The Only Winning Move

However depressing they are on other fronts, I always enjoy elections because we all get front-row media passes to watch Democrats twist themselves into logical knots. Remember all those people who said that John McCain’s proposal to allow offshore drilling wouldn’t help with the gas price thing because it would take too long to take effect? Yeah - well, those same people are tickled pink that Obama thinks he can create jobs by building more highways. When, exactly, do they think that these jobs will appear? By this afternoon? As opposed to, you know, building oil rigs, which can apparently be done without hiring any workers. Never mind that highway investment on the scale Obama is talking about is probably unnecessary anyway. I blame the public schools…

TOWM quip of the day comes from Jacob Sullum, who writes in response to a Reason editors’ voting preferences poll question:

What will you miss about the Bush administration? The idea that $438 billion is a big budget deficit.

Beautiful.

I think the best dig at Reason Magazine I ever read was Virginia Postrel commenting on the Ron Paul racism controversy:

I do fault my friends at Reason, who are much cooler than I’ll ever be and who, scornful of the earnestness that takes politics seriously, apparently didn’t do their homework before embracing Paul as the latest indicator of libertarian cachet. For starters, they might have asked my old boss Bob Poole about Ron Paul; I remember a board member complaining about Paul’s newsletters back in the early ’90s. Besides, people as cosmopolitan as Nick Gillespie and Matt Welch should be able to detect something awry in Paul’s populist appeals. (Note that by “cosmopolitan” I do not mean “Jewish.” I mean cosmopolitan.)

I laughed out loud when I read that because it really hits home. One does often get the impression that Reason spends more time trying to be cool than right. For a case in point, have a look at their collection of Obama assessments and count the number of naive optimists.

Brink Lindsey:

Alas, when it comes to domestic policy, Obama’s inclinations on spending and regulatory issues are almost uniformly wrongheaded. My hope is that circumstances will constrain him from following those inclinations very far. But in foreign affairs, where the president has a much freer hand, he is the clearly superior alternative.

Bruce Bartlett:

I think it is more likely that Obama will restrain Congress’s worst instincts, as the Clinton administration often did on issues such as the North American Free Trade Agreement, than that McCain will be able to do so with nothing but a veto pen. On balance, I think there’s a better chance that an Obama presidency will end up being preferable to a McCain presidency from a libertarian point of view. To put it another way, I prefer another Bill Clinton to another Gerald Ford.

Jonathan Rauch:

The upside: his subtle mind, silver tongue, moderate temperament, cool deftness, and magnetic charisma. The last time we saw those traits combined was in John F. Kennedy, who I think was a good president. Kennedy gets dinged by liberals for not doing much, but that was a feature, not a bug: He was personally charismatic enough to make the country feel ably led but politically shrewd enough to avoid overreaching. If I read Obama right, he may offer a similar blend of charisma and caution. The election of a black president, opening a new chapter in America’s tormented racial history, only sweetens the deal.

Deidre N. McCloskey:

I’m praying (like Barack Hussein Obama II, I’m a churchgoing Christian) that he gets a bunch of Chicago School economists to advise him. And listens. That way he won’t “renegotiate” the North American Free Trade Agreement, and he might even (faint hope) try to get the Doha round restarted: You poor countries allow us to send you some stuff, and in exchange we’ll drop the farm programs. As I said, faint hope.

What the HELL are you people smoking? Bruce Bartlett’s is probably the most offensive: you don’t get to pick presidents and pair them. The 1976 election was between Gerald Ford and Jimmy Carter - not Bill Clinton. So stick to the present, please. Is there any reason to believe that McCain is Gerald Ford or that Obama is Bill Clinton? And if Obama is Bill Clinton, doesn’t it bother you at all that he’s the 1993 Bill Clinton and not the 1996 one? We’re looking at a Dem Senate landslide, in case you forgot. And then there’s Jonathan Rauch, who thinks that style implies lack of substance, and that blackness is a qualification for president. All told, it’s a collection of people kidding themselves. Identify some Obama weaknesses, and then wave the magic “hope” wand and make them go away. Brink Lindsey: “My hope is that circumstances will constrain him from following those inclinations very far.” Well, that’s OK then. You can hope, and St. Barack will deliver. What circumstances, one wonders, could POSSIBLY constrain a left-wing Democrat from his inclination to spend and regulate when he has a sympathetic Congress and celebrity status not just among followers here, but around the world? How does this combination POSSIBLY give you cause to hope that there’s not gonna be all that much spending and regulation?

ENOUGH! I’m sick to death of people making excuses for voting for Obama - especially when they’re Libertarians. There’s nothing about Obama that’s good. I get that he’s “hip.” But “hip” is exactly what we DON’T want. The whole bleeding point of being a Libertarian is that you want government to shrink and get out of everyone’s way. That’s the essence of it. We want freedom through self-determination. “Hipness” is about nothing more nor less than being the center of attention. Yeah, well, politicians get to be the center of attention by doing exactly what Obama is doing - promising people the world while going vague on specifics. It’s because people like you give them the benefit of the doubt that they never have to come clean about anything, say clearly what they really mean.

All of this is exactly the wrong reaction. I want a country where political debates are really boring - where the two candidates simply make their case by laying out policy intentions. And I want the public so bored by the whole thing that only those people who know about policies bother to go vote. I want celebrities in Hollywood and on the pop charts where they belong - out of the White House. The president is not the nation’s spiritual advisor. It isn’t his job to give anyone hope, or jobs, or whatever else Obama is promising this week. The last people we want voting are those who are motivated to do so because will.i.am wrote a (crappy) pop song about one of the guys running!

