Free Rise

It’s not exactly a thought piece, but the Wall Street Journal published my letter to the editor today.

The letter is a radical moderate’s response to a particularly offensive op-ed by the Hoover Institution’s Shelby Steele (”Obama and Our Post-Modern Race Problem“) last week. His thesis was that those who supported Obama’s candidacy in 2008 (and 2007) were gullible victims of a race-redemption narrative, and since the election Obama has proved his cluelessness and worthlessness by enacting policies that are not consistent with the Hoover Institution’s preferences.

Here’s the edited and abridged version of my letter as they published it:

It’s appropriate that Mr. Steele focuses on the old scourge of political correctness, as his op-ed offends me deeply. Simply, I don’t like being called stupid. On behalf of the tens of millions of independents and moderates who supported Barack Obama for president in 2008, may I invite Mr. Steele to demonstrate a little respect for our judgment? We knew what we were doing.

The 2000s were a lost decade of underplanned, unbudgeted, and disastrously executed wars that may never end, and debt-fueled economic activity that proved illusory when the bills came due. Median wages declined, health-care costs soared, and trade and budget deficits became unsustainably large. We Obama voters understood that the next decade would require a radical change of direction. No other candidate for president demonstrated such a predilection for change. We had two years of non-stop exposure to make up our minds about this.

Mr. Steele laments that Mr. Obama is not Ronald Reagan, whose “principled” and “individuated” legacy includes massive government expansion, an unpaid for military buildup, and cementing a culture of spending far above what taxes brought in. George W. Bush, whether he followed President Reagan’s principles or not, got similar results without any meaningful economic progress.

Certainly, those of us who voted for and continue to support President Obama disagree with some of his policy choices to date. But I don’t suppose that Mr, Steele accepts that we’re capable of such nuanced thought.

Eric Meyerson

San Francisco

Last night, I had the honor of attending a San Francisco organizing meeting for Repair California, the movement to call for a constitutional convention. It was marvelous to attend an on-topic town hall-type session where nobody demanded to see anyone’s birth certificate.

The utter brokenness of our state government is as obvious a 7.0 earthquake right now. Our state education system ranks near the bottom in student achievement and performance, even when controlling for poverty and demographic factors. Our university system, once the world’s best, is being hollowed out by budget cuts. Our water system is built for a state with half its population, and catastrophe awaits. Our transportation systems have been neglected for 30 years, leaving LA and the Bay Area with America’s #1 and #2 most congested freeways.

And nothing can be done about any of it, because since 1870 our Constitution has been amended 500+ times. Its 75,000 words contain layer upon layer of special interest protection, rendering our elected leaders essentially powerless to change anything. Not that they want to change anything — mercilessly gerrymandered districts and the two-thirds “yes” requirement to pass a budget has led to electoral non-competitiveness, ideological extremism, and utter gridlock.

The problem isn’t the bums in office. The problem is systemic. And the system needs to get blown up. Ergo, a new constitution.

And so it is that concerned Californians from across the ideological spectrum have come together to get the constitutional convention ball rolling. It will require getting two initiatives on the ballot, and working out a lot of details about choosing delegates and limiting the the new document’s scope. (I used my microphone time to suggest that delegates should be chosen randomly by assembly district, and then they would caucus to elect delegates to the state constitutional convention, similar to the way a jury selects a foreperson.  One of the movement’s leaders, Jim Wunderman of the Bay Area Council, said this proposal is already under consideration.)

Everyone who lives in California should get on board right now. A new constitution is going to happen — almost everyone accepts that it has to. And it will be up to citizens to make sure that California’s new constitution is of, by, and for the people, and not hijacked by the special interests that dominate the initiative process every election.

• Sign up at Repair California
• My other pictures from the event
• SF Citizen at the town hall

Thank heavens for the Washington Post’s Steven Pearlstein. I hope every Congressional staff reads his column today, where he lays out what “stimulus” means and how it affects the economy.

Wanted: Personal Economic Trainers. Apply at Capitol.

I have to agree with him; the economic illiteracy of Congress is staggering, and too much of the debate on the Hill is stuck in the Reagan years.

Of course “learn some economics” is a blunt argument. Plenty of men with impressive economic pedigrees are no more than shills for industries, the wealthy elites, unions, real estate. They’ll have you believe that cutting taxes raises revenues, or deficits don’t matter, or real estate only goes up, or farm subsidies create food security, or taxes on profits impede employment.

