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Saturday, March 24, 2012

The shape of the future

[Welcome to the many new visitors who have arrived courtesy of nakedcapitalism.com .I hope you will do some browsing through the archives here and I particularly recommend the July 4, 2010 post referenced below and the October 21, 2004 post on George W. Bush. You might also enjoy the review of Sebastian Mallaby's book on Hedge funds from October 20, 2011, and the review of Harry Markopolos's book on his hunt for Bernie Madoff on May 15, 2010. I hope you will return. Posts appear every weekend, and you can subscribe via the feedblitz link on this page.]

During the periodic crises that mark the death of an old order and the birth of a new one, the party that seizes power can take advantage of panic, uncertainty, and its own ideological fervor to impose long-lasting changes on government and society. Four years ago I thought Barack Obama and the Democrats might be the party that would do that. Two and a half years ago--on July 4, 2010--I concluded that I had probably been wrong, and that the job had already been done by the administration of George W. Bush. This past week, a story in the New York Times showed how that took place in a critical area of the American economy: energy.

For the last 40 years we've had huge, ongoing controversies and debates about energy in this country. President after President has called for energy independence. The Left has warned of global warming and argued for less dependence on fossil fuels. Meanwhile, the increasingly higher price of oil and environmental regulation led to a significant decline in energy production in the US. When the Bush Administration came into office they decided to do something about this, just as they decided to throw out half a century of bipartisan foreign policy. Dick Cheney formed a secret energy task force composed of energy executives like
the President and himself. In 2005, while our attention was focused on the deteriorating Iraq War, they passed a bill which, among other things, took a new drilling method called "fracking" out of the jurisdiction of the EPA. I do not know if that was reported in the press at all. Fracking, and a relaxed attitude towards offshore drilling, was going to be the answer to our problems and lead to a revival of energy production in the US. These steps would benefit from a long-term rise in energy costs.

As the story shows, this has all been coming to pass, thanks to fracking (for oil as well as gas) in the last ten years or so. An economic boom has hit much of the energy-rich west, including Bush's home town of Midland, Texas, and we now produce more than half the energy we consume at home, which is trumpeted as a move towards long-delayed energy independence. The environmental consequences of all this have become a matter of huge debate, thanks in part to the movie Gasland, from which I first learned about the key provision of the 1995 law.

Barack Obama, of course, campaigned on a platform of more green energy. He has now largely abandoned it and gone nearly whole hog for the Bush program. He is in the process of approving, in stages, the Keystone pipeline. His Administration will not reverse this trend even if it lasts another four years, as I suspect it will. It's campaign this year will focus mostly on social issues.

The Bush Administration also cut taxes, crippling the revenue base of the federal government while it led us into two very long wars. Barack Obama has continued this trend as well. He agreed to extend the Bush tax cuts and added a very expensive payroll tax cut which has, for the first time, but Social Security in the red. Banks, health insurance companies, and the food industry, as well as the energy industry, flourished under Bush, with disastrous consequences. It is not clear, as I have noted, whether the Dodd-Frank bill will effectively regulated banks or not, but it's clear that the health insurance reform, if the Supreme Court upholds it (I think they will) will make the insurance industry richer and stronger without doing much of anything about the real problems in American health care, which were too hot to touch. The organization, strength and effectiveness of the Republican campaign to transform America is also reflected in two op-ed pieces in Monday, March 26's New York Times: one by Paul Krugman on the influence of the conservative organization ALEC, which drafts legislation that has passed state legislatures all over the country, and one by Steven Rattner on the extraordinary extent to which the benefits of the current recovery have gone almost exclusively to the very richest Americans. There is no remotely comparable campaign on the left on any issue except gay rights.

All this is very reminiscent of the Civil War era. While they were fighting that war, the Republicans in Congress also implemented a sweeping economic agenda, including a national banking system, high protective tariffs, and generous legislation to make the transcontinental railroad possible. (The railroads, as a recent book by Richard White has made clear, were the big banks of their time; they fueled booms and busts, and frequently had to apply for government bailouts.)

