PIMCO co-CEO Mohammed El-Erian remarks on the political situation here and in Europe:
Like an earthquake rocking a house, the 2008 global financial crisis exposed a shaky new foundation underpinning Western economies. Just look at Europe, where cascading debt crises have made paupers of once-proud countries, where long-term joblessness and high youth unemployment have dulled the hopes of both recent university graduates and those nearing retirement, and where unusually wide income inequality has heaped social unrest atop financial turmoil.
This is part of what my colleagues at Pimco and I labeled a few years ago as “The New Normal.” But something has changed as this crisis has continued. The systemic instability we saw then has continued to morph, fast and furious: The vicious feedback loops that turned bad economics into bad politics now convert bad politics into even worse economics, further threatening an already tenuous economic future.
and warns of an impending populist backlash:
Sadly, neither Obama nor Romney has yet offered a meaningful, forward-looking economic reform program to address problems such as a malfunctioning labor market, unsustainable public finances, a broken credit system, inadequate infrastructure, and a lagging education system. The risk for the United States, as well as the global economy, is that a lack of vision and political courage ends up leading to even greater economic disappointment and financial instability, bringing with it the social unrest we’ve seen in so many other countries over the past 18 months. Occupy Wall Street and the Tea Party may have somewhat fizzled, but populist anger could return with a vengeance.
I would genuinely like to know Mr. El-Erian’s operative definition of “populist”. I also wonder what form he thinks that a populist backlash could take in the United States.
I have no idea whatever about the political mood in Europe but here in the U. S. there are as yet few signs of any backlash. Mitt Romney, former Massachusetts governor and son of a former Michigan governor and presidential aspirant, is no populist. Neither is President Obama. At least not by any definition of populist that I understand. To me that implies that for the next four years at least there’s not much risk of a wave of populist fervor overcoming our political apparatus.
What does he envision? The Terror? I’m baffled.
What would ‘populist’ look like in America? How about President Glenn Beck.
I don’t really see any signs of that being more likely, do you? Let’s assume for a moment that Bill Gross’s and El-Erian’s thesis of “the New Normal” is correct. Does it look like that’s pushing us in that direction?
As I say, I don’t see it.
According to wikipedia populist refers more to those who support the rights of the common man over the elites or business. The free online dictionary, though, has a more neutral definition in saying that it means ” A supporter of the rights and power of the people”, not really applying any class differentiation.
Icepick’s post about Glenn Beck, whether you love or hate the man, fits the definition. And, in turn, Glenn Beck has been a mouthpiece for The Tea Party and has co-hosted rallies with the likes of Sarah Palin.
Taking it a step further, in the current election choices we have, who do you think lines up more with the folks I’ve just mentioned — Obama/Biden or Romney/Ryan?
Basically, neither. The hyperventilating of partisans in the press and blogosphere notwithstanding Paul Ryan is not a populist, not even a Tea Party guy. They’re confusing him with Rand Paul and I think they’d benefit by putting the Ryan budget and the Rand Paul budget side by side.
As any number of people have remarked, Paul Ryan is part of the reformist wing of the Republican Party not the Tea Party/rejectionist wing.
This is not to say that I’m a Ryan supporter. I think his suppositions on how we can accomplish balancing the budget are wrong.
Quite frankly, I don’t understand the lack of understanding about the populist message of scolding Joe the Plumber about” spread the wealth around'” the general “equality of result vs opportunity” that is a staple of the left, “you didnt create that” or even yesterday’s Obama speech.
It may not be actionable in the sense of public violence, but voting your neighbors paycheck to yourself is what Obama is all about, just not at gunpoint. When half the people pay all the income tax based upon politically successful “elitist” or “fairness” arguments and notions of depriving the general population of their supposed just rewards, although not earned, you are in a populist state.
Nah. He wants you to vote your neighbor’s paycheck to committees of bureaucrats in Washington. On your behalf, of course. There’s no danger with either party redistributing from the top 10% of income earners to the bottom 10% of income earners. They want to redistribute within the top 10%. If that’s populism, what’s elitism?
Populism correlates strongly with violence and we haven’t seen that yet.
Dave
I’m curious what person today you would say fits the definition of ‘populist.’
They’re confusing him with Rand Paul …
Where do you get that idea from? The tea party movement has enthusiastically embraced Paul Ryan, his plan (love/hate it), what they see as someone who is politically different and refreshing from the old crowd on the Hill.
Even Erskine Bowles, from the opposite side of the aisle, has complimentary observations about the new VP candidate. Ryan actually gets quite a few solid reviews from moderate/conservative dems, center and right of center people, which doesn’t happen often these days.
Does it look like that’s pushing us in that direction?
