About Great Depressions, David Brooks Isn't Serious
In a recent New York Times column, David Brooks took the Republicans to task for a “totally misguided” approach to our economic problems that in his view amounts to “no.” While Brooks acknowledges that the various solutions offered up by the Democrats have their shortcomings, to him it is the Republicans who aren’t being serious.
First up, he questions why “the Republicans have decided to demand a fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate.” To that, it could be replied that maybe, at long last, the GOP has figured out that “fiscal stimulus” is a tragic contradiction in terms. Maybe the GOP is finally getting serious? One can hope.
Indeed, it’s possible that the Republicans have figured out that the spending explosion this decade on their watch led to market returns under President George W. Bush of -36 percent. Maybe the same GOP leadership saw how Japan drove government debt as a percentage of GDP from 45 percent in 1989 to 179 percent today, only to see its economy not recover. That the Nikkei Index is still down 80 percent from its highs of two decades ago similarly served as a warning sign that government spending is a false economic God.
It’s also possible that the GOP leadership finally did its homework on the Great Depression and found out that after a monstrous increase in spending then, the U.S. economy was still on its back after 8 years of FDR stimulus. Even better, this same GOP leadership might have done even more homework and figured out that the U.S. economy experienced a major Depression in 1921, but with the federal government’s actions still informed by a Constitution that greatly limited the activities of the federal government, it quite simply did nothing.
Sure enough, during the early ‘20s downturn the federal government correctly deduced that the last thing it wanted to do was burden the business sector with more federal spending, so it actually decreased government outlays, reduced taxes slightly, and balanced the budget. And the U.S. economy soared. Maybe the truly misguided GOP of the George W. Bush years has figured out how totally ineffective government spending always is.
But in case Brooks is not convinced, a thought experiment is in order. Let’s assume that the New York Times’ Metro desk is on one floor in the venerable paper’s new building, and that editorial staff is on another floor. After that, let’s assume that the Metro staffers enter the offices of Brooks, Nic Kristof, Maureen Dowd and Paul Krugman, steal whatever cash is lying around, and then go spend it wildly in Manhattan. Would midtown-Manhattan’s economy be stimulated, or would Brooks, Kristof, Dowd, and Krugman be that much poorer the next time they wanted to go hog wild in Times Square? What Brooks never bothered to explain as he smacked the GOP for its allegedly born-again thriftiness is how government profligacy with money borrowed or taxed from the private sector would actually enhance economic growth.
Brooks correctly suggests that the GOP should talk up capitalism as “in innovative force,” then contradicts his previous suggestion by adding on that “we have been reminded of its shortcomings.” All this begs a basic question about what our present economic predicament has to do with capitalism?
Indeed, wasn’t it the federal government (on Bush’s watch) that made a weak dollar its specific policy such that hapless Americans did as they’ve always done and hedged government thievery with real estate purchases? When Fannie Mae and Freddie Mac followed congressional orders to make home loans available to the weakest of credit risks, was this a failure of capitalism? When some of the federally subsidized borrowers predictably proved unequal to the task of paying off their mortgages, wasn’t it the U.S. Senate (with the Obama administration’s approval) that introduced a mortgage “cramdown” bill that insured “frozen” markets for the mortgage securities that are destroying bank balance sheets?
No doubt lots of mistakes were made of the public and private variety, but it would be nice if just once, Brooks or someone else explained where capitalism was at fault. Logic says capitalism was never practiced, but now that some Republicans have woken up to the utter disaster that is TARP, a non-capitalist concept if there ever was one, Brooks decries “all this populist talk about letting Citigroup fail.” In truth, had Washington let Citigroup fail, that would have been the sole example of true capitalism being practiced in that we know the latter is working when, yes, businesses fail.
Had true capitalism ever been considered amid this mess, failing companies regardless of sector would have been allowed to go bankrupt so that more effective managers could have taken over their assets. Instead, and in a repeat of Japan’s mistakes over the last twenty years, taxpayer money will prop up the walking dead, including GM, Chrysler, AIG, and Citigroup, which means we’ll weaken the various capitalistic companies that did not take government funds in order to “save” those that did.
Brooks is troubled by a GOP that fails to treat our present problems “like a genuine emergency”, but assuming this is true, it seems the Republicans have at long last found their way. Indeed, wasn’t it the GOP controlled Congress that gave the U.S. economy the bodyblow that was Sarbanes-Oxley after the Enron and Worldcom “crises”? Wasn’t it the same GOP-led Congress that foisted the first of two “stimulus” packages on President Bush’s watch that did nothing to stimulate the economy? Wasn’t President Bush’s selling of the free market down the river in the dying days of his administration example enough for Brooks of how tragically his party overreacted?
In a 2007 column for the Weekly Standard, Brooks perhaps gave voice to the kind of Republican Party he wanted. In the column he observed that, "American purpose can find its voice only in Washington." Judging by activist government activity by the GOP in the aftermath of the column, it seems Brooks’s advice was followed, albeit all the way to a party change at the White House, and Democrat control of both houses. So while Brooks decries what he deems the party of “no”, it just may be that the Republicans have finally figured out that big government and excessive government intrusion in the economy not only offend the base, but fail miserably.