When Something Is Wrong

Ah, Tuesday, November 3, 2009 – the day of the off, off-year elections. Yep, every four years it’s the presidential madness, and every two years, when that’s not happening, the off-year elections, when all of the House is elected, or reelected, or not, and one third of the Senate is up for grabs, what with their staggered six-year terms. And then we have the off-off-year elections like this time around, between the two. They’re usually not very important – scattered special elections to fill suddenly vacant seats and odd referendums here and there – and certainly not interesting. But this time around people said they mattered, a whole lot, because we live in turbulent times, in the middle of the worst economic times since the Great Depression. And, yes, we’re still fighting two wars on the other side of the world that have gone on far too long and to the American people seem to have become rather pointless. And we have our first black president, odd enough, with his progressive agenda, odder still – affordable healthcare for all and his notion that the government should do things to make things better, like stimulate the economy with massive spending to be paid for at a later date, in installments, and government intervention to save key industries and major banks and that sort of thing.

This is so very new, not at all like the neo-Reagan Bush years, where everyone simply knew that all the government was supposed to do, really, is step back and get out of the way, so the genius of the free-market billionaires could be let loose to make things better for everyone. Regulations stifled the creativity that created wealth. Taxing the rich discouraged them, from doing cool things, things that one day might employ some of the more ordinary, mundane little people.

But that didn’t work out, and when McCain ran on a platform that in hard times the government should shut down all but essential core services, spend nothing, and let the captains of industry rescue us, no one was terribly impressed. Obama won on that one – someone had to goose the economy back to life, and things had so horribly collapsed that by that point only the government could. It was pretty simple. You don’t let key industries across the country go under, one after another after another. That’s stupid, and cruel. Tens of millions of more of the ordinary, mundane little people would be out of work, they would lose their homes and most everything else. And even if you think they’re worthless people, on moral grounds or something, those are the people who buy the things America produces. You really don’t want them living in the streets, panhandling. You want them spending money on your goods and services. McCain, on the other hand, boasted that he would balance the federal budget by the end of the first two years of his presidency. You know what people said. Yeah, that’s nice, but so what?

But after Obama’s first eight or nine months things aren’t that much better, and those who came out on the short end in the last election have framed the few, scattered 2009 races as a referendum on the whole Obama idea that the government is not entirely useless and stupid. They say it is. Unemployment is around ten percent, millions have lost their homes and millions more will, and incomes, where there are incomes, are flat, and everyone is hunkered down wondering what the hell happened, and whether anything good will ever happen again. Only the stock market is up, significantly, and the GDP finally turned slightly positive. Economists say the recession seems to be over. Yeah, that’s nice, but so what?

So you can see why the party out of power did well:

A Republican Party that struggled in the wake of recent Democratic landslides sprang back to life Tuesday with wins in hotly contested races for governor in Virginia and New Jersey, according to CNN projections.

In Virginia, 55-year-old former state attorney general Bob McDonnell will be the first Republican to win the state’s highest office in twelve years, CNN projects. Republicans will win races for Virginia’s lieutenant governor and attorney general as well.

In New Jersey, former federal prosecutor Chris Christie will oust first-term Democratic Gov. Jon Corzine, CNN projects. Christie will be the first Republican to win the top office in heavily Democratic New Jersey in 12 years.

The two gubernatorial contests have been deemed by some analysts as the first major referendum on President Obama’s administration.

In the 1992 presidential campaign, James Carville had this simple message for his candidate, Bill Clinton – “It’s the economy, stupid.” That became a favorite political cliché. It seems to be true. When times are tough, and they’re not getting better, no matter who caused the mess, throw the bums out. And in an off-off-year, when you cannot do that, do something vaguely analogous.

The only exception to this seemed to be that odd congressional race up in northern New York, a very complicated situation.

That too was a throw-the-bums out sort of thing, a solidly Republican district, since 1854 or so, where the Republicans ran a woman who was middle-of-the-road pro-business practical, as Republicans used to be in the northeast, when they had them. But the Beck-Palin crowd decided to make this a test case for the whole government-is-entirely-useless-and-stupid way of looking at things, and poured in their resources to back the Conservative Party candidate. Fox news championed him, as did the editorial page of the Wall Street Journal and Dick Armey from Texas. He appeared on the Glenn Beck show and Sarah Palin urged voters up there to vote for Palin Values, which he represented – he vowed to vote against subsidies for anyone, including the dairy farmers up there, and would never seek an earmark, which would mean no federal projects for the area and its largest employer, Fort Drum. He was pure. The job of the government was to get out of the way, no more. The Republican Party candidate just gave up.

