Parts to Wholes: the Socionomic Systems Nexus

 

In that entire set of recent posts and materials stretching back over two years you'll find that our framework, evaluations and recommendations have stayed constant, evidence-based and (ahem) accurate from beginning to end. What has changed is the country's willingness to Cowboy Up. But we'll refer you to John Adams speech for the price that must be paid for a Free Republic - it is self-responsibility and a willingness to face the hard problems!

Too Much Government: the Auto Rescue as Exemplar

The "reason" for all the backlash is that government is interfering to much with the private sector. Actually we've been pretty clear that part of the problem is the over-stimulus of the lizardbrains by political opportunists but let's tackle the Auto Industry example head on and we'll let our buddy Jon Stewart do it for us. What an interesting commentary on the state of the Country that one of the most straight-forward, honest and evidence-based discussions of the problems and the need to do something is a "comedy" show. And not the folks who you should be able to count on - the pundits, the media, your elected representatives, you pick. Equally interesting of course is what who people are willing to listen to. If you like a little more detail on the state of business we'll point you at Talking Business: the Outlook vs. the Preparations

What's the State of the Economy

So let's try yet another dose in our long line of attempted treatments of reality checks. What's the actual state of the economy? Sorry if we're going to get more than a little wonkish on but we are after all talking about your future.

The top subchart here shows year-over-year changes in GDP and Employment. One key point to notice is that there are regular cycles and patterns. Another is to notice that Employment is driven by the Economy - in other words as and when GDP turns up so too will Employment. And the Economy turned around this summer but growth is still weak. With the most recent data Employment has also begun to turn - which is about as good as it gets. And trust us, the alternative really was the Abyss!

The bottom subchart shows Private and Public employment since 1980 in blue and on the left axis and cumulative new jobs created in red (and on the right). We had the single worst decade for private job creation since before WW2 - no new jobs were created in a decade. Worse, because it was a very weak recovery this time, we're now about -12.2 million jobs in the hole, not just the headline number of 7 million lost jobs when you account for labor force growth. Over the next decade we need about 20 million to recover breakeven and will be lucky to get 15 according to the BLS. To return to the prosperity of the 50s and 60s we'd need 40 million and there's not a hope in hell of that happening. Welcome to the New Normal!

What Saved the Day: Public Policy

The week before last the Financial Crisis Inquiry Commission (FCIC) began hearings (Pecora 2 Hearings, Malfeasances, Your Future & Cusp Points) and one of the key witnesses was Mark Zandi, the founder and president of Economy.com, a well-respected economic consultant on both sides of the aisle and an advisor to McCain. Some of these charts are borrowed from his materials.

The top chart is from Zandi and shows the impact on GDP of the fiscal stimulus package. Let me put it in a nutshell for you - without public spending we'd have had a disaster on our hands. Growth, such as it was, in 2009 was entirely due to the stimulus.

The bottom two charts are taken from Menzie Chin's recent post updating his on-going coverage of assessments of the impacts and make it pretty clear IOHO what we got vs. what we were facing. Without the stimulus we'd still be at the bottom of a U that was just beginning to flatten out and would take a very long time to begin turning up.

Employment would still be headed down into the toilet and we'd likely be looking at direct, measured Unemployment north of 12%, or worse. The Administration took this problem head on and saved us from the second Great Depression - and took untold heat, criticism and opposition for doing it. All in the name of "sincere" political opposition doing the ideologically correct thing (by the same people who's principled opposition to government intervention almost collapsed the markets in the Fall of 2008 btw).

What Actually Worked

So let's talk about the structure and nature of the package and what worked and how well it worked. Needless to say the loyal opposition has been un-remitting in its criticisms at the time and ever since. If anything should have been done it should have been all tax cuts. Well take a look at some more charts from Zandi (the table) and some pie charts breaking down the structure of the package and spending to date.

The pie charts are taken from FivethirtyEight: Politics Done Right and show the structure and disbursements. As Zandi's table makes clear we got some real benefit out of the tax cuts - a major portion of the effort and partly included as a non-partisan gesture to Republican shibboleths. The permanent tax cuts that they were arguing for would have been, and were at the time, the least effective and in fact enormously contribute to our outyear deficit problem.

