Saturday, February 11, 2012

Muddling Through?

Peggy Noonan reports that people are turning off from politics this election year in a unusual trend. To many tea partyers, this election seems historic, because the President and prior Congress so fundamentally overstepped the constitutional boundaries of government with health care and in other areas. Failure to quickly reverse this trend might doom us to a long period of stagnation. However, it seems that people have no faith in politics or in our elites, so they are tuning out Obama and the Republican candidates. And probably political blogs like this one.

With the economy seemingly limping towards improvement and with the two parties seemingly out of ideas, I believe that most people think that we are such a great country that we will muddle through. But it still feels miserable. One reason why might be the shape of the recovery. Economist John B. Taylor of Stanford offers these two pictures of economic recovery, the first is the current recovery, the second from the early 80s.

In the 80s, real GDP restored to the long term trend, today's recovery looks like it will just parallel the long term trend. The gap means permanent lost jobs, in my interpretation. Taylor makes the same point as I did on the percentage of the population in the workforce not recovering.

The great issue of our day is whether we are going to reign in government rationally or will we allow it grow to the point of destroying itself, in Greek fashion. It's as if we are resigned to the latter outcome, because there is no national leader who can make the compelling case for real change. The tea party movement knows the day of reckoning could come swiftly, but we haven't developed the bench strength to put forward a national ticket.

Bret Stephens on why the Republicans deserve to lose and probably will, even though the voters are sick of Obama.

Thus the core difference between Mr. Romney and Mr. Obama: For the governor, the convictions are the veneer. For the president, the pragmatism is. Voters always see through this. They usually prefer the man who stands for something.

What about Rick Santorum and Ron Paul? They are owed some respect, especially for the contrast between their willingness to take a stand for principle against the front-runners' willingness to say anything. But Messrs. Santorum and Paul are two tedious men, deep in conversation with some country that's not quite America, appealing to a devoted base but not beyond it.

Finally, there are the men not in the field: Mitch Daniels, Paul Ryan, Chris Christie, Jeb Bush, Haley Barbour. This was the GOP A-Team, the guys who should have showed up to the first debate but didn't because running for president is hard and the spouses were reluctant. Nothing commends them for it. If this election is as important as they all say it is, they had a duty to step up. Abraham Lincoln did not shy from the contest of 1860 because of Mary Todd.
The prescription? Change the tone of the national conversation, when the next shoe drops, count on the public to remember that we have a path ahead, a return to limited government.


  1. I look at the 0bama recovery as a decline in our production frontier due to big government programs. Private "free market" solutions are more efficient and better for jobs than state solutions which all depend upon cronies and lack of competition.

    This is not a recovery, it was an opportunity to make all our futures worse off and they didn't let it go to waste.

  2. the 1980 Recession was fundamentally different from this one. This one was the collapse of an asset bubble followed by bank runs and bond runs. That one was caused when the Federal Reserve jacked interest rates into space to end the 70s inflation. One is so much more real than the other.

    And they are the A-team?

  3. Calivancouver, it sounds like you are being snarky with regards to the two recessions being different, but I am not sure. I have heard that line of reasoning from left of center economists.

    DooDoo, I totally agree. We would have been better off with an auto industry restructuring using the normal bankruptcy process, for example. Another would have been a quicker collapse of housing prices, which would have brought new money into real estate more quickly.