http://www.salon.com/news/feature/2009/04/16/cassandras/print.html
The prophets of doom
Meet the Cassandras, 14 economists, bloggers, politicians and
businesspeople of all political stripes who have become the most
strident critics of President Obama's stewardship of the economy.
By Andrew Leonard
Apr. 16, 2009
At a moment of economic stress greater than most living Americans have
ever experienced, it is no wonder that every move made by the
administration of President Barack Obama to address the multiple
simultaneous crises afflicting the economy has been greeted with howls
of criticism from the left, right and middle. Now is a fertile time for
a harvest of Cassandras, all preaching apocalypse. But it can be
confusing -- is the stimulus too big, or too small? Should banks be
allowed to fail, or should they be nationalized?
Hard answers are in short supply. But here's a guide to the prophets of
doom. We've identified them, attempted to ascertain the moment when they
first turned against the White House, and summarized the basic points of
their critique. We've included economists, members of the business
community, bloggers and, just for fun, two of the most anti-Obama
Republicans we could dig up.
THE ECONOMISTS
PAUL KRUGMAN: New York Times Op-Ed columnist, Princeton economics
professor, Nobel Prize winner
Earliest critique: Jan. 9, 2009
Without missing a beat, Paul Krugman went from being George Bush's most
passionate and prominent critic to fulfilling the exact same role for
Barack Obama.
Stimulus: Not nearly big enough to make up for the loss of potential
economic output. Relied far too much on tax cuts.
Banking plan: Geithner's plan has no chance of working. Defunct banks
must be seized and nationalized, the sooner the better.
Most hurtful quote: On the Geithner plan: "This is more than
disappointing. In fact, it fills me with a sense of despair."
GREG MANKIW: Professor of economics at Harvard University; former
chairman of President Bush's Council of Economic Advisers; visiting
fellow at the American Enterprise Institute
Earliest critique: Pre-inauguration, in the New York Times, Jan. 11, 2009
In the econoblogosphere, Mankiw plays a role for conservatives analogous
to what Paul Krugman provides for the left, albeit without the passion.
Stimulus: Mankiw is skeptical of fiscal policy, believing that tax cuts,
as opposed to spending, should be the fiscal instruments of choice. He
also fears the rise of protectionism that the Buy American stimulus
provisions threaten.
Banking plan: Mankiw's bottom line: The banks need to suffer more.
Specifically, he follows the influential libertarian economist Tyler
Cowen's argument (recently featured in the New York Times) that banking
creditors need to accept losses on their bad bets.
Most hurtful quote: "[T]he borrowing and debt imposed on future
generations will not be very different [from Bush], at least if the
numbers in the Obama administration’s own budget document can be trusted."
SIMON JOHNSON: Co-founder of the Baseline Scenario, a blog about the
global economic and financial crisis; Ronald A. Kurtz Professor of
Entrepreneurship at MIT's Sloan School of Management; senior fellow at
the Peterson Institute for International Economics; former chief
economist at the IMF
Simon Johnson expressly disavows being a populist, but outside of Paul
Krugman, few critics have been more unremitting or convincing in their
attacks on Obama's approach to the banking industry. His Atlantic
magazine blockbuster, "The Quiet Coup," paints a disturbing picture of a
United States government co-opted by Wall Street's elite.
Earliest critique: In a Joe Nocera New York Times column, Feb. 14, 2009
Stimulus: Needs to be bigger.
Banking plan: The banking and financial lobby "oligarchs" wield too much
power over Washington. Their stranglehold must be broken. Insolvent
banks must be placed into a government-mediated receivership. The
Geithner plan won't work.
Most hurtful quote: The last paragraph of "The Quiet Coup": "The
conventional wisdom among the elite is still that the current slump
'cannot be as bad as the Great Depression.' This view is wrong. What we
face now could, in fact, be worse than the Great Depression -- because
the world is now so much more interconnected and because the banking
sector is now so big. We face a synchronized downturn in almost all
countries, a weakening of confidence among individuals and firms, and
major problems for government finances. If our leadership wakes up to
the potential consequences, we may yet see dramatic action on the
banking system and a breaking of the old elite. Let us hope it is not
then too late."
NOURIEL ROUBINI: Professor of economics at New York University's Stern
School of Business; chairman of RGE Monitor, an economic consultancy
firm; former senior economist in the White House Council of Economic
Advisers under Clinton
At the height of the housing boom, no one was predicting an economic
collapse with more fervor than Nouriel "Doctor Doom" Roubini. As the
crisis kept deepening, he kept predicting it would get worse, and kept
being proved right.
Earliest critique: In Forbes, Feb. 12, 2009
Stimulus: Should have included fewer tax cuts, and needs to be better
coordinated with stimulus spending by other major economies.
