Jon Taplin's Home Page

I must say I am looking forward to the President’s second Inaugural Address on Monday. In my lifetime there have only been two second term Democratic presidencies and Bill Clinton began his second term with the shadow of the Whitewater and Trooper gate  allegations hanging over him. He had already begun his dalliance with Monica Lewinsky, and so the events that led to his impeachment were already in motion. Barack Obama on the other hand begins his second term with a much bigger mandate (51% of the popular vote to Clinton’s 49%) and no threat of scandal.

Equally important, the Republican Party is in complete disarray, as can be seen by their cave in today on the debt ceiling. David Brooks wrote an unintentionally humorous column today complaining that Obama is being too tough on the Republicans at the very moment of their meltdown. After laying out how he would hope Obama might propose some small bore initiatives that Eric Cantor could agree on, Brooks then states he doesn’t think that is going to happen, unintentionally laying out a perfect strategy for the Democrats..

It’s more likely that today’s majority party is going to adopt a different strategy, which you might call Kill the Wounded. It’s more likely that today’s Democrats are going to tell themselves something like this:

“We live at a unique moment. Our opponents, the Republicans, are divided, confused and bleeding. This is not the time to allow them to rebuild their reputation with a series of modest accomplishments. This is the time to kick them when they are down, to win back the House and end the current version of the Republican Party. Read more…

As many of you know, David Brooks is one of the few conservative columnists that I regard highly. But occasionally he writes something that is so boneheaded, it makes you wonder. Such a column was his defense of Mitt Romney and the Private Equity Business this week. Here is Brooks.

Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations.

The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient.

This version of the 1980′s could have been written by one the hundreds of Lobbyists deployed by the Private Equity Industry in Washington. That was probably where Brooks “researched” his story.  The real history of the era is quite different.The 1980′s was the start of the financialization of American business, with it’s wave of complex financial instruments that only a quantum math scholar could decipher. Writing after the Great Depression of the 1930’s, the economist Joseph Schumpeter spoke of “vanishing investment opportunities” by which he meant that the enormous growth of productivity, combined with the oligopolistic pricing structures of American capitalism generated a growing surplus which went beyond the capacity of system to absorb it. As I researched this post I began to wonder if Schumpeter’s concern still applied to the American economy and certainly Ben Bernanke in a 2005 speech called “The Global Saving Glut”, seemed to believe so. American capitalism had always been a boom and bust cycle as an historian of the Panics of 1837, 1857, 1869, 1873, 1893, 1903, 1907, and 1929 would know. However, by the late 1960’s economists had come to believe that fiscal and monetary policy had eliminated the extremes of the business cycle. But by the mid 1970’s, after the Arab oil embargo, the American economy began to fall into a condition known as Stagflation—a brutal combination of business stagnation and unemployment mixed with the inflation brought on by rapidly rising energy prices. Read more…

Sir Isaiah Berlin wrote a wonderful little book called The Hedgehog and the Fox: An Essay on Tolstoy’s View of History. Here is a quick version of Berlin’s thesis.

‘A fox knows many things, but the hedgehog knows one big thing’. This fragment of a verse by Greek poet Archilochus describes the central thesis of Berlin’s masterly essay in which he underlines a fundamental distinction that exists in mankind–between those who are fascinated by the infinite variety of things (foxes) and those who relate everything to a central all-embracing system (hedgehogs).

I think our current election pits a hedgehog (Romney) versus a Fox (Obama). I think the libertarians who comment on this blog are hedgehogs. I think Bob Dylan is a fox and Louis Armstrong and Picasso and Susan Sontag and Martin Scorsese and Steve Jobs and Mark Zuckerman are all foxes. I think Ron Paul is a hedgehog and Franklin Graham and Rush Limbaugh and Rick Santorum are hedgehogs. They see the world through a single lens, be it Austrian economics or fundamentalist religion.

But our world cannot accommodate hedgehogs, because “the infinite variety of things” is only exploding. The hedgehog is incapable of dealing with facts that contradict his world worldview. Take the whole inflation debate which our Libertarian correspondents have been telling us is coming down the pike at hyper speeds for the last four years, because the Treasury and the Fed are “printing money”. As Richard Duncan points out in his new bookThe New Depression: The Breakdown of the Paper Money Economy , that at the very point that Greenspan was unloosing the easy money, Globalization was causing “a 95% drop in the marginal cost of labor by bringing a billion people from the developing world into the global industrial workforce.”

How could you possibly have inflation in such a circumstance? Hayek is simply not able to account for this. So Ron Paul will never stop predicting hyper inflation and the suckers will never stop buying gold futures which PAY NO INTEREST.

Or take Paul Ryan’s insistence that an austerity budget like the Conservatives pushed through in Great Britain is the key to America’s future. Ryan continues to push his budget, which mimics the British one, despite the announcement this week that Britain has fallen back into a double dip recession.

