The Blue State Blues

A couple of weeks ago, Tom Blumer wrote at Pajamas, “Very Different Economic Times in Red vs. Blue States“; certainly the very blue “parentheses states”, as Tom Wolfe described them, have been having a tough time making a go of it, as these two headlines on the Drudge Report indicate:

Or as a recent City Journal article put it, “Houston, New York Has a Problem.”

Meanwhile, Jennifer Rubin asks, “What’s The Matter With Harry?”

One of the more curious — but not unprecedented — incidents in the last couple of weeks involved Harry Reid. The Wall Street Journal explains:

Just as U.S. credit markets this week were close to the edge of the cliff, threatening capital-starved businesses large and small, Senate Majority Leader Harry Reid stepped in front of reporters and offhandedly announced:

“One of the individuals in the caucus today talked about a major insurance company. A major insurance company — one with a name that everyone knows that’s on the verge of going bankrupt. That’s what this is all about.” The next day, share prices fell sharply across the insurance industry. Let us stipulate we do not think it necessary for even U.S. Senators to understand the internal mechanics of credit default swaps and collateralized debt obligations. But if we have learned anything amid the panic over Bear, Lehman, Merrill and adventures in naked short-selling, it is that rumors can obliterate economic value, instantly.

But this wasn’t the only such incident:

It calls to mind Senator Chuck Schumer’s public suggestion in July that troubled IndyMac Bank “could face collapse.” It did, after a deposit run. Senator Schumer said criticizing his action was akin to blaming “the fire on the guy who called 911.” The nation’s shareholders would sleep better at night if some Members of Congress enrolled in Arsonists Anonymous.

All of this raises the question: are they trying to make things worse in the hopes of furthering their party’s election prospects? Similar suspicions were raised when Nancy Pelosi seemed to inflame her partisan opponents and resist any effort to whip her own caucus on the first failed bailout bill vote. Certainly as the financial crisis has intensified their electoral prospects have brightened.

But if we assume that they “meant no harm” we are left with an equally troubling conclusion: they are reckless and ignorant about the ways in which their words and actions may impact a fragile economy. Or to put it differently, their first consideration is invariably “How do we maximize the public’s perception that things are rotten?” rather than “What can we do to contain the conflagration?”