What was, is and will be effective is the direct stimulus spending which has a high multiplier effect. What the pundits never discuss is three things. 1) What could be passed politically - on that score it was a very well-balanced package. 2) What would work in which timeframes - tax cuts while less effective are much faster so the balance was about as good as could be crafted. 3) What could be managed - there's a limit to what could be effectively and efficiently managed by the existing Federal departments and agencies and, as Tim Geithner and others have repeatedly explained to the few who were listening, we went right up to those limits. NB: given how severe the job problems are it's very likely we're going to need a second round of stimulus. Now we'll really see the long knives come out to cut off your nose to spite the other guys, eh?

Welcome to Ohio: Can You Handle the Truth?

This last week the President made a major but very short announcement on Financial Reform (Comes 'round, Goes 'round: Hastening Forward Slowly to Finance Reform) announcing the start of major new structural changes in the Industry. While all the punditry chalked it up to quick and dirty reactions to the MA. elections in fact they've been under discussion and review for months, while the Administration kept reaching out the Industry to be cooperative and collaborative. The other major speech he gave was at a town hall in Ohio. And, IOHO, he told the truth and shamed the devil. The question of whether or not people are prepared to hear it is another thing entirely of course. But he outlined the situation as it was, what's been done, the impact it's had and how much farther we've got to go. We strongly suggest you at least listen to the first twenty minutes but if you're really interested in knowing the most important thing, how people are reacting, hang in there thru some of the questions and answers. We think you'd find it revealing.

You won't hear anything in that speech that he didn't say at his Georgetown speech on the Economy almost a year ago, that senior members of the Administration haven't been saying frequently since then or that we weren't saying repeatedly for the last two years.

So you decide - where does the weight of the evidence lie? Who's telling the truth and facing up tot he harsh realities and who's in denial and throwing temper tantrums insisting on magic quick fixes. Welcome back to Coach Carter's gym - or as Col. Nicholson asked - can you handle the Truth?

It would seem that not a lot of your fellow citizens can.

Essay Collections

US Presidential Election 2008 (Early Days): Candidates, Positions, Policies and Consequences Over the course of the Election one of the driving themes that emerged was the need for CHANGE – it could no longer be business as usual. For things to change however not only needed good leadership and sound policy it required, and requires, an electorate willing to accept the painful costs of change. It was not at all during the election that the voters were willing to face the prices required to pay the Pipers who’d made their party. Nor was it clear that the candidates were able or willing to, so to speak, tell truth to the power. Fortunately as the campaigning evolved we moved away from simple-minded slogans and extremist positions, legacy of the culture wars to some extent, and to more substantive and realistic positions. But where we’re at  today was and is shaped by where we were, what we went thru and the choices we made. In a very real sense the story of the 2008 election is still with us, not just in the results, but in the issues considered, the way they were considered and how people reacted. Our considered judgment is that we’ve still got a long, long, long way to go before the electorate is willing to face the truth. Here we try to tell the early part of that story and its beginnings.

 From Nomination to Election: Evolution vs. Devolution, Policy vs. Perjorative and Consequences To persuade voters, or to provide leadership in any situation in fact you must speak to both the rational mind and the emotional mind. If you like you present to the forebrain, the modern mind that’s recently evolved, and but you sell to the hindbrain, the lizard-brain, which is the oldest and most emotional part of our psychological makeup. It is also where our deepest emotional reflexes,
values and beliefs reside and, ultimately, where decisions are made. It is, in other words,
where candidates win or loose. The other major evolution of the campaign was that as John-boy grew increasingly less substantive his desire to win led him to sell more and more to those emotions, using some of the most pejorative arguments and labels. In fact the McCain who we long admired became increasingly hidden by and subservient to the candidate who wanted to win. Apparently at almost any cost. In the course of the final months of the campaign the groundwork was laid for our current crisis of institutional confidence and the metastasis of lizard-brain appeals – in other words the seeds of the Tea Parties were sown in 2008. And now we’re reaping the harvest.