Britain’s austerity experiment in particular has been judged by economists to have been ill-timed and poorly constructed at best. It is a reminder, in the consensus view, that the basic tenets of Keynesian economics – primarily, that government spending plays a key role in maintaining demand when the private sector is struggling in a severe financial crisis — remain as valid as ever.

So much for the hedgehogs. Never let facts get in the way of ideology.

But how are the foxes going to convince the country that their vision that we are at a Cambrian Moment–A time of radical evolutionary development–is a rational reaction to the end of the Interregnum. I am convinced that Liberals must embrace the experimentation that flows from Subsidiarity: the notion that matters ought to be handled by the smallest, lowest or least centralized competent authority. David Brooks writing about Jim Manzi’s latest book Uncontrolled: The Surprising Payoff of Trial-and-Error for Business, Politics, and Society, notes that experimentation is the key to rethinking our politics.

Manzi wants to infuse government with a culture of experimentation. Set up an F.D.A.-like agency to institute thousands of randomized testing experiments throughout government. Decentralize policy experimentation as much as possible to encourage maximum variation.

Here once again we return to the idea of New Federalism. As you know, I have been wrestling with this idea for years without coming to a satisfactory conclusion. I think as the school year ends this becomes my summer project.

I had dinner last night with one of the most important conservative media voices in America and some of his friends. I had gone to the dinner expecting some fireworks, but was totally caught off guard by his charm and what he had to say.

First, he was disgusted by “the pygmies” in the Republican Presidential Race. As much as he dislikes Obama, there was not a one of the current Republican candidates that he could be enthusiastic about.

Second, we found ourselves in agreement that the issue of Crony Capitalism is perhaps the most pernicious threat to our Republic. Crony Capitalism distorts everything from Crop subsidies flowing to agribusiness to our inability to cancel useless Pentagon weapon systems. And the disease effects both political parties.

As the evening progressed I kept trying to move us beyond the Left-Right dialectic we are trapped in and to suggest that we might find some common ground in the liberal principles that are the basis for our Republic:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

Now the word “liberal” is seen as poisonous to conservatives, but it’s origins in John Locke’s Natural Rights theory were the basis for our revolution. Read more…

I always love it when David Brooks and Paul Krugman tussle on the pages of the New York Times. On Monday, Brooks wrote a column called The Wrong Inequality, arguing that the Occupy Movement was wrong to target the 1% and that the real inequality problem was between the people who didn’t have a college degree and those who did. This is what I call the feeble attempt on the right to change the subject.

So this morning Krugman weighs in with Oligarchy, American Style and without ever mentioning Brooks by name, performs an epic smackdown.

Pundits try to put a more benign face on the phenomenon, claiming that it’s not really the wealthy few versus the rest, it’s the educated versus the less educated.

So what you need to know is that all of these claims are basically attempts to obscure the stark reality: We have a society in which money is increasingly concentrated in the hands of a few people, and in which that concentration of income and wealth threatens to make us a democracy in name only.

He then goes on to point out that the biggest gains are really going to the top .01%, whose incomes have risen more than 400% since Ronald Reagan first started cutting taxes for the wealthy. Of course the rationale for Republican supply side economics from 1980 on has been that cutting taxes on the wealthy encourages investment in the productive industries which in turn fuels employment for all, leading to higher consumption of products in a virtuous circle. But that obviously is not working out to be true and so the Republicans now contend that the investment of all this surplus wealth from both corporate and billionaire balance sheets is not happening because they are “uncertain about the future” under the Obama administration.

This is nonsense. What has happened in the last 30 years is very clear. Because all of the income gains have gone to a very small number of people, the purchasing power of the average household has fallen dramatically. For a while (1989-2006) this was masked by the explosion of consumer credit as people used their home equity like an ATM to keep up with the aspirational lifestyles of the rich and famous. As for the rich and famous, they were not investing in new productive enterprises, they were speculating in the casino we call Wall Street. Investment bankers worked long hours to invent new instruments of speculation as the explosion of derivatives masked the sad truth that the traditional role of finance as the engine of new enterprise faded into the background noise on the trading floor.

As for the one real area of Innovation in our society, the Internet Industries, it has become increasingly obvious that the capital needs of these businesses are relatively low compared to the last boom of industrialization that fueled the post war growth of steel, autos, chemicals and oil. Why else would Microsoft, Apple, Google and IBM each have over $50 Billion in cash sitting in the bank?

We are not going to get out of this stagnation until the gains of our economy are spread a little bit more evenly. The Koch Brothers and their mouthpiece Herman Cain (with Rick Perry in the Green Room) are trying to cut their taxes even further by floating flat tax proposals. I think an election fought on the lines of “Whose side are you on?”–forcing the Republicans to defend their “Oligarchy, America Style”–will be good for our fading democracy.

Two weeks ago, I said that a profound split in the Republican Party would become apparent on November 5 if John McCain lost. Turns out the pros aren’t waiting for the death certificate to fight over the corpse.

