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About Our Zombie Economy

I mentioned Matt Continetti's story "The Zombie Economy" in my last post, and I just wanted to count off a few more thoughts I had when I read it again.

1) I imagine my conservative readers will like this story. The thesis is that when the government tries to pick winners and losers, it wastes money. This is especially true when the government is trying to pick winners and winners, as it did during the darkest days of the recession.

After Lehman's failure, the official line of the U.S. government was: If you're in trouble, you get a life jacket. GM, Chrysler, AIG, Fannie, Wall Street, states, the unemployed. Our economy turned into an Oprah episode. "You get a life jacket! You get a life jacket! Everybody gets a life jacket!" That's an acceptable way to reduce uncertainty in an economic calamity, but it's not a good way to run an economy long term. Fair point.

2) MC's analysis is complicated and undermined by the suggestion -- made explicit in the Weekly Standard cover image -- that this is all Obama's doing. Not so. The first auto bailout was passed under Bush. The bank bailout bill known as TARP was passed under Bush. The Fannie and Freddie assistance, under Bush. The AIG rescue, under Bush. But -- this is so weird! -- I can't find the word Bush once in the article.

3) The critique of the auto bailout is lacking. Continetti acknowledges that Detroit's big three are back in the black, that the federal bailout has made them profitable again, and that business has picked up. That's all good news, and this is an article about bad news, so the author has to argue that the Obama administration will somehow make the companies worse off going forward. That's impossible, because it's the Future. So instead Continetti makes fun of the Chevy Volt.

To repeat: the argument that the government is propping up a zombie economy at one point hinges on the author's opinion of one car that he's never seen. (It's almost like he's picking winners and losers!).

Obama likes the Volt because it's environmentally friendly. But it's also impractical and terribly expensive at $41,000. Taxpayer money, in other words, is subsidizing at great cost a product that only the wealthy will be able to afford in order to make the green lobby feel good.

Why is energy efficiency "impractical"? Why does it matter that only the wealthy can afford this car? Why wouldn't there be a market for a $41,000 vehicle when incomes have recovered faster in the upper class? Would it have been better if the government had subsidized the production of Chevy rickshaws? Why is Continetti picking winners and losers, again? And what is the point of this anecdote?

4) There's no solution in this piece. Many of the observations made are mainstream. Fannie and Freddie should be reformed. The states will recover their tax revenue and then they should better manage their finances. When GM goes public again, it should build better cars. These are all fine points, but together they don't argue for a zombie economy or a lost decade, and they certainly don't prove that Obama has packed the U.S. economy into his impractical Chevy Volt and floored it off a cliff.