Politicians Aren't Always Wise

... now there's a surprise!

Frequent and valued commenter Dean posed this conundrum in a recent comment.

KT, what I have found fascinating about all this is, despite all the analysis that's been done on the financial crisis including yours, which has been excellent by the way, the "solution(s)" are derived straight out of "things we learned in kindergarten".

As you pointed out, there are consequences that apply across the board with respect to economic behavior whether you are 14 yrs. old or 40 and whether you are the head of a household of one or the CEO of a Wall St. firm.

He's absolutely right. Finances aren't that complicated. Work hard, acquire valuable skills, save money. At a national level, you need to encourage these things. It seems simple, but we're dealing with fallible human beings who have personal goals not always in concert with national goals.

Politicians want votes. They work very hard learning to how to win votes. They may or may not know how to do anything else. Take the case of Robert Rubin. The conventional wisdom right now is that George Bush was a horrible president and Bill Clinton was a good one. Just one look at their respective economic records will convince you of that, right?

However, Clinton's Treasury Secretary, Robert Rubin, the supposed architect of all that Clintonian prosperity, has helped wreck Citigroup. Rubin advised them to get into the subprime market and they blew $20B. Rubin didn't fall and bump his head on his way from the Treasury to Citigroup. He's been the same Robert Rubin all along.

The truth of the matter is that Robert Rubin doesn't know what he's doing. He didn't know when he worked for Bill Clinton and he didn't know when he was with Citigroup. He didn't need to know what he was doing because his job never asked that of him.

Robert Rubin never had economic prosperity or long-term economic stability as his primary goals. Not as Treasury Secretary and not as Citigroup advisor.

At the Treasury, Rubin's goal was to help Bill Clinton and the Democrats win votes. Short-term prosperity was guaranteed to accomplish this. Long-term prosperity might or might not do it. Over at Citigroup, Rubin's goal was to earn big bonuses for himself and his fellow executives. That Citigroup is now collapsing doesn't diminish his accomplishments there - after all, he walked out with over $150,000,000. Citigroup is now just so much smoking wreckage, but Robert Rubin is a success.

Going back to the central theme of this blog, prudiciousness, I would argue that our culture is what really gets us in the end. People like Robert Rubin have always been around. Politicians have always striven for votes. What's different now is the underlying set of values in our nation. We have decoupled earning from having in our values. That's what is leading us to these phenomenal levels of debt and what led us to elect a man who epitomizes this shift in our values, Barack Obama.