Can We Please Start Letting Crises Go To Waste Again?

Will Wilkerson longs for the good old days when a crisis was just something to solve, not an excuse for another trillion dollar government enterprise.  He's really down on Former President Bush, but I agree with his larger point, which could simply be put as "Enough Already!"

The Aughts began in crisis when the second plane hit the second tower on Sept. 11, 2001.

The Bush administration, loath to let a serious crisis go to waste, managed to parlay the nation's alarm and credulity into an ill-conceived invasion of an entirely unrelated country, wasting over a trillion dollars and many tens of thousands of lives, all while losing control of the fight in Afghanistan and failing utterly to bring down Osama bin Laden.  (The Week - Will Wilkerson)

He accuses Obama of the same crime:

Bush's botched attempts to capitalize on crisis—the ugly aftermath to which Obama is heir—might have made an alert leader wary. But instead, Obama set up shop in the Oval Office and proceeded immediately to use crisis as (Emanuel's words again) "an opportunity to do things you'd think you could not do."  

Similarly, the Obama administration could have focused narrowly on getting the economy back on its feet, on getting the unemployed back to work, but it didn’t. Instead, it has followed Bush’s lead, pushing its most ardently desired policies through the window of crisis. A prolonged economic quagmire may be our reward.

A "Marriage of Incompetence and Craven Opportunism"

This marriage of incompetence and craven opportunism is so much in the familiar spirit of the age that one must conclude that the age itself remains unchanged.

The World Turned Upside Down

The world is now facing the first truly global economic crisis, which is continuing to develop at an unprecedented pace. The current situation is often compared to the Great Depression of the late 1920s and the early 1930s. True, there are some similarities.

Naturally, all national governments and business leaders must take resolute actions. Nevertheless, it is important to avoid making decisions, even in such force majeure circumstances, that we will regret in the future. We must not revert to isolationism and unrestrained economic egotism...Although additional protectionism will prove inevitable during the crisis; all of us must display a sense of proportion.

Excessive intervention in economic activity and blind faith in the state's omnipotence is another possible mistake. True, the state's increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent. The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation...

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the
state...

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing.

What makes this speech all the more amazing is that it comes from Vladimir Putin, Prime Minister of Russia, and former KGB officer. Being an old Reagan era cold-warrior, who manned this nations ballistic missile early warning system from the height of the cold war to the after the collapse of the Berlin wall and the Soviet Union... I never, in my wildest dreams, thought I would live to see the day that that an ex-KGB officer, President of Russia, and current Prime Minister would lecture, and rightly so, the United States on the dangers of Socialism and the Socialist state. I now know how General Cornwallis felt as he surrendered at Yorktown as the band played "The World Turned Upside Down". All I can say in absolute astonishment and amazement is:

LISTEN TO THE NICE RUSSIAN MAN, HE KNOWS WHAT HE'S TALKING ABOUT!

The serving men doe sit and whine, and thinke it long ere dinner time: The Butler's still out of the way, or else my Lady keeps the key, The poor old cook, in the larder doth look, Where is no goodnesse to be found, Yet let's be content, and the times lament, you see the world turn'd upside down.

Cheers!

~Finntann~

http://online.wsj.com/article/SB123317069332125243.html?mod=googlenews_wsj

Oooh! It's oh so stimulating!

Stimulus: If I take my hammer and smash it down on your big toe, that's technically a stimulus. I provided an input that elicits a response, "your screaming and yanking your foot away". That in a nutshell is the problem with stimulus, it is not a positive or negative term, it is neutral, (If I tickle you, you laugh).

Economically speaking, the more appropriate term is "incentive". Government induces desired behavior by the offer of reward. For example, telephone companies may compete in the long distance market (the reward) if they allow competition from other companies within their own infrastructure (the desired effect).

The problem with incentives is that they sometime lead to undesirable results due to the subject behaving in an unexpected manner. CEO stock options were initiated as an "incentive" aimed at producing higher and better CEO productivity. The problem was, that as CEO's soon learned, one could induce higher stock prices (the desired effect) through bad business decisions, claim the reward, and bail before the bottom fell out. The long term result being stinking rich (and retired) CEOs, and shaky and unmanageable companies.

Let us take a theoretical example of "economic stimulus" through the use of government spending (admittedly the numbers are completely made up).

The US government implements a $1 Trillion dollar stimulus package along the lines of the old WPA. The project: The maintenance and upgrading of the federal interstate highway system, federal buildings, and the like. We will grant them the same effectiveness as the old WPA in creating 3.3 million jobs paying a "security wage" to the recipients at the going regional rate. We will also grant the same time period of the old WPA of 8 years (1935-1943).

So, the government creates 3.3 million jobs for an 8 year period. The question then becomes what happens when the money and jobs run out? The government through the use of expenditures can only provide economic support while expending funds. The system is not self-sustaining... the government produces an artificial market...withdraw the funding and the whole house of cards comes falling down. Without WWII... we would either still be running the WPA or long since bankrupt (or socialist). The WPA was only made unnecessary by the economic stimulus induced by the war.

If the stimulus undertaken by government simply 'artificially' creates the desired end-state (employment) we are no better off than we are now, in fact we will be worse off, as we will be forced to continue pumping money into the programs established. Government action must be focused on those areas that can produce long-term positive effects in the economy, anything else is just a hand-out.


Think about it.