Arguing Against the Idea of Doing Things

There is such a thing as medical humor. You feel awful and the doctor asks that question. Have you had this before? And you know the answer if you say yes. Well, you have it again. That might be followed by a quick smile, but differential diagnosis is difficult and that’s a little bit of doctor-humor. And it’s not a bad diagnosis. Things do recur. And if you can manage to get an internist – one of those specialists in diagnosis – a bit drunk at a small party far from the hospital, he or she might let you in on a secret – it’s sometimes best to do very little, as many medical difficulties clear up over time, and the trick is to pretend you’re doing wonderful things while you wait for the body to heal itself, which it usually does. So you order tests, and prescribe harmless mild painkillers or sedatives, to make the patient think you really are heroically fixing things. But you’re waiting. It seems that matters which require acute immediate intervention are far rarer than patients imagine. It’s just not like all those dire-crises-in-the-hospital television shows. It seems a lot of medicine is rather mundane. And doing things often does far more harm than good.

Extending that approach to the rest of life may or may not be possible. Back in 2003 the issue was Iraq, and Colin Powell faced off against France’s Dominique de Villepin at the UN – and Powell made his case that acute immediate intervention was required. And Dominique de Villepin raised one eyebrow and asked why. The inspectors were still poking around, and waiting a bit before launching a major war would really do no harm, or no more than had been done by Saddam Hussein already. And there were alternatives to war – economic and diplomatic. It was almost like the doctor saying no, this is not time for open-heart surgery – maybe a change in diet, or regular exercise, would be best first. But Powell waved his little vial of what he said could be some super-toxic biological weapon and we would not be denied. That didn’t work out well.

But years later there was TARP – that passed on the second try in September 2008 – and if Hank Paulson hadn’t gotten that seven hundred billion dollars to keep the financial system from grinding to a halt, well, it would have ground to a halt. Credit had frozen. There was even talk that Bank of America was going to freeze the line of revolving credit that McDonalds had with them to cover daily payroll – and McDonalds would go under. Every McDonalds would be closed – immediately. Could America survive that? And that wasn’t so farfetched – GE was calling Paulson to say something must be done – they couldn’t finance their day-to-day operations and payroll and inventory, as their credit had been pulled. Most everyone’s credit had been pulled. The financial system was collapsing. America – all of it – would have to close up shop.

So you had a different situation. Acute immediate intervention – a massive injection of liquidity – was what this patient needed, stat. And oddly, a good number of Republicans played the role of Dominique de Villepin – let’s wait and see. What is the worst thing that could happen? But any doctor knows you don’t say that when the patient goes rigid, the eyes roll back in the head, and the blood pressure drops to next to nothing. You roll in the crash-cart.

What was the worst thing that could happen? Everyone in the business community knew. Every economist knew. Governments around the world knew. And no one wanted to find out. And the Republicans in Congress finally gave in – with much wailing and gnashing of teeth, for the edification of their constituents back home. But you do what you have to do to save the patient.

Of course most everything else falls between these two extremes, so there are constant arguments about doing or not doing. Fox example, on CBS’s Face the Nation the host, Bob Schieffer, asked Senate Minority Leader Mitch McConnell a simple question – “Do Republicans have any plans to do anything on the unemployment front or are you just going to let things take their course?”

And the answer was classic – “No, I – I think – what – what we’re doing is encouraging the president to – to quit doing what he’s doing.”

You see, doing things is nothing but trouble, and Steve Benen comments – “The Senate Minority Leader has clearly given job policy considerable thought. And to think I doubted him.” And Benen says “the key takeaway here is the realization that McConnell doesn’t even think a jobs agenda is necessary.”

Will the patient heal himself? That depends on the accuracy of the diagnosis, and at the Atlanta Journal-Constitution, Jay Bookman considers the details of McConnell’s remarks and suggests the fellow has no idea what he’s talking about when it comes to the economy.

