Economic Fundamentalism

It is not hard to intellectually give fundamentalism a bad rap. Generally fundamentalism refers to an individual’s strict obedience to a specific set of theological doctrines. It can be found in behaviors ranging from Jihadist terrorism to Sarah Palin bromides. All it really means is that individuals apply certitudes to beliefs that are neither provable nor universally shared. That doesn’t make them necessarily wrong; however, the inflexibility can create a whole host of conflicts, and historically has contributed to human tragedy on a massive scale from time to time. Certainly the ability to compromise one’s fundamental position can be a virtue in a world where the population of diverse believers has grown to nearly incomprehensible levels.

The same could be said of secular issues as well, in fact even more so. After all, fundamental theological or philosophical beliefs are based on axioms which are ultimately subjective or personal, while secular issues deal more with the nuts and bolts affecting everyday living…of everybody. The issues might include things like safety or education, but mostly they have to do with economics or, in other words, survival in this world, rather than the next. For people, or more importantly politicians, to take immovable positions on issues based on their fundamental economic beliefs (taxes bad, growth good, rich bad, equality good, etc) creates an inability to deal with dynamic changes and begs for common ground. So why do I find myself in such disagreement with President Obama’s recent pronouncement of a negotiated “compromise” with the Republican caucus?

The President angrily (angry for him anyway) derided his fellow Democrat critics for not understanding the importance of compromise. Although Obama’s agreement may at first blush appeared inconsistent with his pronouncements both as a candidate and President, for anyone who read The Audacity of Hope he did what one might have expected him to do. Obama essentially declared in his treatise that the supreme value of leadership is when it breaks down intractable competition and in doing so moves the ball forward. His pragmatic approach to the Presidency (with congressional majorities) has been painfully consistent with his book. I believe, unfortunately, he got it backwards. Leadership that seeks to and ultimately unifies has value only after the fact, after it's got the job done...not before. It is the old Neville Chamberlain predicament…what sounds like a duck isn’t necessarily a duck. I suspect a few clever Republicans read Obama’s book and put two and two together.

The divisiveness of the Obama compromise was immediately apparent and I feel de facto evidence of failure to meet his proclaimed goal of moving the ball forward. The Democrats in Congress have been as fractured in their approach to governing over the last four years as the Republicans have been eerily solidified. Reacting as they did made them appear like a colony of meerkats all popping up and suddenly looking in the same direction with equal surprise. That doesn’t happen often for Democrats. Are they wrong? Am I wrong in agreeing with them? Just what is wrong with this compromise?

Don’t believe for a second that the Republican line-in-the-sand on taxation of the wealthy was anything other than political. The sound bite which says returning the top bracket to Clinton era levels would adversely affect employment (which was woefully embraced by the conservative uninformed) boarders on lunacy. There is virtually no evidence (nor educated speculation) that such would be the case. Democrats suggested raising the threshold to a million dollars which the Republican leadership immediately rejected. It could have been raised to a billion dollars of taxable income (which actually only effects a handful of people) and the Republicans wouldn’t have budged, even if every affected billionaire lined up in support of the tax. The so-called fiscally responsible Republican conservatives, whose number one stated goal is to make Obama a one-term President, wanted tax increases tagged to the Obama Administration..period. It was win-win for the Republicans as far as they were concerned, “compromise” or not. If the plan goes through as agreed upon Obama will have to campaign as a President who, if elected, will spearhead tax increases. Christmas came early for the GOP.

Obama’s real choice was also a real opportunity to salvage his Presidency, which I have reluctantly come to believe needs salvaging. He had the opportunity to tell the truth. A position does not fall under the general heading of fundamentalism when there is universal agreement. We don’t know specifically what the consequences of running continuous and mountainous deficits and compiling astronomical debt will be. However, we can all agree that they will be very bad and we as a nation will regret that we didn’t do anything about it. As such Obama was in a unique position to earn his Nobel Prize by risking his Presidency and telling the nation (and therefore the world) that it has to spend less and it has to pay currently, through taxes, for what it is spending (on everything including entitlements and wars of every kind). He should have embraced the termination of the Bush tax cuts, not just for the rich, but for everyone. That’s what a unifying President would have done, instead of arguing that the goodies we got are equal to the goodies they got. The published fears that the short term result would have stalled the “recovery” were speculative at best and not worthy of compromising the truth. I don’t believe it at all. By opposing both Republicans and Democrats on taxation and spending and demanding an era of national responsibility he had the prospect of being the unifier he truly wants to be. Instead, he has become an instrument of continued divisiveness.

The most important thing I took out of my studies as an Economics major in college was that Economics is a social science, not an exact science. Because it is merely an accounting of human behavior the ability of Government to affect it directly is very limited. What this economy needs more than anything else is to regain predictability. That will probably happen when the housing market stabilizes, if the national debt doesn’t do us in first. Predictability is always enhanced by the truth. The near-term economy will not be significantly improved or worsened by increased taxation or reduced spending. Consumer Confidence is the index that trumps them both. However, the long term health of our Economy will be significantly affected by how we apply both taxes and spending. The fights and compromises regarding social support or the widening gap between the haves and have-nots could have waited. For this round it was Economic Fundamentalism 1, Truth 0.