Things fall apart. And the center not only did not hold, it couldn’t seem to get any attention whatsoever. Americans Elect, a lavishly funded “centrist” group that was supposed to provide an alternative to traditional political parties, has been a ridiculous flop.
Basically, about seven people were actually excited about the venture — all of them political pundits. Actual voters couldn’t care less.
What went wrong? Well, there actually is a large constituency in the United States for a political leader who is willing to take responsible positions — to call for more investment in the nation’s education and infrastructure, to propose bringing down the long-run deficit through a combination of spending cuts and tax increases. And there is in fact a political leader ready and willing (maybe too willing) to play that role; his name is Barack Obama.
So why Americans Elect? Because there exists in America a small class of professional centrists whose stock in trade is denouncing the extremists in both parties and calling for a middle ground. And this class cannot, as a professional matter, admit that there already is a centrist party in America, the Democrats — that the extremism they decry is all coming from one side of the political fence. Because if they admitted that, they’d just be moderate Democrats, with no holier-than-thou pedestal to stand on.
Americans Elect was created to appeal to this class of professional centrists, which meant that it was doomed to go nowhere. Because outside that class, the large number of people who believe in all the good stuff the centrists claim to favor are, you know, going to vote for Mr. Obama. The large number of people who don’t believe in any of that are going to vote for Mitt Romney. All Americans Elect could ever have been was a distraction; and it turns out not to have managed even that.
None So Blind
As those who will not see.
Eddie Lazear, the former chief economic adviser to President George W. Bush, had an op-ed published in The Wall Street Journal on May 20 about the fiscal cliff. Among other things, he pooh-poohs any concerns that sudden cuts in spending might hurt the economy in the United States.
He weasels a bit, but basically conveys the impression that there’s no evidence for Keynesian effects.
What this signifies to me is the politicization and corruption overtaking the economics profession. I’ll give Eddie the benefit of the doubt; he is probably just going by what his friends say.
But it’s truly awesome: in the midst of a crisis that has both provided overwhelming evidence for Keynesian views of fiscal policy and inspired a great deal of empirical work that also confirms the case for a Keynesian view, the profession’s right wing is just covering its ears and yelling “La, la, la, I can’t hear you.”
THIRD-PARTY EFFORT FAILS
Americans Elect, a nonprofit group created with the goal of alleviating the United States government’s two-party political gridlock, announced on May 15 that it had failed in its attempt to produce a viable, centrist candidate for the 2012 presidential election in November. The group’s aim was to select a third-party presidential candidate who would appear on ballots in every state, and the process was to have been completed through online votes.
Americans Elect acknowledged that the group’s complicated online nominating process had “failed to generate sufficient interest to push any of the candidates who had declared an interest in its nomination over the threshold,” Kenneth P. Vogel reported in an article for Politico.
Formed in April 2010, Americans Elect was able to win access to ballots in 29 states. It collected more than $20 million in funding from centrist donors and won praise from some commentators. “The goal of Americans Elect is to take a presidential nominating process now monopolized by the Republican and Democratic parties, which are beholden to their special interests, and blow it wide open,” the New York Times columnist Thomas Friedman wrote in July 2011.
Now many observers are casting the failure of Americans Elect as an inevitability, given the polarization of the nation’s two political parties. Chris Cillizza and Aaron Blake, reporters for The Washington Post, wrote on May 18 that the group’s inability to field a candidate “is yet more evidence that there is a cavernous gap between the idea of running a third party candidate for president and the reality of doing so — a gap no one has figured out how to bridge just yet.”
Will the E.C.B. Stop Greek ‘Bank Jog’?
The Financial Times’s Alphaville blog recently had a good write-up of what’s happening, and — implicitly — how the Greek euro exit may be approaching.
What’s happening now is a “bank jog” — Greeks are pulling euro deposits out of banks fairly rapidly, but not quite fast enough to be called a bank run. But where are the euros coming from?
Basically, banks are borrowing them from Greece’s central bank, which in turn must borrow them from the European Central Bank.
The question then becomes how far the E.C.B. is willing to go here; is it willing, in effect, to lend enough money to buy up the entire balance sheet of the Greek banking sector, given the likelihood that this sector will be left insolvent by Greek default?
Yet if the E.C.B. says no more, Greek banks stop operating — and it’s hard to see how they can be restored to operation except by ditching the euro and using something else.
And if that happens, surely depositors in other European countries will start their own bank jogs …
Mysterious Arrogance
Kevin O’Rourke, an economist at Oxford, takes on Lorenzo Bini Smaghi, a former member of the E.C.B.’s executive board, who argued in a commentary article published in the Financial Times on May 16 that Greek voters are being “irrational” in rejecting austerity. As Mr. O’Rourke wrote in “The Irish Economy” blog, that’s an odd position to take given that the policy in question has been an abject failure.
“Leaders in other European countries should surely be trying to offer Greek voters something that the status quo excludes: hope,” Mr. O’Rourke explained. “Instead, they are offering warnings about dire consequences, and statements to the effect that the rest of us can handle a Greek exit. You do have to ask: who is it that is being irrational here?”
I’d just add that as someone who follows this stuff fairly closely, Mr. Bini Smaghi of all people should be the last to lecture the Greeks on sense and sensibility. Few people have been as consistently wrong in their insistence that the initial Greek plan was feasible, that no debt restructuring was necessary or desirable, and that all skeptics about the various plans were just misinformed.
In a way, Mr. Bini Smaghi exemplifies the European elite in this crisis: moralizing, sententious, always wrong yet always convinced that supporters of the other side of the argument are ignorant and unwashed.
It’s an amazing thing to watch.
NATION AT A CROSSROADS
In an attempt to break a political deadlock, Greece will hold national elections on June 17 — a move that is widely seen as a referendum on the additional austerity measures tied to the nation’s recent bailout from international creditors.
At the end of May, public opinion polls showed that the conservative New Democracy party, which supports Greece’s remaining in the European Union and adherence to the terms of the $162.4 billion bailout, had a small lead over Syriza, a leftist political party critical of the austerity programs.
Recent news reports have indicated that while senior European officials have expressed hope that the Greek election will result in a working government friendly to E.U. policies, they have nevertheless advised leaders to prepare contingency plans in case Greece quits the union. Other officials have stressed the need to create stronger unity in the euro zone. “Now is a crucial moment in the history of the E.U.,” Mario Draghi, the president of the European Central Bank, said during a speech at a university in Rome in May. “[European monetary union] governments must jointly and irreversibly define a vision. European intervention needs brave leap of imagination.”
If Greece reverts to its former currency, the drachma, as some commentators presume, bank deposits would be automatically converted from euros, and they could depreciate rapidly. And since E.U. laws provide little recourse in case of an exit, some investors are moving capital out of the country. In a recent article for The New York Times, the reporter Stephen Castle wrote that some lawyers are giving their corporate clients in Greece blunt advice: “Remove cash and other liquid assets from Greece and prepare to take a short-term hit on any other investments."
