Notebook: 23 May 2010

Author’s note: This is not another installment of my series on deficit reduction, the next of which (on corporate tax havens) is still in progress. See Part One and Part Two of my deficit reduction series thus far.

The schedule is this: on December 1, The Deficit Commission reports its findings and makes its recommendations. A month later, on the first Monday in January (which falls on the third in 2011), the white house must submit its budget proposal for FY 2012.

The noise level should be fairly impressive beginning january, but the business MSM isn’t waiting and neither should we.

While voters are preoccupied with their Christmas shopping, the report by the deficit commission may get less general attention than perhaps it should. Assuming the white house gets a heads-up on what the commission plans to recommend (my working assumption), we may see portions of the report reflected in its 2012 budget proposal. We may assume that Wall Street and business news outlets will know exactly what transpires in the commission every step of the way, and will have their spin finely tuned.

But todays (somewhat wandering, I admit) diary is all about the continuing spin going largely unreported on here:

  • On 22 May, an article by Steven Erlanger in NYT titled: Europeans Fear Crisis Threatens Liberal Benefits, which pushes the theme that cuts in European social spending programs, (which he characterizes as the world’s “lifestyle superpower”), will be necessary to restore the markets’ confidence. Erlanger pushes all the right buttons, using phrasing like “cradle-to-grave,”

    “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.”

    He also goes onto place more blame on those lazy Europeans, who have benefited by having reduced defense budgets due to the generous protection offered by America through NATO. Which is disingenuous to say the least. It’s not as if conservatives in the US don’t want an American military presence in Europe – when the Soviet Union fell, they also fell – all over themselves to find some kind of role, any kind of role, for NATO to continue. Furthermore, it’s not like the national budgets of European countries don’t suffer as well from their ongoing NATO committment in Afghanistan. Nowhere in his article does Erlanger propose that Europeans withdraw their commitment to operations in Afghanistan as a deficit cutting measure. Only that they cut social program spending. Erlanger’s story goes long on snippets of man-on-the-street interviews and short on real reporting, but it gets published, nonetheless.

    And why? Because it’s just the latest in a series of articles titled, Payback Time, which reports on “the consequences of, and attempts to deal with, growing public and private debts.”

    Where were they a decade ago, we wonder.

  • In a related story, Bill Jamieson is the managing editor of The Scotsman, and was generously given space in WSJ last Friday to bloviate about Germany’s efforts to protect the Euro by banning short trading in German bonds, and in a number of key German financial institutions. Evidently, Jamieson doesn’t like rent-seeking in reverse, calling the ban, “a smash-and-grab attack on the future of the euro zone that could transform the dynamic of the European Union”. Well, it seems likely that Sarkozy isn’t as ticked off that Germany did this, but that they did it before he did, and will follow suit.

    It also seems that it’s ok with Jamieson that financial institutions can lend on razor thin reserves, but that government debt is much less tolerable.

  • Just now on Bloomberg news TV, Sen. John Cornyn places the blame for the current financial crisis on Fannie Mae and Freddie Mac. What rubbish. The blame rests squarely on an unholy marriage between Wall Street and mortgage generators, and if you want to take the time, watch House of Cards in which it is clearly stated that Fannie and Freddie lowered credit standards in response to Wall Street’s hunger for any garbage they could get their hands on (and they demanded more and more as time went on) and dump the repackaged debt on unsuspecting buyers. I hesitate to recommend watching anything from CNBC, but House of Cards, with David Faber reporting, is one very fine piece of work. Kudos to Faber and team for this. No kidding. This is a tremendously complex story told very well.

    Mostly on CNBC you most often hear the talking point that nobody “put a gun” to anyone’s head, forcing them to take out loans. Well, yes, the gun was put to the head of ordinary, “financially illiterate” [sic] ordinary people by every pro-business, anti-union official and bureaucrat in Washington from Reagan onwards. Elizabeth Warren should sit Cornyn down and explain, with visual aids, the facts of life and just why exactly the American middle class borrows. To them, what the world needed was a global economy flooded with Greenspan dollars.

  • Back to Europe’s story. Did this story run in the Telegraph? The Guardian? On the BBC? Nope. This passed editorial muster on WSJ back on the 17th: Britain’s New Chancellor of the Exchequer Warns Deficit Must Be Cut. Business news outlets have been focused on the UK elections in order to determine the political will out there for cutting social program spending. Similarly, they’ve ignored the enormous problem of endemic corruption at all levels in Greece because the Greeks are just lazy Europeans who want to retire early. The reality of the political unrest in Greece is much more complex. Yet, all you will hear, both in business news and MSM is that Greek social programs are entirely to blame. When will they get it right?

That’s all the push back I can offer today. This lazy American liberal who wants the government to pay to support my every bleeding-heart whim needs to spend the rest of this perfectly lovely New England Sunday afternoon getting ready to go to work.


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