Friday, June 8, 2012

Scott Walker And The Greeks: Towards A More Imperfect Union

Scott Walker And The Greeks: Towards A More Imperfect Union

The last couple of weeks have forced us to pay attention to two nasty civil wars-the deepening economic crisis in Europe, and the recall election in Wisconsin.  Both demonstrate what happens when deep structural issues, entrenched positions, raw ambitions, and cold reality collide.

The New York Times columnists David Brooks and Paul Krugman have been focusing on Europe, entitlement reform, austerity and economic stimulus.   Brooks has just written something on Wisconsin’s governor Scott Walker, a hero to GOP hardliners for his slash and burn tactics.  

Krugman’s position has been consistent since the 2008 crash; governments, here and in Europe,  need to do what they can to stimulate their economies so as to get the maximum amount of money into the hands of the most people, where, presumably, they can spend it and stimulate organic growth.  Krugman belives austerity (whether it is imposed on the Greeks or domestically) is the worst remedy in time of recession-by sucking money out of the system, you deepen the cycle of decline.  This isn’t just a liberal view-his work is supported by Desmond Lachman of the conservative American Enterprise Institute, who adds that tax increases also have an adverse impact.  Krugman and Lachman understand something that the austerity fanatics refuse to recognize.  The less people have to spend, the less they will spend, and that has a ripple effect. If you cut Granny’s Social Security payment by $100, and she is a member of the 1%, it’s irrelevant.  But if she gets by every month with just a little extra to spare, that $100 is real.  So, she stretches out her visits to the beauty parlor, and goes to the movies once a month instead of twice, and skips the Sunday brunch at the diner.  She still makes do because she’s frugal.  But every one of the businesses who serve her take in a little less every month.  With enough Grannies skipping the matinee and doing home permanents, the marginal reduction in revenue starts to become real-tips are down, profits decline, small businesses are pushed towards the brink. Granny is a job creator.

Brooks is both a Euro-skeptic and a “frugalist.”  He sees Greece’s hair shirt as necessary, but the EU as essentially doomed.  Germans are not Spaniards are not Greeks are not French. Without a common culture, economic control emanating from Brussels and Berlin, wrapped in a Euro bowtie, is just another form of statism. 

Brooks holds to an ideal that an educated society can achieve its highest aspirations through shared values of personal virtue and the free market.  That is not possible in Europe, but here, we will all be Calvinists; prudent, thrifty, hardworking,  and possessing moral rectitude. Brooks wants to virtue us out of deficit spending, middle class entitlement programs, etc. He thinks Granny should have a little less, but not be forced to eat cat food.  And he wants her to volunteer for it out of a sense of public duty.

Walker would laugh at both Brooks and Krugman.  He doesn’t care about Granny, unless she’s has a trust fund. He’s not into theory. And why compromise when you are in charge?  Government is the mechanism to reward your friends and destroy your opponents.  He took his oath of office and promptly turned his death ray on his enemies-the public sector unions.  In the name of fiscal probity he slashed compensation, benefits, pensions, and just to stick the knife in further, collective bargaining rights  He exempted the police and firemen because they were more likely to vote Republican.  He plowed the savings into tax cuts for business and the affluent.  This set off a titanic battle between him and the unions, culminating in this last Tuesday’s recall vote, which he won in a cakewalk. 

Walker is now a reverse Robin Hood GOP rock star. He’s going to get a prime speaking spot at the GOP convention, and he’s being talked up for a role in the Romney administration.  On cue, conservative columnists have been writing fawning paeans the likes of which haven’t been seen since the romantic poetry of Byron.

So, what does our cerebral and communitarian David Brooks make of all this?  Well, he’s a little queasy, even though he’s a fan of austerity. And he is too smart not to realize that scapegoating public employees alone is not enough to close the deficit.  But he’s willing to take the win, not unlike the classics professor who is also a hockey fan.  Sending out one’s goon to punch out the opposing team’s star is a tad coarse, but the sight of the Stanley Cup being hoisted high tends to assuage any feelings of guilt.

As for Krugman, he’s viscerally disgusted by the greed. And he’s intellectually appalled by the policy failures, which is more relevant.  Because for all his knee jerk liberalism, Krugman knows his numbers.  Austerity does not correlate with growth.  Reagan himself understood that.

And, interestingly enough, that’s exactly what’s happening in Greece.  There is no question that bloated public payrolls and the social welfare system have played a key role in pushing the country towards the economic brink, and they will have to be reformed. But, since the new austerity measures demanded by the Germans and the technocrats have been adopted, the deficit has grown even wider.  Tax receipts are significantly down, in part because of more evasion, but more importantly, because economic activity is down.  Grandma Rallou and friends aren’t spending either.  Krugman is right.

So, what is the answer?  If Krugman is right about austerity, and Brooks is right that we still need to figure out how to reform taxes, spending, and the big entitlement programs, what next? 

In Wisconsin, it’s Walker carrying the day, and his win is seen as a signal to other GOP Governors that now is the time to milk the cow and kneecap their enemies.   Unfortunately, that’s going to be a signal to the Democrats, if they ever return to power.  Never compromise, just take.

How about the rest of us, the folk who would like a better economy, a more rational taxing and spending policy, a future for ourselves and our kids?

There are a couple of hopeful signs. The politicians may not be paying attention to us, but some of us are starting to pay attention to them.  There’s one other odd number in the Wisconsin exit polls.  17% of the Walker voters said they would vote for Obama. Think about that for a second. 

Maybe Wisconsin really is, in the great Republican Progressive Robert La Follette’s phrase, a “laboratory for Democracy.”