Detailed Abstractions

Well.  It’s official.  Not only do we have an economic crisis, but now we have an economic debate crisis…. apparently that is.

Why is it so important?

Easy… because without being able to spend more money than we can realize in revenue through taxation, we’re all going to die.  Just look around, this theoretically historically unprecedented permanently damaging possibility is sure to end the Republic as we know it:

President who tells us our senior citizens and military members will not get paid….

Bernake warns of catostrophy…

For others, our national security is at stake…. in fact, Al Qaeda itself might attack just because of this!

& on and on….

 With all of that looming, it’s not wonder someone has to be at fault….

There are alternative answers to defaulting itself, for instance let’s get rid of the ceiling altogether.  Or maybe, since a five dollar treasury bond and a five dollar bill are virtually the equivalent, why not give out more IOUs in a different form thereby removing the need for the ceiling in the first place?

But those ideas are centrist, so largely ignored and with a problem this large… someone has to be to blame.

So who is at fault?

Maybe the Tea Party’s fault?  Or maybe, like much of everything else, it’s Bush’s fault?  How about Governor Norquist?!?!

Or maybe there is no maybe.  Ask the brilliant policy minds over at The Rolling Stones, and they’ll tell you, that without question it’s the GOP’s fault.

For the logic minded, one might contend that the President, who refused to pass this perfect budget a year ago when his party controlled both legislative houses shares some blame.

But what do I know…. according to some Barack supporters, his only problem is being too much like the Big Gipper, the famous “let’s raise taxes” President…

The issue is, when you push predictions of doom and gloom for some scenario, blame has to be affixed quickly and preferably without relation to actual facts as that just muddies the waters.  Nope, the goal for almost every writer, seems to be scare tactics followed by blame.

There are a couple who have offered advice.  HBR for one had an interesting post about needing a moderator, perhaps Adam Smith.  It’s not an unpleasant thought and certainly a brilliant economic mind serving as moderator cannot help, but what most struck me about their advice is the same thing that struck me about most of those pieces blaming this or that: it misses who is truly responsible.

For when HBR states the Debt Ceiling Debate needs a moderator, I have to stop and say, they already do: the American public.  Certainly one could make the argument that the current moderators are abdicating their responsibilities and I might agree, but as much as one can delegate tasks, authority and responsibility cannot be delegated.

So sure, the public collectively can give moderator powers to Adam Smith or someone similar but alive, however the responsibility for the consequences of that process will still be the American people.

So…. is there a debate crisis?

Maybe not… as while many of us individually and seemingly ever single writer might view this whole process as out of control; seeing the whole thing as a demonstration in nothing more than the problems with this country, these are just mere opinions.

In all honesty, I’m sympathetic to that view.  However, the market place of ideas is free.  & If you analyze politics like one does the market, with the idea being the result cannot be wrong as the market is not wrong…

Then I think based upon the current political result I would submit a large enough percentage of voters have already cast their vote to continue the political infighting, applaud Pyrrhic victories, and any number of other actions which are designed to benefit their collective and not the average individual.

As proof of this reality, see incumbency rates, or polls which say cut things, but say no to all questions about what to cut, the current press articles being created because people are buying them, and more.  But even without those facts, the logic is simple: the current debate has to be ok with society at large because a free people is watching it happen and doing nothing, in a concerted effort, to substantially change anything.

So by virtue of its mere existence, it is the correct debate needed at this time.

& if it’s not?

Well, as Lincoln stated <paraphrased here>  ”As a nation of free men, we will live forever, or die by suicide.”

According to many reports from recent “economist” we are on are way.  Starting with the “Sage” Warren Buffet (here via Calculated Risk) arguing that supply has dropped below demand, which effectively will balance out the system:

…Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us…

The NY Times  (here):

After a plunge lasting three years, houses have finally become cheap enough to lure buyers. That, in turn, is stabilizing prices, generating hope that the real estate market is beginning to recover….

& Our trusted Federal Reserve Chairman Ben Bernake (here via CNBC):

Federal Reserve Chairman Ben Bernanke told lawmakers Tuesday he expects the downtroddenU.S. housing sector to improve by the end of the year, a senator who participated in the closed-door meeting said….

At first, this might seem like some sort of an agreement, however there is one stark difference.  Mr. Buffet spoke in February 2010, the NY Times piece is from July 2009, & Mr. Bernake spoke in February 2008.

The timing of the statements is instructive, as each was based upon changes in supply and demand.  The problem all had in their given time frames appears to be the same – you simply can’t count on economic activity trending when the growth was due to temporary incentives from the federal government.

As with Cash-for-Clunkers (here), Cash-for-Appliances (here), and recent tax breaks and money for lending, Cash-for-Homes will fail as well.  A temporary relief program will only provide temporary relief and is already showing signs of weakness.  From WaPo (here):

…Even as the housing market shows signs of improvement, including in new data released Tuesday, economists warn that it could take up to a decade for many homeowners to regain equity in their homes, while some people in the hardest-hit regions of the country may not see a recovery during their lifetime. …

CNBC (here):

The recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago and comes at a time when the Federal Reserve is nearing the end of a critical, year-long program to support the mortgage market….

& Time (here):

For a while there, it seemed the housing market had made the turn to recovery. Housing sales were up in nearly every month in 2009. But today it looks like real estate is headed back down again…

Delaying the inevitable will just make the pain worse.