Banking plan: Roubini believes banks in the U.S. and U.K. are largely
insolvent and should be nationalized. He initially decried the Geithner
plan as cumbersome and complicated in early February, but raised
eyebrows around the econoblogosphere in late March when he said that the
plan was viable.
Most hurtful quote: "The U.S. financial system is effectively insolvent."
WILLEM BUITERS: Professor of European political economy, London School
of Economics and Political Science; former chief economist of the
European Bank for Reconstruction and Development; author of the
Financial Times' Maverecon economics blog.
Buiters should get the nod as the most relentlessly caustic critic of
Bush, Obama and everyone else.
Earliest critique: Jan. 5, 2009, Financial Times.
Stimulus: Against it. Won't work, based on "Keynesian fallacies. The U.S
must "focus on getting credit mechanisms and the financial system going
again."
Banking plan: The Geithner plan is "financial shenanigans." The "zombie
banks" need to die.
Most hurtful quote: Very difficult to pick, because almost everything
Buiters writes is hurtful to someone. But this is typical: On housing:
"Myopia, opportunistic behaviour and insider protection: welcome to U.S.
home financing policy."
MARTIN WOLF: Associate editor and chief economics commentator of the
Financial Times; author of "Why Globalization Works" and "Fixing Global
Finance."
Wolf enjoys a special kind of credibility because he has gradually
transformed from a staunch defender of modern capitalism to one of the
most articulate critics of its failings.
Earliest critique: Jan. 13, 2009.
Stimulus: Without global coordination with other major international
economies, even a large U.S. stimulus won't be enough to restore prosperity.
Banking plan: Banking plans must be restructured, zombie banks must die.
The problem is not a lack of liquidity that can be solved by the
Geithner plan -- banks are insolvent.
Most hurtful quote: "I am becoming ever more worried. I never expected
much from the Europeans or the Japanese. But I did expect the U.S.,
under a popular new president, to be more decisive than it has been.
Instead, the Congress is indulging in a populist frenzy; and the
administration is hoping for the best."
WILLIAM BLACK: Associate professor of economics and law at the
University of Missouri - Kansas City; author of the popular book "The
Best Way to Rob a Bank Is to Own One: How Corporate Executives and
Politicians Looted the S&L Industry" (2005); former executive director
of the Institute for Fraud Prevention (2005-07)
Earliest critique: In the Huffington Post, "The Audacity of Dopes," Feb.
10, 2009.
Stimulus: The stimulus is too small.
Banking plan: The Geithner plan just serves the interests of the bankers
who created the mess in the first place. The banks should be put into
receivership, as the law requires. The Obama administration is helping
to cover up fraud by using the stress tests to allow the banks to
declare that they have sufficient capital.
Most hurtful quote: On the Geithner plan: "No, except that it's
trillions, if we're lucky, [that] will go under their plan to the people
that caused this crisis. And it will be the greatest looting of the
American people in our history and it will destroy the Obama presidency
if it continues."
DEAN BAKER: Co-director of the Center for Economic and Policy Research,
holds a Ph.D. in economics
Earliest critique: Jan. 13, 2009
Stimulus: Blames Democratic "moderates" for causing the stimulus to be
too small and thus resulting in higher job losses.
Banking plan: Strongly opposed to the Geithner plan, believes it won't
work, diverts taxpayer dollars to Wall Street. The government is giving
too much to the banks without getting enough control in return.
Most hurtful quote: "Treasury Secretary Timothy Geithner's latest bank
bailout plan is another Rube Goldberg contraption intended to funnel
taxpayer dollars to bankrupt banks, without being overly visible about
the process ... It is hard to understand this plan as anything other
than a last ditch effort to save the Wall Street banks. Unfortunately,
Mr. Obama seems prepared to risk his presidency on their behalf."
THE BUSINESS COMMUNITY
JIM CRAMER: Host of CNBC's "Mad Money" and co-founder of the
TheStreet.com; author and former hedge fund manager.
Earliest critique: On MSNBC's "Hardball," Jan. 28, 2009.
Categorizing Jim Cramer's opinions can be a challenge, because he can
change his opinions drastically from one day to the next. He has argued
that the stimulus needs to be 10 times as big as it currently is, but
also criticized it for pumping up the deficit. He supports taxing the
rich, but not right now.
Stimulus: The stimulus is a disaster and a fraud, has instilled fear in
the economy, and is far too small.
Banking plan: Cramer first supported the Geithner plan to get toxic
assets off the balance sheets of banks, but has flip-flopped several
times on Geithner himself. He is opposed to "lurching nationalization,"
and believes the banks will be profitable again if we can remain patient.