But I think what’s really worrisome about Obama is how willing people are to fill in the gaps for him. He’s made a bunch of speeches hailed as brilliant that failed to say anything whatever. Which means that pretty much anyone can pick them up and see in them what they want to see - as all these Reason contributors are doing here. Deidre McCloskey ends her bit thus: “I wish I would grow up and stop expecting presidents to do good.” Yeah, I really wish you would too. And here’s the rub - you don’t get credit for just saying that until you actually do it.

Bill Clinton best summed up the emotional differences between Democrats and Republicans for me when he said that at convention time “Republicans fall in line and Democrats fall in love.” Nowhere has this been more visible than in the present election, and I’m so much more comfortable with the Republican approach I can’t begin to tell you. “Fall in line” is the better attitude. You take a pragmatic look at your (essentially two) choices for president and go with the one that represents the lesser of the evils. That’s a lot easier to stomach than the Democrat approach - which is to convince yourself that whoever ends up holding the bag is the greatest thing since sliced bread. The “fall in line” approach has its definite flaws, but it’s at least mature. “Fall in love” is so totally inappropriate it’s difficult to know where to start. And the runner-up for “worst approach to a presidential endorsement strategy” is the “hope for the best” crap that’s on display here at Reason.

It isn’t a pundit’s job to “hope for the best.” A pundit’s job is to point out where the political establishment is going wrong and suggest ways to fix it. So rather than Deidre McCloskey having “faint hope” that Obama will adopt some sensible economic policies, she needs to call it like it is say flat-out that it’s UNLIKELY that he will. It’s the spin that’s wrong, you see. The pundit’s job isn’t to say “you know, there’s an outside chance that politican X will come to his senses.” Rather, he should say “What politician X has been saying makes his trade policies sound pretty crappy. Not a peep of support from me until he straightens them out, and here are some suggestions how.” Likewise, no pundit should ever be in Brink Lindsey’s position of saying “gee, maybe some hugely implausible ‘circumstances’ I’ve not bothered to spell out will make the guy turn out OK after all!” NO! The pundit says “Barring some really unlikely chain of events, this guy is gonna blow, and here’s why.” What a pundit should never, ever, EVER say is Jonathan Rauch’s “well, at least he’s hip! And BLACK!” What the fuck kind of commentary is that?

The only person who keeps Reason from being totally useless is Jacob Sullum. Sullum is what a political commentator ought to be. He pulls no punches, and he doesn’t mind talking trash about his own side when they’re wrong. For a good example of how a proper libertarian pundit calls this particular election, see his column from yesterday, appropriately titled “You Choose, You Lose.” An even better example is Richard Epstein, whose October 21 column in Forbes - “The Obama I (don’t) Know” - lays out in detail exactly what’s wrong with Obama. These are appropriate libertarian positions on this election. No one who calls himself a Libertarian can think that Obama is a good thing, and no one who calls himself a Libertarian makes the kind of weasely excuses for him on display in the Reason pages today. I think an honest libertarian can look at Obama and McCain and conclude that Obama is the lesser risk - as Sullum subtly hints he does. I don’t mind saying that I’m not one of them - but I can see how a legitimate Libertarian with priorities ranked a little differently than mine might come to that conclusion. What no libetarian should be able to say is that things are looking up with Obama! The very best Obama can ever be to a Libertarian is ever-so-slightly better than McCain, and that’s not a basis for support. Even if that’s your opinion, you don’t do anything useful by saying tautological things like “Hey! There’s a non-zero chance that he could turn out OK on trade!” a la McCloskey. Yeah, the same holds true for any politician, you moron. So kindly say something useful or get another job. All of you.

Here’s why I’m not too worried about this. The link will take you to a chart (I’m speaking here about figure 1.1 - there are three, selectable through tabs on the bottom) on Robert Shiller’s homepage. It purports to show a disturbing widening in the gap in the Price-to-Earnings-Ratio of stocks and the actual earnings of the companies they represent.

I think this data is spurious. The scary bits in the chart for me are regions like that in the 1960s and 1970s, where the P/E ratio grows in contrast to a relatively steady state for corporate incomes. Periods like those are a pretty stark demonstration that stock prices were doing a bad job tracking corporate incomes. By contrast, periods like the one in the 2000s don’t bother me so much. True, the P/E ratio is sky-high compared to corporate earnings - dramatically so. But it’s exactly this kind of thing that a statistical charlatan exploits to sell books. When you consider what the P/E ratio represents, it’s pretty easy to convince yourself that what it actually is matters not a whit, so long as it generally trends in the same direction as corporate profits.

The P/E ratio is simplicity itself. All you do is take the stock price (P) and divide it by the company’s earnings (E). The P is easy to calculate - you simply look up the stock’s value on the NYSE index (or whatever market it’s traded on). E is a bit harder. For that, you take the dollar amount of the company’s earnings and divide it by the number of shares (a “share” is, after all, just what it sounds like: your own private piece of the company). But no matter - if you own the stock, it’s usually easy to get that number too, and P/E ratios typically posted somewhere public to save you the trouble.

