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December 31, 2012 11:44 AM Wall Street and the Fiscal Cliff

By Mark Kleiman

Four take-aways from this National Journal story:

1. Wall Streeters are “all Keynesians now.” (No Hayekians in hedge funds?) Like all sane people, they want the government, in a situation of prolonged inadequate final demand, to boost final demand, rather than shirinking final demand by raising taxes or cutting expenditures. None of them seems to be afraid of bond vigilantes. None of them is leaving coupons under his pillow for the Confidence Fairy.

2. They’re simply incredulous that anyone believes anything about the public interest firmly enough to motivate action, and they regard such beliefs – whether Red Team beliefs that the welfare state is economically unsustainable and morally degrading or the Blue Team belief that the richest country in the history of the world shouldn’t deprive dying poor people of hospice care to balance public budgets – as signs of immaturity, if not of an Axis I disorder called “ideology.”

3. Reporter Nancy Cook agrees with them on (2):

Part of the financiers’ amazement comes from the fact that politicians cannot to overcome well-worn ideologies—an idea foreign to the New York culture of deal-making, where the only true orthodoxy is the bottom line. … As long as Washington policymakers remain wedded to political ideology and positioning instead of facing the country’s big economic issues, New York will never truly get its sister city down south.

4. The Streeters’ direct responsibility for having crashed the economy through the reckless way they played with Other People’s Money hasn’t put any hole at all in their smug arrogance. Their job, in their view, is to pocket as much of that OPM as possible without actually going to jail, and Washington’s role is to get out of the way of their ability to do so. If Washington acts otherwise, that just demonstrates once again the moral superiority of the deal-making, bottom-line culture and those who live it.

I tend to agree with what I take to have been the Geithner-Larry Summers view that there was no way, in the situation of early 2009, to expropriate these expropriators without risking another Depression. Maybe there’s no way now. But that doesn’t make doing so eventually a less central policy goal.

[Cross-posted at The Reality-based Community]

Mark Kleiman is a professor of public policy at the University of California Los Angeles.