Fiscal Versus Financial
Via Brad DeLong, Felix Salmon observes that John McCain doesn’t know what kind of crisis we’re in:
The number of undecided voters who understand the difference between financial and fiscal is minuscule, and the number of those who think that the difference actually matters is probably zero. But from a technocratic standpoint, the fact that McCain twice referred to the financial crisis as a “fiscal crisis” is telling. It means (a) that he doesn’t really understand it, and (b) that insofar as he does, he thinks that government is at least as much part of the problem as it is part of the solution…
This is, admittedly, a wonky distinction. But you might think that twenty-eight years in congress would be enough time to master federal policy jargon. I’m only 27 years old, after all, and I’ve got this straight. But suffice it to say that a “fiscal crisis” would be a crisis involving the budget deficit being too large. A “financial crisis,” by contrast, is what we’re looking at — a problem in the financial markets. It’s a mistake anyone could make. Unless that person had been, say, discussing an ongoing financial crisis with aides who were bringing him up to speed on the situation. A person like that would have all the fresh jargon he needs.
38 Responses to “Fiscal Versus Financial”
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September 28th, 2008 at 1:15 pm
He also doesn’t know the difference between strategy and tactics.
September 28th, 2008 at 1:16 pm
Whether or not you focus on the particular jargon, McClain and the GOP clearly think that too much gubmit spendin’ is at the root of this problem, as well as indefinable personal characteristics such as “greed”. (And as Robert Reich said in between Newt Gingrich eruptions on This Weak with George Snuffinghumpagas, “If you take away ‘greed’ from Wall Street, you’re just left with pavement.”
Thus McCain’s backing for the Herbert Hoover Memorial Spending Freeze.
September 28th, 2008 at 1:24 pm
We are in a fiscal crisis. The Treasury borrowed $198 billion last week. $78 billion the week before. Since May the deficit has risen by at least $500 billion. Every penny of the bailout will have to be borrowed. $250 billion to start. Tax receipts are cratering.
Masking the crisis is that most of the borrowing has been ultra cheep, virtually zero in some cases, as the panic in the markets has sent everyone rushing into ’safe’ Treasuries. That will have to be rolled over however. Reborrowed in other words. It will be impereritive to do some of that reborrowing over longer terms, meaning 2 to 10 years. The long end rates have already started to rise.
Uncle Sams Treasury has been thrown under the bus. Longer term this is going to be an enormous problem. McCain surely didn’t mean that because nobody has told him about it. He only knows what he is told, like Bush. Proudly and profoundly ignorant.
September 28th, 2008 at 1:27 pm
What do you expect from someone who seems to think all economic questions should be answered with “I don’t like earmarks”?
September 28th, 2008 at 1:32 pm
Yeah, I’ve noticed this with McCain ,and a lot (majority) of politicians, reporters, pundits, “experts,” and sundry time-wasters who get TV time.
This is what happens when a vast majority of a nation’s population has no idea how to make simple prudent decisions regarding their own personal finances, let alone have a rudimentary grasp of economic concepts, the financial system, or how a bank works. Though the better informed ones probably know that “exotic derivatives” are bad things because they involve really, really big scary-sounding numbers.
September 28th, 2008 at 1:39 pm
The front page of the Wall Street Journal, in its main above-the-fold headline, referred to it as a “Fiscal Crisis.” Do you think the WSJ editors haven’t been discussing the crisis enough to have picked up the “correct” jargon?
September 28th, 2008 at 1:39 pm
Banks this year have now lost more money than they have made cumulatively, during their entire history. It’s not as bad as it sounds because they did the same in the Depression and came damn close in the early 90’s. The point is bankers always lose it all. The motivation is they make great money for themselves while doing it.
Which is a great reason why it’s imperative that we bail out the banks because they are the lynch pin of the economic system.
Oh wait………..
September 28th, 2008 at 1:46 pm
it’s not a crisis until investors refuse to lend money to the US government even at elevated rates. America has never had a fiscal crisis. Glad somebody besides me caught mac’s gaffe. He’s clearly out of his depth on economics.
September 28th, 2008 at 1:47 pm
…not to worry, Sarah Palin will handle the economics stuff.
