Friday, March 27, 2009


You have to be extremely careful with anything that comes out of the American Entreprise Institute.  These guys would sell their mother just to get McCarthy back into the senate.  Unfortunately, I find myself in partial agreement with this particular op-ed.

In visits to Asian capitals during the region's financial crisis in the late 1990s, I often heard Asian reformers such as Singapore's Lee Kuan Yew or Japan's Eisuke Sakakibara complain about how the incestuous relationship between governments and large Asian corporate conglomerates stymied real economic change. How fortunate, I thought then, that the United States was not similarly plagued by crony capitalism! However, watching Goldman Sachs's seeming lock on high-level U.S. Treasury jobs as well as the way that Republicans and Democrats alike tiptoed around reforming Freddie Mac and Fannie Mae -- among the largest campaign contributors to Congress -- made me wonder if the differences between the United States and the Asian economies were only a matter of degree.

It might make it slightly more palatable that I came to this thorough Glenn Greenwald at Salon, who obviously hugs terrorists. 

Anyhow, I don't think the question is really whether you agree of disagree with his comments.  Anybody who has had their eyes open for the last few years, any thinking person not blinded by ideology has realized that the US has a major corruption problem.  We have been oozing crony capitalism as never before. 

The question is what to do about this.  And this is why you cannot trust the people at the AEI.  Because everything they ever say all comes back to the same mantra of reduce the budget deficit.  Philosophically, I am in complete agreement with this.  One might ask where these conservative small government types were while Bush was looting the country, but that it water under the bridge at this point.  Right now though, the only thing that is going to prevent us from having a depression is the government smoothing out some of this deleveraging by adding to its own debt.  So I think the fiscal austerity crew are right on a long term basis, but fundamentally misguided at the moment.  The last thing we have to worry about right now is the government crowding out private investment or causing inflation by issuing too much debt.  We can actually afford to have the government expand dramatically for a while.

It's true that if this noisy expansion is as corrupt as the silent Bush coup, then somewhere not far down the road we are well and truly fucked.  But is that any worse than being fucked now, which is where we'll end up if we let the populist rhetoric and the obsession with our debt to derail our efforts to stabilize this system.  I'm not sure we have any choice but to have confidence in Obama, even though I actually have very little, and am totally disocuraged by the mechanics of the financial bailout. 

I'm not really sure how one escapes from the ratchet mechanism of bigger and bigger governmenmt invoked as the solution to the very crises that big and corrupt government itself creates.  Maybe I'm wrong here and cold trukey is the only way to go. 

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