There Are Still No Fiscal Conservatives In The United States

By Simon Johnson

Following President Obama’s State of the Union address, there is a great deal of discussion about whether we might now be edging our way towards fiscal responsibility.

Unfortunately, most of our political elite – both left and right – is still living in a land of illusions.  They cannot even seriously discuss what would be required to bring our true fiscal position under control – remember that most of the recent damage to our collective balance sheet was done by big banks blowing themselves up.  No one who refuses to confront the power of those banks can be taken seriously as a fiscal conservative.

Even those interest groups that prominently espouse fiscal responsibility refuse to confront this reality.  There are no fiscal conservatives in the United States; at this stage it is all pretence.

Pretence is apparently all we are likely to get, as long as the money keeps rolling in (see Argentina for details).

46 thoughts on “There Are Still No Fiscal Conservatives In The United States”

  1. And “pretence” is the same as fiddling while Rome burns. There are studies that show that we humans get almost as much satisfaction from saying we are going to do something (e.g., lose weight) as we do from actually losing the weight. Catholics have a term for it: “Grace in anticipation.” It’s a nice notion but doesn’t require follow through.

  2. Bipartisan ratholes:

    1. The Bailout.

    2. The wars.

    3. Pentagon budgets in general.

    4. The health racket bailout. (Obamacare is based on the Republican Heritage Foundation plan. Plus big Drug is one of the Reps’ favorite rackets. So the Reps voted against Obamacare purely on partisan grounds, not because they actually oppose it. On the contrary, they support all the racket welfare and the mandate.)

    5. Big Ag subsidies.

    6. The “drug war” and the paramilitary-industrial/prison complex that goes along with it.

    7. All other corporate welfare.

    By definition any true fiscal conservative would start by ending all this worthless bingeing, all this criminal looting.

    Yes, it’s unanimous. There are literally zero fiscal conservatives among the power structure.

  3. Nice summation Russ. And then people as usual saying, ‘Oh, it was such a good speech’…

    Anybody catch on the FOX Bears/Packers game the “We’d like to extend thoughts, wishes, etc. to our soldiers in 175 countries(!) around the world.”…..
    That and Obama, Bachman, and Ryan as the spokespeople for our nation-almost wish I was as ignorant as most.

  7. @Russ. Nice, but I would like to respectfully add tax reform to your list. I would like to see a return to the Reagan-era marginal tax rate — especially on capital gains — of 50%. Now THAT would take some political resolve.

    Which leads me to another important item to add: removal of money from politics with (a) better public funding of vetted candidates (those that can garner a certain percentage of votes/signatures, etc.) and (b) the requirement that all FCC licensees donate free time to political candidates.

    Otherwise, it is likely goodbye New Deal, hello New Austerity.

    Finally, I would like to see a curtailing of the speculative markets that drive up the prices of oil and other commodities. I do not advocated eliminating speculation entirely (it can be argued that it serves a valid market function), but just that those that play in those markets be required to put up more equity instead of ridiculously small percentages like 5 or 10%.

    Of course, a fresh round of quantitative easing may allow speculators to come up with the additional capital requirement relatively easily. All that has to happen to get the next big bubble is to have this or that commodity that everybody needs feel a little squeeze from some external perturbation (e.g., cold weather spikes demand for #2 heating oil), and then all the money flows into that sector, driving up the prices of something that everybody needs.

    A final addition to your list: revive anti-trust government actions. Break up the big banks, Starbucks, Home Depot, Walmart, Microsoft, and especially the big media conglomerates.

  8. Greece went first. Ireland had enough rage to pressure the PM to resign. The Tunsian people also see the light. The U.S. is lucky enough that the disengaged masses haven’t taken to the streets in kind, which explains the “feel good” speech of last evening. Paul Ryan’s crisis speech in response to the President’s was closer to reality; both parties are serious about the national budget but politics gets in the way, until the system changes (aka campaign finance reforms).

