Archive for November, 2008


November 24th, 2008 by Collin Canright | No Comments | Filed in Political Economy

As I followed the election and the selection of President-elect Obama’s economic team and its intersection with and relationship to the financial crisis, I decided to re-read William Greider‘s book, The Education of David Stockman and Other Americans. The original article in The Atlantic caused a stir as a result of Stockman’s candor in interviews with Greider, an editor at The Washington Post at the time.

Perhaps the economic stagnation of the late 70s and the recession of the early 1980s, during the debut of the Reagan presidency known as Reaganonomics, would provide some enlightening parallels for today’s financial mess. A few came to mind as I read, not the least of which are Obama’s selection of Paul Volcker as part of his economic team and his need to start his administration with an immediate economic policy.

Stockman’s feeling “dramatic political action would somehow alter the marketplace expectations” recalls recent headlines and market swings. Stockman’s own headline-making confession when markets didn’t cooperate as he expected went like this, “None of us really understands what’s going on with all these numbers.”

The deeper question behind the confession contains a warning for today. As Greider wrote:

These “internal mysteries” of the budget process were not dwelt upon by either side, for there was no point in confusing the clear lines of political debate with a much deeper and unanswerable question: Does anyone truly understand much less control the dynamics of the federal budget intertwined with the mysteries of the national economy?

Immediate political action and victory itself is not enough, as Stockman learned when the fiscal mathematics changed during the trade-offs Congressional of action. He ended up sounding bitter. “Whenever there are great changes or strains in the economic system, it tends to generate crackpot theories, which then find their ways into the legislative channels.”

Let’s hope not. Given Obama’s picks for his economic team, I’m optimistic.

For more, here’s a review of The Education of David Stockman and Other Americans.

Economist Brad DeLong’s blog includes a couple posts on Stockman and Greider and quotes from the book.

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