Now, since this is a simple fraction, it’s easy to puzzle out what it would mean if company earnings drop, but the P/E ratio for a stock rises. Since the P - the price of the stock - is in the numerator, and the E - the company earnings - is in the denominator, then for the P/E ratio to rise while E falls it would have to be that at best corporate earnings are falling faster than the price of the stock, but more likely that the price of the stock either holds flat or even rises as company earnings fall. Same thing for the situation where corporate earnings rise but the P/E ratio falls. For that to happen, it means that E is growing faster than P - which is to say, corporate profits are either (a) growing faster than the price of the stock, (b) growing while the price of the stock holds steady or (c) growing while the price of the stock falls. In either case, it means that the price of the stock is probably not tracking corporate earnings - which is to say, probably not reflecting economic reality. THAT’s the sort of thing that we should worry about - when the stock market is tracking essentially nothing but the machinations of traders.

By contrast - consider the situation where P/E is growing faster than E, or falling faster than E, but in the same direction. That simply means that stock prices are more dramatic than corporate earnings (they rise or fall faster than earnings) maybe, but they are still basically tracking them. It’s impossible for the P/E ratio to rise while corporate earnings rise if P is falling, and likewise impossible for the P/E ratio to fall while E is falling if P is rising.

I won’t say this is exactly what we want. In the utopian world where the Efficient Market Hypothesis were transparently true without qualification, then I suppose the P/E ratio would be less volatile than E itself, and that P/E would stay close to 1. But that’s a world of total transparency in both reporting and prediction. I really do think the future holds something like that, but probably not in my lifetime. Right now, the world economy remains uncertain enough that what tomorrow holds is still guesswork, to a large degree. That means that P/E is both volatile and a long way from unity. But that’s OK with me so long as it generally tracks the real economy.

What Shiller’s graph says to me, actually, is that the stock market is doing a better job than ever tracking the real economy. Because even though it’s true that the P/E ratio has a wider gap with E than ever before, notice how closely it tracks E. Starting in the late 90s, it’s actually just a REALLY EXAGGERATED proxy for E. It rises when E rises, falls when E falls, which is to say that E is doing the real heavy lifting of explaining where stocks prices go. P rises faster than E and falls faster than E, but always in the same direction. In other words, the market is working, and the direction stock prices take in general gives us a good idea where the market is headed. Better still - P/E isn’t just tracking E, it’s correctly predicting it. P/E seems to rise just before E does, and fall just before E falls. It’s a good demonstration of the wisdom of crowds. Prices are volatile, so that means that individual traders have no clue which direction the market is headed. However, traders as a whole seem to be getting it more right than ever. Which is to say, as a group they’re doing their jobs.

Why is the gap between P/E and E so stark all of a sudden, then? No clue - but here’s my stab at it. I would say that it coincides with a massive expansion in stock speculation. That is, back in the 70s there weren’t so many traders; these days, nearly everyone with a job is a trader. The amount of fodder traders have to play with is much larger, so of course there’s some drama. It’s sort of like the difference between shooting someone with a .45 and shooting them with an AK. Dead is dead either way, but it’s a messier kill the more firepower you have. Traders are playing with larger volumes of money than ever (what with the existence of 401Ks and such), but if Shiller’s chart is to be believed, this has only made them more precise in their predictions recently.

Now - one fear that probably still needs calming is the idea that with stock prices in general being higher than ever, isn’t a lot of that money “not real?” Well, no - all it means is that there’s a higher barrier to entry into the market than before. A good way to think of it is to imagine a poker game. You can’t play without first paying for your chips. Likewise - in the stock market, you can’t play without first paying for your stocks. Once you start playing, you’re mostly trading chips for chips (stocks for stocks), but the total amount of money in the stock market can’t grow without someone first playing in. Granted that there’s a caveat here - some of these purchases may be made with borrowed money, and if these traders go bust and can’t repay their loans then yes, some of the volatility they caused was based on money that turns out not to be real. Dispelling this worry takes a longer post - but the general idea is that so long as they never become the majority of traders we’re probably OK, the noise comes out in the wash (some of them, after all, make back what they borrowed and pay back their creditors). That caveat aside, it’s just like a poker game. When you take your chips out, all you’re claiming is money that’s already been deposited. And if there’s more money total on the table than there was when you started, then that’s because others have been buying in with more (real) money to stave off their losses. Either that, or more players have joined the game since you did. (In fact, I think this analogy probably works for the widening of the gap in P/E and E too. The more total money there is at the table in a poker game, the bigger the bets - and especially pots - tend to be. The underlying reality of how you win and lose hasn’t changed, but the stakes have is all.)

So I’m not too impressed with Shiller’s scary graph. I think as long as P/E tracks E, then E is doing the real explaining, and that means the market is working. P/E holding relatively flat would be even better. What’s REALLY scary is when P/E goes in the opposite direction as E. Then the stock market is only tracking its own wankery and has effectively ceased to function as an economic indicator. It shouldn’t surprise anyone that this happened at the height of Socialism in this country in the late 1960s/early 1970s. “We” (meaning the Johnson and Nixon Administrations) adopted an anti-market policy, and the market therefore stopped telling us much that was useful, just as Ludwig von Mises warned it would.

I recently posted on why political polls are error-prone. But I only really addressed one common problem with political polls - the tendency to “correct” for demographics. That it because it seems likely to be the most vexing problem this time around, given the media’s excitement about the possibility of our first black president.

For anyone interested in a quick, humorous summary of all the other problems see this excellent bit by Iowahawk - which I stumbled across in a comment on The Briggs Blog.

