Smile, Darn Ya, Smile!

Gregg Easterbrook’s prescription for healing the aging economy? Optimism! After noting that we’ve had two rounds of tax cuts and and two rounds of stimulus spending, all of which have failed to jump-start the economy, he remarks:

That means more than $7 trillion in borrowing for the economy in just five years, roughly the amount per capita, in today’s dollars, the United States borrowed during World War II. Amazingly, some commentators call this “austerity.” Whatever the label, the Keynesian borrow-to-spark-demand formula has not worked. It is time to accept that more government spending is not the solution.

If more borrowing or more tax cutting aren’t what the economy needs, what is? Optimism. Human psychology is a bigger force in economics than current policy debate acknowledges.

In 2005, many fundamentals of the economy were worrisome – a housing bubble, highly leveraged banks and investment banks, a profusion of liars’ loans. Yet the economy boomed, partly because optimism was universal.

In 2011, many fundamentals of the economy are sanguine – high corporate profits, no resource shortages, low interest rates, ample money supply, low international tensions. Yet the economy is flatlined, partly because there is little optimism.

In reflecting on my own circumstances, I have plenty of reasons for optimism. I have all of my own hair and teeth. I’m fitter than many men half my age. I take no medications. Barring the things about which little can be done and I find tolerable I’m in extremely good health.

I am mentally more acute, if anything, than I was ten years ago. As Camus paraphrases the conclusion of Oedipus at Colonus, “Despite so many ordeals, my advanced age and the nobility of my soul make me conclude that all is well.”

Blogging may play a part in that. For me it’s a form of therapy or mental gymnastics, like sudoku or a crossword puzzle.

Our economic circumstances are fine, too. We own our own home and are planning to stay there until we’re carried out feet first (the addition we put on several years ago made our home completely liveable on the first floor alone). Barring some catastrophe, in ten years our income will probably be higher than it is now albeit from different sources and our present income places us easily in the top quintile of income earners.

I recognize that many are not nearly so fortunate. How can they be helped?

As I scan the transcripts of recent speeches and interviews by our leaders, the persistent message I take away from our political leaders is one, ultimately, of pessimism. Does that help or hinder? I think the latter. I wish they’d find some way to split the difference between an out-of-touch and Pollyannaish optimism and overwhelming doom and gloom. Tenacity and confidence in the face of adversity, perhaps. I see the tenacity but not the confidence.

15 comments… add one
  • Icepick Link

    How can they be helped?

    Just put on a happy face, damn you!

  • Pretty much my reaction to his column, Icepick, hence the title of my post.

  • Icepick Link

    Ys, but you clearly don’t believe. So smile harder!

  • jan Link

    Having a PMA, a positive mental attitude, is helpful. If nothing else it can simply be a bromide for the soul. However, there is a tad more involved in the calculus of ‘healing’ this economy than merely having a ‘smiley’ patina decorating one’s face.

    Businesses rely on weighing fiscal decisions based on clarity of the market ahead of them. If it is too fogged in by pending government regulations, taxation, leadership criticism or excessive demands, then they are more likely to drop anchor and wait until these conditions lift.

    That’s what is holding back much of the vitality and growth in this country, IMO. Financial risk is just not a realistic option for many corporations/small businesses, unless they are one of the chosen few who are receiving loan guarantees from an obliging government.

  • michael reynolds Link

    A generation raised in an environment where risk is so aggressively minimized may not be capable of taking risks. At some point in the last few decades it became accepted wisdom that the most important thing in life was the continuation of life. It may have been the anti-cigarette movement begun in the 60’s, which led to a host of other efforts — seatbelts, helmets, endless medical testing — all of which turn on the unexamined assumption that we are here on this earth for the purpose of remaining here on this earth.

    I think we’re here to work, learn and gain wisdom. Others are welcome to their own preferences in this regard. But those philosophical choices have consequences. If you believe the central goal of life is to cling to life — even at the expense of eating miserable food, exercising obsessively, submitting to endless numbers of medical probes, and shunning all vice — you’re probably not the kind of person who thinks, “Hell yeah, I’ll max out my credit cards and bet it all on starting a business.”

  • Drew Link

    One wonders how much of the gloom and doom is part of the requisite stance of politicians to justify government action. I’ve never heard a pol run on the platform: I’m gonna sit on my arse and do nothing, but if something comes up I’ll spring into action.

