Tuesday, January 5, 2010

Robert Reich's First Lesson In Idiot Savant Economics

Caption: This is what our economy looks like when it's viewed through the lens of idiot savant economics. Image credit: Found here.

Reading Robert Reich's blog post from yesterday, I see some troubling signs of the sort of disconnect between our elite and the rest of us that I wrote about here. In the article, Reich talks about what he thinks is likely to happen to the economy in the next year, and how it will affect Democratic chances in 2010.

He starts out well enough, by making this observation:

The Dems have enough votes to enact health care -- the hurdle Bill Clinton failed to jump, contributing to the Republican takeover in 1994 -- but when it's enacted, expect the spin machines on both sides to be at full throttle. And because health care legislation won't be implemented for another three or four years (depending whether the House or Senate versions prevail), Americans won't be able to test the veracity of these wildly divergent claims. So don't count on health reform to help Dems next November -- nor harm them, either.

Foreign policy is just as unlikely to tip the scales. Sad to say, absent a draft most American families will read about American deaths in Afghanistan much the way they've absorb the U.S. body count in Iraq -- as news items rather than personal tragedies. Nor will Iran's nuclear capabilities, North Korea's missile launches, Pakistan's tumult, or Yemen's terrorists have much electoral effect -- unless terrorists commit an atrocity in America or on American travelers. Needless to say, China's decision about whether and how much to revalue its currency, although important, will affect the votes of about three Americans (and I think I know all of them).

What's Ahead for the Economy and Politics in 2010

All of which, I think, is true. The bill for health care "reform" won't come due for a few more years. It won't be until 2012 that Democrats start paying for that colossal screwup, barring whatever fallout there is from progressive activists refusing to support them this year.

What's really going to affect the vote in 2010, and what will potentially be disastrous for the Democrats, is the state of the economy. Actually, Reich put it a slightly different way:

Issue Number One -- the overriding concern that will determine more than anything how many seats the Dems lose next fall -- is jobs. If unemployment is 10 percent or more next November, the Dems are in danger of losing the House and will almost certainly be short of the 60 votes they need in the Senate.

What's Ahead for the Economy and Politics in 2010

And here is where Mr. Reich goes off the rails. Yes, jobs are important, in fact, jobs or the prospect of jobs in the near future is what will make or break the Democratic Party this year. Where he departs from reality, I think, is that there's something magical about the ten percent figure. There isn't.

First of all, the unemployment statistics, though they have a firm and measurable meaning, could be considered a made-up number for all the meaning they have to the average American. The statistic (as Reich points out) is the number of Americans who are still considered to be looking for work. It doesn't include people who gave up looking for work, who found part-time or unskilled work because they couldn't find a job in their specialty, or who tried to start a business because they couldn't find a job. It also doesn't take into account how many people found jobs that were lower paying than their last ones. In short, it doesn't tell us much of anything about how the average American's employment situation is going. It's only a relative number, and a rather deceptive one at that.

Second, it's just a number, with no particular meaning beyond being at the first double-digit number. If ten percent unemployment were deadly to political chances, Franklin Roosevelt wouldn't have been re-elected once, let alone three times.

Which brings me to the main point of this essay. In the past, I've described myself as an "idiot savant economist". What I meant by that was that it's sometimes effective to examine one's own financial situation, try to determine how many other people are affected by it, and project what effect that will have on the economy. As I showed in that link, sometimes that method of looking at things is more effective than the way "real" economists look at the economy. I put "real" in quotes, not because I think that the guys who earned Ph.D's in economics don't know more about that subject than I do. They do. I just think that many forget what they learned, or don't apply enough skepticism and good sense to their analysis to come to reasonable conclusions. There are plenty of economists who saw the current situation coming in far more detail and specificity than I did. There were also a substantial number who didn't have a clue.

In applying the principles of idiot savant economics to the matter in question, I find that Reich has missed a key point, which explains why he's completely wrong about what will work for the Democrats politically. Let's shelve the question of what will work best for the economy, at least for the moment.

