Someone has to be blamed. We all know that, whatever awful thing just happened. An explanation won’t do – no one wants to hear that many things led to a disaster, some seemingly random and some the result of no one imagining that the one critical thing that went wrong actually would go wrong. As Condoleezza Rice famously told Congress, no one imagined strange folks – a bunch of oddball religious fanatics who were unhappy with American foreign policy in the Middle East – would fly airplanes into our skyscrapers. Sure the Presidential Daily Briefing was titled Osama bin Laden Determined To Strike Within The United States, and there was substantial evidence the bad guys had been thinking about just that, but no one imagined anyone would do such a thing. So you couldn’t blame the Bush administration. That’s what she said. And when, a week or two after we occupied Baghdad, all hell broke loose and there was looting and chaos, Donald Rumsfeld put it succinctly – stuff happens. What are you going to do?
Both responses were deeply unsatisfying. We want to blame someone. But yes, sometimes things just happen – a defective minor two-year-old heating element in a liquid oxygen tank on the Apollo 13 module shorts out, blows a hole in the side of everything and we have a hell of a time getting our three guys back safely. In the movie Tom Hanks saves the day, but who was to blame? That’s hard to say – no one, really – but back in the eighties, at the satellite factory in El Segundo, the geeky double-PhD engineers in the next building over spent months and months identifying what they called single-point-failure elements – the one thing that couldn’t fail or all would be lost – there was no possible work-around. And it turned out there were always more than a few of those. You do need to know what they are. You don’t want a hundred-million-dollar satellite, after that second boost to geosynchronous orbit, to pop, wheeze and go dead. When that happens heads will roll – someone will be blamed. So careful critical path design and the subsequent configuration management tracking – documenting the inevitable modifications along the way – is both good engineering and blame mitigation. Clearly the Bush administration didn’t think that way.
But no one thinks that way. You could say it’s not exactly rocket science, but actually it is. It’s hard and quite tedious work. And we’d rather get angry and blame someone. And of course anyone who has ever been in a management position knows how corrosive that can be. Assigning blame solves nothing. The task is to fix what’s wrong, or try something entirely different, and get the job done. So you find yourself telling the team to stop pointing fingers and get back to work – and they hate that. Yeah, yeah – someone has to pay the price for just not paying attention, for just not thinking. But that doesn’t fix anything. It doesn’t solve the damned problem. But then we all know that most people confuse properly assigning blame with fixing the problem at hand. But smug emotional satisfaction is only what it is – smug bullshit. The problem is still there.
So this makes it hard to think about what happened in the last year of the Bush administration. We faced total economic collapse – the entire financial system turned out to be a house of cards built on bad mortgages that had been bundled into securities and sold as solid investments – Consolidated Debt Obligations rated Triple-A for no particular reason – and those securities had been bundled into other securities and resold, and there were soon other securities of sorts – those Credit Default Swaps – kind of insuring that if things went south you wouldn’t be left holding the bag. And then it got even more complex, until no one knew what anything was worth, really. And it all came tumbling down, as home prices dropped and no one could get out of these complex securities, as no one would buy an asset of no determinable value. You’d get a margin call and have to sell, but you were holding nothing really – and it’s hard to sell nothing to someone and have them hand you cash. The banks and investment houses seized up – Lehman Brothers actually went under – and Paulson and Bernanke went to Bush and then to Congress and said we were one day away from something far worse than the Great Depression and seven hundred billion dollars must be freed – now – to just buy what they called the Troubles Assets (all the crap people had been pretending was worth something) and clear the decks. And that was done – we got TARP – seven hundred billion dollars to do just that. But within a week Paulson gave up on buying those troubled assets – there was no way to make sense of them all, as they were investments in investments in investments and complex beyond belief. So he just threw the seven hundred billion at the banks and hoped for the best. Liquidity might help – as the system had seized up. It was the best that could be done. And it averted disaster.
But how did this happen, and who was to blame? Clinton had left Bush with a massive budget surplus, and the CBO projected that in ten years the United States would be debt free. And then it was all gone. Was it something Bush did, the policies he put in place? Or was the millions of stupid people – many with no actual income, and irresponsible minorities to boot – seeding the whole debacle by taking out mortgages they had no business taking out? Was it the sub-prime industry telling anyone that if they could breathe they qualified for a million dollar mortgage – because they didn’t give a damn, as they were just going to bundle all the crap mortgages and sell the bundle to Wall Street that afternoon? Or was it Wall Street, telling the sub-prime guys to keep those bundles coming, as they could repackage this stuff, get it rated Triple-A (because no one really knew what was in each bundle) and sell it in an instant at a big profit to investors in Iceland or to state pension plans or whomever. Or was it a failure to regulate any of this? Or was Rumsfeld right – stuff happens?
For many, fond of blame, this settled down to blaming the public, who stupidly, and irresponsibly, want something for nothing. The bagger at the supermarket had no business buying a two million dollar home on the hill with the view of the ocean – they could hardly make the special super-low interest payment each month and were fools to think they could sell the place at a profit before the teaser-rate jumped up to normal. What were they thinking? People are so dumb. And you could see this everywhere – look across the ocean to Greece. People there expected the welfare state would take care of them, but who pays for that? Hey, there’s no free lunch.
Paul Krugman doesn’t think much of this emerging narrative – America’s working families and average citizens wanted something for nothing and thus precipitated the economic disaster we endured. Actually, Krugman argues that powerful interest groups did the job, and what brought the country down were reckless tax cuts, foolish military crusades, and structural corruption leading to a deregulation-free financial collapse:
What happened to the budget surplus the federal government had in 2000?
