The past eight years has seen the growth of a culture war between traditional values, like marriage and religious belief, and cultural attitudes toward gay rights, gay marriage and the environment. Some of these differences have become heated, such as animosity toward religious believers by gay marriage advocates. Another set of values that is under attack could be called “fiscal prudence” or “The Protestant Ethic.” We work and save and get an education and eventually we own something like a house and a car and some money in the bank. Recently the latter value system has come under attack by a political party that believes in “spreading the money around.” When I was a child, there was a nursery story called “The Three Little Pigs” which emphasized the point that the prudent person is safest in the long run.
Of course, John Maynard Keynes dismissed this idea by pointing out that In the long run we are all dead.
The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.
We can see that our present leadership is firmly of the belief that short term plans are best because who knows what the future brings ? What we see right now is a war on capitlalism and saving and investing.
There is a major cultural schism developing in America. But it’s not over abortion, same-sex marriage or home schooling, as important as these issues are. The new divide centers on free enterprise — the principle at the core of American culture.
Despite President Barack Obama’s early personal popularity, we can see the beginnings of this schism in the “tea parties” that have sprung up around the country. In these grass-roots protests, hundreds of thousands of ordinary Americans have joined together to make public their opposition to government deficits, unaccountable bureaucratic power, and a sense that the government is too willing to prop up those who engaged in corporate malfeasance and mortgage fraud.
The data support the protesters’ concerns. In a publication with the ironic title, “A New Era of Responsibility,” the president’s budget office reveals average deficits of 4.7% in the five years after this recession is over. The Congressional Budget Office predicts $9.3 trillion in new debt over the coming decade.
The US educational system has been busy re-educating the youth about capitalism and the free market.
Just 35% of American voters believe that a free market economy is the same as a capitalist economy. The latest Rasmussen Reports national telephone survey found that 38% disagree and 27% are not sure.
This helps explain earlier data showing that 77% prefer a free market economy over a government managed economy while just 53% prefer capitalism over socialism.
That is surprising since I don’t know how a free market operates in any but a capitalist system. I expect that this is a consequence of Marxist professors teaching college students that capitalism, a word coined by Marx, is bad. They aren’t completely stupid, though, because they don’t think the government can run the auto companies. Only 18% expect Obama to do a good job with them. I guess that’s his base. Democrats, as expected, are clueless.
However, two-thirds of Democrats (67%) say it is at least somewhat likely that Chrysler and GM will become profitable again under union and government ownership, a view shared by just 34% of Republicans and 33% of unaffiliated adults.
What is going on ? We are seeing the Chicago Way in action as the Obama people threaten those, like the Chrysler secured creditors, who would like the law to apply instead of Obama “spread it around” favoritism. Megan McArdle, who voted for Obama, has reservations but a little late. We could have told her.
This is troubling, because it’s now clear that the worry many of us had at the time of the bank bailouts has come true: the government is using its intervention in the banking system to pressure banks to give special deals to the government’s special friends.
(The government is apparently still taking the line that they are only intervening because the automakers are splendid, robust companies that got caught in a “perfect storm”. If so, Chrysler must be stuck in the Bermuda Triangle, because owners have been playing “hot potato” with its dying brands for most of the last decade.)
Countries that use their banking systems this way don’t get good results. If you’re a fairly uncorrupt developed country, you get slower growth and bloated “critical” sectors that are usually more critical in providing campaign support, lavishly remunerated make-work jobs, and photo ops, than any products the public actually wants. Then, if something like Japan happens, you have a twenty-year “lost decade” while everyone pretends as hard as hard can be that everything is all right, in the sincere but misguided believe that wishing hard enough will make it so.
If you are a badly managed country, you end up like much of Latin America or Africa, with a dysfunctional economy that booms only along with the price of some commodity you happen to produce.
We are hardly Zimbabwe, or even Venezuela. But if we keep using TARP to create a sort of “Most Favored Borrower” status, we’ll erode the safeguards that keep election to office in America from being the kind of giant spoils system that’s common in much of the world. What the bankruptcy judge did was entirely right and proper–it’s his job to allocate losses among creditors. And it’s always true that some of the credtiors won’t like the deal they get. On the other hand, what the administration did really wasn’t. It got its pet majority stakeholders to screw both their own shareholders, and the other creditors, in order to give a powerful union a sweetheart deal.
Imagine even having to say that “We are not Zimbabwe” under the last president.
This will not end well.