With despair rising even among many of John McCain’s own advisors, influential Republicans inside and outside his campaign are engaged in an intense round of blame-casting and rear-covering—-much of it virtually conceding that an Election Day rout is likely.

A McCain interview published Thursday in the Washington Times sparked the latest and most nasty round of Washington finger-pointing, with senior GOP hands close to President Bush and top congressional aides denouncing the candidate for what they said was an unfocused message and poorly executed campaign.

What is emerging is a group of Palinistas gathered around Bill Kristol and The Weekly Standard and the two kings of Right Wing Radio–Rush Limbaugh and Sean Hannity. They believe the future of the Republican Party is in the way Palin can work up a crowd of The Base. Their theory is to return the early days of minority guerrila war when Newt Gingrich was a backbencher and Rush was just getting started. They will launch a permanent campaign against Obama in the same way they ran a permanent anti-Clinton operation. Read more…

There is a great deal of hand-wringing going on inside the Republican Party right now. The potential of a landslide blowout by Obama and the Democrats is inevitably leading to a battle over which faction will control the Republican Party after the election. On one side are the Limbaugh shock-troops, the loud angry social conservatives that have dominated the base for 25 years. These people are completely embarrassing to the intellectual movement conservatives like David Brooks.

And so, politically, the G.O.P. is squeezed at both ends. The party is losing the working class by sins of omission — because it has not developed policies to address economic anxiety. It has lost the educated class by sins of commission — by telling members of that class to go away.

Chris Buckley, son of the founder of modern conservative thought William Buckley, just announced he was going to vote for Obama, partly because the right wing kooks scared the bejesus out of him.

My colleague, the superb and very dishy Kathleen Parker, recently wrote in National Review Online a column stating what John Cleese as Basil Fawlty would call “the bleeding obvious”: namely, that Sarah Palin is an embarrassment, and a dangerous one at that. She’s not exactly alone. New York Times columnist David Brooks, who began his career at NR, just called Governor Palin “a cancer on the Republican Party.”

As for Kathleen, she has to date received 12,000 (quite literally) foam-at-the-mouth hate-emails. Read more…

When a major Republican pundit like Brooks can’t stand where is party is going, you just have to stand back and listen.

House Republicans led the way and will get most of the blame. It has been interesting to watch them on their single-minded mission to destroy the Republican Party. Not long ago, they led an anti-immigration crusade that drove away Hispanic support. Then, too, they listened to the loudest and angriest voices in their party, oblivious to the complicated anxieties that lurk in most American minds.

Now they have once again confused talk radio with reality. If this economy slides, they will go down in history as the Smoot-Hawleys of the 21st century. With this vote, they’ve taken responsibility for this economy, and they will be held accountable. The short-term blows will fall on John McCain, the long-term stress on the existence of the G.O.P. as we know it.

I’ve spoken with several House Republicans over the past few days and most admirably believe in free-market principles. What’s sad is that they still think it’s 1984. They still think the biggest threat comes from socialism and Walter Mondale liberalism. They seem not to have noticed how global capital flows have transformed our political economy.

The New York Times resident conservative on Palin.

She has not been engaged in national issues, does not have a repertoire of historic patterns and, like President Bush, she seems to compensate for her lack of experience with brashness and excessive decisiveness.

The idea that “the people” will take on and destroy “the establishment” is a utopian fantasy that corrupted the left before it corrupted the right. Surely the response to the current crisis of authority is not to throw away standards of experience and prudence, but to select leaders who have those qualities but not the smug condescension that has so marked the reaction to the Palin nomination in the first place.

The conservative columnist David Brooks argues this morning that the basic principle that the conservative movement has been run on since Barry Goldwater–rugged individualism–is both wrong and disproven by science.

Goldwater’s vision was highly individualistic and celebrated a certain sort of person — the stout pioneer crossing the West, the risk-taking entrepreneur with a vision, the stalwart hero fighting the collectivist foe.

The problem is, this individualist description of human nature seems to be wrong. Over the past 30 years, there has been a tide of research in many fields, all underlining one old truth — that we are intensely social creatures, deeply interconnected with one another and the idea of the lone individual rationally and willfully steering his own life course is often an illusion.

Brooks argues that if man is an intensely social animal, then the uber-libertarian solutions of Republican dogma cannot solve the current crisis.

If there’s a thread running through the gravest current concerns, it is that people lack a secure environment in which they can lead their lives. Wild swings in global capital and energy markets buffet family budgets. Nobody is sure the health care system will be there when they need it. National productivity gains don’t seem to alleviate economic anxiety. Inequality strains national cohesion. In many communities, social norms do not encourage academic achievement, decent values or family stability. These problems straining the social fabric aren’t directly addressed by maximizing individual freedom.

These of course are issues we have been talking about since I started this blog in January. I welcome a pillar of the conservative movement into the conversation.