Apparently, on her latest trip to Europe, Secretary of State Hillary Clinton confused local lawmakers by claiming that American democracy is older than European democracy. Reuters analyzes:
“I have never understood multiparty democracy. It is hard enough with two parties to come to any resolution, and I say this very respectfully, because I feel the same way about our own democracy, which has been around a lot longer than European democracy.”
The remark provoked much headshaking in the parliament of a bloc that likes to trace back its democratic tradition thousands of years to the days of classical Greece.
The trouble, of course, is that Hillary Clinton is right. While Athens provided the genesis for the idea of popular sovereignty, and the model for direct democracy, that model is entirely meaningless for the modern world. Rule by “town hall meeting,” as was roughly practiced in Athens, with suffrage restricted to property owners, is impossible for nations that number their population in the millions. The modern innovation of vesting all power in representatives, democratically elected by voters without regards to property ownership, is entirely American. As is the notion of judicial review and “checks and balances” (separation of powers, of course, traces to England). So wipe that smirk off your face, Europe.
Parenting responsibilities today are preventing my producing the usual tome, but it is just as well. In writing about all of the craziness in the economy, I find I often have to step back and remind myself of some of the basics. Considering my constraints today, a quick review of capacity and demand is timely.
In his January 9, 2009, column, Paul Krugman discusses Obama’s then-announced stimulus plan as being too small. He cites Congressional Budget Office [CBO] estimates. Essentially, the U.S. economy, operating at full capacity (which I assume includes a non-zero unemployment rate near 5%), would produce $30 trillion in goods and services through 2010. CBO estimates the current crisis will result in a contraction during this period of 6.8%, amounting to $2.1 trillion.
The contraction is driven by decreasing demand, but there is also feedback: Decreased production (resulting — most obviously — in unemployment) greases the skids for lower demand, which then prompts further decreases in production … and so on.
In the end, we will have an economy “operating” well below capacity. In January, CBO estimated that without stimulus, “the unemployment rate would rise above 9 percent by early 2010, and stay high for years to come.”
The point of Krugman’s column was to alert us that the stimulus bill is too small (at less than $800 billion) to close a $2.1 trillion demand-to-capacity deficit.
That was way back in January … In his column today, Krugman paints an even bleaker picture:
The administration’s budget proposals, released less than two weeks ago, assumed an average unemployment rate of 8.1 percent for the whole of this year. In reality, unemployment hit that level in February — and it’s rising fast.
….
Mr. Obama’s promise that his plan will create or save 3.5 million jobs by the end of 2010 looks underwhelming, to say the least. It’s a credible promise — his economists used solidly mainstream estimates of the impacts of tax and spending policies. But 3.5 million jobs almost two years from now isn’t enough in the face of an economy that has already lost 4.4 million jobs, and is losing 600,000 more each month.
Obama presently has a lot of political capital. If the next couple of months are as bad or worse for the economy than the first two (i.e., demand falling way behind capacity), the Obama Administration ought to deliver the message that the economy is in more rapid decline than anticipated and that his advisers are working on a second stimulus plan to be held “in reserve” should the damaged economy require it. The message is clear and honest and doesn’t talk down to the public. It also signals the administration is flexible and attentive. To paraphrase Roy Scheider’s line in Jaws: “We’re gonna need a bigger boat.”
Economic times are hard for everyone these days. Just ask anyone from the middle ranks of Bear Sterns – the market’s vengeance knows no class. Lawyers are suffering in kind with their clients, too, as top law firms have (to date) laid off in excess of 4,000 staff and 3,000 attorneys, paying what some have suggested is the price of a “law bubble” built on top of the housing bubble. Because the law market will be slow to recover, this news means 7,000 family tragedies, especially for the 4,000 laid off staff, whose lower salaries while employed translate to lower savings, and greater hardship in the transition.
Leave it to “RedState,” the poor man’s “Daily Kos,” to claim misery as a political victory. There, Warner Todd Huston, who’s previously argued that the U.S. ought to criminalize Islam (“Islam is a danger to the world”), launches hungrily into a game of blaming the victim:
Can we review why all this legal advice was needed in the first place, why the boom times came for these lawyers? It is nothing less than the exponential growth of regulation and the avalanche of laws piled on top of laws written to further entangle the business community in confusion and red tape. Laws sponsored and written by lawyers in legislator’s clothing. All aimed at making it harder and more complicated to do business.
The shysters were in charge of creating their own nirvana. The foxes were not only guarding the hen house, but building it too. [. . .] Finally, let me assure the reader that I am not an anti-intellectual, anti-rule of law sort of fellow. [. . .] I really don’t want to kill all the lawyers. But neither do I want to be ruled by those that seek to “interpret” the law to self-enrichment as opposed to living by its spirit. And, in this day and age, we have lost much of that spirit.
So, I rejoice at the troubles seen by Boston’s legal eagles and I hope their discomfiture is felt in every city of the land. I further hope that many of them find useful work in some furniture store or perhaps a nice Taco Bell somewhere. At least they’d finally be serving the public instead of milking them dry.
Huston makes a few critical mistakes that reveal him as not only ignorant, but willfully and happily so. The crux of Huston’s argument appears to be that big-city lawyers (1) somehow profited off of (2) runaway regulation (3) created through litigation rather than legislation, which (4) directly led to financial crisis, (5) so to hell with them! Most obviously, #5 represents a thoroughly unwholesome error of morality. But let’s get on to the substance.
First, there’s no profit to be made in regulation. The benefits of government constraints on business inure to the public by restraining private actors from ignoring the problems they create in the process of turning a profit. If corporate lawyers profit from regulation, they profit by advising their clients on how to *avoid* regulation. So much for #1.
Perhaps Huston is arguing that lawyers build their own straw man regulations to knock over. This doesn’t work either. The law bubble was built on a lack of regulation, which allowed firms to hire a spiraling number of transactional attorneys to cash in on the huge potential for off-book financial instruments. It’s these transactional attorneys who’re now being fired, as anyone who reads “Above The Law” weekly updates could tell you, attorneys who’ve never set foot in the courtroom, much less litigated in favor of increased regulation. The experience and functioning of corporate law flatly contradict Huston’s # 2 and #3.
Maybe some of the attorneys who’ve suffered from the financial fallout “deserved” it, in the sense that they helped clients get away with directionless, dangerous financial practices. But not all of them did, certainly none are the monsters Huston makes them out to be, and (lest we forget), the staff who have lost their jobs in attorney downsizing never deserved any of this. Before we start making political hay out of other peoples’ lives and livelihoods, we’d do well to remember that, behind their suits, attorneys are people too.
