because I view
workers as having at least as much to do with the generation of
that wealth as anyone else (and probably a good deal more). The
proponents of austerity, on the other hand, are remarkably keen
on marginalizing everyone else. In fact, their economic theory
tells them that recessions would automatically self-correct if
only labor costs would drop to whatever level allowed immediate
profitability rather than be obstructed by unemployment-producing
strictures like minimum wage law. (Again, this is a major point
where Keynes proved not that it shouldn't or couldn't work but
that it doesn't.)
While conservatives like to argue that whatever is convenient
for them now is in line with timeless principles, the main effect
of austerity programs is to delay, and the action conservatives
most want to delay is anything that redistributes wealth, even at
a trivial level. For example, unemployment benefits, food stamps,
any sort of income support helps prevent the labor market from
collapsing, allowing the unemployed to hold out for decent wages,
and reducing downward wage pressure on the employed. Businessmen
look at their own labor costs as lost profit, but don't seem to
be able to grasp that lower wages for everyone reduces demand and
locks them into a death spiral. That view is pure politics.
There are reasons why austerity arguments have some appeal,
and those do involve zombie economic ideas -- e.g., the idea that
government should be run like a corporation. But the main idea
is based on pure faith: if we just let nature run its course, we
will rebound from this recession like we've rebounded from every
past one. This is one idea that could be not just wrong but
disastrously so. One big reason recessions in the past didn't
persist was because external factors promised opportunities for
growth: people, land, resources, energy, technology, access to
markets, all those things used to be expanding even when the
economy panicked. All those factors are approaching limits now,
and that in turn limits the opportunities for investors. We've
seen how recovery from the last three or four recessions has
been increasingly protracted, with long delays in recovering
employment levels, and no net wage growth over the last 30
years. Meanwhile, in searching for ever higher profits, the
rich has turned increasingly to financial tricks -- indeed,
one of the big problems with monetary stimulus is that when
we pump more money into the financial system very little of
it ever gets into the real economy, which makes the approach
vastly inefficient. Such stimulus only adds to the inequality
problem, which like austerity aims at impoverishing workers
but winds up hollowing out the entire economy. I suspect that
it has already become the case that the only way to actually
grow the economy out of its recession is through a massive
redistribution of wealth. We're a long ways from having the
political insight to do that, but part of the process is
extirpating the economic zombies Quiggins writes about: the
whole hoary theory of "expansionary austerity" chief among