Centerfield

I finished The Right Nation: Conservative Power in America by John Micklethwait, Adrian Wooldridge. They're a couple of Brits looking at the conservative takeover from the outside. I recommend it. It's much more substantial that most of the political books you see.

Just a thought on all of this discussion on values and the Democratic party. This was spurred by a story on NPR regarding a WPA project in the 30's. Can the Democratic party recapture the message that concern for the poor and working class IS at the core of who we are as Americans? Have we become "less proud" or maybe even embarassed by our underclass and underserved? Can the Democratic party identify areas where the free-market doesn't solve the problem and propose solutions that don't get spun as "more government waste"?

I'm not sure that's the way to sell it. You don't win by making people care about THEM. You win by making them think the them is really we.

I doubt that the democrats ever got majorities because people perceived they needed to care more about other less fortunate people. They got majorities because the people that voted democratic thought that they WERE those less fortunate people.

the democrats regain a majority by recapturing the people who switched sides, middle class working families. It's that simple.

That's why I think the code is restoration.

Chris, part of the appeal of the New Deal was the time itself. The US had massive unemployment and no social safety nets. Today, we have limited unemployment (we will always have some as full employment is hardly ever efficient in a market economy). We also have a credible set of safety nets in case you need it. Why should the Dems implement a new version of the New Deal when the old one isn't needed as much anymore and is likely to go bankrupt in 40 years anyway. The Democrats aren't presenting a new vision to inspire a new America like the New Deal did. They're simply reheating leftovers.

I think the Democrats should think less about recapturing constituencies that they've lost and more on attracing voters who are not traditionally Democrat. That's what the Republicans have done successfully.

If we assume that voters are intelligent, then those who have left the Democrats have left for a good reason. Improving communication or packaging won't bring them back.

As I see it, Democrats need to get over their New Deal heritage and listen to the voters who are available to them today. To me, that means socially liberal but economically conservative voters who are being neglected by the Republican Party.

Can the Democratic party identify areas where the free-market doesn't solve the problem and propose solutions that don't get spun as "more government waste"?

On the waste side of things, Democrats will have to start being at the forefront of reform to have credibility as it pertains to government accountability and streamlining. You may not agree with how Republicans wish to reform government, but Democrats have to do more than criticize. They have to come up with alternate reform plans that are more than just words.

As far as what does and does not solve problems, I think a dichotomous approach (all government or all private) is not only not a winning strategy, but it can lead to some pretty bad solutions.

As a fiscal conservative, I'd be far more interested in a Democratic Party that sought the best of the private and public sector to solve problems ... rather than bashing one sector and praising the other.

Just for fun, I posed a question on my own blog: How would you define "moral values?" One of the most interesting responses I got was the "Scout Law."

The sampling, of course, was extremely small, but I suspect it was indicative of what many voters meant when they responded with "moral values" to the pollsters -- and none of it had anything to do with gay marriage or abortion.

The next movement in the political landscape will not be democratic or republican philosophical positioning.

It will come from economic circumstances beyond anyones control.
The high price of oil combined with a record budget and trade imbalance is causing a crisis in the currency markets. The house of card we have built, where foreign currency is used to simultaneously finance the national debt and compensate for our foreign trade imbalance is starting to crumble. When the value of the dollar starts falling foreign investors loose confidence in the US dollar and no longer participate in the treasure auction (if the value a dollar is falling why keep your wealth in dollars).

No foreign currency coming in means the trade deficit will grow and the dollar will fall even more making oil even more expensive and fueling inflation.

Compounding the problem is that oil contracts are negotiated in dollars. But with the dollar falling there are rumblings that future contract may be in Euros or gold. This will further fuel inflation.

Also the Chinese have huge reserves of dollars (that they use to buy oil) but will the value of the dollar falling and contracts being written in Euros they need to dump their dollar reserves while they still have value.

Things are going to get very interesting.

I am not the only one with this opinion the IMF and Alan Greenspan are getting worried.

http://news.bbc.co.uk/2/hi/business/4025139.stm

http://www.forbes.com/technology/feeds/ap/2004/11/19/ap1667858.html

"As a fiscal conservative, I'd be far more interested in a Democratic Party that sought the best of the private and public sector to solve problems ... rather than bashing one sector and praising the other."