Oh - and the same Briggs Blog entry also contains this pertinent observation:

Ever notice that at the Democrat rallies you hear “Obama! Obama! Obama!”, while at the Republican ones you hear “USA! USA! USA!”?

Yes, actually.

Atlas Shrugged is my favorite novel. I’m well aware of what the problems with it are. No, it isn’t the greatest literary achievement in human history. In particular, the character of John Galt (and the last third of the book, in which he appears) could use some work. I always had trouble imagining that this man who only ever communicates in speeches about politics and morality will be able to settle down to a happy life of making ever-more-groundbreaking improvements to his already-revolutionary motor once the Wesley Mooches are expelled from the halls of power. The idea that the world’s most perfect man needs an unworthy opponent in order to thrive is ceratinly not the impression Rand was shooting for, but there it is. No, I don’t agree with all of it either. In particular, there’s a lack of graciousness about the supermen that’s hard for those of us who occasionally make mistakes to admire. Additionally, the unresolved questions of how you sustain a political system that is geared toward the capable minority rather than the mediocre majority are neither stated nor answered, but they are legion in the astute reader’s mind. It is my favorite novel all the same - because nowhere else have I encountered a read that was as relevant to my personal life and as entertaining as this one. It is an inspiration to me every time I read it.

So I was pleased today to come across this blog entry on countering passive-aggressiveness using Atlas Shrugged. The particular context is dear to my heart: underhanded America-bashing from European weenies. It isn’t just Europe, of course. I’ve run across the same problem in Canada, Japan and South Korea. Everywhere in the world there are people who can’t abide the fact that Americans exist and, like AA failures offered a sip of whiskey in their coffee, just can’t seem to stop themselves from slipping insinuations into the conversation when confronted with one of the species. But in my experience the problem is particularly bad in Europe. In Japan, whatever anti-Americanism you run across is hard to distinguish from the general background noise of their own cultural superiority complex and tendency to passive-aggression in all affairs. In Korea, they have the decency to say it to your face. Not a subtle bunch, the Koreans. And in Canada, you just feel sorry for them, because you know that the Europeans they try so hard to align themselves with don’t really think any better of Canadians than they do of Americans. No, Europe is the only place it ever really got under my skin - and boy, did it ever. It’s just wearying after a while to have to constantly be on your guard with everyone you meet, because these attacks always come straight out of the blue.

I’ll let Rawness’ post speak for itself. Go have a look, and also have a look at the reasoning behind the approach if you have the time. In a nutshell, the idea is that this is an instance where Rand’s advice about “refusing the sanction of the victim” applies. The kind of underhanded America-bashing that one encounters so much of in Europe needs your complicity to work, and so by denying to comply (that is, neither getting openly offended, nor allowing the attacker to simply retreat after the sting - as Hank Rearden does in the courtroom scene in Atlas Shrugged) you beat it. In my experience, this is solid advice. Trying to argue the point mysteriously only ends up making you look overly sensitive, but letting it go is even worse, as it guarantees you’ll be treated with condescension by that person from there on out. The only thing you can do is exactly what’s suggested: let it play out for a bit, then start to calmly ask pointed questions. It’s so devastating in its effectiveness that you really have to see it to believe it.

The only thing missing from Rawness’ post - and this is NOT a criticism as I don’t have any bright ideas on this front myself - is an explanation for where the behavior comes from. There’s this stab at it (from the second link):

Passive Aggressors have a weakness that you can exploit. See, they desperately want to engage in confrontation for whatever reason. Maybe they feel powerless in general and have typically felt this way since adolescence and winning conflicts are a major ego boost for them. Maybe they are trapped in middle management hell. Maybe they have unresolved issues about something, and you remind them of those unresolved issues. In some form you are the embodiment of whatever it is they have issues with, be it because of your race, your culture, your personality, your archetype (maybe you remind them of the big jocks that pushed them around in high school, the cool guy that got all the girls they couldn’t, the hot chick that never gave them a time of day growing up, the optimist they always envied). For some reason, they have a need for conflict and victory in general, and something about you in particular especially triggers that need for victory.

That’s all true, of course, but what I’ve never been able to understand is what it is about Americans that triggers this need in Europeans? Some of their criticisms are, after all, perfectly accurate, and while I do feel that envy plays some role, I’ve never met anyone doing this who I felt honestly wants to be American. Just saying “it’s envy” is too pop-psych for this; the real motive, whatever it is, is likey to be much more complicated, and I’ve never, not anywhere, run across a satisfying explanation for what it could be.

There’s an interesting post at UK Polling Report about a ComRes Survey intended to mimick an earlier Gallup Poll concerning demographic prejudices in US voting. This poll was done back when it seemed plausible that Mitt Romney would be the Republican nominee (thank God that didn’t come to pass!), and the question was how much of a liability his Mormonism would be. Gallup took the opportunity to survey people about a number of candidate descriptions - including age (72 and older - i.e. McCain), sexual orientation, religion (Islam was not included) and … atheism. It turns out that US citizens object to atheists more than anything - with fully 53% saying that they would not vote for an atheist for president, all other things equal. Gays and old guys were next in line - with 43% indicating refusal to vote for a gay, and 42% refusal to vote for someone … erm, John McCain’s age. Unfortunately, there are no data on Muslims, so we don’t know whether that religion is even more objectionable than Atheism, but aside from that possibility, Atheists are THE persona non grata in American politics. OUCH!

