Here’s the new Esquire interview with Creationist Tim Pawlenty, one of the GOP frontrunners (allegedly) for 2012. Nothing on where he stands on evolution, but the governor’s views (such as one can make them out amid the waffle) on the bank bail-out also seem to be the product of something very akin to magical thinking:
ESQ: You’ve been very critical of the bank-bailout bill, a number of times, a bill that was passed at the urging of a Republican president. Let’s role-play. I’m Ben Bernanke and Henry Paulson. I come to you on a Wednesday in mid-September 2008 and I say, “Mr. President, we’ve got to pass this bill, because if we don’t, we won’t have an economy by Monday.” What do you do?
TP: Well, they did say that at one point, and the bill failed.
ESQ: Yes, it failed once but did then pass.
TP: And that Monday the economy didn’t collapse.
ESQ: Well, that depends on your definition of collapse. The Dow went into free fall and the American economy went into the toilet, where it remained for the next year.
To claim that the bank bail-out was a thing of beauty is nonsense, and it is easy to find fault with the way it was put together, but I remain convinced that something had to be done. The wheels were coming off, and to leave the answer to “the market” would have been to make a very big bet on a very pure view of economic theory. Reasonably enough, therefore, the reporter from Esquire presses Pawlenty some more on what he would have done. The answer? Yet more waffle and a conspiracy theory.
ESQ: I have a lot more I want to get to. But I really want to know what you would have done. That critical week, mid-September 2008, with President Bush’s men describing the credit crisis as an oncoming freight train for the global economy, there was a cohort of Republican congressmen, led by Jeb Hensarling of Texas, whose position was rather dogmatic. They said, “We must let this economy find its bottom.” If you had been president of the United States, would that have been your position?
TP: Well, I read an account recently of the Sunday night before one version or another of Hank Paulson’s TARP bill passed. In this story, Paulson, former Goldman Sachs CEO, was meeting with other Goldman Sachs executives, trying to figure out what to do, and surprise, surprise, they came up with the conclusion that the federal government should bail out Goldman Sachs. So I don’t take as an article of faith that the financial world would have come to an end if we had let more of these institutions fail.
This guy is a frontrunner?
Yes, he is a frontrunner, because most of what he said is true. You “remain convinced that something had to be done.” Based on what? The result of the panic of people like you was a government project costing billions of dollars, unemployment in the 10% range, and a stunted economy that will take years to recover. If instead the government had taken a firm no bailouts stand, the market would have gotten the picture and the panic would have subsided sooner, rather than later. And we wouldn’t have been stuck with the billions in unneeded disaster socialism that we have now.
Matthew, you say that “the result of the panic of people like you [ie me!] was a government project costing billions of dollars, unemployment in the 10% range, and a stunted economy that will take years to recover. If instead the government had taken a firm no bailouts stand, the market would have gotten the picture and the panic would have subsided sooner, rather than later. ”
Obviously I agree with your statement that the bank bail-out (the only bail-out I was discussing) cost billions, but I’d be keen to see evidence to back the contention that left to “the market” the financial panic would have subsided sooner (in fact it subsided fairly quickly after TARP passed) or that unemployment would be lower than today’s levels (10% is, sadly, an understatement of the ‘real’ level).
The chart showing the development of the TED spread reproduced here is worth a look: http://yglesias.thinkprogress.org/archives/2010/02/charts-and-graphs-that-will-finally-make-it-clear.php
So, with the bailouts, we have a huge addition to the debt + a recession + the moral hazard caused by banks knowing they are too big to fail. Without the bailouts, we might have had a slightly longer recession.
I choose option 2. Go Pawlenty!
So, with the bailouts, we have a huge addition to the debt + a recession + the moral hazard caused by banks knowing they are too big to fail. Without the bailouts, we might have had a slightly longer recession.
come now, if you want to discuss reasonably with andrew, play fair. there are other options than a “slightly longer recession.” you might not find those plausible options, but andrew does, so don’t put assertions into his mouth to prove your argument. it wastes everyone’s time (including yours).
Sorry, I didn’t mean to imply that Andrew said that the recession would have been only slightly longer. I think it would have been only slightly longer.
The thing is we will never know what would have happened without the bailout. It’s hard to argue in retrospective that something had to be done to prevent something of unknown quality and quantity. It never happened so you argue for drastic measures against an alternative outcome people can imagine whichever way they would like to based on their own ideology.
I argued for the first bailout at the time, it seemed like it had to be done. On a moral, ideological level though I couldn’t really agree with it, so really I have always been rather torn on the issue. In a way I regret we didn’t let things take their course just to see what would have happened. It’s incredibly tiring and frustrating to see us commit more money every time the markets blackmail us with “bailout or crash” without even knowing what they are threatening us with. It’s like a guy asking for your wallet, pointing at you with an object in his left hand covered by a handkerchief. It could be a gun, it could be a knife, it could be a tropical fruit.
I don’t think it’s fair to conflate an anti-bailout position with creationism. They happen to go together in Tim Pawlenty’s case, but that doesn’t prove a causal link. Magical thinking? That’s an unproven assertion at best. I haven’t heard any anti-bailout arguments made in supernatural terms. It strikes me as a cheap-shot to imply that being against the 2008 bailouts is as disreputable as being against Darwin.
First, we should recognize the unassailable truth, pointed out by Matt H (above) that the two positions (of Pawlenty) have no necessary link, though they may both be positions which find support far more more among “conservatives” than among “liberals.” And, let’s get rid of the “creationism” discussion. Creationism’s nothing more than a denial of the “natural” accounts of development, whether of humans, the earth, or the universe; it’s not a “theory” of anything at all.