The new normal has UE-3 around 11%, if computed reasonably. That’s one in nine people that want work not being able to find it, with many more wanting more work or better work than what they have and being unable to find it. And THAT is in the middle of a ‘recovery’ that the politicians BRAG ABOUT.
So yes, I don’t think it will take much more for someone that stands outside of the normal party structure (and Beck has been complaining about Republicans since 2006 that I’m aware of) to take center stage. Glenn Beck is as good a candidate as any for the role, plus he has a certain amount of religious fervor.
Dave
You will get no quarrel from me about rent seeking from “rich” large corporate, or “rich” medicine, or “rich “legal…….
And you know my views on small vs large…
But you can’t have it both ways. You can’t advocate government at anything like the size and influence it is today…..it needs to be a cool 30% plus smaller, and then ask, “son of a gun, you mean the powerful twisted it to their favor?” That would make you a fool. You are decidedly not a fool.
Secondly, when my neighbor pays no income tax, and those like me pay 80% of it, spare me the bullshit diversionary argument.
Despite all the crap about “fairness” when we have no shared tax liability, we will vote our neighbors pocketbook in our favor. It avoids a felony gunpoint robbery charge……
Vs Mr. Obamas
What I’m saying is that’s what we’re going to get with these political parties. We need to open a new can of politicians. This bunch is past their sell-by date.
What I’m saying is that’s what we’re going to get with these political parties. We need to open a new can of politicians. This bunch is past their sell-by date.
And yet, you will reward them by going out and voting for some of them this time around. Then you will be surprised next time around when offered the same craptacular choices.
But Dave,
This Paul Ryan guy is the closest thing Ive seen in years to honesty, honest analysis, sound analysis, and dealing with it.
If you mean what you say, you should be rejoicing. This should be your hero. An honest fiscal and philosophical debate. Let’s go. Let the better argument win.
But look at the left, already. He wants to kill grandma. How can you stand for this?
“This Paul Ryan guy is the closest thing Ive seen in years to honesty, honest analysis, sound analysis, and dealing with it.”
His budget that calls for total discretionary spending of 3.5% GDP? His budget that refuses to say what it would cut, besides Medicaid? Right.
We are not getting real budget/tax reform until we have to have it. To a large extent, what we embrace will be a result of the musical chairs of politics.
Steve
Drew, as I’ve said, I think that his proposals are well-intentioned but objectively incorrect. For example, his healthcare/Medicare reform proposal makes two IMO incorrect assumptions: a) that healthcare costs can be controlled while maintaining a reasonable level of public health by inducing consumers to consume less and b) that in the face of declining revenues providers will willingly take pay cuts.
Yes, consumers will consume fewer healthcare services. And the prices of the services will rise to make up for the revenue shortfall. Lather, rinse, repeat.
What’s forgotten is the reason that Medicare was enacted in the first place: it was an objective fact that seniors were being impoverished by healthcare costs that rose faster than their incomes did.
Similarly for social insurance and balancing the budget: good intentions, bad assumptions which fly in the face of actual historical experience.
But Steve
You just throw up sand in our eyes and say “it’s not possible” making the political obfuscation of the last 40 years possible. Your party has no fiscal credibility. None. Not today, or in 40 years.
My party has betrayed me, but may be coming back. I’m betting on the two guys now. I hope I’m right. I hope so much.
But I know for sure Obama and his embarrasing dolt are wrong. That I know for sure. (Just to be clear, I dont think Obama is stupid. Biden is stupid. Obama is just inexperienced, incompetant and in over his head as an executive, but not in any way stupid. Look at the aging in just 4 years. Ive seen this before in our company CEOs. He’s out of his league. He’s a mess. He knows it. Cant admit it, for obvious reasons. But he’s a mess. A bit scary.)
Reality sucks.
Dave
I hear your point, but you insist that health care services do not behave economically.
You insist that providers will either behave fraudulently (and I will never get forget Steve’s comment that they would just increase services to make up revenues, which I chalk up to the heat of the moment and a brain cramp, because I do not attribute such crass motives to Steve), or that appropriate health care will dinimish in the face of price decisions. I reject that categorically.
No other insurance construct suffers from the ills you cite. Home, auto, liability etc. Only healthcare. And it is only because it is constructed not as healthcare insurance, but as a transfer of routine healthcare economic liability. It’s not insurance. You construct a straw man of health care bankruptcy because it’s suits your argument, and then tell us health care reform is impossible because we will all go down the toilet if we have reform.
Bad assumptions lead to bad policy.
No, I believe that health care services behave economically. But it’s an oligopoly. No “free market”.
