Back To The Future We Go

Not only have I had little time to make a comment on the state of the economy, but there seems to be little point either. Things are steadily slipping backwards from the mild improvement we saw a few months ago. We remain becalmed, leaderless, and clueless. It has become depressing talking about the systemic failure we are living through. So mute and weak are our leaders that we are even bereft of policies to criticize. America’s perpetual election cycle has now sucked out what vestige of energy there was from the policy making elite. And there was precious little energy to begin with.

So, what have we learned in recent days?

That the economy is growing at a rate too slow to build sustainable improvements in the labor market. The 2.2% growth reported for the first quarter is simply inadequate and speaks to endemic weakness rather than any kind of strength. As foundations for future wealth generation go this is flimsy indeed.

We have learned that factory orders are softening.

That consumer spending is flat.

That construction spending is hovering just above disaster levels.

That motor vehicle sales are flat.

And that the employment outlook is worse than we thought.

In short we have learned that the economic recovery is as anemic as it can be without causing alarm bells to be ringing. This is exactly what we should expect from an economy lacking leadership, clear policy direction, and where debate is still has an eery reminiscence of that of seven decades ago.

I grieve for those families suffering, and those that will suffer, as our elite indulges itself in a repeat of the 1930’s. It ought to have been different. That is was not is testimony to the weakness of our leaders and to our collective ability to forget the efficacy of decisive action in the face of the kind of storm encountered when markets get things horribly wrong.

Our unwillingness to deploy the full weight of the government as a bulwark against the failure of the market is a sign of ignorance. An ignorance rooted in blind adherence to ideological purity despite the stack of evidence against it.

Make no mistake about it: we, collectively, have chosen mediocrity. We aspire to it. We indulge in shallow debates about tepid alternatives and eschew any thought of bold policy as being the domain of a naive few. We parse endlessly the fine points of thickly worded speeches whose cumulative heft is negligible. We substitute discussion of phraseology for the search for sharp meaning. We indulge in ever more acute observation of furniture alignments while not noticing the rottenness of the furniture itself.

We seem to to care.

Or we are to afraid of the effort needed to set a healthy course.

The debate we need is difficult. It its fraught with great distinctions. It requires commitment. It needs our attention, involvement, and education. It is one we need to have. Or else this drift will continue unabated and the decline will become more difficult to reverse.

But we will not have such a debate.

Instead we will suffer through a year long election cycle stuffed with grandstanding, pandering, and puffery.

I am convinced that the upcoming election will solve nothing.

Obama has proven to be an indecisive flop. He is a gifted bureaucrat whose greatest skill is tinkering with the details of legislative gobbledygook. He is a wonk’s wonk. His favorite book was “Nudge”. Nudging is his predilection. Unfortunately we need a good wallop. Nudging is good in a healthy economy, where only a little fine tuning is needed. In an economy as deranged and unbalanced as ours became during the years of Reagan/Bush delusion something a tad more heavy handed was required. Obama was the wrong person to deliver the requisite bang to the side of the head.

Romney I think would be just as bad. His skill is in delivering the dry, chilling, and austere management of organization theory. He is adept at squeezing and manipulating in order to rejuvenate a subsystem like a business firm. Those skills are inappropriate when faced with the entire system of a national economy. There is nowhere to offload the supposed dross. There is no one else to absorb your excess. You can no longer fire and slash away safe in the knowledge that the fired and slashed are not your problem. They are. And being a corporate manager is training for authoritarian not democratic government. Besides, Romney now leads a party long ago captured by an anti-social libertarian sect hell bent on deconstructing modernity and whose philosophy is shaped to defeat autocrats not democratically elected governments. Libertarians live in daily fear of George III, apparently unaware of his demise and the subsequent rise of democracy. The tyrant whose taxes they so decry is not some distant autocrat pillaging the realm, but us. The rest of us – we the people trying to band together to solve, collectively, our mutual problems.

One example: The period of fastest economic growth this nation has ever had came at a time of its highest marginal tax rates. This flatly contradicts the libertarian call to cut taxes further and the supply side argument that high taxes impede growth. Either we have to admit that high taxes are compatible with high growth, or we have to acknowledge that the two are not connected at all. The one thing we can say with certainty is that high marginal tax rates rates are not a cause of malaise. History says so. Clearly. Yet here we are entering an election is which that case will be made.

This is what Romney promises to bring to that table. Nothing new.

We are destined to go backwards to retrieve ideas already shown to be wrongheaded in order to conduct our discussion of our future. But we have no Hayek and no Keynes to conduct the debate. We have no one remotely of that stature. So history is repeating its plot without its key actors. And like the remake of any old movie it will fail to rise to the level of the original.

On a parochial level economics is mired in similar miserable doldrums. It has nothing new to add to what it said seventy years ago. It is substantively unchanged decades after the titanic struggles of the 1930’s. Sure it is more formal. Absolutely it looks more rigorous. But its subject matter and what it has to say is the same.

We are back too the future.

Unfortunately our elites – business, academic, and political – are incapable of generating novel responses to our problems. We are stuck with the mediocre when we need – so, so clearly need – the exceptional.

2.2% GDP growth looks about right for the rest of the year. Get used to it.