It seems to me that it's the Republicans that do this. They are the ones that insist all government solutions are bad and all private sector solutions are good. The Democrats have essentially accepted the primacy of the market, but want to temper its excesses and use government where the private sector will not solve the problem. Other than the far left (and I don't really consider them Democrats), as far as I am aware, no Democrats bash the private sector. It's the Republicans that have poisoned the electorate's mind against government by conjuring images of social engineering bureaucrats and wasteful spending. Some of this is deserved, of course, but the GOP has exaggerated the deficiencies of government. IMO, the Democrats need to begin reeducating the public, not that government is THE solution but that it is A solution. Of course, now that the GOP is in control, they (or at least Bush)seem to be more willing to use government.

I think Clinton has really done the groundwork for where Democrats go next: support the economy so it creates lots of good jobs, maximize opportunity, and help out those that have been hurt by the impersonal statistical dynamics of capitalism. And use capitalistic ideas to improve government services.

The problem this election was that we were too busy bashing Bush to mention these ideas much.

Bob Young sez:
> ... crisis in the currency markets. ...

I think this is a limited problem. Yeah, yeah, I know, we're supposed to worry, current account deficit, horror horror. I have yet to see any reasonable model with consequences worse than imports and foreign money getting a little more expensive.

Note that there are counter-dynamics: when the dollar goes down, our exports go up, and the dollar looks like a better bargain, which in turn send the dollar back up.

The dollar trade deficit closely tracks unemployment rates--the higher the deficit, the lower the unemployment figures. Despite the heated rhetoric, it's not a negative economic indicator, as Hume and Smith pointed out over 200 years ago. It's an indicator of foreign willingness to invest in the U.S. One of the reasons for the disparity with the Euro is the unattractiveness of the Euro as an investment vehicle.

The Euro is extremely overvalued right now, the result of tight money and soft socialism policies in Europe that have left the continent with 0% growth and 10% unemployment. Conversely, the dollar is somewhat undervalued. No one is in a rush to "buy up" an already over-valued currency in any quantity.

Our biggest trade balance deficit is with China. Since the yuan does not trade as a currency in its own right, but is pegged to the dollar, the big loser in a dollar devaluation would be the Chinese. This provides quite an incentive to the Chinesse to support the dollar.

Hmmm. Complicated and I don't think complicated problems have big constituencies.

As a follow up to a previous discussion regarding "Big Tent", abortion and party membership, here's an interesting website
www.democratsforlife.org/

It's a dangerous thing to speculate about big economics disasters when you don't really understand all the bouncing balls, Bob.

As others have pointed out, there are strong forces outside the US that have interest in not letting the dollar get too weak. That trade deficit? It exists because so many other countries are selling us stuff. We're the world's best customers. If we can't buy, everyone else suffers.

The bottom line is that all the world's big economies are in the shiznit with each other up to their armpits and there's no real pulling out. If you think the rest of the world is going to let our economy collapse and pull everyone else's down with it, think again.

I will readily concede that the system is very complex and that the science of economics is today, where medicine was in the 1800's. I will also concede that we could solve the problem with fiscal restraint and smaller cars. But the latest federal budget bill is a porker and the SUV is still the king of the road. We need to buy oil and the only currency we have is the every falling dollar. If the tech bubble was irrational exuberance this problem is greed and denial.

At this point I should probably say something profound about hind site and the disaster always being easy to predict after the fact. But I think I will just include some pictures and tables.

The dollar is at an all time low against the yen and the Euro.
http://finance.yahoo.com/q/bc?s=USDEUR=X&t=2y

The trade deficit is at an all time high.
http://www.globalpolicy.org/socecon/crisis/2003/tradebalchart.htm

The federal budget deficit is at a record high.
http://www.publicdebt.treas.gov/opd/opdpenny.htm

We are hemorrhaging money off shore to pay for our oil habit.
http://futures.tradingcharts.com/chart/CO/M

I will readily concede that the system is very complex and that the science of economics is today, where medicine was in the 1800's.

What a marvelous concession. And your authority for such a remarkable statement is...?

While international economics and finance is a complicated subject, it isn't exactly rocket science, nor is it in the stone ages. The effects of trade balances are well known. As are currency exchange and import/export markets. The finanical sky is not falling, not even in small pieces. At least, not for us in relation to international trade, though China's insistence on keeping the yuan pegged to the dollar and not letting it trade on the international markets on its own is troublesome.

