Economic analysis is complicated by the fact that controlled experiments are generally not possible. One cannot test different policy prescriptions on exact same economy and evaluate the different results. Arguments are made by analogy to previous circumstances. For this reason, it is difficult to conjure up a consensus among economists as to the best way to help the American economy recover from its current high unemployment and sluggishness.
There are two basic schools of thought: one that emphasizes monetary policy and one fiscal policy. Is the economy more or less responsive to controlling the money supply or federal taxation and spending, or some combination.
Milton Friedman won the Nobel prize in economics in 1976, for his explication of monetary policy and in part on his analysis of monetary policy during the Great Depression. Friedman argued that that collapse of the economy in the 1930s after its initial signs of trouble was caused the exact wrong policy followed by the central bank. The central back tightened rather than loosenes the money supply cause radical deflation and a lack of money available for investment.
The economist John Maynard Keynes is the champion of fiscal policy. Keynes has argued that federal deficits make up for demand in the private sector during recessions and provide a means for recovery. It should be noted deficits can be increased either by increased spending on reducing taxes
Since the banking crisis in 2008, the Federal Reserve has loosened the money supply about as much as it could. Perhap by this more than any other policy, the Federal Research helped avert a 1930s-like collapse in economic activity. At this point, however, the Federal Research has exhausted much of its ammunition. Interests rates are at historic lows. Monetary policy has helped, but all the Federal Reserve can do now is maintain a loose monetary policy until a strong recovery commenses.
In February 2009, after the immediate banking crisis had abated, the Obama Administration passed its stimulus package with nearly a trillion dollars of deficit spending. Results have been at best mixed. Growth remains anemic and unemployment and under employment remain much higher than the Obama Administration promised. Nobel-prize winning economist and NY Times columnist, Paul Krugman, recently argued that given the lack of economic response, we need to re-double fiscal stimulus. We note in passing that Krugman always argues from more governement spending and not reduced taxes. Either would increase the fiscal stimulus.
We submit the thesis here, that additional fiscal stimulus now would be ineffective because of collective physcology. Given the massive deficits we have already incurred, people will become more apprehensive about the future and hoard cash if the deficit increases much more. The problem was that the Obama stimulus was accompanied with health care changes and progressive agenda that promised not a one-time fiscal punch, but a fiscal trajectory that would incur even greater deficits or significant tax increases. In the face of this uncertainity, people are saving more. in anticipation of future bad times. Ironically, this fear is suppressing consumer demand. Business, also faced with uncertainty, sits greater than average cash reserves.
By creating what seemed to be a permanent and expontenially expanding deficit, rather than a short-term stimulus, the Obama Administration undermined the effectiveness of its signature economic policy. At this point, the best that can done is to reduce uncertainity by maintaining the current tax code and creating an economic plan that restrains federal spending. In any case, it will take a long time to dig out of the current situation, but if certainty returns, businesses will be more willing to invest their acccumulations of cash and consumers wil be more willing to spend some of their savings.
Voter Intimidation in Philadelphia
Sunday, July 11th, 2010On November 4, 2008, Barack Obama became the first black American to be elected President of the United States. Obama carried the election with nearly 53% of the vote. A large fraction of the remainder might have been disappointed from a political standpoint, but could not help feeling a sense of pride that to a large measure the racial bigotry that had been Americas original sin had been cleansed from our collective souls.
On the same day, New Black Panther Party member, King Samir Shabazz, stood in front of a Philadelphia poll brandishing a bludgeon and intimidating poll workers and voters. Christopher Hill, a poll watcher, was called a cracker by Shabazz. Bartle Bull claims it was the worst case of voter intimidation that he had ever witnessed. Bulls claim carries significant weight since he served as a civil rights lawyer in the South in the 1960s.
Though eyewitness claims are important, this incident might have devolved into a clash of testimonies had there not been video showing Shabazz in paramilitary gear strutting at the entrance of a Philadelphia polling place. Further, Shabazz made himself a less sympathetic character when claiming on another video at a different time that if if you want freedom youre going to have to kill some crackers, youre going to have to kill some of their babies.
The Chair of US Civil Rights Commission reported the facts of the case as:
On November 4th, 2008, two members of the New Black Panther Party appeared at a polling station in Philadelphia. Video evidence and eyewitness testimony show that these two members standing athwart the entrance of the polling place dressed in paramilitary uniforms with black combat boots. One of them brandished a nightstick. They hurled racial epithets at whites and blacks alike, taunting poll watchers and poll observers, who were there to aid voters and, according to evidence adduced during our hearing last month, caused some voters who sought to cast their votes that day to turn and leave the polling place, rather than have to contend with them.
Shabazz advocates a very radical ideology and no one claims that he represents any more than a tiny, tiny fraction of the population. Nonetheless, his intimidating actions in front of the polling area clearly deserved prosecution to maintain the integrity of the voting process. Under the Bush Administration, the prosecution began and a default judgment won that would have kept Shabazz away from polling places indefinitely. This was to be followed by further prosecutions of the New Black Panther Party for voting rights violations.
The Obama Administration had an easy decision to make. Simply maintain the prosecution and demonstrate that racial politics will not be tolerated on the part of anyone. Obama was supposed to represent a transition to a post-racial society. What better way to demonstrate that the Obama Department of Justice (DOJ) would not permit racial politics?
Unfortunately, the Obama Justice Department stood down the prosecution against the leaders of the New Black Panther Party and accepted a decreased the judgment against Shabazz prohibiting from polling places in Philadelphia only until 2012. J. Christian Adams an attorney at the DOJ resigned after being instructed by apolitical appointee not to pursue the case. Christopher Coastes also stepped down as Chief of the Voting Rights Division, when his recommendation to pursue the case was denied.
The Civil Rights Commission is now investigating the entire case and the DOJs response to it. The Obama Administration is likely to be further embarrassed. All presidential administrations commit unforced errors and the decision to back off this prosecution is one such misstep. The disappointment is that this error undermines the hope that the Obama Administration could further racial reconciliation. There is no doubt that Obama himself seeks such reconciliation. He should insure that all his subordinates do as well.
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