What will work best for the Democrats is giving the general public some sense that things are really going to get better. Unfortunately for them, things aren't, and it's plainly obvious to many of us. By "us", I don't just mean progressive bloggers. I mean people who are out of work and looking for a job. I mean people who now have crappier jobs than they once did, or need to work two jobs because their primary job doesn't pay enough. I mean people who are living from paycheck to paycheck. You see, these people are idiot savant economists, too. They know what they, their families, their friends, and their neighbors are going through. And none of that is getting any better.

What's more, the Democrats have done precious little to change that. Worse still, our priorities are not the ones that Democrats have voted for. We idiot savant economists have watched as they refused to nationalize the banks and reorganize them sensibly, which is something that economists as diverse as Paul Krugman, Alan Greenspan, Ian Welsh, and Nouriel Rubini have said was the way to fix the financial sector. Instead, they poured trillions into them, with the only positive result that we can see having been that financial executive bonuses are even higher. They refused to make the banks renegotiate overvalued or usurious mortgages, allowing them to throw people out of their homes instead. The banks aren't loaning money to us, because they're too busy buying other banks. There have been no new regulations, because the banks said that wasn't an option. Meanwhile, they let the auto companies dangle and crash, even though they employ tens of thousands of people in high-paying manufacturing jobs.

Meanwhile, the paltry effects of the stimulus package will have about run their course before election day. I suspect the Congress will pass some other stimulus package, just to move the real pain past November, 2010. Beyond that, though, we're in for a world of hurt, and I suspect that most of us out here in the Land Beyond DCTM are aware of that.

That's why Mr. Reich is wrong. What FDR gave us were programs that helped ordinary Americans, not programs that made the rich richer. He gave people hope, and didn't break promises because they turned out to be inconvenient. The country endured far worse and still turned out to vote for FDR and the Democrats, because they knew the government was doing its damnedest to make things better, and that gave them hope that their lives would someday be better.

It's why he's wrong about the ultimate consequences of health care "reform", too. Failing to pass a bill could certainly be a problem for Democrats, but often how one fails is as important as the failure itself. These Democrats won't fail trying to make the health care system better. They'll fail by being satisfied that they created a bill that makes thing worse for many, and better for few besides the people who are already well off. Come the day after Election Day, 2012, I think the Democrats will finally realize how badly they screwed up.

The most recent Daily Kos/Research 2000 poll determined that as many as 45 percent of Democratic voters were either definitely or probably staying home rather than voting. The previous poll had put that number at 40 percent. Only a year after record numbers went to the polls to give Democrats overwhelming majorities in Congress and to put a Democrat, a black Democrat at that, in the White House, this is a firm indication of how badly the Democrats have screwed their base. Among Republicans, that number is about 14 percent. That spells bad news for Democrats at the polls, especially since that number shows more signs of getting worse than getting better.

That's why the progressive movement of today is so screwed. It's run by too many people like Mr. Reich and Prof. Krugman, who have barely a clue what it's like to be the rest of us. Until they do, or until they decide to listen to us when we tell them, things are going to remain bad for us, and for Americans generally.

Afterword: I couldn't include this thought in the narrative, but one of the things that I find so irritating about both Reich's and Krugman's opinions on these matters is that they are clearly humane enough to understand these things. I've used Reich's words and his videos several times to illustrate points about health care, because they show a clear understanding of what the consequences of our current system are. They just don't seem to understand how we have to live in order to deal with it. That really needs to change, or the people who run the Democratic Party will continue to think they can get away with the crap they've been peddling up until now.


Anonymous said...

Because they have more disposable income and don't understand/grasp what it's like right now in this economy, even though they are supposed to be experts. Great post, btw!

Cujo359 said...

Yes, I wrote about that a few weeks ago. I really don't think these guys understand what it means to go without something they need. If you don't, it's really hard to get into that frame of mind.