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Our Coming Recession

| Fri Oct. 3, 2008 3:02 PM EDT

OUR COMING RECESSION....Ezra Klein is annoyed with pundits who think we need to cut back on spending programs because we're about to devote $700 billion to bailing out Wall Street:

The underlying presumption here is that during a recession, faced with heavy spending, the president will have to cut his investment agenda. It makes a certain amount of intuitive sense. In hard times, families cut back. But the government is not a household. In hard times, it should spend more in order to stimulate the economy. That's part of the utility of having a government: When consumers and businesses fall on hard times, they cut spending. Which cuts demand. Which cuts economic activity. Which deepens your recession. All that is a bad Thing. So it's useful indeed that we have an institution able to amp up spending in order to increase demand.

....A better question would take Keynesian economics a bit more seriously. Rather than asking what spending the candidates should give up, the question is which items they should prioritize. In theory, you now want to focus on policies that will create a rapid, short-term boost. This might cut towards a tax rebate and against infrastructure development, or towards green investment and away from health reform. But a recession does not cut against government spending. In fact, it does quite the opposite, and it's a real problem that our political system seems content to lazily assume otherwise.

Right. Monetary policy doesn't have much bite left, so fiscal stimulus is our best bet for boosting consumption and keeping the coming recession shallow. Unfortunately, one of our biggest problems right now is that we also have a large and growing current account deficit. We consume way more than we produce, and our consumption is financed by the Chinese, the Saudi Arabians, and our other fine overseas friends. This can't go on forever, and if we don't do anything about it ourselves, these fine overseas friends will eventually do something themselves. That would be painful in the extreme.

So here's my question. I don't think any real economist has ever addressed any of the questions I've ever posted on this blog, so I should probably just give up, but here it is anyway: Should we try to stimulate our way out of the coming recession? If so, how much and for how long? Or should we instead concentrate on reducing consumption, boosting exports, and getting our house in order before someone gets it in order for us? Can we somehow do both? Inquiring minds want to know.

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Bailout Bill Update

| Fri Oct. 3, 2008 2:23 PM EDT

BAILOUT BILL UPDATE....The House has just voted to pass the bailout bill. Final vote coming in a minute.

UPDATE: The vote was kept open for a few extra minutes. The final tally was 263-171 in favor.

Democrats voted 172-63 in favor.

Republicans voted 91-108 against.

I know a lot of people were unhappy about this bill, but this is good news. It's not the best of all possible worlds, but it is a demonstration to the world that America is willing to clean up its own messes.

Quote of the Day - 10.03.08

| Fri Oct. 3, 2008 1:45 PM EDT

QUOTE OF THE DAY....From National Review editor Rich Lowry on last night's debate:

I'm sure I'm not the only male in America who, when Palin dropped her first wink, sat up a little straighter on the couch and said, "Hey, I think she just winked at me." And her smile. By the end, when she clearly knew she was doing well, it was so sparkling it was almost mesmerizing. It sent little starbursts through the screen and ricocheting around the living rooms of America.

I think this goes in the annals of blog posts he'll someday wish he hadn't pressed the "Publish" button on.

UPDATE: Then there's this from Jonah Goldberg: "It is amazing how the press can focus on how Palin's a disaster and then the second she stops being one, the press yawns as if this is a non-story." Huh? The press is supposed to write banner headlines whenever Palin refrains from being a disaster?

An Inch Deep

| Fri Oct. 3, 2008 1:38 PM EDT

AN INCH DEEP....I imagine this point has already been made — in fact, I made it myself after last week's debate — but this is the blogosphere, so I'll make it again anyway. It's this: I'm not surprised that the insta-polls suggest that Joe Biden won his debate against Sarah Palin. (I'm also not sure it matters, but that's a different issue.) Basically, I think the debate-watching public really does appreciate a command of facts and issues. This doesn't mean they want to hear dry recitations and pedantic inside baseball, but as long as it's expressed in an approachable way, they really do want to hear about actual policy. Biden provided that.

At the same time, I'm a little surprised (I know, I know....) that Palin is getting such generous marks for her performance. No, she didn't propose invading Denmark or eliminating the Supreme Court, but she was still painfully out of her depth. She had all the usual Reaganesque phrases and prepackaged zingers at the ready, but she didn't seem to understand that these are meant to be hauled out occasionally as applause lines, not simply strung together over and over and over. By the time she was finished, she had repeated these stock phrases so often that even a dullard could tell that she was just reading off notes.

At least, that's my take. Yes, she's got a thousand-watt smile and a folksy charm, but even people who are attracted to that kind of thing want to sense some depth as well. Palin didn't provide it, and I think the press underestimates Joe and Jane Sixpack when they act as if that doesn't matter.

Sparsely Attended

| Fri Oct. 3, 2008 12:58 PM EDT

SPARSELY ATTENDED....Virtually everyone agrees that one of the root causes of the financial system meltdown has been the vast increase in leverage at big financial firms over the past few years. It's a problem that's gotten increased attention since 1998 but one that nobody ever does much about.

In fact, it's worse than that. As the New York Times reports today, four years ago the SEC voted to change the net capital rule for the biggest investment banks — not to decrease allowable leverage or even to make sure it stayed at statutory levels, but to increase it. Pay attention to the last sentence:

Decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control....On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks. They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on.

....The proceeding was sparsely attended. None of the major media outlets, including The New York Times, covered it.

