Friday, February 20, 2009

The Endurance of the Reagan Legacy

Despite the fix we're in...

I didn't see it, but I heard today from one of the guys at work that one of the CNBC anchors went off on a rant last night about how sick and tired he was of Wall Street guys taking the hit in the press and in the court of public opinion for the financial crisis, and wanted to know why the blame wasn't being placed squarely on folks who got in over their heads with mortgages for houses they couldn't afford. Cheers over this rant apparently rang out all across the studio and the trading floor.

Another example of guys with everything placing all the ills of the country on people who have nothing.

His rant conveniently ignored the fact that for the most part, local banks are doing just fine, thanks. They knew how to manage their liquidity. It was the Wall Street banks and investment houses that melted down.

Which all goes to show how much this country really changed under Dutch. Even though his policies and ideas have been completely discredited, people still cling doggedly to them (hence, all the hysteria over socialism in the last election cycle, with the ironic part being that due to the excessive greed on Wall Street, we are now closer to socialism than ever before). This extends to the widely held opinion that Reagan was a no-nonsense tough guy who singlehandedly brought an end to the Cold War and made terrorists everywhere shake in their shoes. This is the same Reagan, mind you, who horrified his aides when he nearly gave away the whole nuclear store in his meeting with Soviet Premier Gorbachev, who responded to the Hezbollah bombing of the Marine Corps barracks in Beirut by invading Grenada and pulling out of Lebanon, and who traded arms with the Iranians for hostages and later lied about it.

In this Matt Miller interview, listen to him talk about his new book, The Tyranny of Dead Ideas.

In his new book, The Tyranny of Dead Ideas, Miller writes that while many of our current notions of economic and social well-being made sense when they first gained traction 50 years ago, they don't hold much water today... "Unless we explode the dead ideas I'm talking about in the book, we won't find our way back to a durable prosperity," warns Miller...

Three facts are now poised to shape our economic life for a generation. First, thanks to global competition and rapid technological change, America's economy is about to face its most severe test in nearly a century. Second, our political and business leaders are doing next to nothing to prepare us to cope with what lies ahead. And third, the reason for this inaction is that our entire economic and political culture remains in thrall to a set of "Dead Ideas" about how a modern economy should work. This book is about the threat that individuals, companies, and the country face from the things we think we know, and about the new (and surprising) ways of thinking destined to replace these Dead Ideas so that America will continue to prosper.

The next decade will bring a collision of forces that threaten to disrupt U.S. society, sink the middle class, and call into question the political and business arrangements on which our prosperity and stability have rested for decades. These perils have little to do with the housing-related financial crisis that gripped America in the fall of 2008; in fact, the need to steer our way through this near-term credit crunch now masks longer-term economic challenges that are far more consequential. The stakes couldn't be higher: if America doesn't decisively manage these tides of change, we'll face a backlash against our economic model—which, for all its flaws, has produced more betterment for more people than any other system in human history. If this backlash proves contagious, and other advanced nations lose faith in capitalism's ability to improve the lives of ordinary people, the rich world's efforts to protect its citizens from economic change will doom the developing world to dollar-a-day poverty.

The good news is that there are ways to avert this dark scenario and to flourish. The trouble is we're not doing what we need to because of the Tyranny of Dead Ideas. By this I mean the tacit assumptions and ingrained instincts broadly shared by business executives, professionals, policy makers, media observers, and other opinion leaders regarding the way a wealthy, advanced economy like the United States should work...


CEOs routinely bemoan skyrocketing health care costs, saying they give foreign companies a competitive edge because governments abroad pick up these bills. Yet in the next breath most executives insist that America's government should not play a bigger role in bearing this burden. Who else do they think is available?

Politicians and business leaders say we should cut taxes for most (some would say all) Americans to boost the economy. Yet America already has $40 trillion in unfunded promises shortly coming due in Social Security, Medicare, and other programs serving senior citizens — and that's before we toss in the costs of rescuing America's banking system, not to mention assorted sensible blueprints to insure the uninsured, develop clean energy, rebuild roads and bridges, extend preschool, and more. Has anyone noticed that these numbers don't come close to adding up?