September 28th, 2008 at 1:51 pm
But we’re weird fucking people who read blogs for a couple hours a day and plow through public policy tomes as for-interest reading. Even for my more smart, well-schooled friends, following sports and playing golf and poker tend to occupy the vast majority of their non-work, non-family time. They might make it halfway through a Thomas Friedman book or watch CNN for a few minutes while at the gym.
The couple people I know who work in politics in DC or for their local representatives here – this is Texas, so they’re all Republicans – don’t seem to have much actual policy knowledge beyond vague certainties that markets are good, taxes are bad, and Canadians are waiting a helluva long time for MRIs.
September 28th, 2008 at 2:03 pm
McCain knows the mess we’re in just like every other D.C. pol. But it’s Obama who’ll inherit the mess, and Matt won’t be happy about the consequences. He’ll wind up wishing it was McCain’s tar baby.
September 28th, 2008 at 2:07 pm
McCain: “Our fiscal finances are festooned with fraud. My friends, I’ll fix them.”
September 28th, 2008 at 2:10 pm
I really wish there were an English-language translation for this Spanish-language commentary on the romanticization of capitalism for the poor.
September 28th, 2008 at 2:14 pm
We need more fiscal education….
September 28th, 2008 at 2:26 pm
El Cid: My French allowed me to translate enough of the Spanish to realize it has no application to us. No one in the US romanticizes poverty; we all believe we are just a rung away from fame and fortune.
I used to use a gym where police and firemen worked out. I was trying to argue some basic social ideas with a muscle-bound cop once, who’d already decided I was a communist, or alien, and said to him — thinking he’d have to agree with this minimal idea — “I’d be happy with a progressive income tax, where the rich were taxed proportionately to their income.” He said, no, he didnt like that; he wanted those lower tax rate as soon as he got into that bracket!
September 28th, 2008 at 2:32 pm
Well, I actually had to to go look it up.
I have no intention of voting for McCain, but I’ll aver that it’s possible for one have a solid understanding of the present credit-related crisis and still make the “financial v. fiscal” verbal error when speaking about it.
September 28th, 2008 at 2:41 pm
plato’s cave: I guess you weren’t aware that de Soto is one of the heroes of the Tom Friedman types, and it is just this romanticized capitalism, one which claims that the poor (in particularly the poorest in the 3rd world) are simply one property reform and minor credit access away from being big time successful capitalists, who has been quoted in a million sneering, lecturing columns and commentaries here in the USA.
Yes, I quite understand the proportion of peasants here and in Peru are different. Nevertheless, we get the same pompous moralizing lectures from the nimrods pushing coloring book capitalism.
September 28th, 2008 at 11:14 pm
This is a disingenuous critique. McCain’s entire economic message has been to cut government spending. Of course he views this through the lens of his own experiences. As one of the commenters above said, every single dollar of this bailout is going to have to be borrowed.
I’m a big Obama supporter, and find plenty to criticize McCain over. But this point ain’t one of ‘em.
September 29th, 2008 at 1:27 am
He was going to give every family in the country an increased tax dividend too. Said it twice. I think what he was talking about was increasing the deduction for dependents but who knows. It’d like to get a dividend, any dividend – I’ll take cash, check, electronic transfer into my draft account, on taxes I pay.
September 29th, 2008 at 9:37 am
McCain thinks the fundamentals of the economy are strong. In other words, the problems are temporary financial ones that are overshadowing the strength of the underlying fiscal. To whatever degree fiscal and financial are the only choices, McCain contradicts himself. If he had said it was a financial crisis when it was really fiscal that would be more in line with his statements on the overall economic health of the USA.
September 29th, 2008 at 11:21 am
I wouldn’t say McCain doesn’t understand — it’s more like wishful thinking. With his railing about earmarks and discretionary spending, McCain made it clear that he WANTS people to think of the financial crisis as a fiscal crisis, because a fiscal crisis is the one that McCain feels prepared to solve.
October 19th, 2008 at 10:31 am
Banks this year have now lost more money than they have made cumulatively, during their entire history. It’s not as bad as it sounds because they did the same in the Depression and came damn close in the early 90’s.
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