  9. Dear Simon,

    Call Paul Ryan. Seriously.

    Take Elizabeth Warren with you.

    ……….Lady in Red

  10. PS: I forgot: while we’re on a repeal roll, let’s
    abolish Dodd-Frank as well and put in place something
    simple, clean, short, and unambiguous….

    ….something that won’t inspire Wall Street kids and
    lawyers to retrieve their magnifying glasses looking
    for the magic loophole.

    Let’s get simple.

    You could help Paul Ryan, Simon. Or, you could
    mumble on the sidelines.

    Ryan will meet with you. Ask.

    (….Lady in Red)

  11. There are plenty of powerful supporters for each of the items on Russ’ list, and only a powerful groundswell of opposition will uproot them.

    Unfortunately, the anger of the masses is channeled by media to issues that don’t threaten these powerful interests (immigration, abortion, gay rights, entitlements), or even against government regulation intended to limit the power of these interests.

    What is unbelievable is that people don’t even realize they are wearing blinders and being lead by the nose.

  13. @Lady in Red: “while we’re on a repeal roll, let’s
    abolish Dodd-Frank as well and put in place something
    simple, clean, short, and unambiguous….”

    Something like Glass-Steagall? (all 37 pages of it)

    Oh, and re: Paul Ryan, this from today’s Plain Dealer:

    “Paul Ryan is not what you think”

    By Matt Miller

    “Imagine that President Barack Obama said it was time to get America’s fiscal house in order and then proposed a plan that would not balance the budget until the 2060s – while adding more than $62 trillion to the national debt between now and then. Can anyone imagine Republicans hailing Obama as a ‘visionary fiscal conservative’? The idea is absurd.

    But Republicans do hail House Budget Committee Chairman Paul Ryan as that, even though it is Ryan’s ‘Roadmap for America’s Future’ that I’ve described above.

    According to the Congressional Budget Office, Ryan’s plan would result in annual deficits of between 3.5 percent and 4.5 percent of gross domestic product between now and sometime after 2040, with a balanced budget coming only around 2063. This would add at least $62 trillion to the national debt over the period.

    When I asked Ryan recently how he could still call himself a ‘fiscal conservative’ he offered an evasive digression. But it really shows that you can’t double the number of seniors on Social Security and Medicare and keep taxes at their recent long-run average of 19 percent of GDP.”

    The above was excerpted from washingtonpost.com/postpartisan.

  14. Yup, those apply too.

    But liquidating the New Deal and reducing the people to serfdom is the most bipartisan project of all.

  15. I haven’t looked for polls or read anything, but I did spot a few headlines which seemed to claim most people liked it, which is the kind of thing prone to put me in a misanthropic mood.

  18. Ryan was just silly, not even in the same area code as reality. The U.S. is not Greece or Ireland. For starters we not only have our own currency, it is the world’s reserve currency. The deficit was not cuased primarrilly by the ARRA (stimulus bill). It was caused by the recession, and by massive spending initiatives started under Bush. The Medicare part D hand out to the drug companies, the massive tax cuts which principally went to those who are making the most already, and two wars, one of which had no justification at all, and the other which if handled competently wold have been over in 3 months durring which time we would have caught or killed Bin Laden, and declared victory and come home. Did Ryan address any of that? No he just wants to totally rip off the poor and middle class by cutting SS benefits (for everyone under 55). That after SS has been funding all the other budget busting crap (by building up the SS trust fund that is then lent to the rest of the gov’t) for the last 30 years or so. Despite that, the media insist on showing deference to this clown and refer to him as a smart guy etc.

  19. By the time people emerge from spending their formative years in public schools, 90% feel like they are second-best or worse because they didn’t make top grades, and they never experienced democracy in school, just the rule of authority — which means that, essentially, they think like peasants have always thought.

    They don’t believe they have the power to change things, so they lay low and get by, find a niche in the food chain, and displace their frustrations in safe ways, focussing on lesser issues instead of the oppressive economic system. They compare their situation to that of people in other countries and figure at least they are in America, “superpower”, so they don’t rock the boat too hard.