And he lost to the Democrat.

But the exception proves the rule. The Conservative Party candidate, Doug Hoffman, may have been ideologically pure as the driven snow, but those people up there know all about snow, and snow jobs. They seem to have preferred to have someone down in Washington who would help keep the district from total economic collapse. They’re not stupid. And times are tough. They may still love Palin and Beck, and watch Fox News endlessly, but there is self-interest.

Andrew Sullivan comments that we easily forget the basics, and that it is the economy:

We get caught up in the health insurance fight, we game the Beck-Palin subculture, we chatter about Israel and Iran, we obsess about marriage equality … while the voters who do not do politics for a living are simply trying to survive one of the worst downturns in history. The votes tonight are anti-incumbent votes in protest at economic crisis and the slow pace of recovery. And they are not – it seems to me – some national referendum on Obama’s first nine months. In fact, Obama’s approval ratings in both Virginia and New Jersey are respectable and strong, with unemployment headed to ten percent.

And he cites this, from ABC News:

About half the voters in Virginia and a majority in New Jersey – 49 and 58 percent, respectively – approved of the way Obama is handling his job. Most in both states, moreover, said the president was not a factor in their vote. Perhaps most striking – though simply confirmatory of national polls – were economic views. A vast 89 percent in New Jersey and 85 percent in Virginia said they’re worried about the direction of the nation’s economy in the next year; 56 percent and 52 percent, respectively, said they’re “very” worried about it.

Voters who expressed the highest levels of economic discontent heavily favored the Republican candidates in both states – underscoring the challenge Obama and his party may face in 2010 if economic attitudes don’t improve. The analogy is to 1994, when nearly six in 10 voters said the economy was in bad shape, and they favored the out-of-power Republicans by 26 points, helping the GOP to a 52-seat gain and control of Congress for the first time in 42 years.

So the Republicans did well, but that had little to do with Obama, and Sullivan goes on to argue that the Democrats have a year “to get economic recovery reflected in the polling” – and that their key effort may bear fruit:

And the point about health insurance reform – the critical point that needs to be hammered home – is that it will reduce insecurity in very troubled times.

There too it is the economy. Keeping ourselves pure and far away from anything like government involvement in healthcare, and trusting that the free-market for-profit insurance cartel will make everything come out right in the end, is fine and dandy – in theory. And theory is way cool. But in real life there are all sorts of awful things that happen all the time. Mitigating insecurity around how the hell you’ll pay for any sort of treatment when you get sick trumps theory. Being a free-market supply-side government-is-stupid true believer isn’t much fun if you’re dead.

But aren’t economists saying that the recession is over? That would mean that abstract ideological theory is safe again. Everyone could talk about purity of principles and doing the right thing, and drowning government in the bathtub. Beck and Palin and Fox News would be at the center of everything, vindicated. And the market got all better on its own, not counting the seven hundred billion bailout on Bush’s watch and the seven hundred billion stimulus package on Obama’s, along with the tens of trillion dollars in loan guarantees (not real money until it’s called in, of course). Free markets work, you see – as long as you feed and care for them.

So, if the economy’s stagnant, why are stocks up? What do you say to that?

Actually, Daniel Gross has a few things to say about that in The Mystery of the Rising Stock Market:

Here’s a puzzle: The stock markets are doing very well, yet the performance of the underlying economy doesn’t seem to justify optimism. The buoyant S&P 500 has risen 53 percent since the March bottom. And while the economy expanded at a 3.5 percent rate in the third quarter, unemployment is high, incomes are stagnant, and consumers are shaky.

It’s possible that the stock market is just getting it wrong again. After all, the markets, which are supposed to process investors’ attitudes about the future, hit record highs in October 2007, just as the U.S. economy was about to pitch into recession. But it could be that the notion the stock market is an accurate gauge of the domestic economy’s temperature is outdated.

