Angry Americans Confusingly Hate Both Bailouts and Bailouts

New Yorker financial columnist James Surowiecki, who can be very smart when talking about microeconomics, is less than very smart when talking about macroeconomic politics. At least that's the case in this new column, on "The Populism Problem," which posits that "this new populism has stitched together incompatible concerns and goals into one 'I'm mad as hell' quilt." Excerpt:

The bailout of the auto industry, after all, was as unpopular as the bailout of the banks, even though it was much tougher on the companies (G.M. and Chrysler went bankrupt; shareholders were wiped out, and C.E.O.s pushed out), and even though the biggest beneficiaries of the deal were ordinary autoworkers. You might have expected a deal that helped workers keep their jobs to play well in a country spooked by ballooning unemployment. Yet most voters hated it.

Well, yes. They have also continued to hate, as Tim Cavanaugh has been pointing out since at least the summer of 2008, bailing out underwater homeowners. Could it be that rewarding failure with taxpayer dollars is just widely and persistently perceived as unfair and unwise? Especially when the country's media and governing elites continue to pat these confused little Americans on the head and tell them to swallow their medicine?

Similarly, the failure of free markets during the financial crisis might have led people to think that the government should be more involved in the economy. Instead, the percentage of Americans who think government is trying to do too much is higher than it's been since the late nineties.

Without wanting to, as the president would say, "re-litigate the past," was not the government significantly more "involved in the economy" in September 2008 than it was it was in September 2000? I'm not just talking about budgets here (though it's true that the federal budget increased from $1.8 trillion in 2000 to $2.9 trillion in 2008)–I'm talking specifically about regulation of the financial industry. According to our columnist Veronique de Rugy's calculations,

adjusted for inflation, [regulatory] expenditures for the category of finance and banking were cut by 3 percent during the Clinton years and rose 29 percent from 2001 to 2009, making it hard to argue that Bush deregulated the financial sector. [...]

In eight years, Bush increased the federal government's regulatory staff by 91,196 employees. Clinton cut it by 969.

Here's a helpful chart:

I sincerely do not understand how it is supposed to automatically follow that a crisis spurred in no small part by cheap government money and loose-credit government lending incentives is supposed to make us conclude, after eight years of massive government growth on all levels, that the problem was the insufficient involvement of government. I'm open to persuasion on specific acts of deregulation (like the repeal of Glass-Steagall) or non-regulation (as in the trading of certain derivatives) or sideways-regulation (as in the seemingly capricious changes to various reserve requirements for financial institutions), but it is rare to hear about such tangible policies anywhere near blanket statements about how "the government should be more involved in the economy," and rarer still to see much analysis of how malfeasance took place under regulators' perfectly empowered noses.

At any rate, I could see where it might appear "confusing" to some people that the American people are upset about jobs, yet don't seem inclined to support the federal government's top-down schemes to save or create them, but I expect more from Surowiecki.

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  • ||

    You might have expected a deal that helped workers keep their jobs to play well in a country spooked by ballooning unemployment. Yet most voters hated it.

    Most voters aren't ordinary autoworkers.

    Go figure.

  • ||

    Many of them also realize that the UAW was every bit as culpable for GM's and Chrysler's failures as management was.

  • Paul||

    That's because GM and Chrysler are the UAW. These are two examples of companies that had tacitly become works programs for the UAW, and no longer served their own customers.

    That's why it was easy for Obama to bailout the auto industry (and bastardization of the bankruptcy process). And auto industry bailout is a UAW bailout.

  • askcherlock||

    I totally agree. The UAW's demands have been unreasonable for years. What's good for GM is no longer good for America.

  • Gilbert Martin||

    The fact that whole thing was done as a Democratic party payoff to the UAW and that the bondholder's share of the company was essentially stolen from them and given to the UAW via breaking the bankruptcy rules of succession probably didn't help win the favor of the voters for it.

  • ||

    I only wish voters considered things in such detail and abstraction.

    I think the sentiment is far closer to "It's not fair that they get a bailout and I don't" than it is to "What an inappropriate use of government powers".

  • ||

    "What's good for the Democratic Party is good for America!"

  • ||

    Not to mention that there is nothing ordinary about a total compensation package of around $70.00/hr and retirement benefits which far exceed what the vast majority of Americans could possibly hope for.

  • Old Mexican||

    New Yorker financial columnist James Surowiecki, who can be very smart when talking about microeconomics, is less than very smart when talking about macroeconomic politics.

    Gee, Matt, really - if the guy tackles macroeconomics and he does not show to be smart, how can he be smart when talking about microeconomics?

