To Ease or Not to Ease

When the economy turns south, what should the politicians do? Sometimes they do too much. Sometimes they do too little.

In his first term, Bruce Fein relates, President Nixon vowed he would not resort to the expedient of wage and price controls. Until he did.

Nixon soon renounced his declamation in August 1971 as a presidential election year approached: "The time has come for decisive action. Action that will break the vicious circle of spiraling prices and costs. I am today ordering a freeze on all prices and wages throughout the United States for a period of 90 days."

On the other hand, the Great Depression was made immeasurably worse because the Federal Reserve Board failed to act as the lender of last resort in the four long years from 1929 to 1933. Banks failed in the thousands. Then the government ran around trying to bail everyone out in the New Deal, and that was just as bad.

So what should the government do?

Right now the Federal Reserve is doing all it can to ease the “credit crunch” of the last few months. On the other hand it is clear that the residential mortgage market was way overblown and house prices need to come down.

A recession is the natural cleanup process, the liquidation of the malinvestments of the previous boom. But a huge depression threatens the very fabric of the nation as people get desperate and flock to leaders who promise a way out of the wilderness.

Today the Federal Reserve Board, in conjunction with other major central banks, injected liquidity into the financial system, as reported by Jeannine Aversa.

The Fed announced the creation of a new tool, called the Term Securities Lending Facility (TSLF), geared to provide primary dealers — big Wall Street investment firms and banks that trade directly with the Fed — with 28-day loans of Treasury securities, rather than overnight loans. They would pledge other securities — including federal agency residential-mortgage-backed securities, such as those of mortgage giants Fannnie Mae and Freddie Mac — as collateral for the loans of Treasury securities.

Always remember. The one thing that really matters to the government is the market in US Treasury securities. And that means looking after “the big Wall Street investment firms and banks that trade directly with the Fed.” Before the voters, before widows and orphans, before even the majestic AARP, the government cares about the Treasury markets. Right now, of course, it looks pretty good, with short-term Treasuries yielding 1.5 percent and 30 year bonds yielding 4.5 percent.

That is fine, but the rest of the financial market is tanking. And if the rest of the market goes south then it affects the big ivestment firms and banks that do business with the Fed. So you can never be too careful, so that’s why the Fed intervened today to shore up the financial markets.

Fiddling with the Rules

If you talk to your Democratic friends they will sometimes wander off into a discussion of voting processes: the wonders of proportional voting and the single transferable vote.

All very well and good, as the British would say, but it rather misses the point of voting, and that is to create a winner.

Politics, I like to say, is civil war by other means.  Thus every election is, in its charming way, a metaphorical civil war led by the great barons of the realm.  The fight might be between Baron Reagan and Baron Mondale or between Baron Clinton and Baron Bush.  The great thing is to have a decisive result that is accepted by the vassals of each great lord.

Of course, sometimes the result is really close, and even the dullest person can see that with a little tweak of the rules, they could have won. But never mind; there is always next time.

That’s what happened in the 1960 presidential election.  There was less than 0.5 percent in the popular vote between Kennedy and Nixon and clear indication of chicanery in Illinois and Texas.  But Nixon conceded the election and everyone went home.

In 2000 the election was just as close, but Al Gore did not concede.  The result has been 8 years of political trench warfare, with Democrats—Democrats!—accusing the other party of stealing the election.

Democrats tend to feel that democracy can be improved by changing the rules to ensure more fairness, or more genuine democracy.  But the problem is that they miss the forest for the trees.  It would be nice to have the best possible expression of the people’s will, but it is really important that there is a clear winner that everyone can accept.

It’s hard for Democrats to manipulate the rules of US elections, but it is easy for them to manipulate the rules of their party elections.  In the current presidential cycle anyone can see what a mess this has got them into, as Donald Lambro relates.  Today we have a situation in which the delegates chosen in Michigan and Florida are disqualified because the primaries were too early for the Democrats’ taste.  And the proportional representation rules mean that the winner of a primary does not capture all the delegates in a state but only a majority.

Apart from the fight over Michigan and Florida, the Democrats’ proportional delegate-selection process has resulted in a race where neither Sen. Hillary Rodham Clinton nor Sen. Barack Obama can pull clear of the other, and that may put the almost 800 superdelegates in the position of effectively choosing the party’s nominee at the convention in August, regardless of the primary results.

