First, the primary focus should be on reviving American industry, which includes everything from machine tool factories to software producers and from auto companies to biotech labs. Doing that will entail modifying our arrangement with Asia. Making these kinds of changes can be difficult, but it has happened before—during Reagan’s second term and in the first two years of Clinton’s presidency, when the United States got tough with its trading partners and subsidized innovation and growth.
Despite the title, Judis’ point is not that we should ignore the need to re-regulate the financial sector, but that shackling the Wall Street beast alone will not be enough to return America to competitiveness.
Amid all of our partisan debates about big government vs. small government, we are missing out on the most important opportunity we have to get more out of our taxpayer dollars: eliminating FAT government.
Fat Government is our term for taxpayer money that is used to pay for activities that neither contribute to nor support the broader goals of government and the nation, that is wasted due to inefficiencies, that is lost to corruption, or that is siphoned by government employees who are “working” the system.
Paying for a GSA employee, regardless of his level, to take non-essential travel is wasteful. Paying for him to travel on what were essentially junkets is worse. Where he went is irrelevant: if he spent the government coin to go goof off in Bethesda would have been morally every bit as reprehensible as flying off to Napa Valley, Hawaii, and the South Pacific.
There is now a bipartisan tide of fury growing around the “culture of excess,” wastefulness, and entitlement at the GSA. The system is not working and it needs to be fixed.
It would be delusion to believe that the waste ends there. We need not only to hunt down such institutional cultures and practices wherever they may exist in government, we must replace them with positive cultures of frugality and service.
The same applies not just in the federal government, but at every level of government in the US. Where is the fat?
American government needs a liposuction. Where else can we look?
“The bigger and better question may not be whether insider trading is rampant but whether corporate corruption in general is rampant; whether ethical bankruptcy is on the rise; whether corrupt business models are becoming more common.”
I was dubious about the return of Governor Moonbeam, and frankly remain so, but this measure coming out of Jerry Brown’s office warms my conservative heart.
Under current California law, public employees and retirees continue to receive their state pensions even if they are convicted of a felony and sent to jail. In essence, the taxpayers are paying the former public servant twice: the pension, and the $50,000 or so that it costs to keep that individual incarcerated.
As bad as it is to spend $5ok a year on a convicted criminal, it is good money after bad to pay the pension on top of that. Brown’s move makes great fiscal sense and should be supported.
Jon Hilsenrath and Ruth Simon of the WSJ echo and fortify what David Brooks was saying in The New York Times last week: three years after the start of the global financial downturn, Americans are starting to liquidate their consumer debt, down 8.6% in over the past 38 months. Any fiscal conservative would take that as good news: the people of the United States have taken a small but important step toward becoming a nation of savers and investors again.
But for some reason, the article (starting with the headline) seems to take a negative view of the trend:
The national belt-tightening, known as deleveraging, comes as the U.S. economy struggles to fend off a double-dip recession. Paying off bills slows consumer spending on appliances, travel and a slew of other products and services. Home sales, the engine of past economic recoveries, remain depressed.
This is all true, no doubt, and a lot of us are revisiting our Keynesian roots these days. But short-term pain is better than long-term pain. The sooner American consumers learn to live within their means and stop competing with enterprises for increasingly tight credit, the faster we can begin to rebuild an economy that need not rely on financial manias to drive prosperity.
What is more, it is still an exaggeration to say that Americans as a whole have rediscovered the virtue of thrift. Much of the “de-leveraging” is the result of credit default. It will take some time before we can really judge the extent to which behaviors have changed for the better, or whether Americans will return to their spendthrift ways just as soon as they think they can afford it.
As we confront the systemic malfunctions that have led first to the Global Financial Crisis and now to the popular reaction of Occupy Wall Street (OWS), conservatives need to step away from our unqualified endorsement of markets and recognize that there are times where markets create perversity and contradiction that harm society. The answer is neither to consign capitalism to the waste basket nor leave the problem to correct itself, but to fix the chunk that is broken. Martin Wolf, the respected economist who serves as associate editor at the Financial Times (nobody’s idea of a lefty rag, pink paper notwithstanding) noted in an editorial from early 2009:
Among the possible outcomes of this shock are: massive and prolonged fiscal deficits in countries with large external deficits, as they try to sustain demand; a prolonged world recession; a brutal adjustment of the global balance of payments; a collapse of the dollar; soaring inflation; and a resort to protectionism. The transformation will surely go deepest in the financial sector itself. The proposition that sophisticated modern finance was able to transfer risk to those best able to manage it has failed. The paradigm is, instead, that risk has been transferred to those least able to understand it. As Mr Volcker remarked during a speech last April: “Simply stated, the bright new financial system – for all its talented participants, for all its rich rewards – has failed the test of the marketplace.”