This is surprisingly typical of how things get done in Washington. In all sorts of areas, decisions that turn out to have enormous impact are made in sleepy little commission meetings or by executive order, with hearings attended only by a few die-hard lobbyists on both sides and — at least under the Bush administration — the final decision practically foreordained in favor of whatever the business community wants. Then, like a cherry on top of an ice cream sundae, the budget for oversight is either cut or eliminated because the business community insists that market discipline will take care of such things far better than a bunch of federal bureaucrats.

Turns out that doesn't always work so well.

"Let's Cover This Nation in Prayer For Sarah Palin"

| Fri Oct. 3, 2008 12:39 PM EDT

The Internet brings the world to your fingertips. You can buy books, read news, get directions, reserve a table at your favorite restaurant, listen to music, or any number of other things. But did you know that you can also engage in "a spiritual war in the heavenlies... where battles are won or lost?" So says Vicki Garza, a Dallas advertising executive, who launched a new website where you can direct your prayers—online, virtually—to Sarah Palin and her family.

Here's the idea, according to Garza:

Many people are excited about the thought of having a strong believer like Sarah Palin in office but how many of us can say that we pray for her daily? This website is dedicated to doing just that. Whoever would like to make a commitment to pray for Sarah Palin can go to www.prayforsarahpalin.com and enter their zip code. A marker will automatically be placed on the prayer coverage map, which can be viewed live in Google maps. There are approximately 43,000 zip codes in the United States. Our goal is to have people praying for Sarah Palin in every zip code. I believe prayer changes things.

Not a fan a Sarah Palin? No problem. Turns out the Internet is brimming with ways to channel your psychic energy to the politician of your choice. Would you prefer to include McCain in your prayers (I mean, the way things are going for him lately, he could use the help)? Well, visit prayformccainpalin.com. Is Obama more to your liking? Worry not. You can pray for him and his friend Joe here. Oh, and at the risk of "pointing backwards again," as Palin put it at last night's debate, you can also offer up your prayers for President Bush.

I can't speak for the one in the heavenlies, but the spiritual battle online is raging.

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Economic Report

| Fri Oct. 3, 2008 12:06 PM EDT

ECONOMIC REPORT....Your economic report for the day: Factory orders plunged 4% in August; the service sector was stagnant; wages were stagnant; auto sales dropped by a third; jobless claims are up dramatically; the commercial paper market fell nearly $100 billion last week, its biggest drop since 9/11; short-term lending rates remain astronomical; employers cut 159,000 jobs in September; and credit remains so tight that Arnold Schwarzenegger is begging the Treasury for a $7 billion loan for the state of California.

That is all. For now. I recommend the House pass the bailout bill today.

Heavens, Another Must-Watch Palin/Couric Clip

| Fri Oct. 3, 2008 11:13 AM EDT

CBS continues its quest to destroy the McCain campaign by releasing another interview clip that makes Sarah Palin look utterly unprepared for the vice presidency. (I was wrong yesterday when I said the can't-name-a-Supreme-Court-decision clip was the final one.) Try to watch this one and not snicker.


Watch CBS Videos Online

Am I crazy or is this the sort of answer Jay Leno might get while questioning a random person in a Jaywalking bit? "Hey buddy, come over here. What's the worse thing Dick Cheney has done in the last eight years?" "Uh, I dunno Jay. I don't really follow the news. He shot that old guy, right? That was pretty bad!"

Post Debate Snap Polls from CNN Show Little Changes for Palin

| Fri Oct. 3, 2008 10:58 AM EDT

Here are some poll numbers CNN aired directly after the debate. Check out the last two.

Who did the best job In the debate?
Biden - 51%
Palin - 36%

Biden did better or worse than expected?
64% - better
14% - worse
20% - same

Palin did better or worse than expected?
84% - better
7% - worse
8% - same

Palin qualified to serve as President?

Before debate:
42% - yes
54% - no

After debate
46% - yes
53% - no

Despite the fact that a vast majority of watchers thought Palin did better than expected in the debate, just 4 percent came away with their minds changed about her qualifications for the presidency. That suggests that the environment is just so poisoned for Palin, or her lack of experience is so thorough and so well-known, that there is simply nothing she can do to convince people she belongs in the game.

Veep Debate: An End to the Sarah Palin Reality TV Show

| Fri Oct. 3, 2008 1:36 AM EDT

For the past few weeks, it's seemed as if Sarah Palin has been a contestant in the ultimate version of the reality show America's Toughest Jobs. She passed the first challenge: give a Big Speech. She did fine on the next one: hit the campaign trail. She royally screwed up the third challenge: give a Big Interview. Then came the most difficult one: hold your own in a Big Debate. And she did.

For 90 minutes Governor Palin, who had become a bleeding ulcer for the McCain campaign, stuck to well-crafted talking points, recited them with passion and conviction, and played the part of the spunky, down-home, up-North middle-class-mom-turned-governor well. She did not demonstrate much depth in policy knowledge, but she managed to display treading-water familiarity with the obvious issues of the day. (Media and advocacy group factcheckers will soon be producing the list of her factual misrepresentations.) It helped that moderator Gwen Ifill did not pose questions that might push her off her script. Palin repeated buzz phrases--"greed and corruption of Wall Street," for instance--over and over. (She was obviously coached to use the word maverick repeatedly, former Republican Senator Rick Santorum observed after the debate.) For some viewers, her autopilot replies might be a turnoff. But for conservatives and independents who want to like her, she probably performed well enough--and she probably performed well enough to stop the hemorrhaging she had caused the campaign.

Which means that perhaps John McCain will return to center stage, as Palin--and her uninformed responses to Katie Couric's questions--becomes less of an issue.