So, after all this fiddling with the rules we have a situation where the nominee of the Democratic Party may be selected by politicians in a smoke-filled room, which everyone agrees is a Bad Thing.  After all, that’s what the rules were intended to prevent!

In the Republican Party we believe in playing the game according to the rules.  We don’t expect to get to Nirvana with perfect rules; we just acknowledge the need for rules, some kind of rules, and we believe in sticking to them.

So it couldn’t happen to a more deserving bunch of folks.  Dems everlastingly tweak the rules in search for an elusive “fairness” and end up tainting the result of the whole process.

Of course, back in the good old days, in the Civil War era, people would split parties at the drop of a hat and hold national conventions all the time.  Nobody worried about the exact fairness of the rules.  You announced a convention, you ordered up the special trains on the cool new railroads to get the delegates to the convention, and then you sat back and waited for people to turn up.  Then you had a grand old political brawl for a week.  Then everyone went home.

That was politics.

Employers Cut 63,000 Jobs in February

The lede in the New York Sun, reported by Jennine Aversa of the AP tells it like it is.

Employers slashed jobs by 63,000 in February, the most in five years and the starkest sign yet the country is heading dangerously toward recession or is in one already.

That 63,000 number is from the Bureau of Labor Statistics’ Establishment Survey which is a report on jobs from employers.  The Household Survey, a BLS survey of households, is no better, with a reduction of 255,000 in the number of people who say they are employed.  You can see the latest numbers here. 

The Bureau of Labor Statistics also lets you view their time series on employment.  You can find the URLs for them here.

The Establishment Survey graph shows employment increase slowing to a stop over the last year.  The Household Survey graph shows that employment has been flat for the last year.

The question is whether we are going into several years of depressed employment growth like we had in 2001-2003, or whether the Fed’s rapid reduction in interest rates will restart the economy quickly.

You’d think, what with the mortgage meltdown, that it will take a while for demand to revive.  But the stock market today seems to take the employment news in its stride.

The bottom line is that nobody knows nuttin’.

"Sexism" in Science

At Harvard University, writes Christina Hoff Sommers, they have a course called Math 55. Over 50 percent of students drop out. In 2006

The final class roster, according to The Crimson: "45 percent Jewish, 18 percent Asian, 100 percent male."

Only 17 women have completed the course since 1990. The science on women and science uncertain.

The research on gender and vocation is complex, vibrant, and full of reasonable disagreements; there is no single, simple answer

But the gender activists are ready with a single, simple answer. They paraded before a Congressional subcommittee last fall and agreed that the dearth of women in science was due to sexism.

All agreed on the need for a revolutionary transformation of American science itself. "Ultimately," said Kathie Olsen, deputy director of the National Science Foundation, "our goal is to transform, institution by institution, the entire culture of science and engineering in America, and to be inclusive of all-for the good of all."

Rep. Brian Baird, chairman of the subcommittee asked the assembled throng:

"What kind of hammer should we use?"

The activists have the answer; Apply Title IX to science education. Title IX is the section of federal law that is currently being used to force gender equality in college sports. The activists want to force universities to have equal participation in science by men and women. And they have already started. The National Academy of Sciences and the National Science Foundation are moving to make science more “fair.”

Already, the National Science Foundation (NSF) is administering a multimillion-dollar gender-equity program called ADVANCE, which, as Olsen told the subcommittee, aims to transform the culture of American science to make it gender-fair.

Except, of course, that women, mostly, don’t choose science education. Just as men, mostly, don’t choose education for the caring professions.

We Leninists believe that the only way to effect change is through the maelstrom of disaster: “the worse the better.”

But it certainly seems to be a pity that we will have to destroy education in order to save it. But really, will the activists be content with anything less than a complete bonfire of education as we know it?

Not Just a 50-50 Nation

Mark it down. It’s not just a 50-50 Nation any more.

Everyone agrees that politically, the US is a 50-50 nation, split down the middle between religious, married-with-children, private-sector Republicans and secular, single, childless, public-sector Democrats.

Except that this year I think we can expect more like a 55-45 nation as the nation’s moderates expectorate the Republicans.

But now, after the primaries in Ohio and Texas, it looks like we’ve got a 50-50 Democratic Party.