    I ask you this because the terms MICRO and MACRO economics are meaningless obfuscations created by statis economists to hide their disdain for the Laws of Economics, trying to convince their patrons (the government) that their interventions would be beneficial "because, in the aggregate . . ."

  • ||

    OM, I

  • ||

    should say "I 'heart' you. I get smarter when I read your posts."

    stupid HTML

  • ||

    Ideally, macro should be nothing more than generalized micro. But in practice they are almost different fields. When you aggregate the whole of the economy into half a dozen easy variables, you're no longer dealing with reality.

  • ||

    Just like describing the behavior of 10^23 particles in a gas by an equation involving four variables and a constant isn't dealing with reality, that's why we call it the Ideal Gas Law. But it's close enough to the truth for practically any application...and likewise for macroeconomics.

  • Old Mexican||

    Tulpa,

    People don't act like particles. That's the reason why an Ideal Gas Law makes a pretty good approximation to reality, because particles act within the same laws of physics, whereas people tend to make choices, which are NOT like laws - it can be anything. Thast's why MACROeconomics is a chimera, a charade, a fool's errand, the lazyman's choice for a career in economics.

    So DON'T equate people with particles. You are talking about something entirely different.

  • ||

    No, no. You know it's a careful empirical field when, in the middle of an equation, they use at term like "animal spirits."

    Or it might just be some new age religion.

  • Old Mexican||

    "And then, a miracle happens!"

  • robc||

    Hari Seldon is fictional.

  • Old Mexican||

    Similarly, the failure of free markets during the financial crisis might have led people to think that the government should be more involved in the economy.

    We have free markets?

  • Old Mexican||

    I sincerely do not understand how it is supposed to automatically follow that a crisis spurred in no small part by cheap government money and loose-credit government lending incentives is supposed to make us conclude, after eight years of massive government growth on all levels, that the problem was the insufficient involvement of government.

    You don't need to understand, you just need to believe it:

    - The bubble bursted! We need more government.
    - Credit expansion led to the bubble! We need more government.
    - Cats and dogs are having sex with each other! We need more government.

    It's kind of like a Hare Krishna mantra... It gets to the point when you just have it imprinted on your mind!

  • ||

    Government is all over education. Education is fucked up.

    Government is all over healthcare. Healthcare is fucked up.

    Government is all over financial services. Financial services are fucked up.

    Government is all over manned spaceflight. Manned spaceflight. . .wait, we don't have that anymore.

  • Government||

    But we mean well.

  • ||

    No, you don't. Not ever.

  • ||

    The Bene Gesserit meant well too, but look at the mess they made...

  • ||

    That's okay. Some sandworm/human monster will straighten it all out through a few millennia of oppression.

  • ||

    Don't forget that government is all over society and society is all fucked up too.

  • ||

    Oh, right. Thanks, government!

  • ||

    Could it be that rewarding failure with taxpayer dollars is just widely and persistently perceived as unfair and unwise? Especially when the country's media and governing elites continue to pat these confused little Americans on the head and tell them to swallow their medicine?

    And how many of these same taxpayers will pat their congresscritter on the ass and send them right back to DC to fuck things up all over again?

  • ||

    Hopefully not nearly as many as before. It seems to me that in the past people hated Congress as much as they do now, but most of them believed it was everybody else and "not my guy!" I think more people are waking up to the fact that, yeah, it's their guy too.

  • ||

    Thanks to the intertubes!

  • Taxpayer||

    But MY congresscritter smiles at me in the mailers he sends me! And he shook my hand once and gave me a sincere look!

    So, obviously, he (or she) is not one of the many fuckups in Congress.

  • Sam Grove||

    Similarly, the failure of free markets during the financial crisis might have led people to think that the government should be more involved in the economy.

    There's an assumption.
    What is this kind of argument called?

    1 an economic crisis occurs
    2 we have a free market*
    3 the free market failed

    *Really? See how the left AND right destroys the meaning of words?

    We need a new phrase. How about "consumer regulated market"?

  • ||

    I believe that syllogism suffers from the Fallacy of the Excluded Middle. My symbolic logic days have receded deep into the mists of history, though, so YMMV.

  • Warty||

    Look at that HGH jaw and that just-got-done-felching smirk on his face. What a fucking asshole.

  • Paul||

    and even though the biggest beneficiaries of the deal were ordinary autoworkers. You might have expected a deal that helped workers keep their jobs to play well in a country spooked by ballooning unemployment. Yet most voters hated it.

    He can't be serious with this. The government, falling all over itself to save the UAW, which bought and paid for our current president?