Most hurtful quote: (On the stimulus) "But Obama has undeniably made
things worse by creating an atmosphere of fear and panic rather than an
atmosphere of calm and hope. He's done it by pushing a huge amount of
change at a very perilous moment, by seeking to demonize the entire
banking system and by raising taxes for those making more than $250,000
at the exact time when we need them to spend and build new businesses,
and by revoking deductions for funds to charity that help eliminate the
excess supply of homes."
JIM ROGERS: Legendary investor, financial commentator and co-founder
with George Soros of Quantum Fund and creator of Rogers International
Commodities Index
Jim Rogers is a ubiquitous presence on the financial news networks, and
is never at a loss for a strong opinion. The ultimate advocate of a "let
the free market sort everyone out and only the strong survive" philosophy.
Earliest critique: August 2008: "We'll be worse off whoever is president."
Stimulus: Won't work because "the idea that you can fix a period of
excess borrowing and excess consumption by more borrowing and more
consumption to me is just ludicrous."
Banking plan: Will lead to a duplication of Japan's lost decade. "It's
exactly the same mistakes the Japanese have made. They haven't recovered
19 years later, neither will we in the United States." Would prefer to
see the banks allowed to go bankrupt.
Most hurtful quote: "The world is in serious trouble and American
politicians and European politicians are making it much worse. This has
a long way to go. I don't particularly like to say this but it is going
to be the worst recession since the 1930's."
THE BLOGGERS
YVES SMITH: Author of the popular financial blog Naked Capitalism since
2006; head of Aurora Advisors, New York-based management consulting firm.
It's safe to say that in the econoblogosphere Yves Smith is the
anti-Will Rogers: She has never met an Obama economic policy she liked.
Earliest critique: Dec. 8, 2008.
Stimulus: Too small, won't work without a thorough cleanup with the
financial system and an overhaul of financial regulation.
Banking plan: Will not work. Banks are insolvent and must be
nationalized immediately. Obama's efforts to fix the financial system do
not deal with the "opaqueness and complexity" of the instruments that
started this mess.
Most hurtful quote: "I cannot recall a major U.S. policy initiative
being met with as much immediate revulsion as the so-called Geithner
plan. Even the horrific TARP, which showed utter contempt for Congress
and the American public was in some ways less troubling."
BARRY RITHOLTZ: Author of financial blog the Big Picture; regular
commentator on CNBC, Bloomberg, Fox and PBS; CEO and director of Equity
Research at Fusion IQ, an online quantitative research firm
Barry Ritholtz has ridden his blog's huge popularity to a bookstore near
you. Keep your eye out for "Bailout Nation."
Earliest critique: Jan. 29, 2009
Stimulus: Too small.
Banking plan: Will not work. Nationalization in the form of "prepackaged
Chapter 11 bankruptcy reorganization is the fastest way to fix the
banking system.
Most hurtful quote: In response to Geithner's statement that "We have a
financial system that is run by private shareholders, managed by private
institutions, and we'd like to do our best to preserve that system,"
Ritholtz exploded: "No! Defending these idiots was your old gig. In the
new job, you no longer work for the cretins responsible for bringing
down the global economy. Please stop rationalizing their behavior, and
preserving the status quo!"
THE POLITICIANS
MICHELE BACHMANN: Member of the U.S. House of Representatives,
Minnesota, 6th District
Earliest critique: Dec. 19, 2008
When you're talking House Republicans, you're not going to find too many
nice things said about Obama's economic policies. But no one has taken
the criticism to further extremes than Bachmann, who is convinced that
the new White House is ushering in an era of "economic Marxism."
Stimulus: Opposed. Advocates cutting taxes and spending instead.
Banking plan: Opposed. Part of Obama's final leap to socialism.
Most hurtful quote: "I think what we're seeing is an implementation of
all of the radical ideas that Bill Ayers and Ward Churchill, the radical
ideas that we've seen on some college campuses, they're now being
implemented in our government and they're taking a nefarious route ...
If you look at FDR, LBJ, and Barack Obama, this is really the final leap
to socialism."
RON PAUL: Member of the U.S. House of Representatives, Texas, 14th
District; failed presidential candidate, 2008
Ron Paul gets special credit for being the elected politician who has
most consistently warned that economic disaster lay around the corner.
He was bound to be right, sooner or later.
Earliest critique: Nov. 5, 2008
Stimulus: Since nearly all government spending is bad, fundamentally
opposed to fiscal policy. Stimulus spending will only further aggravate
the national debt, and turn the recession into a depression.
Furthermore, it is unconstitutional to expand government so greatly.
Banking plan: Ron Paul once introduced a bill calling for the Federal
Reserve to be abolished, so it's safe to say he does not fall into the
nationalize-the-banks camp. The banks should live or die by the free market.
Most hurtful quote: "It is a strong ideological position to believe that
government can run things because if it isn't socialism, it's fascistic
and it's inflationary and it's control, and it's loss of liberty ..."
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