Everyone agrees that education is the key to improving future living standards in a fiercely competitive global economy, and that we need to lift all children, not just the most talented, to higher standards of learning and achievement. Yet in the 2008 presidential campaign, not a single major-party candidate questioned our shockingly inequitable system of school finance, which dooms schools in poor neighborhoods in ways no other advanced nation tolerates. How are 10 million poor American children supposed to compete?

Top economists in both political parties perennially assure us that free trade is "good for the country," because the benefits to some Americans outweigh the losses suffered by others due to foreign competition. But wait: Who put economists in charge of weighing the interests of one set of Americans against another?

The answers to these questions will depend on how quickly we escape the pernicious influence of...

Six Dead Ideas:

The Kids Will Earn More Than We Do. Broadly rising incomes have been considered an American birthright. This pattern of generational advance is now at risk for as much as half the population.

Free Trade Is "Good" (No Matter How Many People Get Hurt). Though millions of people may be hurt by foreign competition, we're told, the overall gains from free trade so outweigh any downside that it is folly to question its ultimate advantages.

Your Company Should Take Care of You. Business (not government) must fund and manage much of our health and pension benefits, this idea holds, or else we risk becoming socialist.

Taxes Hurt the Economy (and They're Always Too High). The truth is that taxes are going up no matter who is in power in the next decade, and the economy will be fine. We won't turn into France or Sweden.

Schools Are a Local Matter. Americans need more skills to maintain our living standards as developing economies rise up to compete with us. America also spends more on schools than nearly every other wealthy nation — with worse results. Yet our unique model of "local control" and funding of schools remains sacrosanct.

Money Follows Merit. The most cherished illusion of today's educated class is that market capitalism is a meritocracy — that is, a system in which people basically end up, in economic terms, where they deserve to.

Getting to the effects of Reagan's ideas specifically, see Leon Wieseltier's Washington Diarist: Love Me I'm a Liberal:

It has been many decades since liberalism could fall back upon the power of platitudes; the platitudinous authority now belongs to the other side... The repudiation of George W. Bush is not in itself a renovation of liberalism, and neither is the apotheosis of Barack Obama. The public has not yet broken the grip of the conservative discourse that has dominated America for a generation.

Consider the insane headline on Newsweek's cover, "We Are All Socialists Now": an exclamation of its inner Hannity, as if the president is preparing to abolish private property or expropriate the means of production. All that is happening, comrades, is that our democratically constituted central government is acting to protect the whole of our economy by taking over, for a period, a part of our economy. But second natures, which are made more by culture than by thought, are not easily extinguished. Sean Wilentz was shrewd to contain the Clinton years in his recent study of "the age of Reagan," because Bill Clinton's inglorious role in the history of liberalism was to teach it to sleep with its enemy... On the day that Clinton pragmatically announced that "the era of big government is over," liberalism forgot itself.

Pragmatism has a dark side. The allure of pragmatism was lost on the conservatives, of course. They sought power so that they could act on what they believed. And when they got their chance, they ran the republic down in almost all its aspects. We must not draw the wrong conclusion from the rubble. The problem was what they believed, not that they believed.


Brother Charles said...

Recently I had an incident with a parishioner who was throwing a rant in church about our recent election and the threat of "socialism." So I told her that she was being unfair and that, besides, we already had a socialist state, but with socialism for banks and car makers, not for people.

But, as usual, despite my best efforts, I wasn't fired from my job.

Thanks for the post.

Jeff said...

Brother Charles,

But, as usual, despite my best efforts, I wasn't fired from my job.

LOL. Some of us lead either blessed or charmed lives. :) Thanks for the lift. I needed that.

Thanks also for the tag on the BC post, despite my overheated rhetorical flourishes (I can get a lot worse). It got some interesting reactions over at your place. I'd like to have a discussion with you over issues around that and the whole concept of how to do youth catechesis these days, maybe when both of us have the time.

