Archive for November 10, 2008

No Clever Title Needed: Volcker for Treasury

Please, Paul, be our Yoda!

Forget Larry Summers. Paul Volcker is who we need in Treasury. We need a face of discipline and someone who is removed from the Greenspan years at the Fed, and Volcker is both.

Carter appointed Volcker, a Democrat, to chair the Fed in 1979. Reagan stuck with him through his two terms. In 1979, Volcker took control of the Federal Reserve with inflation at 13% and molasses-slow economic growth. Volcker made the very unpopular decision to dramatically increase interest rates, thereby reducing inflation precipitously. The anticipated recession that followed was a necessary — albeit painful — result of swift action taken to correct a very serious inflation situation.

Sound economic policy amounts to balancing economic growth against the threat of inflation. Economic growth makes for lower unemployment, but too much money in the system (that spurs the growth) can result in runaway inflation. The Treasury Secretary must provide disciplined intervention to maintain sustainable growth. What Treasury, though, has amounted to over the last eight years is a laissez-faire department, operating on the assumption that the market will correct itself, twirling ever upwards. In fact, for much of W’s presidency, the Fed Chairman has been the sole face of economic policy.

The Fed’s mandate needs to be scaled back by Congress. The Fed’s onus should not be both spurring economic growth and controlling inflation. These two goals are at cross purposes anyway. The Fed’s actions on interest rates, for instance, should be in response to inflation, keeping monetary growth on par with economic growth. Since Greenspan, though, the Fed has assumed a very visible role in economic growth, a role borne out of legislative necessity (i.e., the Humphrey-Hawkins Full Employment Act) and also out of Greenspan’s own philosophy that the market is always right, that regulation and discipline are anti-growth. As a result, we have a system where massive growth in monetary supply has produced unsustainable bubbles: in the stock market, in the housing market. We have seen run-amok growth in the derivatives market, and we are currently slogging our way through its collapse. We have also seen repeated, panic-driven reductions in interest rates as responses to burst bubbles. It’s time to stop scurrying, stop running. It is time to face the problem of a cracked system with more than just band-aids.

We need a Fed with a limited mandate, and we need a Secretary of Treasury who knows how to work with the Fed to balance the contradictory processes of inflation control and economic growth. Volcker has already proven he knows how to stand strong and make the tough, unpopular decisions. We need that leadership now.

So why not just reappoint Volcker to the Fed and let Summers have Treasury? Two reasons: (1) Volcker is relatively untainted by the years of deregulation and the derivatives frenzy; Larry Summers and Robert Rubin (as Clinton’s treasury secretaries) were very much simpatico with Greenspan on deregulating derivatives, Rubin more so than Summers, but Summers inherited Rubin’s treasury department. (2) Larry Summers carries too much baggage relating to his arguably brusque, arrogant style. To get us through the current economic crisis, the Treasury Secretary needs to be a conduit effecting policy, not a distraction affecting policy.

Also, a Volcker-led Treasury will cool the Fed’s jets when it comes to monetary growth. With a stabilizing and calming force at Treasury’s helm, I suspect the Fed will be less inclined to throw more money into the economy.

Bad News for Bad News

Call it the wages of sin? In Obama’s first press conference, Fox News is already getting the cold shoulder. While I generally prefer reconciliation, Fox has proved itself to be objectively worthless, hyperpartisan, and blatantly agenda-driven: it’s affirmatively bad for American discourse, and Obama gave them every chance to change their tune. Expect Sarah Palin to cry “censorship,” but this is a good day for the American media.

Unravelling Bush’s Executive Orders

The political elements of my generation – those of us who came of age at the crescendo of Bush’s “power” – may spend the rest of our lives working to reverse the last vestiges of the damage Bush has done to this country. But a good deal of that damage can be fixed immediately. President-Elect Obama plans to immediately repeal many of Bush’s executive orders, starting with those limiting stem cell research and barring foreign clinics from even mentioning the word “abortion.” May I suggest retooling the Office of Faith Based Initiatives so that it doesn’t dump money on useless abstinence only programs?

Work to Do

As I warned on November 5th, our victory on the preceding day was as much due to our efforts, as the GOP’s massive failures during the previous eight years. So let’s not break out the “yes we did” stuff just yet; there’s still a lot of work to do. It’s vitally important that we not let our guard down, and focus on building effective, needed policy: America turns to the Democrats when our nation is in trouble, and we must not let the country down.

Election Fallout: Conservative Talk Radio

“Grassroots conservatism” has a problem. Over the past eight years, conservative radio pundits built a media empire on the twin pillars that dissent is unpatriotic and that, perhaps more importantly, the President (as commander in chief and “unitary” executive) can, and should, do anything. As long as a conservative Republican resides in the White House – for talk radio, if not for America – unbridled, unquestionable executive authority approximates the right-wing theocratic ideal.

Of course, all this armchair philosophy built on aggrandizing the national executive starts to seem a little distasteful when the President Elect is, by the same pundits’ account, a socialist terrorist-hugging Muslim. Based on this legacy, one would expect that, for the Terror Presidency’s primary apologists, transitioning from “all the President’s men” to “marginalized opposition” would prove difficult. Cue hand-waving, careful omissions, and denial: we’ve always been at war with Eastasia, so don’t make me cut your mic.

In fact, the transition seems to be proceeding seamlessly. Both Hannity and Limbaugh have stuck mainly to their election-era points, proclaiming that the man who curried upwards of sixty million votes is somehow still a mystery, and already responsible for one recession. Perhaps this is preferable to Mark Levin’s response (audio below – Levin is the only one to release daily podcasts). In his first post-election show, after nearly blowing a gasket about the prospect of a President “ruling by executive order” – which Levin was for, before he was against it – the shrill shock jock somewhat violently proclaimed that “we will defeat you,” then launched into a rant about how he drives liberal politicians crazy. As Willy Wonka would say, “strike that: reverse it.” All in all, a good first day of backtracking on eight years of “support the President” propaganda.

If the transition from “support the President or the terrorists win” to “the President supports the terrorists winning” seems so quick as to be bewildering, it’s because we’re forgetting two things. First, conservative talk radio is not built on a principled, unifying political theory: it’s simply reactionary, through and through. You’ll know I’m right if you heard conservative talk radio criticize Obama’s plans to revamp Bush’s executive orders not just for the political decisions he’ll make, but also for allegedly overreaching his office (Levin already took the first step). Second – and most critically – we’re forgetting that conservative talk radio thrives on its ability to somehow create, in the white Christian male, a persecution complex. Hence persistent conservative obsession with the “Fairness Doctrine,” despite the doctrine’s illegality and President-Elect Obama’s stated unwillingness to pursue it. Talk radio is primarily about fear and xenophobia, both of which will trump reason any day of the week. Especially from 11 AM to 2 PM EST.