Economy vs. Policy vs. Politics: From Early Warnings to Near Collapse Very early in 2008, January in fact, we warned that the economy was headed for serious difficulties. Later we even identified it as the single most important issue in the ’08 elections, and so it turned out. We then tracked it to and through the crisis, as the economy worsened and the markets collapse. Toward the end of the year we then went on to discuss the steps necessary to correct the problem. And the actions necessary to correct the long-standing and long-ignored deeper flaws that had accumulated over three decades and that metastasized under severe pressure in a collection of major problems all acting at once.This collection of essays puts together the story from beginning to an end, though not the final end. That is not only still playing out but has a long way to go. Along the way we try to address the nature of the total economy in such a way that it’s easier to understand the machinery and how economic cycles work. We also address the policy steps we think are required to repair that machinery in the short- and long-terms.And since we’re going to be living in a policy-driven economy for a long time we also take a hard look at the politics of the situation, and the partisan posturings, that  contributed to the crisis and have hampered us since then.

Wrestling Alligators, Draining Swamps: Economic Policy, Politics and Partisans 2009 was the year we narrowly avoided an economic collapse into a second Great Depression and managed instead to turn it into a Great Recession. While the Economy has stopped its freefall we came very close to the edge of the abyss. The Economy is beginning to recover thru the combined effects of fiscal and monetary policy but joblessness is still higher than at any time since the Great Depression and will take years to begin growing again. Unfortunately the long-term prospects are rather poor, with a weak and jobless recovery and relatively high unemployment and poor job creation throughout the rest of the decade. Unfortunately the things necessary for our survival also became political footballs with strong opposition more on the basis of ideology than on a sound understanding. We try to dig deeper into the crisis, the fiscal policies and the strategic outlook to debunk many of the myths that became headlines and political attacks. A key component of the crisis was malfeasant behavior on the part of the Financial Industry where short-term profits were gained at the risk of long-term damage. To prevent a future occurance we need to re-think the role and function of the Industry and re-formulate the legislative and regulatory regime under which it operates.But political sausage-making is an ugly business at its best and the influence of special interests has rallied behind reducing and slowing down reform, despite its being in the best interests of the country and the industry.

Previous Posts

 From Misconception to Collective Affirmation: the Inaugural Renewal

Welcome to Coach Carter's Gym: Renewal of Duty, Honor and Country

Hard Problems, Deep Changes, Bitter Fights: Framework to Power Politics

It's Your Life: Change Is Hard, Change We Must, Changing We Are!

Change is Necessary: Current Course and Speed = ROCKS!

Reflections for the Season: Faith, Hope and Renewal

Renewing America 1: Hard, Doable and Necessary

Renewing America 2: Institutions, Values & Performance

Renewing America 3: Re-thinking, -designing & -building for Performance

Renwing America 4: Time for Some Changes

Confronting a Cusp Point: Renew, Relapse or Reverse?

Readings

Declarations: Suspend Your Disbelief – Peggy Noonan Flying in, we take the route over the Lincoln Memorial, the Jefferson, the Tidal Basin: the signs and symbols of the great republic. And you've seen it all a thousand times but you can't stop looking, and you can't help it, your eyes well. After a minute you realize you must have a moony look on your face, and you lean back. The lady to your right, engrossed in a paperback of "Marley & Me," sees nothing. Your gaze continues across the aisle, and you see another woman looking out the window in the same way, avidly taking it in. Her view includes the Capitol. She leans back. I know her. A woman of the Reagan era, an old acquaintance, and when we land we greet each other. "Isn't it something that no matter how many times you see it, it still grabs your heart?" I say. She responds, wonderingly, "I never see it that I'm not moved. To this day." We are grownups, we have seen limits and imperfections, compromises and mess, and yet this brilliant thing endures. Lincoln will always be Lincoln, and nothing can mess that up. What is required for full enjoyment of an inauguration, from opening prayers to speeches to marching bands is, in the great 19th-century phrase, the willing suspension of disbelief. If you don't put your skepticism aside, you will not fully absorb and experience the drama. You must allow it to be real for you. Those two young people on the stage did not really take poison and die, but Romeo and fair Juliet did, and that is the reason the audience, which knows the actors still live, says, with genuine feeling, "Oh, no!"