    That is how peasants are, passively angry and shrewd. More shrewd than they know, because in youth they have flashes of insight about their situation and afterwards act accordingly without thinking further about it. Most of the time their minds are otherwise occupied –a nd why not, if you don’t believe you can change anything ? But deep down, they do know.

  20. I was happy seeing the list Russ compiled above. Noteworthy too: Russ’s piercing the veil of the GOP’s farce-fraud-disingenuous-duplicitous machinations to repeal the Big Bonanza for the insurance industry, aka, health reform legislation, or whatever name it goes by.

    I don’t see any talking heads on the boob tube accounting for this charade, and this is more evidence that the internet is now the only source of intelligent information, and dissemination.

  21. add these to Argentina:

    The Blood Bankers: Tales from the Global Underground Economy
    James S. Henry
    James S. Henry (Author)
    , Senator Bill Bradley (Introduction)

    Meltdown Iceland: Lessons on the World Financial Crisis from a Small Bankrupt Island
    Roger Boyes (Author)

    Iceland is the perfect scale model: Argentina the perfect storm. The Blood Bankers, well…it shows us the darker side of our norm.

  22. @mondo: “They don’t believe they have the power to change things, so they lay low and get by, find a niche in the food chain, and displace their frustrations in safe ways, focussing on lesser issues instead of the oppressive economic system.”

    Well, they do not always displace their frustrations in safe ways, as a quick review of U.S. gun ownership rates and deaths-by-firearms (intentional or accidental) reveals.

    Yesterday I was in a meeting, and my client (an executive with a major manufacturer) announced delightedly: “The fastest growing category of 4-H is the shooting sports.”

    Gee, I thought 4-H was about learning to raise livestock and winning ribbons for the biggest pumpkin at the state fair. Silly me.

  23. I think a lot of people think guns may become necessary one way or another. It is a right guaranteed in the constitution, after all. Very few of them go off the deep end — far, far fewer than the number of suicides, or mental breakdowns without violent behavior. You people who are nervous about guns would do better to focus on putting constraints on the police –because they are getting out of hand, injuring and killing, people EVERY DAY.

    Up here in Canada we are starting to have a real problem with the RCMP, our national police force, brutalizing and killing people with stun guns. But hey, if they survive they get free medical treatment . .

  24. Yeah, we will be Forced to buy insurance from those bandits. And most of my fellow Liberals just go blindy along saying “It’s better than nothing.” Whatever.

    So Obama and his crew say that Insurance will be forced to spend 80% on patients, which unless my math is off means 20% profits, which is ball-park what they are bleeding us now for.

  25. I had no idea that Canada had such a large population of angry and shrewd peasants that they could be blamed for – well, what are you blaming them for…?

    May I suggest a Monty Python skit for your general “social” education…it’s the one where two “peasants” are knee deep in mud manure slopping it around, all the while having a soaring intellectual conversation in perfect English…they immediately fell into semi-barbaric grunting and groveling as the Prince rode by on his stead, asking for directions…

    Any time any day, if given the choice to punch a clock in a belching savage factory or dig out the honey from a bee hive, I’ll take the bee hive, my friend.

    Ditto for living attached to a laptop or wha’ever – I’ll take bee hive duty…

    Peasant psycho-logist on baseline – too many jokes in my head, too many one frame cartoons – can’t compute…

    LOL – thanks for the giggle of the day…

  26. You are right. There are no true fiscal conservatives in Congress. Reality may change that, as we both know. The way I see it, unless Congress is willing to make the hard choices (not necessarily as England is), ultimately the country will be like the homeowner who has run up his full credit line right before the crisis. Oops!! Countries can be foreclosed, and it’s not a pretty picture. The choices in that case become severely limited. Like there aren’t any.