Well, not really. The liberal, educated, leadership cadre doesn’t add up to that many votes. But when they are added to a race-based supermajority of blacks supporting the First Black Candidate, then a Senator Obama can rise to 50 percent of the Democratic Party vote.

Of course, they are kidding themselves. The purpose of the Democratic Party is privilege, handing out patronage to the loyal rank-and-file. The real work of the Democratic Party is cutting checks, and for that you couldn’t do better than vote for Hillary Clinton, the patronness of the “women with needs.”

The liberal elite likes to elevate the grubbiness of this into something idealistic, something compassionate.

But as we all know, it ain’t compassion when it is Other Peoples’ Money.

Especially when the Other Peoples’ Money is Other Peoples’ Taxes.

But for now we have a 50-50 Nation and a 50-50 Democratic Party.

Michael Medved writes that the 50-50 Nation has endured for 50 years, ever since the end of the FDR years. Nobody has won big except when a popular incumbent has faced a weak opponent.

They call the current setup in the United States the Fifth Party System. The question is: what would the Sixth Party System look like? Be careful what you wish for. Big realignments in politics come with big upheavals. Think slavery in the 1850s and the Great Depression in the 1930s.

Meanwhile we can sit back and enjoy the hit show “50-50 Democrats.”

Texas v. Ohio

As Texas and Ohio voters go to the polls the Wall Street Journal edit page wants you to compare the two states.  Texas is booming and Ohio is hurting.  Here are the numbers according to the WSJ editorial.

The state [Ohio] has lost 200,000 manufacturing jobs since 2000, home foreclosures are soaring, and real family income is lower now than in 2000. Meanwhile, the Texas economy has boomed since 2004, with nearly twice the rate of new job creation as the rest of the nation.

In fact, over the last ten years Texas has added 1.6 million jobs and Ohio has actual had a net reduction of 10,000 jobs.

Who will tell the people, as a lefty once titled his book?  Well, not Senators Barack Obama and Hillary Clinton.  They are busy telling Ohioans that they would roll back NAFTA.  But Obama seems to be in a spot of bother because his economics chappie told the Canadians not to worry.  His opposition to NAFTA was just for the benefit of Ohio voters.

The problems of the rust belt couldn’t perhaps be due to the high taxes and heavy unionization, could it?  Or Big Government?  The Journal reminds us:

Ohio politicians deplore plant closings even as they impose the third highest corporate income tax in the country (10.5%) and the sixth highest personal income tax (8.87%).

In fact, the jobs in Ohio are not threatened so much by Canadians and Mexicans as by evil corporations in other American states.

Ohio, Indiana and Michigan are losing auto jobs, but many of these "runaway plants" are not fleeing to China, Mexico or India.  They’ve moved to more business-friendly U.S. states, including Texas.

Guess what.  General Motors is going to open a new plant to build hybrid cars.  But not in Ohio.  Oh no.  Their new plant will be near Dallas,Texas.

Dems Trash NAFTA

Democrats like to tell us how they believe in science—unlike those knuckle-dragging holy-rollers in the Republican Party who believe in superstition.

Actually, it really doesn’t much matter what people believe about the Creation.  It doesn’t really affect how we live our daily lives.

But then there’s NAFTA, the free-trade treaty between the US, Canada, and Mexico.  Last week, Senators Obama and Clinton were competing in Ohio to see who could trash NAFTA more.  Writes a San Francisco Chronicle editorial writer:

The politics here aren’t surprising: Ohio Democrats blame the North American Free Trade Agreement for the state’s rust-belt slow-fade of factory closings, job losses and declining income.

There’s only one problem with that.  The science.  We know, as well as we know anything, that the more trade between people and between countries the better.  It all comes from the basic theory at the foundation of economics, the Law of Comparative Advantage.

The law says that even if you  are a highly skilled person that is better at everything than anyone else, it is still better for you to concentrate on the skill that you are best at and buy the other things from other people rather than try to do it all yourself.  In short, trade it don’t make it.

The problems in the rust belt are not due to NAFTA.  They are due to the privileges and subsidies awarded by the government to the big industrial corporations and unions fifty years ago.  The privileges were unsustainable, and the economy has been dying a slow death for the last twenty years as the subsidies and privileges slowly unwind in layoffs and corporate bankruptcies.

It’s a pity that politicians can’t bring themselves to tell the truth, and that the voters don’t want to hear it.

That means that the sufferings of the rust belt will continue.