Insofar as is concerned the bailout, the chiefest recomendation in its favor is that something even worse (than what is happening and is going to happen) would have been the result in its absence. On that point, we’ll never know and there is no economic or psychological knowledge extant on which we could rely for such assessment. My own reason for opposing the bailout is
twofold: the first a matter of justice vs. corruption and misfeasance and the second more a matter of economic soundness vs. economic insanity. I’ll treat the latter first; as most who’ve read my comments in the past know, I adhere to the (marginalized) Austrian School (of economists).
The proximate causes of the crisis are well-known to all and have been extensively discussed in all media, whether or not their individual relevancies have been properly appreciated or not.
What is not well understood (or, indeed, understood at all by most) is that the ultimate cause
is the government-managed monetary itself and its immediate requisite or characteristic: a system of banks cartelized through government regulation in an attempt to manage (usually by lowering) the market rate of interest through control of the quantity of money; the process is underpinned by a vague surmise that lower rates and rising prices (but not too much of either!) make for economic “good times.” The U.S. is not alone in following this path; it has been the way of most nations for most of a century`; and, since 1974, led by the U.S. acting first, all have separated their money from any other determinant of its value (such as convertibility to some standard commodity) than the market price of each in terms of others of a similar nature.
The SYSTEM is the cause of its systematic weakness. Though it might be considered “common” or “lowbrow” to express it in the following fashion, the system is, itself, an attempt to “get something for nothing,” a stab at “a free lunch.” It’s principle (and most easily-identified) weakness is to be seen in the fact that, whatever the proportion of newly-created money might
happen to be, its salutory effect on some (who are the first to get some and be able to “pass” it, like counterfeit, to unknowing others) and its straitening effect on others (further from the source and subject to raised prices on many of their purchases) is exhausted after the passage of some time. To achieve anew or continue what some perceived as salutory effect, additional increment to the total is necessary. Prices have adjusted to the reality of the increased quantity and, so, too, have interest rates (other things remaining equal) returned to their former height. To achieve their lowering to the degree experienced in the past, it is unsatisfactory to merely increase the money quantity by the previous incremental percentage: what is required to maintain the approximate economic effect of the lowered interest rate in effect is that the INCREASED quantity be increased by the same percent increase: the effect is not additive but multiplicative. The damage to the economy that is done does not consist merely in several segments of society being advantaged (by being first to receive disbursements of the increased-quantity money) at cost to other segments; just or not, it is essentially merely a transfer from some to some others. The losses to society are more complex.
In rearranging (lowering) the market rate of interest, many purchases and investments become more attractive–“doable”–that did not qualify under the previous, higher-interest regime. Some may buy houses (or bigger and more expensive houses) than would have under the older prevailing rate. Others may expand their production of such houses (or their purchases of land on which to build such houses). Yet others may enlarge production facilities for the provision of plywood and other building materials or of the many and varied appliances and other amenities intended to service the prospectively increased market (including the “gearing up” for the provision of even as-yet nonexistent improved versions of such appliances). Expanding plants hire more hands–at higher wages–which hands, not resident in the immediate surrounds, must either move to the locale (requiring increases in housing stock) or be withdrawn from other employments (which now must offer more to keep their workers or hire new ones to replace the ones who’ve left for the greener pastures). New plants will be built–some in places where no such industry had existed previously, leading to a more pronounced trend of the same type as described for expanded plants (except that failure of an expanded plant may be adjusted by simply closing down the expansion but a new plant may need to be shut down entirely, with the consequent necessity of all its hands to move to another location just to reenter the employment market. In these instances, and even though some of the facilities may be sold at some loss but still continue to function, other must be abandoned as unfit for any known purpose or enterprise of the time. These periods of “hard times,” whether called “recession” or “depression” (differing in length of time for readjustment to some more “normal” state of affairs) are, like the “good times,” simply the inevitable effect of trying to manipulate–lower– the rate of interest on the market).
In this wise, it is useless to blame those holding office when crises occur. Some, indeed, will have favored policies which could not but exacerbate the pre-existing instability; some of the practices may, indeed, border on criminality or criminal negligence and will stimulate much recrimination, name-calling, etc,–all essentially useless in coming to grips with the underlying problem. The underlying problem–or problems, as the case might be–can NEVER be dealt with as long as there is some form of “bailout” as happened during the Great Depression (when FDR
simply TOOK 40% of the wealth of the American people of the time (seizing the gold in private hands and then devaluing the dollar from 1/20th to 1/35th of an ounce of gold–into which the dollar could no longer be converted except by foreigners). But the latest bailout owes its origin to the similar bailout (by Bush 41) following the S & L crisis, in which the losses were simply transferred to the taxpayer-at-large (including the accounts of those whose deposits exceeded the amount insured under the FSLIC). Although we may be able to identify a great many of the malpractices occurring in the lead-up to the crisis and, presumably, reduce the likelihood of their reoccurrence through legislated solutions, IT IS MY OPINION that such disposition merely
puts off to some later date a similar but far larger (and that, again, is merely my opinion–I cannot offer proof that it MUST be so) crisis. Indeed, I believe it is only a matter of time before such a crisis will occur internationally in scope and with presently-unimaginable consequences.
It is because of the possibility of such occurrence (and its greater proximity to the present) that I believe the past crisis could very well have been our last, best chance to address the monetary problems of universally-worthless currencies and their grave threat to the survival of civilization.
I said, at the start, that I’d address the “justice” matter last; it’s far simpler. By and large, what’s happening it that a whole bunch of no-goodnicks, deadbeats, connivers, charlatans, and outright thieves are, by and large, “getting away with it” while the major burden falls on those who had no hand in causing neither the crisis nor the ensuing malaise. The uninvolved ordinary taxpayers bail out the stupid losers and the guilty winners go merrily on their way. On second thought, the old saying has it “people always get the government they deserve.” Mebbeso.