But the column still hits important points. Tax cuts increase debt to put some money into the economy. Spending increases increase debt to put more money in the economy than tax cuts do. And some spending on consumption may help the economy in the short term, but spending on investment helps in the short term and paves the way for tomorrow’s prosperity.

This is not hard. But it’s harder than “ungh, taxes always bad, ungh ugh ugh” or “ungh, buy more stuff so recession end, ungh ugh ugh” which is sadly what we’ve come to expect from Congress.

With the economy in a free-fall and a bottom still months if not years away, Washington has taken on a public debate about fiscal stimulus. And like most Washington debates, it’s being crushed by dead ideologies, false assumptions, and old-fashioned pork barreling.

The stimulus debate seems to falling along two primary lines of argument, both utterly predictable and useless:

(1) Spending vs. tax cuts. Falling into their stereotypes, the Democratic leadership wants to spend, and the Republican leadership wants to cut taxes. The former will have a direct impact on demand, the latter a greater relief to wage-earners. But to call the modern Republicans supply-siders is giving them too much credit. They just think it’s both politically popular and economically beneficial to reduce taxes. Most of them couldn’t draw a Laffer curve if you spotted them a cocktail napkin, a Uniball, and both axes.

(2) “Stimulative” spending vs. pork. This choice is about as false as you can get. All spending, if it’s spent in America and primarily on domestic labor (as opposed to imported goods) is stimulative. It doesn’t matter whether it sounds useful (freeway maintenance, subway construction) or frivolous (the National Endowment for the Arts). In the short term, spending is spending.

If anything, spending on arts — which would presumably pay people to teach and create art, and thus help develop the young creatives on whom real long-term economic growth depends — would be highly stimulative, both short and long term. Conversely, building another bridge to nowhere would require importing tons of materials from overseas, or igniting a disastrous trade war by requiring the projects to Buy American. And long-term, projects like exurban freeways hurt our domestic economy.

But really, both of these above debates are ridiculous, because such is the premise of “stimulus” — that the a shrinking economy can grow again (or shrink more slowly) by encouraging people to buy more stuff.

That’s a 20th-century economic model — dig minerals out of the earth in country A, ship it country B for processing and manufacturing, and then ship it again to the USA for retailing and consumption. Country B gets paid in US dollars, which they then use to buy American assets, which the Americans then rent back from country B. (Warren Buffett calls this phenomenon “a sharecropper’s society.”) Meanwhile, in America, lenders lend to other lenders, who lend endlessly to consumers, who can keep borrowing to pay off past debts. But the global housing bubble brought debt to its breaking point, and defaults are still working their way up the debt stream.

What we’re witnessing now isn’t just the downswing of the business cycle; it’s a reckoning of our debt dependency. And it will result in the restructuring of our industries, whether we like it or not. Big Auto is probably terminal. Many retailers are definitely terminal. Many banks have already died.

Or as Umair Haque puts it so brilliantly: “20th century capitalism is eating itself… Today’s leaders are plugging dikes, bailing out industries and banks as they fail. Yet, what negative global growth suggests is that the problem is of a different order: that we have reached the boundaries of a kind of growth.”

True. Our economy as a whole is restructuring, becoming something else by necessity. So what should the purposes of a “stimulus” bill be?

(1) Expedite America to the next economic model. This means a model that reduces our dependence on oil and other minerals, restores sanity to borrowing, and gets our trade closer to balance. It means a model where we spend more on investments like renewable energy, sustainable food, general research, shared transportation, and education, and where our growth comes from doing things smarter instead of just making more. Because “more” is becoming less of a viable option.

(2) Support Americans through the transition. The new global economy requires that millions of workers move from 20th-century jobs to 21st-century ones. People will still need to grow food, sew clothes, fix machines, and lay pavement, but not in the same places or manners they once did. The upheavals that will result from this transition are massive and obvious — think America during and after WWII — and people need help to make it through this shift.

We need to get serious about this as a nation. The current spending/tax cut bill contains some elements (like home weatherization) that address both these points.

But America’s borrow-from-abroad-to-buy-from-abroad economy isn’t just down in the dumps. It’s doomed. Any bill that focuses on consumer spending for its own sake is only prolonging the inevitable, and extending the pain for the worse.