There is however a paradox to our current crisis. Our current Republicans have not enjoyed the political advantages of their Civil War counterparts. Now as then, the country remained quite evenly balanced politically throughout the Crisis era. The earlier Republicans could do anything they wanted for more than eight years because the South had seceded and was originally re-admitted under Reconstruction governments. The Bush Administration originally got into office only thanks to a purge of Florida voters, Democratic ineptitude and a cooperative Supreme Court, and it relied upon a highly divisive base of religious conservatives that has turned into an electoral millstone around its neck. The shape of the coming campaign has become clear: the Democrats, to judge from the numerous fund-raising appeals I receive, will be focusing almost entirely upon social issues, counting on them to turn out the younger voters upon which they depend. (The Silent generation is solidly Republican and Boomers split evenly in the last election.) And Obama looks very likely to be re-elected, but without regaining a majority in the House of Representatives.

Thus we face an economic future in which we look more and more like a Third World country, with enormous economic inequality, fewer rights for workers, and declining public services, coupled with reinforced women's and gay rights--at least in the blue states. (The Republicans are working harder than ever at imposing their social agenda where they hold local power.) Had either party triumphed on both fronts, one might speculate, the country might actually break up again. (I do expect a burst of secession talk in the deep south if Obama is re-elected, but I don't expect it to go anywhere.) As it is, each side gets what it wants most. The Republicans get unrestrained economic freedom and the political power that goes with it; the Democrats get women's and gay rights, and their domination of university life will continue. No one will do much of anything to benefit the nation as a whole. That is the result of the great revolution that began 40 years ago, when the Boom generation started putting its own feelings above the accumulated rationalist legacy of the last two centuries. Their effect has indeed been profound.


NxNW 74 said...

I concur that in a 4T, society has to find resolution to key issues that jeopardize its very survival and future well-being.

In this 4T, which I believe started with the 2008 financial crisis, 2 issues are nearing resolution. Professor, younare right in pointing out that we have "new norm" or societal consensus emerging with Energy Dependency and Women/Gay Rights.

I don't believe we are closer to the end of the 4T. Each existing generation is largely "in-between" life phases right now. But most importantly there are still large issues that are currently jeopardizing society that need resolution. I believe we cannot move from this 4T into a 1T until there is reconciliation and resolution on:

A) The huge financial deficits and govt debt that currently prop up all institution and American way of life and worldview and approach to same. There is no way it can go on indefinitely and suspect the " Debt Wall" will be hit before the end of the decade.
B) The political and geo-political dynamics of the Jewish and Isreali influence on American domestic and foreign policy. A tiny and stategically insignificant nation wields far too much influence on world events that provide little to no intrinsic value to its allies.
C) The breakdown and mass irradication of the traditional family unit of mother-father-kids and it's positive effects in maintaining a functioning, self reliant and civilized society.

These three things need resolution before we can move out of the 4T.

It, is in my view, a largely X'er and Millie problem to solve and/or resolve given our generational life experiences being mostly affected by these 3 points. We mostly do not "know" of the world that existed prior to 1975. We only know what we have seen and felt as pre-teens and onwards (when presumably there is a conscious mind that can absorb and understand the world we inhabit).

Based on this I wholly agree that the 4T ends 2020 to 2025 when Gen X and Millie are wholly in the next generational phase of midlife and adulthood. The transitions into these phases for which we are going through are acting as the catalyst to resolve these core issues.

Regardless of political leanings, the generational responses from my cohort are refreshing. Whether Tea Party, OWS, Libertarian, Anonymous, etc. we are seeing wholly new dynamics and methods to fix what is crippling our society.

This is largely due to Boomers moving into their next life phase and the generational responses from those backfiling their place.

Professor, I love your insights and wisdom into the world pre-1975 and I think once you can view the world since then from the lense of someone who only knows this world, you may have a clearer sense of the outcomes of this Turning .

Middle Seaman said...

Do we know that Boomers are Repubs? Many Boomers, me included, are white collar workers who tend to be socially liberal and are repulsed by the craziness of the right.

How long will your "future" last? Obama or Romney in 2012 will result in similar coming four years (depends somewhat on how much of pushover Romney is). But 2016, with high unemployment, terrible or non existent health care, lower services and increased disconnect between elected officials and the electorate may bring out a much more massive, powerful and intelligent Occupy type movement.

Then the "future" will be short.

David Kaiser said...

To Middle Seaman:

I expressed myself a bit clumsily. In the last election Boomers split evenly, Silents were heavily Republican. I have edited accordingly.

The Boom and X generations will be in charge for a long time.

Tom said...

