POLICY WITHOUT PROMISE
Sometimes, watching Barack Obama at work, I'm reminded of an American Idol contestant who has learned all the tunes and the moves, but not how to make them swing.
It's far from his problem alone, of course. Washington in the past few months has spent more time and more money with less effect that at any point in our history. Republican or Democrat, Congress or the White House - it doesn't seem to make any difference.
While the financial markets are, to be sure, limited indicators of cultural and political change, their indifference to an unprecedented infusion of public funds is startling. And they do have a history of hinting at what things will be like a half year from now and it doesn't look pretty.
Months down the pike we will find out if they underestimated the effects of the bailout, but right now they're among the best numbers we have and, besides, they are probably closer to the mindset of the average American that at any point in the recent past. When Warren Buffett and the typical worker could sit down at a bar and commiserate, you know things are bad.
Why hasn't it all worked better? One question that keeps coming back: what if the government suddenly banned all gambling and Las Vegas went under? How would you bring that city back?
While the government, of course, hasn't banned gambling in the financial markets - it hasn't even repealed recent legislation that let it get out of hand - the problem is both similar and much harder. If it was just a normal recession, our problem would be to get people working again. But in our case, working at what: creating another mythical financial bubble? Can you really replace massive betting with non-existent dollars on non-existent assets by weatherizing homes and building windmills?
Add to this the fact that an uncertain amount of the capital that has been lost was not only imaginary but came originally from the laundering of large amounts of illegal monies from things like the drug trade and the Russian mob, and the complexity grows. Adam Smith didn't have to deal with that.
The government - Bush and Obama, Congress and the White House - have approached the matter with what might be called a solution bubble, which is to say if you make the solution grandiose enough, no one's really going to know what's going on so, with luck, you can create what might be called a hedge fund of hope. As noted here before, Tim Geithner has essentially applied Bernie Madoff's principle to the federal budget: give us your money, don't ask questions, and we'll take care of it for you.
But the problem is not really political and it's not moral. It's more likely a reflection of education, class and culture. Harvard trained lawyers and MBAs think differently than much of America. They are skilled in theories, abstractions, and the subsidiary effects of action taken at seemingly remote distances. They are more interested in algorithms than in anecdotes, in philosophy over pragmatism and in the intellectual over the empirical.
There are times when such people can be helpful but a near depression is not one of them.
Imagine how different the plan for recovery would have been if it had been conceived by mayors and not senators, small business people and not attorneys, and those who knew how to instill hope among millions and not just in the elite corners of the nation's capital.
That's not how Washington is run these days, however. The number of lawyers in town has soared, small business people are virtually non-existent, and the planned measures are being described by a media that earns enough that it even worries publicly about its own taxes at White House news briefings.
And it's not just the bank bailout, although some of that has been grotesque. There has also been a generalized tendency to create abstract, even ethereal, solutions and to ignore practical approaches that could, for example, change the expectation of small businesses, whose role in job creation is constantly underrated in Washington and the media. If one half of all small businesses currently with a payroll added one employee that would produce about 3 million new jobs, almost matching those promised by Obama to be created or, in his slick escape hatch, "retained."
Obviously that's not likely to happen under any circumstances, but it gives an insight into a portion of the economy that has been hardly mentioned in the bailout.
Beyond actual change in employment is the psychological factor. I already find myself checking to see what businesses have closed on familiar blocks. And if a local business owner tells me how bad times are, I'm as likely to think I'm talking to an expert as I would be reading the Washington Post op eds.
To get the economy going, everyone has to have enough confidence to take a risk or two, to spend instead of hoard, to enjoy a night out instead of leftovers. There is little encouragement for this in what has been going on in Washington.
To be sure, the semiotic sales pitches are there. Like the constant comparison to the New Deal, when the actual similarities are minimal at best. Here, for example, Wikipedia's description of what just one Roosevelt aide - and a mere social worker at that - did in the early days of the New Deal:
In March 1933, Roosevelt summoned [Harry] Hopkins to Washington as federal relief administrator. Convinced that paid work was psychologically more valuable than cash handouts, Hopkins . . . supervised the Federal Emergency Relief Administration, the Civil Works Administration, and the Works Progress Administration. . .
FERA, the largest program from 1933-35, involved giving money to localities to operate work relief projects to employ those on direct relief. CWA was similar, but did not require workers to be on relief in order to receive a government sponsored job. In less than four months, the Civil Works Administration hired four million people, and during its five-months of operation, the CWA built and repaired 200 swimming pools, 3,700 playgrounds, 40,000 schools, 250,000 miles of road, and 12 million feet of sewer pipe.
The Works Progress Administration, which followed the CWA, employed 8.5 million people in its seven-year history, working on 1.4 million projects, including the building or repair of 103 golf courses, 1,000 airports, 2,500 hospitals, 2,500 sports stadiums, 3,900 schools, 8,192 parks, 12,800 playgrounds, 124,031 bridges, 125,110 public buildings, and 651,087 of highways and roads. The WPA operated on its own, and selected projects with the cooperation of local and state government but operated them with its own staff and budget. Hopkins started programs for youth (National Youth Administration) and for artists and writers (Federal One Programs).
Note the speed with which things happened, the variety of programs, the grant of money to localities to do what they thought best, and the huge number of people employed as a result. Finally, and not least important, note how everyone could tell what was going on and how it would help their community or some other.
An ecology of excitement, real improvement, real jobs and things anyone could see and appreciate was part of the magic of the New Deal and part of what is sorely absent from the current bailout, where - when some of the above was proposed - it was cast aside as pork.
Well before the current crisis (albeit while it was quietly getting ready to burst upon us), I suggested a number of programs of a similar quality: specific, useful and easy to comprehend. For example:
- Returning credit card interest rates to the limits of the 1980s.
- A shared equity program in which federal, state and local government would help new and lower income homeowners by becoming co-owners and getting back its share plus any profit on resale.
- A massive railroad building program to bring the U.S. up to the levels of other developed countries and create new economies along new routes.
Instead, during the bailout debates, interest rates were hardly mentioned, the direct participation of the feds in home purchases came reluctantly, and building high speed rail service for the business elite swallowed most of the rail money in the stimulus package. Similarly, sound New Deal ideas like letting bankruptcy courts rewrite home loans still struggle for political acceptance. Revenue sharing - i.e. letting many bailout choices be made at the state and local level where change could be more easily judged, seen and felt - was suppressed with Obama even warning governors and mayors about the reports they would have to file with the feds. This despite the fact that there is no proof that state or local government are more inefficient or corrupt than the feds on such programs.
In the end, our wallets were emptied some more and we were left, in the words of Peggy Lee, thinking, "Is that all there is?"
We find ourselves with policies short on practicality, money desperately needed by the little guy ending up with banks and insurance companies, promises without visible dimensions, and solutions without soul.
The answers we have been given provide plenty of material for economists and columnists but far too little that can be deposited in a personal checking account. Finally, it don't mean a thing if it don't have that swing and we sadly find ourselves with huge growing deficits and still so little to dance about.