43 thoughts on “The Slow Death of Conventional Wisdom

  1. Bri, Bri, Bri:

    There’s a paucity of acknowledgement here….it is the very “Tea Partiers” that you so revile that have caused the very shifts you lament – away from the MSM “natterings” and outrright biases / lies (see: Rather, Dan) and a cleaving TO the Fox News model of presenting the facts.

    Theyr’e not “terrified” of anything, they’re too busiy raising families, paying taxes and working.

    As Bill O’Reilly himself points out, he is neither a Repblican or a Democrat, he simply presents the facts of the day for a growing (#1 cable news show) audience of people who buy the common sense approach, the thoughtful analysis, and the, pardon the epression, calling of spades as spades, as needed.

    As an aquaintance of yours, I feel your pain in seeing your former MSM print product platform and it’s “safe” job securities crumble like so much feta cheese.

    Common sense is returning, and conventional wisdom as you define it , is clearl in it’s path.

    We’re taking the country back, Bri.

    The government experiment that Obama is foisting on the credulous race apologists who elected him is a failure, and worse, a blatantly radical turn to socialism.

    It must and will end.

    The writing is on the wall. My sincere regrets to you, but here’s a hand up.

    Jump on board, and let’s make this country great again.

    Let’s stop ridiculing honorable women like Palin and Bachmann.

    Let’s ensure equal opportunities, not equal outcomes.

    And at the very least, take in some data from someone other than a died in the wool fist shaking, railing against “the man” adled elitist / Guevara-ista, like your buddy Leinfester.

  2. Momkat says:

    I heard John Gunyou talk a couple weeks ago and the statistic that stuck with me is that in 2007, 70% of the US GDP was us buying stuff. Doesn’t sound sustainable to me.

    1. Mike Kennedy says:

      I hardly think it’s the Tea Bag people who are afraid of change. Reading Lambo’s above screed, it seems to me it’s the dyed in the wool liberals who are afraid of change. They fear for the economy (because it’s service based rather than manufacturing based), fear for journalism (because it is becoming more decentralized with internet, blogs etc.), fear for politics because new movements like the Tea Party threaten the status quo.

      I’m not in the least worried about the American economy, which happens to be the most innovative, flexible on the face of the earth.

      Momkat: Don’t let the number stick with you for too long. The man you listened to repeats the same distorted statistic that financial journalists spout on consumer spending. Here’s an explanation:

      http://innovationandgrowth.wordpress.com/2010/05/01/giving-credit-where-credit-is-due-consumer-spending-is-not-70-of-the-economy/

    2. You know Mike, I can’t decide about you. On the one hand you’re hanging out here with the very brainy gurus of SRC, myself excluded. And you seem in control of a basic understanding of human commerce. But then … you seem to actually expect me to believe you when you suggest the Tea Party crowd are far-sighted leaders of some kind of coherent, sustainable revolution? Really?

      Moreover, it isn’t a “service based” economy I’m bemoaning, it’s an economy based on … junk. Crap that artificially gooses quarterly profit margins, but depletes all sorts of resources that could/should be focused on goods and services people actually need, i.e. for which they — not the marketing kids on the 18th floor — are expressing demand.

      Step away from the retrograde, man.

      1. Mike Kennedy says:

        Lambo:

        I’m the last guy to support the Tea Party. What I said was that they represent a movement that challenges the status quo and it alarms liberal — there is not disputing that. It also alarms many Republicans. Me, I could give a shit if it threatens either/both/all parties. The more the merrier.

        I’ve never selected who I vote for based on political party — okay I lied. I did that when I was in college. Voting liberal was all that counted. When I grew up, I no longer tethered my ass to any political party. They all suck in one way or another.

        As to your observation that the economy is based on junk, well……can’t even fathom where you’re coming from on that.

        You are so wrong I scarcely know where to begin.

        But I will. The good old USA of A leads the world — yes, I said world, in science, medical research, aviation, advanced education (college and beyond) and military development and technology.

        And we aren’t far behind in overall technology, from software and computers to IPods and Kindles and everything of the sort.

        Now if you want to consider all of that junk……..well, okay by me. Each is entitled to his or her own opinion.