The UK Polling Report post points out that Britons are as likely to be racist as Americans - which is to say, barely at all. Equal numbers of Britons and Americans are uncomfortable with a black President/PM, and that number, at 5%, is encouragingly low. (Of course, that with the caveat that it’s right at the boundary of “acceptable,” and if the Bradley Effect is real this number is actually higher than it seems.) Similar numbers of Britons also don’t mind going public with their ageism, with about 43% objecting to the idea of a 70+-year-old PM. Sexism is somewhat lower in the UK - 7% of them objecting to a woman vs. 11% for us. There was a question about divorce on both surveys, but I decline to report on it because there were significant differences in phrasing. Where it gets interesting is with Atheism. While lower than in America, the number is surprisingly high in the UK as well: 20%.

One might not have guessed it, but not believing in God would appear to be almost as much of an electoral handicap for a potential leader in the UK as being Muslim or gay.

But therein lies the difference. We don’t have numbers for Muslims in the US, but the point is that gays are much more acceptable to US voters than Atheists. In fact, the profiles of voters in both nations couldn’t be more different. Minorities and women are - broadly speaking - acceptable in both places, but there similarities end. While a disturbingly large number of Britons object to Muslims and gays, they are still more tolerant of them (well, gays, anyway) than US voters. And while Britons are most concerned that their candidate not be too old - argubly sensible, given the demands of the job, though that of course should be judged on a case-by-case basis - Americans are most concerned that their President believe in some mystical sky bully. While it does matter to some degree which flavor of supersitious nonsense the candidate subscribes to (Catholics are marginally better than Jews; Jews are greatly preferable to Mormons), apparently any flavor is better than none at all.

So I hereby declare myself more discriminated against than any other minority group. That gives me unlimited license to guilt trip the government into buying me a house and a college education and giving me a job I don’t qualify for, AND it allows me to refuse to tip waiters. Ain’t America grand?

Matthew Yglesias is convinced that this election doesn’t spell a permanent end to “Conservatism,” as is under discussion in the blogosphere. Perhaps a temporary retreat, he speculates, but nothing so devastating as “never again.”

I have a strange fascination with these pronouncements - as I guess anyone as interested in politics as I am should. It is clear to me that political thought does evolve with time, and so the idea of an end to “conservatives” as we know them isn’t that far off the charts for me. I can think of two convincing modern examples, in fact. The first is of course the death of Labour in the UK. As an undergraduate I read Margaret Thatcher’s first volume of memoirs, and while I can’t quote it exactly, not having the book in front of me, there was a line after the description of the confidence motion against Callaghan to the effect that thus ended Britain’s last Labour government, “perhaps its last ever.” And that struck me as the kind of thing that no American would ever say. It was just sort of unthinkable to me that there could be an America without Democrats and Republicans. As mercurial as those categories can sometimes be (no more so than at present!), surely they’re permanent?

But I’m not sure Thatcher was wrong in substance. It’s true that there’s still an active Labour Party in the UK, but it’s hardly the same hardline Socialist outfit that was such a fixture of post-war Britain. That group stumbled about the 1980s like a zombie (after having written a manifesto that Gerald Kaufmann famously described as the longest suicide note in history) until it finally became clear to it that the writing was on the wall. Tony Blair was elected to party head as an excuse for axing “Old Labour,” the party constitution was substantially rewritten, and though Old Labour still sits on the back benches, the party has taken to styling itself “New Labour” to underscore the split with the past. The label survived, but not the recipe.

There’s a similar example from Canada. Though the current Conservative Party of Canada occupies some of the same political space as its forebearer (the Progressive Conservative Party of Canada), Stephen Harper’s “Tories” are not the same Tories that Brian Mulroney headed. That party died in 1992, when it was reduced from an absolute majority to a mere 3 seats in Commons. “It” never recovered, and the 1990s saw the Bloc Quebecois, of all people, head up the official opposition - that thing which could supposedly “never happen.” What Canadians call “Tories” now is a party called the Canadian Alliance that changed its name when it digested the remanants of the old Progressive Conservative Party in 2004. The point is that Canada’s politics definitely shifted in the 90s, as did those of the UK.

Could it happen here? It’s an interesting question - one first posed to me in a talk I attended shortly after reading Thatcher’s memoirs, actually. The speaker was Bay Buchanan - yes that Buchanan - Pat’s sister. And she stood up in front of us and predicted in all seriousness that the Republican Party wasn’t going to last because it was an ideologically unstable coalition. You just can’t have social conservatives and libertarians sitting on the same bench, and she claimed that where it’s easy to bury the hatchet when you’re all in opposition together, it’s harder to smooth over your differences when you have to govern. This was 1995 or so, just after the so the Republican Party was at its most influential ever, so it was a bold prediction, but one I found completely convincing. Think of it this way - I can come up with a defining statement of principle that all Democrats will agree with, and it goes something like this:

There are social problems, and the government can and should intervene in the economy to fix them.

No Democrat worth his salt disputes this, and it’s a basic statement of principle. Whatever their superficial arguments on just how much to raise or lower taxes, just how much to charge for this that or the other tariff, just how much money to throw at national daycare or government housing projects, Democrats all agree with each other on fundamentals. They merely haggle over details.

