The New York Times’ David Leonhardt goes off on one of the papers’ frequent jeremiads on the evils of consumer spending, and how this time, it’s sure to be all over now, baby blue state:
But the real culprit — or at least the main one — has been hiding in plain sight. We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making.
The auto industry is on pace to sell 28 percent fewer new vehicles this year than it did 10 years ago — and 10 years ago was 2001, when the country was in recession. Sales of ovens and stoves are on pace to be at their lowest level since 1992. Home sales over the past year have fallen back to their lowest point since the crisis began. And big-ticket items are hardly the only problem.
The Federal Reserve Bank of New York recently published a jarring report on what it calls discretionary service spending, a category that excludes housing, food and health care and includes restaurant meals, entertainment, education and even insurance. Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover.
As blogger William Teach writes, “Missing is ‘Obama is clueless, doesn’t understand how the economy works, and has surrounding himself with advisors that still think they are in a far left college bull session:'”
See? Lilliputian consumer spending is not a symptom or result, but a cause. Which, let’s be honest, at this point, two years from when “economists” declared the recession over, could be considered a cause of the recession continuing on at the deepest level since the Great Depression. And, if that’s so, wouldn’t it make sense to enact policies that leave people with more of their own money, especially those evil rich people who have more buying power? Actually lower income and capital gains taxes, sales tax and property tax, at least for, say, 5 years? Increase consumer choice, like with incandescent light bulbs? Stop groping people at the airport who do not fit the profile of an Islamic terrorist? Stop putting more burdens on the auto industry which drives up costs? Let Big Oil and Big Coal (again, I’m not a fan of coal) do their jobs on American soil? Stop mandating the use of food as fuel? Heck, let little kids run a lemonade stand without a permit? All those, and others, would make sense, right? Au contraire, Rabbit!
THE notion that the United States needs to begin moving away from its consumer economy — toward more of an investment and production economy, with rising exports, expanding factories and more good-paying service jobs — has become so commonplace that it’s practically a cliché. It’s also true. And the consumer bust shows why. The old consumer economy is gone, and it’s not coming back.
In simple words, what seems to be suggested is an economy run by government (investments) with everyone at the same blue collar income level doing blue collar jobs (not that there is anything wrong with blue collar jobs, they just aren’t for everyone): in other words, their old buddy, communism.
Teach’s post is headlined, “NY Times: This Prolonged Recession Is The Fault Of You Consumers.” Which wouldn’t be the first time a paper with that name made such an accusation, albeit on the other side of the Atlantic. The Times of London actually did run a Scrooge-like article on the eve of Christmas 2009 titled, “Thrifty families accused of prolonging the recession.”
Leonhardt’s column doesn’t go quite that far. But in addition to its hints of what Virginia Postrel would call “Depression Lust,” it’s yet another example of the strange push-pull mindset that’s often at work inside the Times. The advertising department is constantly looking for new companies to advertise expensive goods to Manhattanites, and even to “the dance of the low-sloping foreheads,” as another Timesman is wont to say, out there in the hinterlands. And yet, many who work inside the Times HQ may not realize it, but at the base of their office building, at street level, are countless…what do they call themselves again?…retailers. Yes! that’s the word.
In a way, Timesmen have the same blindness towards business and consumers that Rod Dreher once wrote about how the average New York paper sees the town faithful. (For the Times, this would also include those who celebrate religions other than, or in addition to, leftism itself.) Or, to be more accurate, doesn’t see them:
True story: I once proposed a column on some now-forgotten religious theme to the man who was at the time the city editor of the New York Post. He looked at me like I’d lost my mind. “This is not a religious city,” he said, with a straight face. As it happened, the man lived in my neighborhood. To walk to the subway every morning, he had to pass in front of or close to two Catholic churches, an Episcopal church, a synagogue, a mosque, an Assemblies of God Hispanic parish, and an Iglesia Bautista Hispana. Yet this man did not see those places because he does not know anyone who attends them. It’s not that this editor despises religion; it’s that he’s too parochial (pardon the pun) to see what’s right in front of him. There’s a lot of truth in that old line attributed to the New Yorker’s Pauline Kael, who supposedly remarked, in all sincerity, “I don’t understand how Nixon won; I don’t know a soul who voted for him.”
