Is the Sky Falling?
by Matt Stoller, Fri May 11, 2007 at 12:43:26 PM EDT
"Medicare is a disaster and needs to be scrapped." - Senator Bob Bennett
"We need to consume less" - Douglas Holtz-Eakin, Advisor to John McCain
"We have a lot of protectionism in our economy, it's just for people around this table." - Dean Baker
One of the compelling aspects of the blogosphere is how it can bridge all sorts of different worlds. The discussion of diversity and black consultants has drawn in bloggernista, the discussion on trade has brought in Skeptical Brotha and David Sirota, and we're able to connect Iraq, habeas, and trade into a freewheeling chat with thousands of readers and hundreds of participants. One group that isn't in our conversation, though, is a very important one. The decision-making global elite. And so, today I went to a public event put on by my friend Steve Clemons, a self-described radical centrist, from the New America Foundation on whether the Economic Sky is Falling. The event has economists, writers, businessmen, Senators, and thinkers on how the global financial system is working. And if there's a consensus, and there really isn't a substantive one, it's one of tone. Everyone except for a few outliers is really worried about possible areas of instability, including the trade and budget deficits, and entitlements. And former Senator Bob Kerrey, who moderated, kept bringing up the difficulty of politics and the challenges facing public opinion as a public official when trying to make good public policy decisions. Public opinion is fickle, which is something Kolbe worried about as well.
The first panel had Daniel Yergin (an extremely optimistic and respected oil analyst), Doug Holtz-Eakin (McCain's economiy policy advisor), Rep. Jim Kolbe, Michael Mandel (chief economist for Businessweek), Clyde Prestowitz, James Galbraith, and it was moderated by Sebastian Mallaby of the Council on Foreign Relations and the Washington Post. It's an impressive crew. Mallaby laid out a general frame for the discussion - are we worrying about too many crises? Does the fretting about the deficit obscure or change our debate in unhealthy ways? It's interesting to get a sense of Sebastian Mallaby, who has incredibly valuable real estate in the Washington Post Op-Ed pages and is a well-respected foreign policy thinker. He's a charming and dapper fellow, with a form-fitting suit and a kind of witty sneer. It was interesting after the panel that though I was one of the first people to stand up to ask a question, he seemed to go out of his way to choose others wearing suits instead of me. And afterwards, when I went up to him and Michael Mandel of Businessweek, they both kind of blew me off. I don't get the sense that this was done out of malice, just out of a tribal instinct. I don't look like their people, and that's a bit scary, I suppose, if your reputation depends on perception.
Overall, I found the tribalism of this financial elite quite fascinating. Among business opinion leaders in the press, there's a sort of blindly happy optimism that reminds me of Tom Friedman on TV, a belief in openness, free markets, warfare, and the rightness of our political elites. Businessweek economist Michael Mandel fit perfectly into this mold, answering Mallaby's question with an optimistic and happy go lucky analytical framework. In fact, his optimism was quite remarkable; he dismissed concerns about global risks, though he did say "I don't think that bad things never happen, I just think that the bad things that we expect tend not to happen." His reasoning for not caring about the deficit was interesting. When we worry about deficits, historically the first things to go are R&D and education, so in essence, excessive concern about deficit reduces our seed corn. Mandel also dismissed concerns about our trade deficit and Warren Buffett's allegations that we are becoming a 'sharecropper economy', and the worry about Medicare considering that the problems are with 50 year out projections. These were interesting points and ones I didn't, honestly, expect, but I guess it makes sense considering the CNBC bubble cheerleading I watch all the time. It seems like the business press is a triumphalist squad for their way of life, and Mandel reinforced this impression. I asked Mandel afterwards about the new trade deal announced yesterday, and he told me he's "not that concerned about the details", and though he broadly likes more trade, he thinks there are adverse effects of trade we need to deal with. It wasn't clear to me what those are, but it's an interesting change in free trade orthodoxy.