        However, it’s because of these developments, along with others made in other parts of the world, that much of the world lives a life that is better — by a long shot — than ever before. As one of my old econ teachers used to say, would you rather be middle class today, with all the material things in life, or live as a wealthy person 100 years ago. I think the answer is probably self evident to anyone who has studied history.

      2. If only WE manufactured all of the wonderful stuff you listed.

        You are the one telling me I’m calling science and research junk. I’m not. In fact I think the U.S. ought to encourage private and university labs far more than it does. But that would be the always counter-0effective hand of Big Gummint, wouldn’t it? “Junk” is junk. I think we all know it when we see it. And trillions of dollars in derivatives is more toxic junk than Cheetos.

      3. Mike Kennedy says:

        We do produce the technology. Where do you think it comes from? No, it’s not made here. That no longer is a comparative advantage for the U.S. But high tech, biotech and most of the leading technologies are developed here. We have produced about half the world’s Nobel prize winners over the years.

        The other part of the equation is productivity and technology. About 6 million manufacturing jobs have been lost in the U.S. in the last 30 years, but 28 million have been lost in China. Why? Factory efficiency.

        Did the U.S. make more steel in 1970 or 2007. Yep. 2007, with about 400,000 less steelworkers.

        As the author of the book Sonic Boom wrote “Each year the U.S. has fewer heavy manufacturing jobs but more white collar jobs. Wouldn’t our forebears think it was great news that their descendants are leaving the dehumanizing circumstances of the assembly line for white collar jobs? Getting millions of people out of factories and seated at desks is a tremendous social achievement.”

  3. Newt says:

    Quel horreur! The unfairness of reality. You guys suppose reality might cross the Atlantic any time soon?

    //——————//

    May 22, 2010

    Europeans Fear Crisis Threatens Liberal Benefits

    By STEVEN ERLANGER

    The New York Times

    PARIS — Across Western Europe, the “lifestyle superpower,” the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.

    Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.

    Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. “The Europe that protects” is a slogan of the European Union.

    But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.

    With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.

    “We’re now in rescue mode,” said Carl Bildt, Sweden’s foreign minister. “But we need to transition to the reform mode very soon. The ‘reform deficit’ is the real problem,” he said, pointing to the need for structural change.

    The reaction so far to government efforts to cut spending has been pessimism and anger, with an understanding that the current system is unsustainable.

    In Athens, Aris Iordanidis, 25, an economics graduate working in a bookstore, resents paying high taxes to finance Greece’s bloated state sector and its employees. “They sit there for years drinking coffee and chatting on the telephone and then retire at 50 with nice fat pensions,” he said. “As for us, the way things are going we’ll have to work until we’re 70.”

    1. Would you care to enlighten us on how the casino/arbitrage financial system has impacted this scenario? More to the point, are you really as pleased as you sound that Europe’s entirely enviable middle class support system is eroding?

      What is the point of “progress” if not to reach a point where people — average people, not hedge fund managers — can live relatively anxiety-free?

      1. Newt says:

        Brian – I hate hedge fund managers as much as the next guy.

        But how can you defend the explosion of public payroll workers whose numbers and benefits outweigh those of the private sector taxpayers who make it possible?

        There comes a tipping point (as we are witnessing in Greece, Spain, France, UK, California, NY, etc.) where the math stops working.

        Go ahead and tell private sector taxpayers that their raison d’etre is make sure government employees and payment transfer beneficiaries live “relatively anxiety free.”

      2. I guess I just can’t get my undies in the same kind of twist as you over the salaries/benefits of middle class government employees. But perhaps you’d like to take a stroll through the Gummint Center and “line item” every non-essential employee?

        But seriously Newt, THIS is the root cause of Greece’s problems? Really?

  4. Newt says:

    Roubini – The Prophet – speaks:

    “The crisis is not over; we are just at the next stage. This is where we move from a private to a public debt problem,” he says, his speech the mongrel drawl of a man who was born in Turkey to Iranian parents, raised in Israel and Italy and lives in New York. “We socialised part of the private losses by bailing out financial institutions and providing fiscal stimulus to avoid the great recession from turning into a depression. But rising public debt is never a free lunch, eventually you have to pay for it.”