Putting an End to Magical Thinking But I worry that there is more magical thinking afoot than the president realizes. Magical thinking can be defined as a perversion of traditional American optimism. Magical thinking is the can-do attitude without the do. It's faith without works, to borrow a Biblical verse. And it has played a key role in shaping the economic crisis. We know those days are gone. The jig is up. And the economy has to be transformed by genuine, hard-working optimists instead of magical thinkers. This will start with how we choose to frame our losses, says psychologist Denise Cummins, who teaches at the University of Illinois, Urbana-Champaign. "That's the silver lining -- how will you frame this or describe this to yourself," Cummins says. "Whether you couch it in a disaster framework or it's-a-challenge-but-I'll-get-through has a whopping effect on your endocrine system. If you say it's the end of world or that you are stupid and it will never get better again, you're going to keep shooting more and more cortisol and adrenaline through your system, and if you do it long enough, you'll build more receptors for bad hormones. "Ruminating can actually exacerbate the damage. Instead, tell yourself another story. If you put it in terms of a challenge -- what can be done, where do you go from here, and what you have left that's still good -- you dampen all these hormonal effects."  Then ruminate on the words of President Obama in his inaugural address: "In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less. It has not been the path for the faint-hearted -- for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things -- some celebrated but more often men and women obscure in their labor -- who have carried us up the long, rugged path toward prosperity and freedom." Here's a toast to the end of magical thinking.

The New Political Rumbling What does the Massachusetts election mean? It means America is in play again. The 2008 election settled nothing, not even for a while. Our national politics are reflecting what appears to be going on geologically, on the bottom of the oceans and beneath the crust of the Earth: the tectonic plates are moving.America never stops moving now. Massachusetts said, "Yes, we want change, but the change we want is not the change that has been delivered by the Democratic administration and the Democratic Congress. So we will turn elsewhere."We are in a postromantic political era. They hire you and fire you, nothing personal. Family connection, personal charm, old traditions, fealty to party, all are nice and have their place, but right now we are immersed in crisis, and we vote on policies that affect our lives.It is not the end of something so much as the beginning of something. Ted Kennedy took his era with him. But what has begun is something new and potentially promising.

Politics in the Age of Distrust Despite the Democratic triumph that month, they noted, public distrust of government remains intensely high. Historically, it has been nearly impossible to pass major domestic reforms in the face of that kind of distrust. Therefore, they counseled, the new administration should move cautiously to rebuild trust before beginning a transformational agenda.The Obama administration interpreted the political climate in an entirely different way. As John F. Harris and Carol E. Lee wrote in a smart piece in Politico on Wednesday, the administration interpreted the 2008 election as a rejection of not only George W. Bush-style conservatism, but also Bill Clinton-style moderation. The country was ready for a New Deal-size change. It had a leader in Barack Obama who could uniquely inspire a national transformation.As happens every four years, hubris defeated caution, and the administration began its big-bang approach.Most probably in anticipation of the Republican triumph in the Massachusetts — said to be in part a popular rebellion against the health reform bill now winding its way through Congress – the New York Times columnist

America, the Unbalanced David Brooks recently wrote a column titled “The Pragmatic Leviathan.” Finally, a third reading conjured up this image, of a motorcyclist about to hit the pavement. I stumbled across it some weeks ago when Googling “rugged American individualist.”Behold, this risk-loving, rugged rough rider, enjoying his freedom. In sissy Europe he would be constrained by law to wear a protective suit and a crash helmet. Not so in many freedom-loving American states.There we can see these rugged bikers roaring past our cars on their Harley-Davidsons, T-shirts flapping in the wind, with a bandanna at most as protective headgear. With their vestigial sense of proportion, they bristle at the very idea that government should tell them how to dress for a bike ride. That same sense of proportion, of course, also would lead them to expect the helping hand of government, should they ever take a serious spill, as this rough rider seems about to do.Even if the motorcyclist had little savings and did not carry health insurance, he surely would expect to be taken by ambulance or helicopter to the nearest hospital emergency room for whatever treatment was critically needed, however expensive. He would be encouraged in that expectation by that great and ever patient enabler of reckless individualism – the United States government.To my mind, this biker is a metaphor for the general attitude celebrated by David Brooks, in health care and beyond.Americans want government to make sure that they have at their beck and call the most sophisticated health system in the world, without even a hint of a queue or rationing or balancing of benefits and costs (cost-effectiveness analysis).At the same time, they rail at town hall meetings and in the voting booth against government intrusions into that health system, and they wring their hands incessantly over the height of health insurance premiums and the taxes they pay to support the system.It is all born of that deep, vestigial sense of proportion which, ironically, in his earlier column titled “Tea Party Teens” David Brooks had deplored.This deep, vestigial sense of proportion also informs the attitude in this country toward life-cycle financial planning in general, which leads millions of Americans to live improvidently when young, only to throw ourselves upon the mercy of government in retirement.