I’ll be traveling tomorrow and I have to finish a few big tasks, but I’m hoping to post a bit tomorrow afternoon and over the weekend.
Before I leave you for the day, I want to briefly address a post by Simon Johnson:
This deeper critique is posed probably in its sharpest form by Arianna Huffington in her new book, “Third World America” (in the spirit of disclosure, let me note that I am a contributing business editor at The Huffington Post). Her point is that we should not think of the last financial crisis in isolation, but rather as the outcome of a longer-run pattern of behavior.
Excessive consumer debt is an outcome of prolonged inequality – in trying to remain middle class, too many people borrowed too much, while unscrupulous lenders were only too willing to take advantage of such people.
Remember that: Arianna Huffington is, in Simon Johnson’s view, a sage, and the U.S. middle class is heading for Third World immiseration.
The financial crisis may be behind us, but the link to the likely intense debate this fall regarding fiscal policy is direct. We are told that fiscal austerity requires outright and immediate further cuts in the benefits previously promised to people at the federal, state and local level.
The benefits promised to people at the federal, state, and local level — understand that Johnson is attacking those who advocate pension reform for employees of state and local governments, who won concessions through a combination of effective collective bargaining and using taxpayer-funded salaries to shape the political process, as well as those who are calling for reforming Medicare and Social Security.
Never mind that this is simply not true — at least in the form currently presented (here are a primer on short-term issues and another on the longer-term perspective). A vocal class of people — including some at the upper end of the income distribution – incessantly insist that entitlements must be cut while refusing to address the real causes of both our recent surge in government debt (the financial crisis, caused by perverse incentives in the financial system) and the genuine longer-term issues we face (which are about controlling the future increase in health care costs, not cutting the level of benefits today).
A vocal class of people — including some at the upper end of the income distribution — incessantly insist that medical providers, public research universities, K-12 schools, and a wide range of other institutions not be subject to any kind of fiscal discipline. Many in this vocal class are direct beneficiaries of taxpayer largesse, and organizational discipline would have a direct and deleterious impact on their personal bottom lines. Others are ideologically motivated. Among social service providers, there is a tendency to favor indirect over direct transfers to the poor, thus preserving a role for relatively well-compensated middlemen.
The refusing to address long-term problems point is a fair criticism of Republican members of Congress. Of course, it is also a fair criticism of Democratic members of Congress. We’ve discussed the cost containment mechanisms in PPACA at length. The main upshot of the legislation seems to be that medical providers will receive large amounts of taxpayer dollars, which takes us back to an earlier point, without any expectation of fiscal discipline, apart from pilot programs that can easily be strangled in the crib — indeed, that were legislatively designed to be easily strangled, contra efforts by the Obama White House to create stronger cost controls.
The self-described fiscal conservatives really cannot be taken seriously. In the financial reform debate, they either didn’t show up or preferred to keep the existing system in place, and they refuse to put serious health cost control measures on the table.
I think that Johnson has made valuable contributions to the policy conversation, and I profit from reading his thoughts on domains in which he has specialized knowledge that I definitely lack. But it’s not obvious to me that Johnson can be taken seriously when he operates at this level of political abstraction.