    As eurozone leaders panic and markets continue to dive, Roubini believes Greece will prove to be just the first of a series of countries standing on the brink.

    “We have to start to worry about the solvency of governments. What is happening today in Greece is the tip of the iceberg of rising sovereign debt problems in the eurozone, in the UK, in Japan and in the US. This… is going to be the next issue in the global financial crisis.”

    It already is. And Roubini claims to have foreseen it as far back as 2006.

    “I was writing about the PIGS [Portugal, Italy, Greece and Spain] six to nine months before everyone else, I was worried about the future of the monetary union back in 2006,” he says. “At the World Economic Forum I outraged a policy official by suggesting the monetary union might break up.”

    1. As a defender of low-taxation and “small government”, I’m interested in your defense of Greece’s astonishing lax tax enforcement. Their books — and society — might be a few steps further from the brink if they actually enforced progressive taxation. As it is, they are some kind of Libertarian fantasy land sprung to life.

      1. Equating libertarianism with anarchy — and it sure sounds as though Greece’s tax system was fairly anarchistic — is silly.

        As a general defender of low taxation, I’ll tell you that Greece’s “astonishing lax tax enforcement” sounds more like a path to higher taxes, and certainly more unfair taxes, than lower. Government, large or small, for better or worse, isn’t a foundation; you don’t have the option of becoming an MPR-style sustaining member. You pay your damn taxes.

      2. What are you saying? That Greece should enforce the tax laws it already has? Because I think that might be a huge assistance in getting through this mess. But, yeah, basically I think “Libertarianism” is a largely hypocritical semantic dodge.

      3. Yes, that’s exactly what I’m saying. Those tax laws should be enforced.

        That, and I’m also saying that suggesting a land in which tax laws aren’t enforced and surprisingly few people pay the taxes required of them is a “Libertarian fantasy land” reflects either a shortsighted misunderstanding of libertarianism or an intentional and misguided conflation of libertarianism with anarchy.

  5. PM says:

    You might have missed this one, Newt, but back in 1988, as the discussion of creating the Euro was going on (and I was working at a local Fortune 500) I wrote the following:
    “I find it hard to imagine that a common European currency can succeed without the necessary unified political institutions for a common European fiscal policy.”

    prophetic, no?

  6. leftymn says:

    I dont know about the veracity of MK’s link on Personal consumption. But i have heard that the actual amount of personal consumption runs between 60-70%, and “personal consumption” also includes healthcare expenditures, which make up 15-20% of the total .. the non exact amounts refer to fluctuating levels at any time.

    essentially anything that is not government spending or corporate or business spending is personal consumption … be it on healthcare, toasters, movie tickets, cherry cokes or health club or legal fees.

    i do think that much of the economy in the USA from about 1980 to 2008 was based on essentially tulipmania… when the % of GDP factored to financial services spikes up like it did in the 90’s and Oughts then it is “nothing” based.

  7. john sherman says:

    One of the many things wrong about conventional wisdom is explained by one of Robert Reich’s anecdotes in his tpm blog: He was on a gasbag show, and during the break the director reproached him for not being angry enough; Reich asked why he should be or seem angry, and got the reply that anger caught viewers as they were channel surfing. One of the things, I like about listening to NPR is that the panels have people who (a) actually know what they’re talking about, (b) are interested in getting to something like the truth of a matter, (c) are respectful of each other, (d) are willing to say when they don’t know something and will even defer to somebody who does. This compares instructively with FOX news or any show with George Will on it. As long as news is confused with bear-baiting or dog fighting, we won’t get anything but a sorry spectacle.