Balance of trade is one of the most misunderstood statistics in economics. A trade deficit is not usually a bad thing. A trade surplus is often a bad thing. If you track wages, employment, GDP growth, and trade balances, you'll quickly find that they rise as trade deficits increase, and vice versa. This is because trade deficits reflect investment flows much more than they do flow of goods and services. Trade deficits are mostly a surplus in investments.

We ran massive trade supluses during the Great Depression, and (much) smaller ones in 1974-75 and 1991-92--all times of recession or depression. We ran massive trade deficits all through the 1990's, while the economy was going full bore and government revenues were in surplus.

Naturally it's more complicated than that, and balance of trade affects other things, such as exchange rates, interest rates, and inflation. But for the most part a persistent trade deficit is a positive economic indicator for the home nation. The effect the Europeans are worried about is that a cheaper dollar and more attractive investment possibilities in the U.S. will hurt their economies.

Well tully, obviously economics has reach the level of an exact science of which you are the absolute master. Why don't you run that magic, always right, Nobel prize winning computer program you are working on and tell us all what the financial indexes and economic indicators are for next year. No? How about next month? Maybe next week?

I was conceding as a point in the discussion that in general the science of economic has not reached the level of sophistication were it can predict with any accuracy future events. If you want to prove me wrong cough up the numbers for close of businesses next Friday.

I stand by my previous posts.
If the IMF and Alan Greenspan think there is a problem, and the graphs look like an exponential curve, we have a problem.

PS: Lighten up. It a weekend blog discussion not a fight to the death.

All I have to do to prove you wrong is predict that the currency markets will not descend into madness before next Friday, Bob.

I stand by my previous posts.

Goody! Then I needn't do anything at all, save watch Armageddon fail to materialize.

Strange! I don't remember making a prediction about next Friday.
I do recall something about “we could solve the problem with fiscal restraint “.

But if you really want a prediction here is one: We will have a recession in 2005. If oil goes above $50 a barrel and stays there it will be a bad one, accompanied with significant inflation.

Now my personnel preference is that nothing bad happen, since I have some family members in a very financially vulnerable place. But that would require the republicans to care about something besides gay marriage and lining their pockets with congressional pork.

ROFL.

Strange! I don't remember making a prediction about next Friday.

Nope, just started demanding them from others when your own portentious cataclysmic scenario was questioned.

We will have a recession in 2005.

And you would be willing to wager on this 2005 recession prediction of yours? Are you confident enough to give odds?

LOL

I believe you were the one who angrily insisted I backup my statements about the primitive state of the science of economics. And it must be a primitive science if it can't predict the future behavior of the modeled system with any degree of accuracy.

If you didn't want me to show it to be a farce you should not have asked.

As for the recession I give it a 75% of occurring under current condition and 100% if oil stays above $50 a barrel.

I'd be willing to bet 10 bucks on it. But collecting could be a problem.

75% is 3 to 1. I'll happily put my $3.33 against your $10. Or my $33.34 against your $100 (I'll throw in the penny for free).

Yep, I asked that you back up your statement. You still haven't. Instead you started demanding that I produce Alan Greenspan's econometrics team from my back pocket, claiming that was all that could prove you wrong. I take that to mean that you'd rather attack the messenger than cite anything relevant--and actually explain how it applies.

What the Bushies are doing with the dollar is actually fairly transparent, and is why the Euros are whining. They (us, that is) are trying to get the Chinese to de-peg their currency because Chinese energy buying (paid for in US$) is pushing up oil prices, and to simultaneously drive up US exports and subsequent US domestic employment (which, I note, is the actual market mechanism for narrowing a trade balance). And we're punishing the Euros, mainly France and Germany. I'll leave the motivations on that one to the imagination. I'm sure you can come up with a reason if you try.

The likely effects to the US economy of the current policy are a modest increase in interest rates, a modest increase in import prices, and a major increase in US exports with an accompanying rise in US employment and wages. Also likely is robust GDP growth driving some inflationary pressures. But short-term recession is highly unlikely.

Of course the beautiful thing about this argument is that I would prefer to loose.

Loosing 10 bucks to not have a recession is money well spent.

The ugly thing is that while I can see the validity of your arguments you have turned a deaf ear to everything I have said. You ignore my words (and Alan Greenspan's and the IMF's)and hear only what your bias will allow you to see.

The reality of 2005 will be the ultimate arbitrator.

Goodnight.