The heart of the problem the economy faces is a financial system that, like a nuclear reaction freed from containment, has spun out of control. In this case, the proper reaction is to restore the core to a newer, better containment vessel, allowing it to give of heat but ensuring that it is never again allowed to spew damage and destruction across the face of the American and global system.
We do not like regulation very much: every conservative and most Americans nurture a tiny libertarian within. Our economy, however, was not meant to be the playground of Austrian-school theorists. The price of civilization is the judicious, careful surrender of a degree of liberty in return for the benefits of living in a society that allows us each the freedom to find our own level. The alternative is chaos that places liberty at risk.
The financial sector has been allowed its unshackled freedom, and in Paul Volcker‘s words, has failed the marketplace. The time has come to return the beast to the bridle, allowing it to resume its rightful role serving the nation and the aspirations of all, rather than serving itself and the desires of a handful of oligarchs.
For a company that makes a substantial portion of its revenues from the banking and finance industry, Bloomberg and its editors have taken a courageous and principled stand with this editorial. This is welcome proof that there are indeed those in and around southern Manhattan who have retained a balanced view of government regulation.
Gratuitous regulation on any industry – especially in a global economy – risks a loss of some degree of competitiveness. But to see all regulation of industry as equally bad (the less regulation, the better) or equally good (the more regulation, the better) is to substitute Doo-doo economics for common sense. If corporations are to exist as legal entities in a democracy, they, like people, must be subject to such limitations on their freedom of action so as to ensure the actions taken for their own benefit do not damage others.
The principle we should use to judge whether regulation is excessive is to ask whether a statute or administrative rule deprives a company of a fair reward in return for the risk taken when taking into account all costs involved, both public and private. Federally-insured banks have their risk absorbed by the American public. Their rewards should be limited accordingly. We use the same principle with public utilities: in return for a monopoly, returns are limited in the form of rate controls. Private risk, private benefit. Public risk, public benefit.
This is pure common sense. As opposed to, say, self-interested rhetoric.
As long as we are putting corporate American under the microscope (with a view toward fixing it, not tearing it down), we may as well take a look at some of the other viruses plaguing the institution of the joint-stock company. One such institution, suggests Nobel Laureate Joseph E. Stiglitz, is the stock option:
Stock options have been defended as providing healthy incentives toward good management, but in fact they are “incentive pay” in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
This is not the sort of thing, I would imagine, that is compelling the Occupy Wall Streeters to set up their tents. But as we grope toward a series of polices that will kill the maladies afflicting our institutions, this is one that could use some attention.
In an Anthony Gregory of the Independent Institute captures the real problem with Occupy Wall Street in spare paragraph stripped of partisanship or ideology:
But overall the protesters’ message is too vague and heterogeneous — at best — to elicit much enthusiasm. As in the tea parties to which it has been compared, many in this movement are condemning a nebulous conception of the status quo without much of an inspiring alternative vision.
Even Karl Marx understood that you cannot have a better future unless you clearly and truthfully describe the current system and its faults, provide an alternative, and then stand back and let the two sides have at it. It was a problem that afflicted the radical end of the student movement in the 1960s, and it afflicts the radical left and reactionary right today.
And, sad to say, most of the rhetoric that suffuses our current electoral process suffers the same malady.
The Occupy Wall Street protesters make some good points. The collusion between rampant banks and those charged with regulating their activities have, in part, led us to the current financial crisis. But the answer is not to pull the plug on Wall Street. The answer begins with an intelligent debate about the proper role of the financial sector in our economy, and the best way to ensure it is no longer given the opportunity to endanger the nation and the world at paltry personal risk to those set to benefit the most.
In a City Journal article entitled “Parks and Re-creation,” Laura Vanderkam offers a glimpse at an interesting model for the maintenance and upkeep of city parks in her profile of Manhattan’s successful park conservancies. What is attractive about this model is that it circumvents the quasi-religious debate around whether public services can or should be privately funded, introducing public-private partnerships as a way to improve public lands while preserving the public coffers.
What the article questions, ever-so-gently, is whether public largesse to preserve parks extends beyond prosperous enclaves like Manhattan. One effort in the Bronx, for example, is having trouble sustaining the momentum and enthusiasm around Central Park, High Line Park, and others in Manhattan. The successes in New York seem to extend from moneyed people who want the public spaces near them to be clean and pleasant. I call this the “clean up my back yard,” or CUMBY movement.
The model deserves emulation. There are areas all around the United States that could benefit from such activity, and not just municipalities. With 70 state parks and beaches facing closure due to budget constraints, California could use a wisely managed CUMBY effort.
Not everything worth preserving, though, will be preserved by private interests. At some point the public must step in to preserve those assets that benefit everyone. Using unique models like New York’s, private money may foot part of the bill. The full answer is better management, not just of park services, but of the entire pool of public funds.