    Another problem with conventional wisdom is those who are considered conventionally wise. In 2009 the most common guest on the gasbag shows was Newt Gingrich, whose last significant accomplishment came a a decade and a half ago when he was fired as Speaker by those who knew him best. Compare Al Gore and John McCain: Gore won the popular vote for president and in the more than eight years since then has won both a Nobel and an Oscar; yet he has been harder to find on Sunday morning t.v. than Jimmy Hoffa; McCain, on the other hand, got trounced, has been busy turning his back on his previous positions, and is not doing real well in his primary, yet if it’s Sunday morning, he must be on the tube. Similarly, John Kerry, though currently a senator with some important responsibilities, is on many fewer talk shows than Dick Cheney famous mostly for presiding over a deeply unpopular government, and then there’s his daughter Liz whose only credential is a nepotism job with the State Department, yet she’s all over the tube pretending to know something about foreign policy. This helps explain why when 600 old white people show up in Nashville with teabags stapled to their hats, 200 reporters are right behind them. I wonder what it would take to get 200 reporters to cover say an AFL-CIO convention.

    A third problem is indifference to fact; some statements are capable of being verified or falsified, but the commentariat hasn’t shown much interest in the subject. Jay Rosen proposed that gasbag shows do a followup in which statements made on their shows are compared with the truth. Tellingly only ABC showed interest in the subject, and even then they put the actual job off on Polifacts, a project of the St. Petersburg Times. Our alleged opinion leaders either don’t care whether the stuff on their show is true or false or they lack the capacity tell.

    1. Damn straight! Even locally, our “gasbag shows” are populated by a small cast of numbingly familiar characters rarely if ever saying anything enlightening, or, hell, honest. i include the suddenly, implausibly saintly Tom Horner in this crowd.

      But your essential point, that the so-called legitimate press is like a moth to every freak show flame, is spot on. I’ve seen it first hand. What’s very troubling is that within the walls of these newsrooms allegedly sharp-eyed, skeptical reporters spend/waste so much time rationalizing crap, usually on the grounds that if they don’t do it someone else will.

      Crap ain’t the “need” that I see.

  8. Newt says:

    Brian et al make continuous sport of those who contend Obama is bent on a making America a socialist nation. It’s not me this time, folks – it’s the raw data:

    //——————————————-//

    Private pay shrinks to historic lows as gov’t payouts rise

    By Dennis Cauchon, USA TODAY

    Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.

    At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.

    Those records reflect a long-term trend accelerated by the recession and the federal stimulus program to counteract the downturn. The result is a major shift in the source of personal income from private wages to government programs.

    The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. “This is really important,” Grimes says

    The recession has erased 8 million private jobs. Even before the downturn, private wages were eroding because of the substitution of health and pension benefits for taxable salaries.

    The Bureau of Economic Analysis reports that individuals received income from all sources — wages, investments, food stamps, etc. — at a $12.2 trillion annual rate in the first quarter.

    Key shifts in income this year:

    • Private wages. A record-low 41.9% of the nation’s personal income came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December 2007.

    •Government benefits. Individuals got 17.9% of their income from government programs in the first quarter, up from 14.2% when the recession started. Programs for the elderly, the poor and the unemployed all grew in cost and importance. An additional 9.8% of personal income was paid as wages to government employees.

  9. PM says:

    Oh, come on, Newt–this is the result of the most serious economic decline since the 1930’s–private payrolls/wages are down because people are out of jobs. And when they are out of jobs, then they apply for unemployment, so the public payrolls go up. When the recovery comes, then unemployment payments will stop, and private payrolls will expand.

    Mistaking the business cycle for socialism is quite a reach!

    1. Mike Kennedy says:

      I’m not ready yet to scream the S word, either. But the gist of the article is correct. Government support of the economy is not sustainable. And the wrong policy mix will only prolong the agony. In order for recover to come, the right policies have to be in place. You know what they say about those who don’t learn from history.

      1. PM says:

        i agree completely with the article–and, of course, the article says nothing about socialism.

        The gist of the article is, i believe, this:
        “The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. “This is really important,” Grimes says”

        And i agree with this as well. But i do not think that Obama or anyone in his administration disagrees with this. The idea is that the government spending increases that we have seen are supposed to be temporary, designed to re–ignite the economy, to prevent a collapse, to keep this a recession rather than a depression. Even the most Keynesian of economists say that this kind of increase in government spending levels is a temporary thing. Even those who argue for a second stimulus package agree that the spending levels have to go down eventually, and go back down to levels closer to the 1990’s.