McConnell: If you talk to business people and Bill Daley, the present chief of staff did recently, you find out their biggest complaint is overregulation. You know, the federal government with that stimulus money hired a quarter of a million new employees. These people are busily at work trying to regulate every aspect of American life in – in health care, financial services, through the Environmental Protection Agency, really sort of bureaucrats on steroids that are freezing up – the private – private sector and making it very difficult, Bob, for them to grow and expand. You know, you’re seen the reports that they’ve two trillion in cash. The reason they’re not investing that in hiring more people is the government has made it very expensive to expand employment.

Bob Schieffer: So do you – do Republicans have any plans to do anything on the unemployment front or are you just going to let things take their course?

McConnell: No, I – I think – what – what we’re doing is encouraging the president to – to quit doing what he’s doing. Quit overspending. And we’re hoping with the debt ceiling discussions we can begin to address deficit and debt. And second, they need to quit over-regulating the American economy. This is something they can do on their own. They don’t have to come to us for permission to rein in these regulators who are really at work across the American economy making it very, very difficult for businesses to function.


In short, McConnell argues that overregulation of the economy by President Obama has caused a decline in business willingness to invest. And no, the Republicans don’t feel compelled to propose policies to address the shortage of jobs, because Obama already has the authority to fix the problem. He just refuses to do so.

The question is, does the McConnell hypothesis correlate with actual facts? Let’s go to the data.

First, we should address McConnell’s claim that the government has added a quarter million employees under Obama. According to Bureau of Labor statistics, that’s an outright lie. Through last month, total federal employment had increased by 59,000 since President Obama took office, and most of that increase has been in national security fields, not government regulators.

In other words, the entire premise of McConnell’s claim is false.

And can the lack of private investment in the American economy be explained by policies implemented by Obama? Bookman has charts for that, tracking private investment over the last ten years – it tanked in the last years of the Bush administration and jumped up under Obama. The data are clear:

In fact, by the time President Obama took office … the decline in private investment begun three years earlier had been astounding. The collapse bottomed out in early 2009 and then began to increase, rising 22 percent so far.

That’s what the facts show.

So we have a bad diagnosis:

The facts show that McConnell is trying to blame the greatest collapse in private investment since the Great Depression on policies that hadn’t been implemented yet by a president who hadn’t even been elected yet. Yet here in these United States of Amnesia, his version of events actually has its supporters.

The White House’s agenda seems to have improved the economy – more facts the doctor should consider, were this like medicine. And Benen argues here that, in theory, this should create an opportunity for Democrats:

Congressional Republicans not only don’t have a plan to create jobs; they don’t even see the need for one.

And Benen is pleased that the Senate Democrats are at least looking in the right direction:

Fearing the economy may be getting worse, Democrats plan to soon unveil what they’ll call a “Jobs First” agenda – and the stakes are high. A bleak economic outlook, like the May jobs report, could cost Democrats their thin Senate majority and even the White House if they can’t make a strong case to an anxious electorate that their policies will create jobs. …

Sen. Mark Begich has enlisted business officials to present senators with their ideas for bolstering job creation, and the Alaska Democrat wants his party to unveil a package full of proposals – like a boost in infrastructure spending and changes to visas to boost tourism – that one by one could be brought to the floor over the next several weeks.


All kinds of ideas are apparently on the table. The best possible idea – an ambitious stimulus that ignores deficit concerns – won’t generate any consideration, but modest measures, including a payroll tax holiday, are still being bandied about.

And he sees that former President Clinton is on the case, writing a piece for Newsweek with lots of quite workable ideas for job creation, but adds this:

I’m not especially optimistic about “Jobs First.” Getting Dems to agree to a meaningful plan will be like herding cats, and getting the GOP-led House to pass it will be impossible.

But I’m at least mildly encouraged by the shifting discussion. Instead of an all-deficit-all-the-time debate, Democrats are talking about what can be done to create jobs – while Republicans deliberately ignore the issue.