Republicans haggle over a LOT more than details. There is, to the best of my knowledge, no analogous definitive statement of principle that one can reasonably expect all nominal “Republicans” to agree on. The Party is ideologically unsound, and the name “Republican” is really a shorthand for a collection of anywhere from 3 to 5 distinct groups of anti-Democrats who find it convenient to caucus together. From my perspective, these groups are National Greatness Conservatives (neocons), Social Conservatives< (religious nuts) and Libertarians. Others have added names to this list, but I’m happy with these three - which are broadly the three that Bay Buchanan pointed out in her talk. No matter - if we even agree on the three that I outlined, it should be clear that they have very little in common aside from an shared distaste for Democrats. The reason I am certain that there WILL be a death of “Conservatism” in America is because even now no one is sure what it means.

Yglesias bases his assurance that there will always be “conservatives” on this line of reasoning:

It’s in the nature of things that politicians and intellectuals whose ideas tend toward the preservation of existing wealth and privilege are going to manage to find money and institutions to support them.

That’s indisputable, I think, but it’s beside the point. “Conservatives,” by this definition, can be anyone - including, I hasten to add, the barons of a Canadian-style welfare state who’ve been in power too long. If the Democrats were to govern uninterrupted for the next two decades, who can honestly doubt that in the US, like in Canada now, the prime concern of new college graduates would be getting “a government job,” and that there would be a serious vested interest in keeping the handouts flowing? This is a dictionary definition of “conservative,” but it isn’t a very useful one in the present context. It’s only in extreme leftist caricature (of the kind that turned Michael Moore into a person of privilege) that “conservatives” are all and only the rich people fighting to preserve their privileges, carried along by a band of dupes! In more serious discussion, it’s much more complicated than that.

And of course, the complication itself is the problem. “Conservatives” just don’t know what they are, and that’s what’s as likely as anything else to confine them to political oblivion.

The Democrats are now and always have been the majority party in this country. The ONLY place where Republicans have a competitive advantage is in winning the presidency, and even that advantage seems to have retreated. For that reason, contra Yglesias, I won’t be at all surprised to see that “Conservatives” vanish from the scene. Not completely, granted. The Religious Right has some hot air in its lungs yet (and the National Greatness crowd were all Democrats before they were Republicans anyway). But as a political force, it wouldn’t surprise me to find that the Bush Administration had finally dealt the dying blow to that ever-precarious coalition we called “conservatives.” He did it by pretending to be Reagan - that is, by pretending to be all three members at once - equal parts religious, national greatness, and libertarian. But really he himself was just religious, and his advisors were all national greatness, and the libertarians, having been shut out, responded by pulling the plug. The Party then completely misdiagnosed the problem, swapping the places of the National Greatness and Religious Right (McCain being Cheney as president, Palin Bush as VP), and everyone blaming the Libertarians for the crash. But blaming the Libertarians is a bit like scolding a worker for charging you wages. If you don’t pay someone, he’s right to walk off the job - and Libertarians got fed up with endless wars funded by deficit spending, unchecked expansion of entitlement programs, the compiling of a national database of information on innocent (everyone is innocent under the law until proven guilty) citizens without due process, the federalization of absolutely bloody everything, even education, the regulation of political speech and the use of government funded programs to spread President Bush’s personal religious feelings as far as they would go. Whatever these things are, they’re NOT libertarian. If the Republicans expected us to stick around, the least they could’ve done would have been to deregulate some things here and there. But quite the contrary, they just kept adding and adding pages to the federal books. Workers don’t work without paychecks, and coalition members can’t be expected to stay if there’s nothing in the deal for them.

Sooner or later the Republicans are going to discover that pandering to patriotism only gets you so far. I think McCain already appreciates this. In spite of myself, I genuinely like the guy, even though he’s not in my faction, exactly. But I don’t think the Republican Party appreciates this. I think the Republican Party thinks it wins by winking at anti-abortionists and scaring people about Supreme Court appointments. And I think that until that changes, until they get more serious about their platform, they’re going to have trouble recouping their losses.

I don’t think anyone knows what’s going to happen, least of all Matt Yglesias. Me personally, I haven’t even written off a McCain victory yet. I admit I like Obama’s chances a bit better at this point, but I think the current polls will turn out to be misleading, and (contrary to what I told Noah over coffee a week ago) even if McCain loses, it’s going to be a lot closer than people have been led to expect. So far be it from me to prognosticate about the future of the Republican coalition at this point! I just think that these reports of the death of these reports about the impending collapse of Conservatism are premature. It may well happen. We may indeed be witnessing a general realignment.

The emphasis should be on “general.” One thing I am sure of is that a lot of the people currently voting for Obama are not really his supporters. They like him because he’s hip, he talks pretty, and they hate Bush. I doubt that in two years they’re going to be anywhere near as enthusiastic about him as president as they are now about him as a candidate. And that’s yet another thing that Yglesias needs to factor into his calculations. If he’s certain the Republicans are going to survive this election intact, he should at least raise some questions about the Democrats. Two terms for Jimmy Carter (or, as I prefer to put it, McGovern gets his chance!) may be the last nail in Old Lab…the Democrats’ coffin too. Not for the same reason, of course. In the Democrats’ case, it would be that a politically weak and far-too-far-left president exposed the party’s philosophy for what it really is. People would have second thoughts about that in a way they would not have, say, about the more moderate, stronger Hillary Clinton.

So the points of departure with Yglesias are … as many as there can possibly be, really. The Republicans may indeed implode this year, the Democrats may soon after, and the chips may well fall in unexpected places. Keep your bets open; these are interesting times.