That’s a bit of a bastardization of the infamous Kael quote; what she apparently really said was:
“I live in a rather special world. I only know one person who voted for Nixon. Where they are I don’t know. They’re outside my ken. But sometimes when I’m in a theater I can feel them.”
Similarly, the average Timesperson vaguely knows that consumers consume; particularly when they’re told to cut 250 words out of their latest article, because an Armani or Mercedes ad needs to be shoehorned into the right-hand quarter of page A-9. And yet the Times’ writers are constantly churning out college-thesis-style articles on the evils of consumerism, or the latest person who chucks it all and decides to live without their fridge or go full Sheryl Crow for a year. (Funny how those who decide to permanently go without another form of paper are rarely mentioned by the Times.)
Of course, as often with the Times, ideology trumps reality in more concrete forms. Leonhardt writes:
The easy thing now might be to proclaim that debt is evil and ask everyone — consumers, the federal government, state governments — to get thrifty. The pithiest version of that strategy comes from Andrew W. Mellon, the Treasury secretary when the Depression began: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Mellon said, according to his boss, President Herbert Hoover. “It will purge the rottenness out of the system.”
History, however, has a different verdict. If governments stop spending at the same time that consumers do, the economy can enter a vicious cycle, as it did in Hoover’s day.
Blogger Vox Day responds:
The minor point that David Leonhardt omitted from his article is the small fact that Hoover didn’t listen to Mellon. Mellon’s strategy was never enacted. Hoover overrode the objections of his “liquidationist” Secretary of the Treasury and embarked upon a spending program that was increased faster, in percent of GDP, than anything that FDR subsequently did. The failure of Herbert Hoover was not a failure of austerity, it was the same failure of Keynesian interventionism that FDR repeated.
And as Amity Shlaes wrote in The Forgotten Man, Hoover began spending almost immediately after the crash:
At the beginning of that same month, November, Hoover received a confidential report from Fed officials that the market readjustment was not completed but would instead last months more. The mood was shifting to crisis, and Hoover felt energized—another rescue opportunity in the offing. He mulled over foreign policy, preparing an Armistice Day speech. Even as he moved to act, he savored the situation, commissioning the famed portraitist Leonebel Jacobs to produce pictures of himself and Lou. “The primary question,” he later wrote, “at once arose as to whether the President and the federal government should undertake to mitigate and to remedy the evils.” His conclusion was that yes, this was a job to be taken on: “we had to pioneer a new field.”
Right away—in November 1929—Hoover pushed to expand an existing public buildings program by the healthy sum of $423 million on the theory that the spending would boost the economy. In Washington, builders put up great structures—a new agriculture department, for example. He asked his secretary of commerce, the man who held his old job, to establish a national system of cooperation among the states in public works projects. When Congress convened in December, the president called for “the expansion of the merchant marine, the regulation of inter-State distribution of electric power, the consolidation of railroads, the development of public health services, and departmental reorganization for greater economy.”
But this was only the beginning. This time, he thought, perhaps the president could broker the recovery. “Words are not of any great importance in times of economic disturbance,” he announced. “It is action that counts.” The problem with the economy, at least as it was evolving, was mostly a monetary or an international one—Germany was already in depression. Yet at first Hoover focused on fixing it with domestic fiscal tools. And before a year would pass, Hoover had done damage that did matter on three fronts: by intervening in business, by signing into law a destructive tariff, and by assailing the stock market.
As Vox notes, “There are 112 comments from the educated readers of the New York Times following the article. Not a single one points out this fundamental error.”
Update: Michael Barone quotes a recent post from Megan McAardle of the Atlantic to send a dispatch himself: “Memo to NYT: Hoover did not cut spending.”
(Bumped to top.)