But who has the right diagnosis here? Do we ignore the problem and let things heal themselves, or do we do something? In the Financial Times, Clive Crook argues that doing nothing might be a bad idea, as we’re flirting with the possibility of a lost decade:

After a recession, this economy usually gets people back to work quickly. Not this time. Progress is so slow; the issue is not so much when America will return to full employment but what “full employment” will mean by the time it does.

The administration thinks the pace of recovery will pick up soon. Last week President Barack Obama called the pause a “bump in the road.” Others think the slowdown will persist and might get worse, fears that cannot be dismissed. One alarming possibility is that the traits the US has relied on to drive growth in the past – labor market flexibility, rapid productivity growth – might have become toxic. If the US is unlucky, traits seen as distinctive strengths are now weaknesses, and a “lost decade” of stagnation, like Japan’s in the 1990s, might lie ahead.

And the argument goes like this:

Strong productivity growth, reflecting the US economy’s famous ability to cut jobs promptly, is central in all this. Potential output is growing even as actual output and employment stutter. This hurts now, the optimists acknowledge, but when conditions improve workers will be rehired. A low-friction labor market is fast to hire as well as to fire, and American companies will take up the slack quickly once conditions allow. In the end, US labor-market exceptionalism will deliver new jobs and strong growth as in the past.

But will it? Two things might work differently this time. First – since the recession was unusually deep and the recovery unusually slow – the US is experiencing unheard-of long-term unemployment rates. The housing slump and its associated plague of negative equity aggravate this by making it harder for the unemployed to move to find work. Long-term joblessness erodes skills and employability. Structural unemployment is surely inching closer to European levels. America has not been here before.

And he says you can make a case “for welcoming low productivity growth if it keeps more people in work.” It’s better to spread the pain around through short-time working than it is to cut jobs. But then there is the issue of the role played by debt in this cycle:

Under circumstances such as today’s, with households striving to cut debt and interest rates at zero, economies can behave in strange ways. In a paper last year, Paul Krugman of Princeton and The New York Times, and Gauti Eggertsson of the Federal Reserve Bank of New York drew attention to the possibility of a “paradox of toil,” akin to the paradox of thrift (whereby if everyone tries to save more, the economy shrinks and so does aggregate saving). The logic of the paradox of toil is simple. Suppose the supply of labor increases, or productivity rises. Initially, prices would tend to fall. If nominal interest rates are stuck at zero, the real interest rate and burden of debt both rise. This leads overleveraged consumers to cut spending still more. Demand is not just slow to respond: the economy shrinks.

It is a peculiar world where higher productivity reduces output; and willingness to accept wage cuts worsens unemployment (which Mr Krugman and Mr Eggertsson call the “paradox of flexibility”). The idea that easy hiring and firing might permanently raise long-term unemployment is less bizarre, but still not something the US has needed to worry about in the past.

And now we do, so we get an odd diagnosis:

A gradually improving recovery would put things right side up. US strengths would be strengths again. But a prolonged slowdown, with consumers still not on top of their debts, might be self-reinforcing. Some would say this has already begun, hence the pause. The optimists say no, not yet – and they had better be right.

But Krugman says we are not at all flirting with the possibility of a lost decade:

The flirting took place three years ago. The lost decade question now isn’t whether our flirtation with a lost decade will turn into something serious; it’s whether the torrid affair we’re now having with the potential for a lost decade can somehow be broken up.

His diagnosis:

What you see isn’t a recovering economy that may be stumbling; you see an economy that has stopped its free fall, but hasn’t really been recovering at all.

So is this the time to quit doing things? Or is this the time to do things? Will the economy heal itself? Or is this the time for acute immediate intervention? Ask your doctor. The politicians don’t know.

Of course the doctors know even less. They’re concerned with the body, not the body politic. They have it easy.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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