    I heard today that at the recent FOMC meeting the FED decided to keep doing QEII. From my perspective, the rope is geting longer and thinner and our position more precarious by the day. The President’s speech last night was masterful and said absolutely nothing of importance (unless you believe the crap about getting private industry to invest in infrastructure, or that the government can be efficiently reorganized, which, even if I were a very young man, I wouldn’t believe).

    I’ve yet to hear a rational discussion about real solutions. It’s politically unadvisable, and rationally imperative, which explains why it’s not happening.

  27. The “deep end” as you call it, is moving into more shallow waters. When 30 million people can’t find jobs or food, the deep end is barely getting their feet wet. If they’re angry and dying and have a gun…. Well, buy some Kevlar just to be on the safe side.

  28. And a huge thanks to John, Eric, Terry, Graham, and the rest of the Pythoners for showing us that humor is a vital part of counteracting the insanity of life. As I’ve always said: “If you lose your sense of humor, you might as well be dead.”

  33. Ok Simon….its about time you blamed ring around the collar on a conspiracy of TBTF banks… enough already.

  34. Simon says; “most of the recent damage to our collective balance sheet was done by big banks blowing themselves up.”

    That, as I see it, is about half of a half truth. Yes, the banks blew themselves up, but that was only after the regulators, desiring and with amazing hubris deciding to play the risk-managers of the whole world, came up with capital requirements for banks, based on what they so narrowly perceived as risks perceived, and allowed the banks to leverage more than 60 to 1 whenever a private triple-A rating was associated with an operation, or infinitely if that triple-A happened to belonged to a sovereign.

    I ask, can a fiscal conservative agree with that banks, when lending to a “risky” small business or entrepreneur need to have 8 percent in capital, but when lending to the “ultra-safe” government they need no capital at all?

    Simon says: “No one who refuses to confront the power of those banks can be taken seriously as a fiscal conservative.”
    That should start by confronting the powers of the Basel Committee and its decoy the Financial Stability Board… but, though the owners of the blog do a lot of questioning of the bankers, they do not want or dare to upset the regulators… that goes against their beliefs and agenda… which make it impossible for them to even contemplate the notion that the Basel Committee generation of regulators were and are plainly incredibly dumb.

    To control based on risks already perceived by the bankers like those expressed in credit ratings? Such nonsense! What about to try to control for the risks that might not perceived by the bankers and the regulators?

  36. Has economic analysis improved regulatory decisions? December 17, 2010
    http://psdblog.worldbank.org/psdblog/2010/12/has-economic-analysis-improved-regulatory-decisions.html

    “…study suggests that social scientists can contribute to the economic analysis of regulatory decision-making in several ways. First, scholars could help identify the conditions under which particular forms of analysis, and particular expenditures on economic analysis, might yield more efficient policies. For example, cost-effectiveness analysis may be most useful in eliminating the most inefficient projects, such as a wasteful chronic toxin regulation. Second, researchers could participate in the development of analytical tools to improve an evaluation. And lastly, researchers could assist in developing and improving the data sets that are used as inputs for statistical models. The data sets are crucial for informing regulatory decisions via economic analysis…”

    http://www.aeaweb.org/articles.php?doi=10.1257/jep.22.1.67
    Journal of Economic Perspectives
    Vol. 22, No. 1, Winter 2008
    Has Economic Analysis Improved Regulatory Decisions?
    Robert W. Hahn and Paul C. Tetlock

  37. December 15, 2010
    http://psdblog.worldbank.org/psdblog/2010/12/do-credit-bureaus-improve-credit-availability-and-if-so-for-whom.html

    Do credit bureaus improve credit availability and if so, for whom?

    “The conventional wisdom is that the exchanging of information on an individual or firm will go a long way in determining credit worthiness, thereby improving credit availability. When a bank evaluates a request for credit, it can either collect information on the applicant first-hand, or it can source this information from other lenders that have already transacted with the applicant. Information exchange between lenders can occur voluntarily via “private credit bureaus” or it can be enforced by regulation via “public credit registries.”