Over-consumption, defined as consumption of services beyond what is required to maintain a reasonable level of health, exists but IMO it’s a rounding error. Most people just get the tests and have the procedures performed that their doctors order.
steve wrote: His budget that calls for total discretionary spending of 3.5% GDP? His budget that refuses to say what it would cut, besides Medicaid? Right.
Yeah, but it is STILL better than any of the other dreck put out by ACTIVE politicians. (The Pauls may be excluded from this, but they’re so far out on the fringe it is a minor miracle that they got elected.)
It’s still a big stinking pile, though.
“. And it is only because it is constructed not as healthcare insurance, but as a transfer of routine healthcare economic liability. It’s not insurance.”
Always remember the demographics of medical spending. 50% of people account for 3% of our spending. 10% account for about 65% of spending. What that means is that most health care spending really is insurance. The routine care, the kind that makes up 3% (ok actually a bit more) of our spending is not really insurance, but it does not account for much of our spending. (link to one of the most basic charts you should keep in mind when talking health care.)
http://theincidentaleconomist.com/wordpress/atul-gawande-on-big-medicine-and-the-rise-of-chains/
Steve
“No, I believe that health care services behave economically. But it’s an oligopoly. No “free marketâ€.”
OK, fair enough. Now what?
If you tell me fee for service, as is your won’t, you are telling me docs are corrupt motherfuckers. I have a problem with that. Docs aren’t generally schmucks. Some yes. Most no.
If you tell me people take a ” free lunch,” on someone else’s nickel, let’s talk.
“This Paul Ryan guy is the closest thing Ive seen in years to honesty, honest analysis, sound analysis, and dealing with it.”
Thank goodness for Drew!
The last couple days of bio and profiling of Ryan have just raised my already high opinion of him. He is a straight arrow in his belief and delivery of what he sees as a way to get us out of this fiscal labyrinth. He at least has the balls to have a plan, which, if elected can be refined. He also talks about ‘truth telling,’ something extinct in DC. And, he and Romney are excited and motivated to something different, creative, and involving the people’s energy and cooperation in getting this country off the wrong tract and onto the right one.
Tell me, what kind of plan did Obama ever offer in his campaign era of 2008? He electioneered on closing Gitmo, derided raising the debt ceiling, said he would half the deficit, that he would be transparent (posting legislation on the internet), that there would be no lobbyists welcomed (hello Sylandra), that he would bridge racial/political divisions…what promises did he keep? What great economic, or for that matter, exceptional job plans has he offered? Both attempts have been weak efforts and have miserably failed. His budget received no votes. His job’s plan waffled around the Reid Senate, until they could manipulate the vote where just enough dems voted against it where it failed (wiping the upcoming 2012 election sweat off dem’s brow). But, because republican’s numbers were greater, voting against it, they could be slammed for not wanting a job’s plan. What a head fake! Furthermore, where has Obama even had the guts to even admit entitlement programs are in trouble?
And, you guys are nitpicking someone who at least addresses the issue!!!! You may find holes in it. You may not think it all pencils out as some wonks on this site prefer. But, all those flaws can be remedied as long as there is someone out there who is aware of and publicly admits how much we desparately need to do something about these problems. After all, these Romney/Ryan plans are but lobs over the bow of the populace heads, saying “look out, we need to do something NOW!”
Get real!
Jan, Romney wants to cut taxes and raise defense spending. Ryan’s plan has considerable problems with overly optimistic growth assumptions, problems with his healthcare proposal and generally assuming that someone in the future is going to fix the problems with his plan. Most importantly of all, they are proposing that we can have our cake and eat it too, while simultaneously achieving slimmer, trimmer thighs.
The problem with this is that tough, unpleasant choices will need to be made in the near future. The politicians will HAVE to lay the groundwork for what they believe needs to be done or the public will reject them. These pols are NOT doing that. They’re peddling hope and change as surely as Obama was four years ago. Do they have some plans? Yes. Do those plans hold water? No.
Explain to me how we are going to keep increasing spending on everything, accelerate spending on defense, cut revenues and STILL balance the budget?
We have no problems that can’t be overcome. But we don’t have any problems that can be overcome simply by magical thinking.
Explain to me how we are going to keep increasing spending on everything, accelerate spending on defense, cut revenues and STILL balance the budget?
At least the republicans are making noises in the right direction, and bringing up uncomfortable issues to be discussed, which the dems are not doing. I think we have a better chance to experience some of the needed fiscal pain with the R’s than with the D’s who seem to be going full speed ahead in the wrong direction.
I also think that no politician, who wants to do real reform, is going to lay out all their plans in full detail, beforehand. It’s like someone graphically discussing a serious operation — the gruelsome minutia — and then expecting the patient to be undergoing the knife with glee.
@steve
… 10% account for about 65% of spending. …
Unless services to that 10% are cut substantially, I do not see how the problem will be fixed.