Liam said...

Great post, Jeff. I think Reaganism has been one of the most destructive forces in American politics.

Did you see Robin Gibbs on Santelli (the CNBC jerk)? He didn't pull any punches. The highlights:

"I think we left a few months ago the adage that if it was good for a derivatives trader, that it was good for main street. I think the verdict is in on that."

"Gibbs picked up a hard copy of the housing plan from the briefing room lectern and implored Santelli to 'download it, hit print and begin to read it.' Gibbs added: 'I would be more than happy to have him come here and read it. I'd be happy to buy him a cup of coffee, decaf.'"

I went to a talk by Jeff Madrick on "The Case for Big Government." His main three points were: 1)Cross-country analysis has shown no correlation between small government, low taxes, and wealth creation; 2) Contrary to conservative claims, the US has always had a big government, and it has created wealth; 3) the results after the anti-government movement came into power have been disastrous.


Jeff said...

Thanks for the links and quotes Liam. I heard about the CNBC rant at work yesterday, and didn't find out that it was Santelli until I went out on Youtube today looking for it. What about a bunch of testosterone-driven yahoos these traders are. They'll never change.

Yeah, I've been reading that Gibbs took him to task for it but the news coverage was mixed, and of course, in the comboxes there were all sorts of reactions across the board. Thanks, I'll look all this material over, especially the Madrick piece.

Jeff said...


Can you try reposting that last URL?

Liam said...

The one that says TEXT? That's a mistake, there's no URL. Sorry about that.

cowboyangel said...

Great post, Jeff. I like Miller's thesis that we're trapped by the Tyranny of Dead Ideas. I'm concerned, though, that it's not just about Reagan and the conservatives. I mean, how many times have we had to hear about FDR lately? There's a feeling sometimes that with Obama's victory, we've "gone back" to some glorious liberalism. But it's not 1932, or even 1992. And it's inaccurate and unhelpful for liberals to try and place all of this on Reagan and the conservatives. Neoliberalism is called "neo"-liberalism for a reason. It basically wed a hyped-up liberal push for free markets with the conservative idea of small government. Wieseltier is correct to bring Clinton into this, but he seems to blame Bill for his political calculations rather than admit that aspects of liberalism itself might be the problem.

The information revolution has totally transformed society, going way beyond the idea of global communication leading to global markets. Just one example: In information theory, information grows in value as it spreads. And you see this being lived out right now as more people develop technology to share information quickly. To share music, for example. But what happens? We're trying to apply intellectual property rights that were developed in the agricultural era and were meant for information products that could be easily controlled and regulated by a very centralized agency. But I see little being discussed by either side on what the information revolution means economically, politically and socially in the not-so-long run. Disavowing the flawed theories that got us into this mess is a good start. And I appreciate Obama's focus on pragmatic solutions, but that's like figuring out how to plug the holes in the bottom of the ship and bail out the water rather than figuring out how to better navigate the ship so we don't run into the shoals again. FDR and JFK and Johnson and Reagan and Lincoln are all fine to learn from, but we're dealing with something new - they can't help us with a lot of this.

Maybe we're so scared of the future, we're retreating more to our glorious past? Just had that thought. Maybe we need the figure of FDR bailing us out of the Depression (whether accurate or not), because we can't see any way forward.

And maybe we need clear-cut bad guys as well - Bush and Reagan, so we can pretend that we're moving away from the things that got us in trouble.

In the end, I think both liberalism and conservatism as we have known them will vanish. But a lot of politicians will continue flogging them in order to get votes. Socialism! My God. The fact that we as a country would even entertain questions about this right now just shows how backwards we are.

I think Miller's Six Dead Ideas are good. Would like to see more. Maybe I'll look into his book, though I'm in the midst of three others right now.

Brother Charles said...