        We can have honest disagreements about how much increased government spending is appropriate–we all agree that there is a need for some, and that it needs to go on for a while (we can disagree about the exact length). But to call this creeping socialism is simply dishonest. And i think that all reasonable people can agree with that as well.

      2. PM: Thanks … for reiterating the obvious. And I mean that. Our friends apparently require regular refreshing on what has happened since the bubble burst, and that their prized private sector failed to respond as needed by infusing the economy with billions of dollars in new demand. Their argument, which is growing quite stale after so many months, and clear evidence that as a desperate patch it has worked, would be much invigorated by proposals for how the private sector should pull us out of a deficit crisis … besides blindly cutting the .01% a new round capital gains tax cuts.

        I mean, as far as I can tell, that is the ONLY idea they ever have. It must be a Libertarian thing.

  10. Dave says:

    Brian, I’ll be you missed me!

    That first video you linked to was outstanding. Tkacik also has some good points, but I think we need to throw government into the same hopper as the she discusses. Government workers have every incentive to create more red tape and offer little additional value. The difference is when the newspaper model fell apart, the employees mostly lost their jobs. With government, if the economy collapses we tend to hire even more government employees.

    While not a fan to the Tea Party folks, fiscally they have a point. The US is following in the footsteps of Europe and that model is falling apart rapidly.

    No argument that the US has needed some fixes, but the current Democratic plan is nothing outside of the box, it is also a pattern and movie that we have seen before.

    1. Dave: Good to hear from you again. How’s life in the river valley?

      But, as usual, I’m not buying the argument that middle class government employees are anything close to a critical drain on our productivity or deficit . Most of those people are shopping the same places as you. Not to belabor the old Pentagon analogies, but if conservatives were as serious about government waste they’d at least entertain the discussion about building $1.2 billion bombers to fight … well, who, exactly? The Taliban? Al Qaeda? China?

      1. The Post story strikes me as entirely credible, and I think it contains echoes of something Mr. Sherman was getting at. Namely, that our mainstream media (and I guess that includes the Wall St. Journal editorial page) engenders and feeds off conflict and crisis, not crisis-solving or remediation. An improving situation of whatever kind is NOT A STORY. No one gets angry enough to stay tuned through the next commercial block or buy tomorrow’s paper.

    1. Mike Kennedy says:

      Quite right, PM. It is a good analysis and I think there is something important to point out. The American economy is wonderful most of the time at healing itself.

      We’ve been down and out many times and always have come back. This will be no different.

      1. Mike Kennedy says:

        However, that being said, my question is how long will it take? And are the policies leading us to a recovery sooner or will it take longer and perhaps a change of course? I don’t have the answers, but I have suspicions. Only time will tell.

      2. Does anyone know “how long it will take”? My larger point, vis a vis “junk” is that underlying all the Wall St. gaming that’s gone on is the question of building/offering direction to an economy more solidly based on need, which strikes me (and others) as more sustainable than debt leveraging and derivatives.

      3. “…building/offering direction to an economy more solidly based on need, which strikes me (and others) as more sustainable than debt leveraging and derivatives.”

        I would agree. However, if people want to gamble on derivatives, what the hell do you care? Sure, regulate them and oversee them like we do other investment vehicles, so we have standards for some level of transparency and whatnot. But it’s still gambling, and if we create a system in which gamblers and their enablers are deemed “too big to fail,” we’re just kicking that can down the road. It doesn’t make the problem go away; it just delays dealing with it for real.

  11. Mike Kennedy says:

    First of all, Brian, when there is excess money in the system, there has to be a place for it to go. It went into the biggest housing bubble in the history of the U.S. and the subprime derivatives were creations based on that excess liquidity.

    Derivatives have been around for ages and ages and never caused the harm we saw in 08. Those derivatives were based on a house of cards, but one that was created by the Fed, the government and Wall Street.

    You keep pointing the finger at Wall Street, which was merely the drunk. The people who provided the booze long after the point of intoxication need to be held responsible, as well.

  12. Newt says:

    Today’s headline from USA Today …

    ——————

    US money supply plunges at 1930s pace as Obama eyes fresh stimulus

    The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history

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