The PostWest
Tea Party Amateurs are Vulnerable to a Sucker Punch
After carefully reading through this column by Asia Times' Spengler--who is consistently extremely thoughtful--I find his logic, unfortunately, compelling.
Quite some number of Ricochet commenters have argued that if August arrives without an increase in the debt ceiling, there are no good reasons for a new financial crisis to erupt. I broadly agree. But as Spengler points out--and this argument, I think, must be taken seriously--there are plenty of bad reasons. Keynes wasn't wrong about everything. We all, I assume, feel robust frustration with the idea that countercyclical fiscal policy is the way out of the recession. But those animal spirits of the market? I wouldn't write those off yet. It's almost trivially true to say that when people panic, they behave irrationally. Mass panic is a well-known phenomenon. You feel confident in ruling this scenario out? I don't.
Now, before you say, "Well, if it happens, it happens, the stuff's overvalued, the day of reckoning comes today or it comes tomorrow but it's still coming" consider the ensuing political scenario he sketches out:
In that event, the Obama administration would declare an emergency, summon bankers to Washington for crisis-management sessions, slash every form of spending except for coupon payments on Treasuries, and so forth. Markets would swoon over the uncertainty. And the president would be on television denouncing the lunatics who brought things to this point. Congress would pass emergency legislation, markets would snap back, and Obama would declare himself a national savior.
Obama, meanwhile, would play the populist against the banks, demanding tougher government controls, consumer protection, and perhaps even the right to dictate that banks make loans to the Democrats' pet projects in the name of job-creation (just as the Clinton administration forced banks into the subprime market, supposedly to help poor people buy homes).
No good crisis should go to waste, Rahm Emanuel said. ...
That's a little too plausible for my taste.
Spengler imagines Obama's speech:
My fellow Americans, the Republican party has been in the pocket of the big banks for too long. After the last Republican administration led the country into the worst economic crisis since the Great Depression, you elected me to restore the balance in favor of working people. Now the Republicans have pushed America into yet another crisis, and again we are faced with the danger of depression.
In consultation with the Federal Reserve and world leaders, I have taken emergency measures that ensure that the irresponsibility of big financial institutions and their Republican friends will not harm your job, your pension or your bank account. And I am sending Congress a set of emergency reform measures to ensure that the banks put the needs of ordinary people ahead of their own fat bonuses.
And you know, that sounds about right.
Spengler's key point is this: "In a crisis the executive authority holds all the aces, because only the executive can act to alleviate the crisis." He warns against expending all the ammo on the debt-ceiling showdown. I think I have to agree. His logic is pretty compelling.
Peter was right to note that Margaret Thatcher picked her battles with caution. His example--her capitulation to the National Union of Mineworkers in 1981--is apposite.
Remember Reykjavik, yes. But also remember that when Thatcher took a look at the situation in 1981 and realized her government was not prepared for the fight, she caved. Immediately. It was not because she had no principles. It was because she knew what the situation was; she had a healthy respect for the constraints of the battlefield; and she did not propose merely to go down with glory. She proposed to win.
FP: The Republican party and its candidates are pathetic. Given the disaster that Obama has brought to the US both domestically and internationally, it should have been easy to not only win any duel with Obama but the election to boot. That they can't and won't only attests to their utter incompetence. And the country will sink further. Crisis of leadership is a component of demise.
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