But he doesn’t think that’s it. He sees those three indices tracking large companies conveniently based in the United States, but not main street businesses. And they do something else entirely, the international stuff, as they are “more Davos than Chamber of Commerce.”

All you have to do is look at how they make money:

These increasingly cosmopolitan firms have been busy globalizing and expanding their operations overseas. In 2006, according to Standard & Poor’s, 238 members of the S&P 500 broke out revenues between US and non-US sales. These companies notched about 43.6 percent of sales outside the United States. For large companies that had already saturated the US market, the home market was something of an afterthought. In the second quarter of 2007, 66 percent of Coca-Cola’s beverage business came from outside North America.

And of course, given our long recession, demand for products and services of all types in the United States has shrunk, even since 2006, so they did this to survive:

Yes, the global economy in 2008 experienced its first year of shrinkage since World War II. But growth has resumed, and in some places – Peru, China, India – it never stopped. As a result, the globe’s economic geography has continued to change, with the United States accounting for a smaller chunk of global output and demand each year. For much of the past two years, virtually all growth in economic activity has taken place outside America’s borders. As a result, US-based companies are becoming even more reliant on non-US customers and operations for sales. S&P last summer updated its numbers. In 2008, the figure rose to 47.9 percent (with 253 of the 500 companies reporting), up from 43.6 percent in 2006. Put another way, in two years, big companies’ proportion of sales coming from outside the United States rose 9.8 percent. It’s likely the 2009 figure will be something very close to 50 percent.

Of course that would be fine if we made the stuff they’re selling, but we’re not doing that:

In fact, in the months after the global credit meltdown, US exports plummeted. They bottomed in April, at $120.6 billion, and though they have been rising, the August 2009 total is still 20 percent below the August 2008 total. Globalization is changing the way we do business. It’s not a matter of US companies exporting goods – burgers, soda, cars, software – made in the United States to Beijing but rather, making goods overseas and selling them overseas.

He points to General Motors:

GM’s sales in China are rocking. In the first nine months, the company sold 1.3 million cars in China, including more than 181,000 in September. By contrast, GM in the United States in the first nine months sold 1.5 million cars in the United States, down 36.4 percent from the year before. And in September, GM sold just 156,673 cars in the United States. That growth in China is good for GM’s shareholders and for some of its executives. But since most of the cars sold in China are produced there, with parts produced by suppliers in China, rising sales in the Middle Kingdom won’t translate into jobs for unionized workers in the Middle West.

He has other examples, but it comes down to a strong stock market and a weak, slow-growing consumer sector here at home not really being in contradiction. This may be the new world order, and we may have to get used to it, which now means “a sustainable rally in American stocks without a sustainable rally by American consumers.”

So if you are one of many hunkered down wondering 1) what the hell happened, and 2) whether anything good will ever happen again, well, the answers are 1) it doesn’t matter much now, and 2) no.

But someone is doing well. The Wall Street Journal reports on how the captains of industry have responded to tough economic times:

Pensions for top executives rose an average of 19% in 2008, with more than 200 executives seeing pensions increase more than 50%, according to a Wall Street Journal analysis. …

Executive pensions rose even as the share prices at the companies declined an average of 37% in 2008 and many firms froze employee pensions and suspended retirement-plan contributions.

As Kevin Drum says – “My friends, that’s what we call shareholder value.” Or you can put it another way. The more ordinary, mundane little people just don’t know how to play this game. They’re losers.

What this means in elections to come is hazy, but the general outline is clear. Traditional Republicans are pro-business, and mainly pro-corporate. They talk free markets, but the aim is to unburden the corporations from regulation and taxes, and the wealthy from taxes, to assure a thriving economy, as each will make a ton of money, and some of the more ordinary, mundane little people will probably get some of it, so they should be happy, damn it. Their bumptious base, on the other hand, is all evangelical and big on social and moral purity, and took Reagan quite seriously – government is useless, Palin just resigned, to prove it, and actually they think Bush was an idiot who spent too much money and got us into stupid deficits, and stupidly added drugs for the elderly to Medicare when that wasn’t his business and broke the bank. They’re trouble for the traditional Republicans. And then there are the Democrats, trying to use government to fix things, for the ordinary, mundane little people, who they think count too.

We’ll see who votes for whom in another year.