The Great Recession and self-inflicted wounds

Losers

In sports, all great competitors know that they have a choice, even when confronted with daunting, insurmountable odds. They can lay down and let the larger, stronger opponent run up the score. Or they can find a way to compete, to make a game of it. A good loss is a dignified way to show what you are made of, that you have grit, attitude and brass, and you aren’t to be trifled with, even in defeat…

The financial crisis delivered a significant blow to the economic well-being of the U. S,, indeed, the world. There were two responses to this challenge, one of a great competitor, and one of a pathetic loser. The response to the threat of overwhelming defeat is instructive, not only for its policy implications, but for how we as individuals should respond to challenges that seem hopeless.

Consider the policy makers of the Federal Reserve, terrified as they were of the entire system collapsing. Regardless of your views of the impact of the Fed — and I was an early critic — one must grudgingly admire their determined and innovative responses. Consider not what they did but their attitude and creativity when confronted with what appeared to be an insurmountable challenge: They stepped up their game big time. If they were going to lose this battle, they were going to go down fighting.

They threw away the rule book. The new liquidity facilities were certainly never envisioned 100 years ago on Jekyll Island, where the Fed was born. But that didn’t stop them…

Now let’s turn the discussion to losing and failure, which means it’s time to consider the collection of incompetents we call the U.S. Congress. Rarely has so much stupidity and malfeasance been assembled in a single room at one time.

When we look at the weak sectors of the economy…it should be obvious that our national economic wounds are mostly self-inflicted.

The drag from federal government usually is a simple and obvious fix. During a recession and recovery, spending should rise and the Fed should make credit less expensive.

Except in this cycle. Before you start telling me about beliefs and ideology and the deficit, all one needs to do is compare federal spending during the 2001 recession cycle, with a Republican controlling the White House and a split Congress, to the present cycle. Apparently, the importance of reducing deficits and having a smaller government only applies when the GOP doesn’t control the White House…

The bottom line is that as a nation, and mainly because of Congress, we haven’t risen to the challenges we face. There has been little intelligence, no creativity, negligible cooperation, and an epic failure of civic responsibility.

There is plenty of blame to spread around, but not in equal measures to both parties. The Democrats have been timid and short-sighted in their approach. The Republicans have been all of that, but much, much worse. No wonder independents are the fastest-growing political affiliation, especially among the young. Count me as one among them, a former liberal Republican from the Northeast, embarrassed by what happened to the party of Lincoln.

Congress is a national embarrassment. That sentence is one we all have believed at one time or another to be true. But the sentence I never imagined I would ever write is this: Thank goodness for the Federal Reserve.

Barry Ritholtz is my favorite Recovering Republican.

Though he didn’t expand on the concept, that definition is easily the largest sector of expansion among those now listed as Independents when it comes to voter registration in these United States. And that, my friends, is one of the best reasons to scrap the out-of-date process we use for political primaries. The California model of open primary with the top two finishers getting a run-off is what we deserve. Comparable to what exists in much of the democratic world – and also allowing candidates independent of the two decrepit old parties.