Bush, Cheney & a secret cabal? Seriously? I voted for Obama & the Dems and 4 years later I'm hard-pressed to blame Bush for the perpetuation of ANY bad policy. At what point do we hold 'our' team accountable? The Dems in Congress squandered their mandate. The President is no better (or worse) than his predecessor when it comes to sticking-it to the people. And now my choice really sucks....

MouseOfSuburbia said...

As to increased talk of a southern secession... maybe we should have a national referendum. I know how I'd vote.

Anonymous said...

"benefit the nation as a whole." I believe that energy at 3 dollars a BTU, instead of the pre-fracking 12 dollars, does "benefit the nation" as a whole.

If the Dems do as David Keiser recommends re: energy, they will be imposing a burden on those least able to afford it.

I do agree with Keiser with respect to President Obama's fiscal policy - huge disappointment.

p.s. Shouldn't the post read, "about the key provision of the 2005 law" and not the "1995 law"?

Anonymous said...

Interesting analysis for the emotional and economic sides internal in USA. I am still waiting for the global debt crisis resolution to bankrupt the fat cats and cause real conflict between big powers to end the 4th Turning and start the 1st Turning. Nobody knows how that will turn out or if it is even possible to just muddle through as Japan has done for 20 years. For just one country extremely disciplined it was ok but not when everyone all at once is in trouble as now is the case. The economic and climate problems seem to go hand in hand as pumping up Asian coal uuse has accelerated global heating since 2000, start of crisis. So solving economic problems seem to make weather and physical comfort worse (tornadoes, drought, flood). Some talk of not a generational crisis (80-100 year type)but eventually of a civilizational crisis as the basis of industrial post middle ages thought is based on technology, science, progress, nationalism. Without fossil fuels that is all gone but maybe we could save what is left of the planet.

Anonymous said...

Nice blog - came over from the link at nc and read a couple of posts! Keep it up.

I have to say I'm somewhat concerned with Obama's kick the can down the road strategy - he's decided to be Hoover. I think the can's getting pretty beat up and he may not be able to kick it down the road far enough to make it somebody else's problem. Already the can is getting so beat up that we're certainly slipping away from a meritocracy to kleptocracy. Bummer, third world America.

Bozon said...


While I agree with much of the analysis, and it is a very revealing analysis at that,

I do not see it as helpful to lay blame for the situation here on so called boomers, because I have looked, a little bit, at how that generation was enrobed by history, both domestically and internationally, which it could neither fully comprehend, nor prevail over.

The fragmentation, and discrepancy, in which American politics has been structured, and then conducted, since the beginning, more readily accounts for the predicament we find ourselves in than the mere boomer generation's foibles, great as they now loom large on the historical stage.

All the best,

Thomas said...

"History Unfolding" and "The Shape of the Future" suggest to me the notion of "prevailing trends," which is generally how I have understood Prof. Kaiser's comments (and I hope, in the main, how they were meant to be understood!).

In essence, the prevailing mindset of the New Deal was that the Nation had serious issues that required an organized, unitary response that Government was uniquely (and solely) equipped to provide -- this in the aftermath of catastropic market failures and attendant human suffering. This is not to say that this was universally supported, only that it was prevailing at the time.

The apparent prevailing mindset of the political right is to return the Nation to the social, legal, and financial conditions that prevailed in the late 1800s. The hallmarks seemingly would be minimal Government regualtion or intrusion into the activities of individuals, corporations, or markets; extreme individual responsibility (inasmuch as Government would have a diminished role as regulator, arbiter, or protector); and as minimal a tax structure as possible. This seems to me to be the inevitable result when the governing party truly subscribes to the notion that "the Government that governs best governs least", or that "Government is the problem." Again, this sentiment is not universal, but it seems to represent a trend that can be traced to the Reagan Administration, at least, and was never really reversed by any subsequent Democratic administration - but was certainly accelerated during the last Bush Administration.

I think it is an open question as to what combination of conditions will occur that would caause the trend to reverse. I had hoped that President Obama would use the momentum from his election to put the brakes on the current trend, if not reverse it. Such has not been the case, and it is disappointing.

For me, the attraction of this blog and Dr. Kaiser's informed comments is the attempt to understand how far "back to the future" we will have to go, with 21st century versions of Gilded Age robber barons, trusts, unchecked pollution, environmental degradation, skewed income distribution, etc., before the crisis that motivates another New Deal - type of response to one or more of the accumulated ills.