In the current issue of Foreign Policy, the editors of the FP Survey ask “top experts” for pithy solutions to the world’s economic problems, “twitter style.”  Some of the answers:

THE BIGGEST THREAT TO THE GLOBAL ECONOMY IS …
Anti-market bias. -Bryan Caplan •  Procrastination. -Peter Diamond •  Short-term thinking. -Esther Dyson •  A euro meltdown. -Dean Baker  •  Tax-cut fanatics. -Jeffrey Frankel •  The bond market. -Andy Sumner •

MY OUT-OF-THE-BOX SUGGESTION TO REVIVE THE GLOBAL ECONOMY IS
Wipe out debts. -Daron Acemoglu •  Require candidates for national office to pass ninth-grade tests on arithmetic, history, and geography. -Jeffrey Frankel •  Double down on science. -Tyler Cowen •  A government lottery where winners have mortgages, student loans, or other debt paid off. -Mark Thoma •  We don’t need “out-of-the-box” solutions; we need “head-out-of-the-sand” ones. -Adam Hersh •  Pray. -David Smick

BARACK OBAMA’S BIGGEST ECONOMIC MISTAKE HAS BEEN …
Letting Larry Summers go. -Gary Hufbauer •  Not reorganizing the big banks. —David Smick •  Trying too hard to find common ground with an opposition that won’t compromise on any terms. -Vincent Crawford •  Assuming office in January 2009. -Jeffrey Frankel

OCCUPY WALL STREET IS …
A misdirected tantrum. -Philip Levy •   A harmless pastime for unemployed youth. -Gary Hufbauer •  Reasonable complaints about crony capitalism plus self-righteous economic illiteracy. -Bryan Caplan

BY ELECTION DAY 2012, THE U.S. ECONOMY WILL BE …
Improving, but leaving many people behind. -Arnold Kling .  Limping along, with unemployment declining but still around 8 percent. -Daron Acemoglu .  Blamed for the outcome. -Jeffrey Frankel

ECONOMISTS SHOULD BE PAYING MORE ATTENTION TO …
How people actually behave rather than how they are idealized to behave. -Abhijit Banerjee •  Corporate governance. -Peter Diamond •  The fact that macroeconomic theory went up a blind alley some 20 years ago. -Jeffrey Frankel •  Creeping protectionism across the global economy. -Gary Hufbauer •   The impediments to job creation for young people. -Valerie Ramey •  Reality. -James D. Hamilton

Many questions in the field of financial regulation are hard to answer:    Would the separation of commercial banking and investment banking help prevent crises?   To what extent should individual consumers be protected against foolishly borrowing too much?  Should Credit Default Swaps be regulated out of existence?    What should regulators do about patterns of high executive compensation that is evidently not a reward for performance?  I have views on these questions, just as other observers do.  But in these cases I see the arguments on both sides.

The question of funding the U.S. financial regulators, the Securities and Exchange Commission or the Commodity Futures Trading Commission, is easy to answer, however.  I do not see the argument  for cutting funding  of the SEC and CFTC or for the other ways that Republicans in Congress are finding to make it difficult for these agencies to do their jobs.   They are also deliberately impeding two new agencies set up in response to the 2008 financial crisis — the Consumer Financial Protection Bureau, lodged at the Fed, and the Office of Financial Research at the Treasury — from doing their respective jobs.

Bernard Madoff was the most obviously venal of the figures in the financial crisis of the fall of 2008.  There is nothing hard to understand about the swindle he perpetrated, no ambiguities about where the legal line is drawn, no free-market interpretation that anyone uses to justify what he did.  The SEC had been warned over and over again in the years before 2008.   Why did it do nothing?  In large part because it had in effect been given a mandate to regulate as little as possible. 

I realize that in the United States, as in every country, we have some regulations that are excessive or undesirable.  But how anyone can think that regulation by the SEC was excessive during 2001-08 and that this contributed to the financial crisis?

That is the irrationality on the Right.   There is an equally irrational point of view on the Left.  It goes like this:  because the head of the CFTC is a former investment banker from Goldman Sachs, it must necessarily be that he is serving the interests of the financial community.  It happens that Gary Gensler is doing a great job, against great odds.   He has been trying to force derivatives trading into clearinghouses with lower counterparty risk, as required by the Dodd-Frank bill, to try to avoid repeats of September 2008.  I can see, when an investment banker is appointed to such a position, asking questions that one would not ask if he came from some other profession.  But he has been in office for 2 ½ years, pursuing regulation of derivatives with sufficient vigor to make most of Wall Street angry.  Reading the words “Goldman Sachs” on someone’s resume should not be a substitute for all other thought processes.

Floyd Norris notes in the New York Times (Feb. 9, 2008, p.B3),“George W. Bush is in line to be the first president since World II to preside over an economy in which federal government employment rose more rapidly than employment in the private sector.”    It is another bit of confirmation of the truth behind a comment that “Joe S.” posted in response to my blog entry of February 6 (“Reagan and Stalin”): “What, pray tell, does the Republican Party have to do with conservatism?”  

The liberal and conservative labels are no longer useful.   It’s not that shorthand political labels are never useful; they are, even though individuals resist pigeonholing. 

And it’s not just that these particular words have long since lost their original meanings.   Linguistically, “liberalism” of course was supposed to refer to a philosophy of leaving individuals free from interference by government and other entrenched institutions, while “conservatism” was supposed to mean valuing continuity and stability.   But it is a commonplace that Americans use the word “liberal” to mean the opposite of what it meant in the 19^th century (which is now often called “neoliberal,” for some reason).  

Supporters and detractors alike still considered George W. Bush a conservative, despite the original meaning of the word, when he launched radical departures from longstanding American principles  in the spheres of foreign policy and domestic policy.   The White House has asserted maximal political powers for the executive, and has used these powers to enact virtually unprecedented levels of interventionist policies, ranging from Iraq to domestic citizens’ right to privacy.   

But people still seem to think that the Bush Administration also stands for conservatism in the economic sphere as well.   Or some think that President Bush may no longer stand for economic conservatism, but that other Republican politicians do.   I would contend that, not just George W. Bush, but also Richard Nixon, Ronald Reagan and (to a lesser extent) George H.W. Bush, all — in sharp distinction from their conservative rhetoric – in practice have been interventionist.  They have all wandered, far from the principles of good neoclassical economics, and far from from the principles of small government and laissez faire.  How far?   Farther than did, for example, Jimmy Carter and Bill Clinton.  

The criteria are:
(1) Growth in the size of the government, as measured by employment and spending.
(2) Lack of fiscal discipline, as measured by budget deficits.
(3) Lack of commitment to price stability, as measured by pressure on the Fed for easier monetary policy when politically advantageous.
(4) Departures from free trade.
(5) Use of government powers to protect and subsidize favored special interests (such as the oil and gas sector, among many others).   

Documentation that Republican presidents have since 1971 indulged in these five departures from “conservatism” to a greater extent than Democratic presidents can be found in some writings of mine, listed below.   The name I would give to this set of economic policies, as well as to the parallel abuses of executive power in the areas of foreign policy and domestic policy, is neither “liberal” nor “conservative” but, rather, “illiberal.”

Original:     “Republican and Democratic Presidents Have Switched Economic Policies,” in Milken Institute Review, vol. 5, no.1, 1st Quarter, 2003, pp.18-25.

Shortest:    “Trading Places” , Financial Times, Sept. 13, 2002.

Most recent: “Responding to Crises,” for 24^th Annual Monetary Conference, Cato Institute.   Cato Journal vol. 27, no. 2, Spring/Summer, 2007, pp 165-1708.