    I’ve never feared government shudown, or dramatic defunding. The essentials will be attended to. And putting men and women of zeal, but also capable of effecting potential adverse consequences, on the sidelines for awhile would be an interesting experiment.

    “Businesses rely on weighing fiscal decisions based on clarity of the market ahead of them. If it is too fogged in by pending government regulations, taxation, leadership criticism or excessive demands, then they are more likely to drop anchor and wait until these conditions lift.”

    And this is exactly a point I’ve made repeatedly, and a stance I’ve heard from small businessmen repeatedly. But better get your armor suit on……..

  • So smile harder!

    The beatings will continue until morale improves.

  • steve Link

    ” If it is too fogged in by pending government regulations, taxation, leadership criticism or excessive demands, then they are more likely to drop anchor and wait until these conditions lift.”

    Once again, business had utopia in the early 2000s. Low tax rates, deregulation and, even better, an administration that was not going to enforce regs. What we got out of that was very weak job creation. Unemployment stayed down because we had people leaving the job market. Growth was in the financial sector (fake) and in construction (bubble). If we lower your taxes some more, will it work this time? Why? If we put the GOP back in office so you can stop having regs enforced again, will you create jobs this time? Why?

    Steve

  • PD Shaw Link

    In the words of that immortal buddy, Samuel J. Snodgrass, as he was about to be lead to the guillotine . . . Make ’em laugh.

    Or in the words of Brian Cohen . . . Always look on the bright side.

  • jan Link

    Once again, business had utopia in the early 2000s. Low tax rates, deregulation and, even better, an administration that was not going to enforce regs. What we got out of that was very weak job creation.

    Steve, One legitimately might be able to postulate that we should have had a business utopia based on some economic perks in the early 2000’s. However, there were other factors that fed into this time period which negatively effected the economy’s growth —> the fiscal chaos following 911, coming into a recession after the dot com bust; the whole Bush/Gore political fiasco; the growing unease surrounding the sub-prime exploitation, where so many in the real estate market were waiting for the other shoe to drop — just to name a few.

    Although our current economic environment is full of woes, they are of a different composition than the earlier part of the last decade. We’re flat on our face, with regulations coming out of every government orifice. So, to back-pedal on some of these restrictions, coupled with enacting a genuine tax reform serving to reassure business that government is behind them, rather than waiting ahead with a redistribution-of-the-wealth trip-wire out in front of them, would, IMO, add fuel to this economy, stimulating more growth.

    It may have been the anti-cigarette movement begun in the 60’s, which led to a host of other efforts — seatbelts, helmets, endless medical testing — all of which turn on the unexamined assumption that we are here on this earth for the purpose of remaining here on this earth.

    Michael, I think you have a valid point about insulating ourselves too much against taking risks. Many of the people today seem to have no aspiration higher than ones that are self-centered, self-contained and self-serving. Older people cling to longevity, while younger ones creatively find ways to minimize effort in their lives. The human by-products of such a generational mix, keeping as much risk or inconvenience as possible at bay, is sitting still and having very little movement around the gameboard of life.

    I’ve never heard a pol run on the platform: I’m gonna sit on my arse and do nothing, but if something comes up I’ll spring into action.

    Drew, didn’t Warren Harding basically do this in 1921 — just let the free market sort out the downward economy, so it was able to recover fairly quickly without the involvement of government intervention?

  • samwide Link

    “A generation raised in an environment where risk is so aggressively minimized may not be capable of taking risks.”

    Heh. That just reminded me of the story of the guy about to be hung. He steps onto the trapdoor of gallows and it’s wobbly. He says, “Is this thing safe?”

    Folks, we’re all standing on a wobbly trapdoor. Life ain’t safe.

  • steve Link

    The 1921 recession is not well understood. If you want to see what data is available to explain what happened, follow links. In short, the 20s should be seen as a series of minor recessions leading up to the Depression. If you want to laud the policies followed during that period, feel free.

    http://www.angrybearblog.com/2010/04/1920s-depression-glenn-beck-thomas.html

    http://www.angrybearblog.com/2010/04/1920s-depression-glenn-beck-thomas_19.html

    Steve

  • Icepick Link

    The beatings will continue until morale improves.

    Fuckin’ A, Bubba. Now you understand.

  • Drew Link

    jan –

    “Drew, didn’t Warren Harding basically do this in 1921…”

    You are a better historian than me.

    steve used to post some good stuff. Now its all just weak partisan crap.

  • Icepick Link

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