I do think that the 3% benefit from the equipment and personnel needed to service those 10%. You would know better than me, but I know it is a substantial amount.
Drew,
Recommend you Dan Ariely’s book or watch some of his Ted Talks.
At least the republicans are making noises in the right direction….
Yes, and while they were making such noises in the early 2000s they did things like pass monstrosities of farm bills, transportation bills, Medicare Part D, etc. Why should I believe them now when they say they’ve reformed, even though they mostly got the same leadership class? When they throw out McConnell and Boehner and the committee and subcommittee chairs that were in charge back then, then I’ll start to believe them.
I also think that no politician, who wants to do real reform, is going to lay out all their plans in full detail, beforehand.
I’m not asking for full details. But don’t tell me you plan on increasing spending every year by an average of 3.75% per year (that’s the Ryan Plan, and that’s without the Romney Bump to Defense) while cutting taxes and then explain that you are balancing a budget that is already about 40% debt financed. Where are the balls in that proposal?
They don’t have to tell me they’re going to reduce 3 people in this subsection of that group who are a part of that program which is contained in the research program contained in this department, but it would be nice if they told me they were going to cut SOMETHING.
Not to mention that Ryan has spent his entire adult life working for and with the Washington DC elites, while becoming one of them. He is far more of a DC insider than Obama, and even more of his adult life has been spent in politics.
but it would be nice if they told me they were going to cut SOMETHING.
I repeat, what has Obama told the people he would cut? All I’ve heard from him is raising taxes and spending more.
That’s the problem of putting a semi-structured plan out like Ryan has done, because you are then criticized for not having more details. And, when you start providing ‘details,’ you instantly give the opposition fodder to construe the plan their way, feeding a more negative version to people who don’t know any better.
Ryans’ medicare ideas, which has morphed into the Ryan/Wyden second generation plan, is a perfect example of this. All you hear from Obama is how Ryan is going to destroy medicare as we know it. In reality, the plan doesn’t effect people 55 and over, and offers choices to younger people, of either keeping the standard medicare or a subsidy from the government to purchase a private plan. I personally would opt for the second choice, if there was a choice available.
However, when you have no plan, like Obama, then generalities become talking points, which then become sound bites, and that is how people superficially decide an election.
I repeat, what has Obama told the people he would cut? All I’ve heard from him is raising taxes and spending more.
And when have you heard me call Obama anything other than a catastrophe?
I refuse to reward the Republicans for being slightly less terrible than their opponents.
@jan
Many people use bad behavior to justify bad behavior. I am as guilty as anybody else, and if I tried, I could cite a few of them. Having an abusive childhood is not an excuse for being an abusive adult.
This is one of my general problems with politics. “But Bush did it first” (whiny voice) is the Democratic logic.
I do agree that Rep. Ryan has produced a budget rather than complaining about the Democrats. In an earlier thread, you mentioned Sen. Wyden working with Rep. Ryan to produce legislation. He also produced a list of things he wanted, and they were able to write a bill each could support. A conservative and a liberal working together to produce something.
There needs to be less finger pointing and more hand shaking, but I am a dreamer.
Daydream Believer
There needs to be less finger pointing and more hand shaking
I agree TastyBits. But, in order to get to such a point there needs to be a unified goal of making this country stronger and better.
However, my definition of ‘strength’ is more citizen self-reliance, while social progressives seem to encourage a citizenry to be subjected to a lifetime dependency on big government.
I also view ‘better’ as having more upward mobility opportunities by being given a fair chance to make a profit in whatever business or job one goes into. The other side seems to define ‘better’ as creating a level playing field of equal outcomes, no matter what the effort has been to create such an outcome — in other words ‘fairness’ to the extreme of punishing another’s productivity.
So, there are lots of differences to be bridged or compromised on before getting to that hand shake.
@jan
So, there are lots of differences to be bridged or compromised on before getting to that hand shake.
I tend to agree with you more than disagree, but if Sen. Wyden and Rep. Ryan can agree on a bill, I am certain we can find something we could agree with @michael reynolds.
I try to keep up with what the other side thinks and why, but it has gotten more difficult. I am sure that the other side has the same complaint. I want to understand their argument – premise + logic, and I want to know where we disagree. This is how to determine where we agree, and at that point, progress can begin.
President Obama has a radically different idea of stronger and better than I do, and the way he constructs reality makes sense to him. Conversely, the way I construct reality makes sense to me. The truth is that most people have more in common than they may realize. We may disagree on which bread is best, but we can agree that a shit sandwich is not good. It is not much, but we may also find that we agree on a tasty filling.
There is no other side. Homo sum: humani nil a me alienum puto.