    Yeah, I love to see favors handed out to special interests over here, but hate to see them handed out over there. That's why we should love the auto bailouts, but hate the bank bailouts.

    Oh, in other news, Obama was on my radio today, MY fucking radio, telling me (Me!) that the American Structured Securities Rescue Act for a Prudent Economy has created or saved over 2 million jobs.

  • ||

    Does anyone at all buy this shit?

  • ||

    Retards.

  • ||

    And journalists, apparently, since no supposedly neutral article I've seen bothered to question the validity of those numbers.

  • ||

    You'd think journalists would want to have credibility, if for no other reason than economics. I mean, who wants to read someone who is obviously that unconcerned with the facts? Even partisans can get frustrated with total bullshit at times.

  • prolefeed||

    the ASSRAPE act?

  • caught in the act||

    It does promote wider ASSLAN penetration, something we can all get behind.

  • Invisible Finger||

    It's obvious that Surowiecki is underwater on his mortgage. And rather than blame himself for taking out a stupid loan for a stupid length of time, a massive problem for the age 35-65 crowd, he wants Mommy And Daddy Government to kiss him and make it all feel better.

    Surowiecki and his ilk want to pretend that the credit run-up of the last 20 years was normal and not a generational anomaly in US history. That makes them extremely simple-minded analysts.

    http://www.contraryinvestor.com/mo.htm

  • ||

    I thought the job of an automobile company was to manufacture and sell a quality automobile at an appropriate price point, not to employ people.

    Guess that is why I am an engineer not an economist.

  • ||

    Oh, pish. A look at their financials show that Ford/GM/Dodge aren't even, really, in the business of employing people.

    They're in the business of paying retirement benefits. Some wag called them a retirement plan with a manufacturing subsidiary.

  • comrade||

    I think Jeremy Clarkson called it a "pension fund that just happens to make cars".

  • Paul||

    Some wag called them a retirement plan with a manufacturing subsidiary.

    Nice.

    "pension fund that just happens to make cars".

    Catchier.

  • Ryan M||

    How about "government: a pension fund that happens to destroy civil liberties"

  • SkepticalTexan||

    "The Populism Problem" ????

    Just how historically ignorant does one have to be call libertarians, Tea Partiers and their fellow travellers "populists"?

    Let's see ... What were the primary positions advocated by late 19th century populists? 1) Free silver, a vast expansion of the money supply. 2) Easy credit. 3) Nationalization of the railroads. 4) Price controls on agricultural commodities and silver.

    Surowiecki's "right-wing cultural populism" is almost exactly 180 degrees opposite of real Populism. Let's compare: They are 1) Pissed off at the Fed and the vast expansion of money supply. 2) Pissed off about irresponsible lending. 3) Pissed off about nationalization of transportation industries. 4) Pissed off about excessive regulation.

    It's not exactly 180 degrees, though. Some of the cultural conservative wing of the Tea Party movement would agree with the old school populists on one very small issue. After all, WJ Bryan did argue for the prosecution in the Scope's trial. But that wasn't really a populist political issue.

  • Paul||

    While you are 100% correct on the history, "populism" is alas, defined as anything that 'people want' (aka 'hoi polloi') that isn't based in logic, reason, or founded on intellectual or educated conclusions.

    In this particular case, it's the distrust of a total government management of the economy as supported by four economists, the Obama administration, the Bush administration (reluctantly, or so Bush claimed), John McCain, Paul Krugman (it's not big enough), the UAW, Goldman Sachs, AIG et al.

  • SkepticalTexan||

    There are other, perfectly suitable words to describe advocacy of what the "'people want' (akk 'hoi polloi') that isn't based on logic...".

    For example, democratic.

    WRT to trusting the parties that you listed, such trust would be illogical, unreasonable, and necessarily based on intellectual deficiency or miseducation.

    Since the parties you list in fact advocate a 21st century version of the Populist agenda AND agreeing with them isn't based on logic et cetera, I'm afraid that even your corrupted definition of populism does not accurately apply.

  • stupid republican||

    Someone says it, Too llong have i been trying to convince others that everyone that considers themself a supporte of the democratic party is either an intellectual midget, with no mind for themselves who can only repeat what they hear on cnn, or evil, wannabe dictators. The proof is in the pudding.

  • ||

    What galls the most about the linked article:But angry voters aren’t that nuanced in their thinking:

    "Angry voters aren't that nuanced"

    while he gives only either/or options and comparisons. He cannot understand why people would oppose both rising healthcare costs and specific gov't controlled healthcare cost controls and he thinks WE are the ones without nuance?

  • ||

    I know, I know. Preview is my friend.

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