    “The process that is used in a given economy is an important determinant of credit market performance. Information sharing may mitigate adverse selection in the credit market and reduce moral hazard by raising borrowers’ efforts to repay loans. It can also reduce excessive lending as borrowers may consult multiple banks. Perhaps for these reasons, collecting cross-country information on credit bureaus and credit registries is now becoming the focus of a number of initiatives such as the World Bank’s Doing Business project.”

    All from the World Bank>>>

  38. Yes indeed but there is really nothing you can do which will correct for the lack of clear definition of what is the purpose of those entities or activities you want to regulate.

    If you read through all the Basel Committee documents you will not find one single word that refers to what is the purpose of our banks… and that is why it all ended up in hands of regulators with so narrow minds that all they wanted was for banks not to default… as if that is a purpose… and therefore drove the banks into the low risk waters which regulators perceived the credit rating agencies could perceive… and where our banks, or better said, the taxpayers, will be drowning because of lack of bank capital.

  39. http://www.pogo.org/pogo-files/alerts/good-government/gg-ra-20110125.html (link here for the full agenda)

    January 25, 2011
    “For the past 30 years, the Project On Government Oversight (POGO) has championed good government reforms as a nonpartisan, independent watchdog. Implementing the following recommendations will help put the country on the right track to a more effective, accountable, open, and ethical government—one that is truly responsive to the needs of its citizens.”
    (read the full agenda here:
    http://www.pogo.org/pogo-files/alerts/good-government/gg-ra-20110125.html

  41. ah but Annie I didn’t grow up in Canada. I was born and grew up among the working folk of central USA. I think right now they are a LOT more angry than Canadians are. Canadians are generally happy with their country, just having a problem with their police.

    Good comment, Bayard. Just because something is absurd, doesn’t mean it ain’t true. Johnny Depp’s pirate character rides that insane edge today as well as the Pythoners did in their day — and both have been hugely popular with the common folk, which tells you something about the common folk I think.

  42. Those too, but don’t forget they’re now officially Bush/Obama Rep/Dem tax cuts.

    In my list I was just focusing on government spending on corporate welfare, which phrase is by now practically redundant. So it also follows that all taxation is now nothing but theft, money lost to the people and gained by our enemies, even as they drive us with whips into an artificially, intentionally manufactured Depression.

  43. To clarify – all taxation on the non-rich is theft. But more and more that will be the only taxation going forward.

  45. Humour such as Monty Python can never be completely understood unless you LIVED in the culture…

    You missed the crucial point, mondo, the peasants show basic good manners and tolerance to the delusions of the Prince because the Prince remains in HIS role as a harmless idiot.

    The minute the Prince actually BELIEVES he is in charge of the peasants – the torches and pitchforks come out. That’s why the skit is “funny”….

  46. I’ve often read articles here off of links from Calculated Risk but never compelled to reply until now.

    In 2006, Dems, including Obama, banged on pots and pans calling out on Bush for his deficits. Then the Dem-controlled congress took the deficit to new heights.
    The result? Record deficits, compliments of the Dems.
    Now Reps have retaken the House after banging on pots on pans calling out Democrats on their deficit. The result? Record deficits, higher than the Democrat-controlled House.

    Boehner claims that the House need Obama to set a budget. Hogwash! Congress sets the budget. The “new” Republicans are jacking up the budget just like the “old” Republicans blaming the Dems for the deficits that they themselves sign off on.

    http://www.bloomberg.com/news/2011-01-30/boehner-says-u-s-default-would-be-finance-disaster-update2-.html

    Both parties need the other party as a boogie man so they can blame them for their own sins. As long as Americans stay ignorant and apathetic about the problem, they will continue fail to elect fiscal conservatives. Furthermore, they deserve the big spenders they elect to office and have nobody to blame but themselves.

    Americans are mortgaging their own future for today’s shiny tech gadgets, shinier large screen TVs bought on even shinier credit cards. What else would you expect of the people they elect?

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