Here’s a question with an easy answer. When you’re in a desperate situation, and you know someone else who has been in a similar situation and made some bad choices as to how to get out of it, do you (a) do exactly what he did or (b) cast about for some other solution?

Amazingly, Paul Krugman and Ben Bernanke advocate choosing (a).

First, some clarity. The situations in question, as you may have guessed, are the Japanese “lost decade” of the 1990s and the current American “credit crunch.” The similarities between the two are striking. On December 29, 1989, the Japanese stock market hit an all-time high of 38,957.44. Not only has it never even come close to duplicating that performance, it’s currently valued at 7,162.90 - about what it was worth in 1982. Throughout 1990, the Nikkei posted near-constant losses. There was a reprieve in 1991-1992, but it dropped some more in the following years and bounced around but generally declined until 2003. This was the consequence of the infamous “bubble economy.” Like with the Great Depression, the initial collapse was probably unavoidable, given the financial and regulatory environment of the time. It was very much a case of irrational exuberance, caused by almost exactly the same thing that is casuing the current problems in America (irresponsible lending based on overvalued mortgage assets), and there wasn’t much anyone could’ve done in 1990 but let the Nikkei fall. What WAS, in all probability, avoidable was the so-called “lost decade.” That was a problem created entirely by the unwillingness of Japan’s political class to accept some pain in exchange for later gain. The banks continued making bad loans because the central bank kept cutting interest rates until they were literally zero (1998), and the government kept stepping in to hand out cash every time this scheme failed to work. The downward spiral was eventually broken under the stewardship of reformist prime minister Junichiro Koizumi - probably the only postwar Japanese leader to understand “no pain no gain.”

Let’s start with Dr. Krugman, since his intellectual dishonesty is well known. An October 25 post on Krugman’s blog suggests that the problem with the bailout is that it isn’t expensive enough.

Japan’s bank bailout in 1998 was more than $500 billion, in an economy whose dollar GDP was only about 1/4 that of the United States today. Do the math. And the just-announced IMF loan to Iceland is $2.1 billion — that’s for a country with only 300,000 people. Both of these numbers seem to suggest that an eventual outlay of $2 trillion is in the realm of possibility.

Yes, that’s all very convincing until you bother to remember that Japan didn’t start recovering until 2003. There is NO EVIDENCE WHATEVER that the $500billion that the Japanese government spent on that bailout did any good at all. In other words, at best Japan just put $500billion in an empty oil drum and lit it on fire. At worst, it used this money to prop up bad loans and crowd out the kind of prudent investment necessary to restart its economy. On either interpretation, why the HELL does Krugman think it’s a good idea to throw MORE money at a bailout that we have historical reasons to believe WON’T WORK??? Thanks, but I’ll pass. The data point about Iceland is, of course, completely irrelevant. Iceland may well be asking for proportionally much more money than we are, but (a) Iceland’s entire economy is a banking economy (aside from some fish here and there, it doesn’t have any industry or exports) and (b) we don’t know whether the Iceland bailout is going to be successful, i.e. the most generous thing we can say about this citation of it as evidence that financial prudence is more expensive is that the jury’s still out (the trial hasn’t even happened). Notice also that Krugman’s hallmark dishonesty is on full display here. When we’re talking about Japan, it’s the sensible “size-of-economy” that’s the standard of comparison. When we’re talking about Iceland, we’ve inexplicably switched to “size-of-population,” which of course has nothing to do with anything. But what’s especially galling about the whole thing, as if it needed pointing out, is that Krugman is citing a case of known failure as a recipe for success. The Nobel Committee was really engaging in self-parody when it gave this man a bus pass, let alone an award.

Now here’s Bernanke. He wants to cut interst rates to 1%. Again, does no one remember that Japan did exactly this in the 1990s to no effect? It’s as though, instead of a simple inability to learn from history, there’s a stubborn refusal to do so. I understand the logic here, and it’s not wrong so much as uninformed. Bernanke is operating under the assumption that the problem is that banks are holding on to their loan capital. So, to stimulate new lending, you want to make loan capital “cheap” by lowering the prime interest rates. That seems to make sense. But - just as with Japan in the 90s - the problem has been misdiagnosed. The problem isn’t that banks aren’t lending. In fact, the dollar amount of loans is still growing by as much as 10%. They only call it a “slowdown” because the rate of growth in lending is down. But note that in absolute terms, more loans were made this year than last. The problem is more likely that there’s too much lending going on. (After all, many of those loans that accounted for lending last year were mortgage investments - neither prudent nor economically productive. It is NOT a bad thing if we write fewer of those this year!) Now, a slowdown in lending WILL mean more unemployment and it WILL mean recession and it WILL therefore mean pain. But this is all unavoidable. If the whole problem is that loans are coming in bad (rather than that loans aren’t happening), then obviously you want loan money to be harder to get in the hope that the dwindling supply of loan money gets better-allocated. It is never - that’s NEVER - a good idea to throw value at investments that don’t return value. It was when Japan finally got around to learning that the hard way that winds started to blow in their favor again. When your problem is a mass of bad loans, the solution is not to lend more than ever! The solution is to lend less and more prudently, and to let the unprofitable businesses fail. This is a simple allocation problem: we want money going to those parts of the economy that are most productive. By cutting interest rates even further when there is no evidence that lending has seized up (failed to grow as quickly as last year is NOT the same thing as seized up! Repeat after me: “there is no credit crunch.”), he’s inviting more bad loans, more misallocation of resources, and inflation. Brilliant.

