THE STASH MARCH 17, 2009
-
Read Later
READ LATERAvailable only to subscribers. SUBSCRIBE TODAY
-
Listen
ARTICLE AUDIO
- Font Size
Ezra Klein has some thoughts on whether democracies--particularly our version--can respond effectively to economic crisis, a question I raised yesterday:
Congress has been pretty pliant amidst all the rapid-fire bank bailouts and even the stimulus package. Republicans have been truculent about the stimulus, but truculence is also the luxury of the minority. If they were in the majority, they'd probably be much more constructive as they could claim credit for the recovery.
Indeed, I think our political system is actually fairly well-designed for short-term crises. The problem is long-term crises like global warming or health costs. As Peter Orszag wrote back on his CBO blog, "our political system doesn’t deal well with gradual, long-term problems" that require "trading off up-front costs in exchange for long-term benefits."
I'd certainly agree that our political system doesn't deal well with long-term crises. But it's not an either-or proposition, and it's the short-term crisis that's keeping me up at night. (With a long-term crisis, at least you have several years to change public opinion, which is probably apathetic at worst and can be mobilized to get politicians' attention. With a short-term economic crisis, public opinion will often be arrayed against you.)
As to the point about the bailout, I guess I'm not nearly as confident that Republican opposition isn't distorting the response in important ways. For one thing, Democrats believe the word "nationalization" is basically un-utterable because Republicans would wrap it around their necks, the occcasional assurance from Lindsey Graham notwithstanding. For another, the stimulus was less potent than it needed to be thanks to near-total Republican opposition and the demands of the few Republicans who did play ball.
In any case, the point doesn't hinge on Republicans per se; it has to do with the tensions built into our political system generally. Whatever the source of their hesitation, most members of Congress are clearly petrified about, say, handing over more bank bailout money even though what we've got is clearly insufficient. Now, there's good reason for Congress to be scared--mistakes were made, as they say, and the public is rightly pissed. But mistakes are inevitable under these circumstances. It would be nice if they didn't lead to paralysis, since you still need to fix the problem. But our system can tend toward paralysis.
As Matt Yglesias points out in response to Ezra:
[T]he U.S. political system, with its high number of veto points, is arguably unsuited to taking decisive action in response to a crisis compared to alternative models, such as the Westminster system in play in the United Kingdom and Canada or to the multiparty coalition systems of northern Europe. ... Certainly the American system doesn’t appear to have been designed with an aim to facilitating a decisive response in a crisis situation.
The British parliamantery system is one model that might be more effective. Another model is something along the lines of the freer hand a president has in dealing with a foreign policy crisis. It's beyond obvious to point out that both can be abused, and they may be undesirable for other reasons. The point is just that our current system has some real limitations in these situations.
--Noam Scheiber
4 comments
Ezra Klein has some thoughts on whether democracies--particularly our version--can respond effectively to economic crisis,
george:
As per usual, the word "effectively" is used here as though it can be defined, understood and then instantiated objectively. THIS is effective but THAT is not.
Says who? Says the one who defined what the word means.
So far the economic bailout has been effective in pouring hundreds of billions of dollars into the big banks and insurance companies that caused the crisis. They have taken those billions of dollars and passed them out amongst themselves. This makes the economic team in the White House VERY, VERY ANGRY, however.
Alas, there is not much they can do about it because, as everybody knows, these VERY, VERY FATCATS are just too big to fail.
Meanwhile the Democrats play their part in the crony capitalist charade by basically arguing that they WOULD nationalize the banks if only those "truculent" Republicans were not allowed to say mean things about them to the public. Like, say, calling them SOCIALISTS!
As for "alternative" approaches to the crisis, I suspect it is not Britain or Canada the ruling class in America is longing to emulate.
No, I'm thinking it is more like China. After all, the Chinese government can do practically anything it wants to, right? And that is so much less messy than the puppet shows put on in Washington.
Or maybe President Obama will take the "unitary executive" model to places it has never gone before.
george walton
- iambiguous
March 17, 2009 at 5:43pm
Our political system is not only unsuited to taking action, almost any kind of action, it is designed to discourage the kind of immediate action the Framers feared the mob might demand and, without roadblocks, get. And that doesn't even count things like the filibuster that the Framers didn't anticipate but might have liked.
The long-term/short-term dilemma complicates the situation. Because our system is so inhospitable to taking action, only a crisis seems capable of generatimng action. And the possibility that, say, Social Security or Medicare may run out of money decades from now doesn't fit most people's definition of a crisis that demands immediate action.
"With a long-term crisis, at least you have several years to change public opinion, which is probably apathetic at worst and can be mobilized to get politicians' attention"? How long have we been tryiong to change opinion on this? How closeis the public to being mobilized about it?
- JoeyBarbash
March 17, 2009 at 5:46pm
I think this latest AIG kerfuffle shows that it would be completely impossible for the federal government to nationalize, pre-privatize, put in receivership or whatever else you want to call it any major national banks. To do so would perforce involve the government in all sorts of details like compensation that would now be looked at in a highly political context. That's why the government has tried to claim that even though it owns 80% of the common shares of AIG, it does not control its board/management. Of course, that charade is over.
Since the government would need to retain many of the employees who work at these firms to help wind them down and operate various divisions before they are sold or restructured, it would be caught in an impossible bind. It's not like we have a civilian investment banking corps that is ready to go in and take over. It is clear that the Obama administration recognizes this, even if almost all of the intelligent center-left, including Krugman, Marshall and you, Noam, do not.
And, even more than the stimulus, it shows that democracies have a problem handling financial crises in certian ways -- i.e. taking long term and deep investments in private industry. I cannot think of any way that the government -- even through a so-called independent body like a resolution trust corporation -- could pump in the money we are talking about into just a few institutions and not be under a microscope that would make management thoroughly impossible. So we muddle along . . .
- tgolomb
March 17, 2009 at 7:17pm
Richard Stout devoted many of his columns is this magazine making the case for a parliamentary system, at a time of very divided government in the US (Democrats in Congress and Republicans in the WH). TNR would do a service by reproducing some of his columns. Absent the date, you would think he wrote them today rather than 30-35 years ago. Yes, it's true, TNR has had some remarkable contributors over the years.
- raylward
March 17, 2009 at 9:35pm