I'd be happy to talk about my experiences some time, but youth catechesis has not emerged as one of my strong points. I grew up so differently than the kids I minister with (e.g. without religion) that sometimes I find it hard to relate.

Be well and happy Lent!

Jeff said...

Hi William,

You know, just as an aside… It may be very wise of you to have switched to blogging primarily about prose, poetry, and media. People may get emotional about it, but they aren’t as likely to get angry about it as they are with some of these other topics.

You’re absolutely right. There’s no way to go back to FDR and conventional New Deal solutions, mostly because we are a massively indebted nation now rather than the world’s biggest creditor, and also because we are no longer an industrial economy, but an information, finance, and service-oriented economy. At least, though, I'd like to see someone with a guiding philosophy like FDR's instead of a philosophy like Hoover's. Someone who's interested in the well-being of all of this country's citizens instead of just an international business elite. More properly stated, a concern for common global citizens instead of an international elite.

I was watching AFL-CIO chief Richard Trumka debating EEU ambassador John Bruton on the Jim Lehrer News Hour about the "Buy American" clause in the stimulus package. Bruton kept talking about how "we" needed to think hard about how "we" were going to spend this stimulus money wisely. I couldn't help but think of the joke about the Lone Ranger being tied to a stake next to Tonto and saying "We're in big trouble now, Tonto" and Tonto responding with "What do you mean 'we', white man?" Now, I'm hearing Hillary talk about how interdependent we are with China and how we need to keep them afloat in order to save our economy. It was one of the reasons I didn't care much for Hillary to begin with, and I'm disappointed that this is going to be the policy viewpoint of this admistration.

By the way, on that topic of sharing music and how American business has been slow to adjust to the new paradigm... I was watching a video the other night (Hotel Rwanda. Excellent. Believe it or not, I'd never seen it before) and there was a hip anti-piracy ad at the begining of the DVD going on about how you wouldn't steal a car, a handbag, a cellphone, etc..., etc... and that stealing pirated DVDs and CDs was the same thing. I have another NPR piece for you to listen to. The Rise and Fall of the Music Industry. It's about a book by Rolling Stone Editor Steve Knopper called Appetite for Self Destruction. It's chronicles how the record companies failed to read the signs of the times and to adjust correctly in the digital age.

Jeff said...


I'd like to email you offline sometime about that, if you don't mind.

cowboyangel said...

I'd like to see someone with a guiding philosophy like FDR's instead of a philosophy like Hoover's. Someone who's interested in the well-being of all of this country's citizens instead of just an international business elite.

That's for sure. I do like Obama for that. It's interesting, because he seems to have a guiding philosophy, but it doesn't seem ideological, or as ideological. His philosophy allows him to be flexible.

I actually saw that debate between Trumka and the European guy. The Euro guy wouldn't address the isolationist policies of various European countries. Personally, I don't blame them for having the policies, but it's a bunch of crap to pretend that they don't. I think there can be a healthy balance between free trade and protective policies.

Yeah, the record companies have really blown it on technology and music. I mean, who's doing the best in the music business right now - Apple. That tells you a lot. But I'm talking about at an even deeper level. The whole concept of copyright is being challenged by new technology. And you're not going to hear Liberals/Democrats talk about it in much depth, because so many of them are lawyers.

Jeff said...

In a way I can see where John Bruton is coming from, because he's a former Irish Prime Minister. It took a massive infusion of deutschmarks and other EU currencies to get the Irish economy up out of the doldrums, so he's used to looking abroad for a solution. You and Trumka are right, there is a lot of protectionism that still exists in Europe, but I don't really mind seeing those European farmers standing up and protecting their way of life while they still can. A lot of the Mexicans we see up here working in meat-packing plants and cutting people's lawns used to be self-sufficient farmers before NAFTA came along.

I see some logic in what Bruton is saying in terms of competitiveness, but I'm sick of everyone looking to reach into our pockets. The American taxpayers (for generations to come) are the ones who are going to be on the hook for this stimulus package. The primary focus of it should be, according to Obama at least, American jobs.