Another panelist was Douglas Holtz-Eakin, an advisor to John McCain and a Former Director of the Congressional Budget Office, who was pretty forthright in his right-wing positions. Holtz-Eakin believes that we are not investing enough in innovation, infrastructure, and education. His answer is that the country needs to 'consume less', and that the way to force this consumption cut is to 'take care of entitlements'. He said that "social Security is the biggest single tool the government has to get a grasp on consumption". It's a fascinating language, this economics. You see, what Holtz-Eakin means is that old people are getting too much food and medicine, and so we need to cut that amount of food and medicine. The tribal customs, though, ensures that this is presented in passionless tones and suits, draining all perceived human consequence out of the decision-making forums in which these elites swim.
This panel was not all full of disconnected cheerleaders for global elite decision-making, and I'm sure that in private there's more, um, color in these folks' opinions. Clyde Prestowitz, the President of the, Economic Strategy Institute and James Galbraith were more humane and reasonable in their thinking. These individuals both had a kind of cynical tone about what they perceived as a lack of responsibility within the decision-making bodies, and I imagine that JFK's advisors would have been proud. Prestowitz analogized the global economy to the dot com boom, with Cisco at $100 a share and Long-Term Capital Management doing really well (before it collapsed). The sky could fall, but it will happen in a way we don't expect. Prestowitz mocked the idea that deficits don't matter, asking 'well if deficits don't matter then why do we need an IRS? We can just print money.' He got a smattering of applause from right-wingers because they don't like the IRS, and let me just say that right-wingers are weird (there were also gold bugs in the audience). Prestowitz indicated that there's a stealth move away from the dollar, and suggested that the derivative market is large, opaque, and it's unclear where risk is being allocated. Galbraith was the only person to deal with the political crisis in economic decision-making, talking about Iraq, and how he's concerned about the stability of the global financial system. He argued persuasively that Social Security doesn't need to be cut, and that Medicare should be dealt with as a systematic part of overall medical reform. I can see an interesting bipartisan 'entitlement reform' packaged with universal health care, though it does seem like this cast of characters is pretty far from effectively grappling with the political crisis we're in at the moment.
Rep. Jim Kolbe, Republican from Arizona, was up next. It was fascinating just how derisive he was towards the political process - politicians can't think of the long-term because they are always running for reelection and long-term thinking doesn't sell. Daniel Yergen, oil analyst, also spoke and talked about how awesome markets and technology really are, dismissing 'Peak Oil' as a theory with a 'this is the fifth time we've run out of oil'. I am quite suspicious of Yergen, as he called the California electricity crisis an issue of infrastructure, and not fraud.
The general splits in the community here are fairly interesting. There were other panels with a variety of Senators and economists, including Stabenow, Conrad, and Bennett. Subtly, you could get a sense of the looming fights. Everyone spoke of problems with 'entitlements', but the centrists meant Medicare and the Republicans meant Social Security and Medicare. At one point, Senator Bob Bennett of Utah said "Medicare is a disaster and needs to be scrapped," and at different points both Kolbe and Bennett went off on Social Security being a huge problem that the public will not grapple with. Kent Conrad was very clear that deficits do matter, and that Social Security is basically not a big deal. He, along with Galbraith, was the only one to place faith in the public itself. In the last panel, Dean Baker, a labor economist, threw on the table the idea that trade deals should work to outsource lawyers, doctors, and professionals to equalize the playing field, which was a rather deviously clever concept, since he subtly meant that it was the people in this room who would lose their jobs.
The consensus, if there is one, is that American economic problems run straight through the health care system. That makes sense to me. Risk is high, return is low, and we are all prisoners to our employment. I don't really think we're at a point where decisions can really be made, because the problem is not policy, but politics. With a few exceptions, the people in this room are still holding on to the fig leaf that elites should get together, assess problems, and then push solutions through the political system via bipartisan commissions.
Not likely. But their suits are well-tailored.
Tags: Bob Bennett, Dean Baker, Kent Conrad, Steve Clemons (all tags)
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