Posts Tagged ‘david leonhardt’

Don’t look to us

12 August 2011

Households, that is.

Household consumption has long been the mainstay of U.S. GDP, and asset-bubble-driven consumption in turn helped drive the expansions of the 1990s and 2000s. But consumption spending has been weak in this so-called recovery, growing at only about 2% (annualized and inflation-adjusted) since its trough in spring 2009, and it fell in each of the last three months for which we have data (see graph). On top of that, today’s consumer sentiment numbers are the worst in three decades. To find worse, you’d have to go back to a month that included recession, double-digit inflation, Americans held hostage in Iran, long gas lines, and the eruption of Mount St. Helen’s (this is starting to sound like a pub trivia quiz . . . the answer is May 1980).

(Graph from

File under “Outraged and paying attention”: From the press release accompanying the consumer sentiment survey data (from Thomson Reuters / University of Michigan):

‘”Never before in the history of the surveys have so many consumers spontaneously mentioned negative aspects of the government’s role,” survey director Richard Curtin said in a statement.

‘The Obama administration received poor ratings from 61 percent of respondents, the worst showing among all prior heads of state. [I could not find a rating for Congress, but in recent polls Congress gets even lower ratings than Obama.]

‘”This was more than the simple recognition that traditional monetary and fiscal policy measures were largely spent; it was the realization that the government was unable or unwilling to act,” Curtin added.’

Yes. Imagine if the government had spent this year looking for ways to stimulate the economy rather than contract it through spending cuts. Failing that, imagine if if Obama had forcefully and publicly told the Republicans that it was absolutely unacceptable for them to hold the debt ceiling hostage to their root-canal economics. (It worked for Bill Clinton in 1995-96 with the government shutdown.) At least one branch of government would be seen as more focused on jobs than deficits.

Instead, as Curtin implies, the public rationally concludes that jobs take a back seat to deficit cutting on all major politicians’ agendas. And the attention given to the debt-ceiling debacle has much of the public expecting more of the same in connection with the budget appropriations deadline on Sept. 30, the deadline for the Group of Twelve’s long-term budget-cutting proposal on Nov. 23,  and the expiration of the Bush tax cuts on Jan. 1, 2012. It’s easy to imagine the entire rest of the year devoted to partisan trench warfare, isn’t it? Be glad these guys are on vacation.

P.S. Title inspired by The Clash, of course. Alas, poor London. Feels weird to read about traditional looting for a change instead of the financial variant.


Jobs, jobs, jobs, stimulus, Depression

28 January 2010

It’s been noted that President Obama used the word “jobs” more times (29) than other word in last night’s State of the Union address.  Much of that was in connection with a jobs bill that he plans to introduce, and about which he mentioned a few reasonable-sounding specifics.  But indications are that he and his party will try to do this one on the cheap, rather than open themselves to the “big spenders” charge or the predictable cries of deficit scolds who think there’s nothing wrong with the economy that a good bloodletting won’t cure.

And, according to polls, last winter’s American Recovery and Reinvestment Act (a.k.a. the stimulus bill) is unpopular.  It was too small to make much of a dent in the massive unemployment crisis, and the continued high and rising unemployment has led many to conclude, by that famous fallacy post hoc ergo propter hoc and with the encouragement of countless politicians and talking heads, that the stimulus actually caused the rise in unemployment.  Brad DeLong has an excellent column on “America’s Employment Dilemma” right here.

Some on the right have likened the Obama stimulus bill and the still-high unemployment to the New Deal jobs programs and the Great Depression:  the argument is, if they didn’t end it, then they must have caused it.  (Which is kind of like blaming Doctors Without Borders for an earthquake.)  Others make the less extreme but still ridiculous argument that because unemployment is still high, the fiscal stimulus must not have created a single job.  (Which is hogwash — Prof. Menzie Chinn of Econbrowser shows that private studies by IHS/Global Insight, Macroeconomic Advisers, and Moody’s estimate that the stimulus has created 1.1 to 1.6 million jobs to date, and Chinn himself estimates that the number may be more like 2.9 million.  It’s wonkish stuff, but worth a look.)

Anyway, here’s an unpublished letter I wrote a few weeks ago to USA Today in response to a letter that made that bogus argument about how those New Deal programs that employed millions somehow didn’t employ anybody:


Big swinging deregulators

30 May 2009


” ‘As Treasury secretary starting in 1999, [Larry Summers] shepherded a couple of bills that helped deregulate financial markets, and he has made it clear that he doesn’t buy the notion that these laws caused the financial crisis.” — David Leonhardt, New York Times, 25 November 2008 (more here)

In this weekend’s NYT Magazine, Summers’ old boss, Bill Clinton, takes full responsibility for the failure to regulate credit derivatives, those most opaque and easily abused of financial instruments.  We already knew that Summers, his predecessor Robert Rubin, and Fed Chairman Alan Greenspan backed the blanket exemption of credit derivatives from regulation.  What we did not know until this week, however, was just how much they regarded financial deregulation as a holy sacrament.  (OK, so we did know that about “Alan Shrugged” Greenspan.)

A Washington Post feature on Brooksley Born, the head of the Commodity Futures Trading Commission at the time, makes this plain.  In 1998 Born wrote a “concept paper” pondering the possible merits of derivatives regulation, prompting a circling of the wagons by Summers, Rubin, Greenspan, and Securities and Exchange Commission chairman Arthur Levitt:

‘In early 1998, Born’s plan to release her concept paper was turning into a showdown. Financial industry executives howled, streaming into her office to try to talk her out of it. Summers, then the deputy Treasury secretary, mounted a campaign against it, CFTC officials recalled.

‘”Larry Summers expressed himself several times, very strongly, that this was something we should back down from,” [Born aide Daniel] Waldman recalled.

‘In one call, Summers said, “I have 13 bankers in my office and they say if you go forward with this you will cause the worst financial crisis since World War II,” recounted [Michael] Greenberger, a University of Maryland law school professor who was Born’s director of the Division of Trading and Markets.’

Cognitive capture, anyone?

The paper was released, and it didn’t cause a crisis.  Unregulated credit default swaps, on the other hand . . .

Mark Thoma has a synopsis of the Post story on Economist’s View.  (Hat tip: Baseline Scenario.)

(For a helpful primer on the rise and fall of the original BSDs, see Daniel Gross’s Slate column of 25 September 2008.)