2010 election

What I had on my mind heading into the election was this column by Paul Krugman from Sunday, "Mugged by the Debt Moralizers."  Consider this passage, in particular:

So what should we be doing? First, governments should be spending while the private sector won’t, so that debtors can pay down their debts without perpetuating a global slump. Second, governments should be promoting widespread debt relief: reducing obligations to levels the debtors can handle is the fastest way to eliminate that debt overhang.

I am in firm agreement on the first point.  In fact, it would be hard to find someone who called for more spending than I did any sooner than I did.  (Nice summary here.) 

I'll have much more to say about this when the dust settles in the next 24 hours or so. But nothing happened yesterday to change my mind that we'll all be using the phrase "gridlock, stalemate, shutdown" so often over the next two years that we'll sound as if we're chanting.

The bottom line:

1. Unless the White House is willing to capitulate completely, fiscal policy simply won't be available to deal with the economy.

2. We need to hope (prayers might also be useful) that the monetary policy options available to the Federal Reserve will be far more effective than many think they are going to be.

3.  The biggest fights in Washington over the next two years will be over anything having budget implications.  These are likely to be epic battles with religious fervor the likes of which haven't been seen in Washington since prohibition.

4.  Multiple government shutdowns will be threatened; more than one is likely to occur.

5.  It's not at all clear that financial markets have priced in the disruptions and extreme uncertainty that are about to occur.

More soon.

Tonight's election results will produce the usual rush to judgment by pundits and partisans alike. Given the magnitude of the projected GOP gains, the polls probably won't even be closed in any state before at least one person in both of those groups begins to stay that this is the start of a realignment in U.S. politics that will last for generations.

Anyone who uses "realignment" tonight, tomorrow, or in the next few months to characterize the 2010 election will either be guessing or spinning.

It may well be a realignment, but anyone who uses that word tonight, tomorrow, or in the next few months to characterize the 2010 election will either be guessing or spinning.  The fact is that there's no way to know until long after it occurs -- and I'm talking about years rather than hours after an election -- that a political realignment has happened.

Realigning elections in the U.S. have three primary characteristics. 

It was New Year's eve a long time ago, I was in a liquor store buying a bottle of champagne and, while I waited in line to check out, I asked the owner if this was the most important day of the year for his business.

He emphatically said no.  New Year's eve wasn't even close to what he considered most important in terms of sales because that was just one day. The month or so before Christmas was far more important because that was a series of events over about five weeks for which people bought alcohol.

I don't want to take this analogy too far.  I'm not saying for example, that elections are intoxicating or that drinking booze and voting in any way are similar.

But...