The answer is three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.
So who was responsible for these budget busters? It wasn’t the man in the street.
Krugman sees it this way:
President George W. Bush cut taxes in the service of his party’s ideology, not in response to a groundswell of popular demand – and the bulk of the cuts went to a small, affluent minority.
Similarly, Mr. Bush chose to invade Iraq because that was something he and his advisers wanted to do, not because Americans were clamoring for war against a regime that had nothing to do with 9/11. In fact, it took a highly deceptive sales campaign to get Americans to support the invasion, and even so, voters were never as solidly behind the war as America’s political and pundit elite.
Finally, the Great Recession was brought on by a runaway financial sector, empowered by reckless deregulation. And who was responsible for that deregulation? Powerful people in Washington with close ties to the financial industry, that’s who. Let me give a particular shout-out to Alan Greenspan, who played a crucial role both in financial deregulation and in the passage of the Bush tax cuts – and who is now, of course, among those hectoring us about the deficit.
So it was the bad judgment of the elite – not the greediness of the common man – that caused America’s deficit.
But you do assign blame where blame is due, as Steve Clemmons notes:
Americans are having to pay for what they allowed to happen – and they did allow the crew that ran the White House to get away with what it did. I believe that not that much has changed, though, and that the problems Krugman outlines remain very embedded in the political order today.
Of course Daniel Drezner argues the other way:
The point of this post is not to let American policy elites off the hook. The point is that Krugman’s notion of a passive, innocent American public doesn’t wash either. Political leaders only implement the kinds of Big Policies like the Bush tax cuts and Iraq invasion if there’s an American public that’s copacetic with these policies. The majority of the American public supported the key policy decisions that led to the current macroeconomic situation, and suggesting otherwise is tendentious.
But then Kevin Drum argues back:
Despite this broad support, nobody was crying out for either huge tax cuts or invading Iraq until George Bush and the rest of the GOP started talking them up. Without that, the public would have continued to vaguely think that taxes were too high and Saddam Hussein was a bad guy before switching the TV to Monday Night Football and forgetting about it.
It’s true that public support was probably necessary in order to pass the Bush tax cuts and invade Iraq. But the polling evidence is pretty clear that it was far from sufficient. Nothing about public opinion changed in 2001. The only thing that changed was the occupant of the Oval Office. The public isn’t blameless in all this, but the polling evidence makes it pretty clear that it was a minor player.
And see Big Tent Democrat:
I want to provide a further example – in 2009, the public was strongly for taking action against the financial sector. Indeed, the President famously remarked to the bankers “My administration is the only thing between you and the pitchforks.” And indeed, so the Obama Administration remains, for reasons only Geithner can explain. Apparently on this issue, it’s okay to note that Presidents are not powerless bystanders.
And Tim J at Balloon Juice adds two things:
(1) Popular opinion is not exactly an inexorable force to which politicians swing like algae on a harbor rock. If you have enough money and enough media outlets you can make people care about any damn thing you want.
Do people remember 2003 anymore? The only people thinking hard about Iraq right after 9/11 either worked in the White House or knew personally someone who did. Once Bush and his neocon advisers decided to go to Iraq it took a full-court press by FOX, the internet right, talk radio, nonstop screaming hysteria from the bully pulpit and a healthy dose of processed bullshit fed to pet reporters like Judith “fucking right” Miller. It also took an incredible amount of naked lying. …
If you care enough and have enough resources public opinion just doesn’t mean anything. It might be relevant for third rail issues like Medicare and Social Security (that is to say, they have support that no amount of screaming on FOX can budge) and yet Republicans keep taking a tire iron to those anyway. That is nigh inexplicable unless you dismiss the idea that public opinion has even a small influence on the GOP agenda.
(2) If anything the recession is an even more obvious point in Krugman’s favor. The most obviously stupid move in the whole affair came when a bipartisan team of wise men decided late in the Clinton Administration to deregulate the banking industry. In a sense bankers are like algae on a harbor rock: at least collectively they don’t have any complex or hidden motives. They want to get rich and they will follow whatever incentive system government creates (whether it means to or not) to get wealthy as fast as possible. Those bizarre investment decisions of the early aughts make perfect sense if you consider that the people who made them made a fortune and kept it. So their firms caught fire and blew up. Who cares? Those “stupid” bankers are still stupid rich. Unless the rules change and/or a lot of people go to jail, you can bet any money that they will make the same decisions again.
Harder to understand is why a small band of respected leaders such as Phil Gramm, Bob Rubin and Alan Greenspan set out on what amounted to a holy jihad against accountability and transparency in banking. “The public” did not demand banking reform because “the public” had no idea what banking reform is. Alan Greenspan, on the other hand, must have had some idea where his jihad was leading. Uncle Alan represented Charles Keating in 1984.
And he is all in favor of Krugman’s conclusion, as Krugman says this:
The larger answer, I’d argue, is that by making up stories about our current predicament that absolve the people who put us here, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.
Well, yes. And to go back to the previous analogy, anyone who has ever been in a management position knows how corrosive assigning blame can be, as assigning blame solves nothing. The task is to fix what’s wrong, or try something entirely different, and just get the damned job done. But that doesn’t mean someone, who just wasn’t thinking, will remain on the team. You quietly find that person another career opportunity, so to speak.
Yep, assigning blame is pointless, but some folks need to be eased out. And it seems Krugman does know who they are.
Just Above Sunset 