Look - this isn’t that hard. Japan at least had the excuse that its situation was new. We don’t. We saw what happened to Japan - so I suggest we learn from it rather than aping solutions we know aren’t helpful.

I suppose the upshot is that it means there won’t be a second term for President Obama. The downshot is that we may be in for a “lost decade” of our own. And the down-down-shot is that it was all completely avoidable. Ben Bernanke has done all he can do. He needs to take his finger off the trigger and let events play out. It isn’t his job to prevent recessions - just to soften them. He’s done that, and it’s enough. Please, please, let’s now leave the interest rate alone! (I wouldn’t actually mind if he raised it.) And for the sake of God in Heaven NO MORE BAILOUT MONEY! As for Paul Krugman, the only thing that seems likely help him at this point is an arsenic pill in his coffee.

One of my alltime favorite moves is Donnie Darko. Someday I’ll give it the post it deserves, explaining why I like it so much and what I get out of watching it. But for now I’ll stick to pointing out some complications that I noticed this time ’round.

Yes, I saw it again (twice) this weekend. And one of the things that always impresses me about it is how well thought-out the plot is. It’s ingenius, really, how it sort of lulls you into thinking that there are holes, but the more you think about what seem like holes, the more obvious it is that either they’re not really holes, or that they’re intentional. I really appreciate that in a film - or novel, or short story. When something is so cleverly put together that you can relax and try to puzzle out the things that don’t fit rather than making the more normal assumption that the author was just lazy. Rather like that famous example of the single inconsistent date in William Faulkner’s chronology. I apologize, I can’t remember the details, but it was pointed out to me as an undergraduate - that in one timeline of Yoknapatawpha County one of the dates is off by a year, if you cross-reference it with the events from some of Faulkner’s novels. It’s the exception that proves the rule in the completest possible sense of the term - so much so that my professor was convinced that Faulkner had done it on purpose to underscore the point - a common refrain in his novels - that there is accuracy in storytelling and accuracy in history, and that they are not the same thing.

It’s rare that I trust an author that much, but I trust Faulkner, and I trust Richard Kelly’s writing in Donnie Darko (I make no claims about his other films). So when I come across inconsistencies, I assume that there is some reason for them.

There are two that bugged me this time through.

The one - why does the movie start when it does? That opening scene is a great one - Donnie sleeping in the middle of a mountain road, to which he apparently sleepwalked (erm, sleep-biked) the night before. It seems wrong. The time bubble in which the movie takes place surely starts when Frank (the giant ghost-bunny) wakes him from his sleep and prevents him being killed by the falling jet engine. So … why does he go back to the mountain road to unwind time, and why does the movie start there? It’s especially interesting given that Donnie himself must realize that the events of the movie - such as they are - started there - the night before he first encountered Frank - rather than on the more plausible-seeming October 2. And it’s especially confusing given that the countdown Frank gives him starts from the meeting on the golf course, not from the mountain road.

The other - Gretchen has an assignment for Dr. Monnitoff - to write about the most important invention in human history. Donnie’s response makes it sound like he’s not in her Physics class. He first makes the assumption that she has Monnitoff (”It’s Monnitoff, right? That’s easy…”), which seems strange, given that they’re in the same English class and thus the same grade. More than that, he already knows the answer: soap. So all told, it sounds like Donnie took the class and had the assignment the year before. And yet - from later scenes of the movie we know that Gretchen and Donnie are both currently in Dr. Monnitoff’s class as they’re lab partners when they present their “Infant Memory Generator” project. Not only that, but the project they co-present seems to be following the theme of “great inventions.” Previously Monnitoff asked them to write about great past inventions, now he’s asking them to imagine the kind of thing that might be invented in the future, right? But if that’s the case, then why didn’t Donnie have the same essay due at the same time Gretchen did? Or - if Gretchen was doing a makeup assignment (this conversation happens on her second day of school; she’s a transfer student) - it seems somewhat implausible that (a) Monnitoff would’ve given her the exact same assignment as the rest of his students given that he’s already told them his preferred answer or that (b) Donnie would act the way that he does in telling her what the answer is. It’s certainly not going to help her to regurgitate an answer that Monnitoff will surely know someone tipped her off to, but more to the point, Donnie acts like he has to search his memory for it. It isn’t as much what he says but his general manner that makes it sound like he’s recalling something from further in the past than the previous week. Or that he would act like Gretchen is not in his Physics class when he must know that she is.

I have no clue what’s up with the first one. I would be really interested in suggestions. For the second one, I wondered if maybe it has to do with Donnie being held back a year. He mentions earlier in the same conversation that he’s held back, but if he said specifically what year I didn’t notice it. I have, however, the impression that it wasn’t the previous year, but further in the past. But I don’t really know where I get that impression, and anyway it would make sense if it were the previous year, given that his medication and therapist visits seem to be revent developments in his life (his father has to be reminded of the therapist’s name, for example, and Donnie’s sleepwalking, which apparently correlates with going off his pills, is relatively new, judging by his mother’s attitude to it). So maybe the assignment is a makeup assignment for Gretchen culled from last year’s batch, and it was one Donnie’s remembering from last year when he was in the same class for the first time. It still doesn’t really explain why he doesn’t seem to be sure that Gretchen’s in Monnitoff’s class, but the whole conversation is awkward, so it’s not hard to chalk that up to posturing.