Simon Johnson, an econ professor at MIT and former IMF economist, started blogging recently at TPMCafe. And David Kurtz interviewed him in today’s episode of TPMtv. The argument Johnson makes is one that’s been tossed about in a loose aphoristic way in the public debate but seldom gets put in such blunt and concrete terms. What Johnson argues is that in economic crises in recent decades where the IMF has worked to step in and put things right, seldom if ever do things get fixed unless the political power of the group that caused the mess is somehow disrupted — in most cases the political power of the group that ran the big financial institutions.

Not that political elites are wholly displaced or overturned. But there’s got to be some fundamental break in their power to get the necessary reforms through.

A couple things occur to me about this. One is that whatever you can say about the IMF and the World Bank, the key factor behind their role as crisis-fixing and stabilizing institutions in the post-war era is that they had the power of the US behind them (and the developed countries more generally). So whatever the wisdom of their interventions, they usually had the power to dictate solutions. And that very often meant overruling political elites who either would not face problems or had vested interests in not facing them.

Now, let me stipulate that the record was by no means perfect. I know that. But for the purposes of this discussion, my point is that there was an external power that could step in in a politico-economic situation that had become dysfunctional or stuck. For the US (or probably Europe, for that matter), though, there’s no outside force.

Back to the initial point. Everyone is always saying: how can we fix the problem as long as the people we have in charge are the people who created the problem in the first place? Very true in many ways. I’ve said it a lot myself. But this point has brought it home to me in a much more concrete way. The assumptions, the vested interests, the wealth, the political power are just too much to overcome.

Here’s the interview …

On Gregg’s rendezvous with destiny …

By citing reservations about the economic recovery package, Gregg reinforced widespread GOP criticism about wasteful spending that has less to do with reviving the economy than rewarding Democratic constituencies. And by noting his differing view on the census, Gregg breathed life into Republican charges of a White House power grab over a critical Commerce Department function.

Both issues are part of an emerging GOP case against Obama and the ruling Democratic Party: Strip away the new face, the lofty rhetoric and the promises of post-partisanship and you’ll find the same big-spending party of old, bent on politicizing government to consolidate its hold on power.

Even with the stimulus package on the verge of passing later this week, the unanimous GOP vote against the bill in the House and the near-unanimous opposition in the Senate revealed a Republican Party surprisingly united in direction and in message for perhaps the first time since losing its congressional majority in 2006.

So Lincoln, Obama and a Commerce secretary walk into a bar … well, at least Obama’s cracking jokes about it. That and the day’s other political news in the TPMDC Morning Roundup.

I keep hearing about this and have mentioned it here a few times in passing.

From Bloomberg …

Treasury Secretary Timothy Geithner, under intensifying pressure from Wall Street and Congress to complete his financial-rescue plan, is being handicapped by a dearth of staff experts critical to the effort.

Geithner’s strategy of forging a partnership with private investors to buy toxic assets would benefit from aides steeped in law and finance to thresh out the competing interests in the plan. Yet the administration has yet to nominate people for any of the Treasury’s financial posts as the White House seeks to avoid Senate confirmation battles.

Administrations often take a while to fully staff out. But under present circumstances Treasury is really sui generis.

In our interview on Friday, one of the questions I asked Joe Stiglitz was: if it’s so obvious that all this Tarp 2/Bailout stuff is a bad idea and not going to work, why do we keep coming back to it?

Here’s his answer …

Can Obama ever recover from Judd Gregg deciding not to be Commerce Secretary?

Especially since he’s taken on the status of a cult hero?

For the backstory, see Greg Sargent.

Did he really hold up a dead mouse on the floor of the House? I can’t tell what’s in that little bag he shook around there.

Late Update: Price’s flack tells Greg Sargent, “It was a toy mouse, from a pet store.”

I can just see some well-scrubbed young GOP aide, new to Washington, being sent out to a pet store to find a toy mouse to use as a prop. Heady day for that kid.

From TPM Reader MF …

This is similar to a point that’s already floating around, but for all the complaints in the blogosphere that President Obama wiffed the negotiations over the stimulus out of an excessive attempt to appear “bipartisan,” it seems hard to deny at this point that Obama’s stimulus strategy has been incredibly effective. First, he proposes the package that is more or less what he would like to see enacted. Then, House Democrats run up the tab inflating it above the original targets and pass it on a party-line vote. Finally, “responsible” moderates in the Senate, including Republicans, save the day from those partisan House Democrats by bringing the package back down to earth, which just so happens to be in the ballpark of what Obama originally proposed. Done and done. It’s all political kabuki, and everyone played their part brilliantly, especially Nelson and Collins, who now get to go home and take credit for their post-partisan “fiscal responsibility.” As much as I share many people’s skepticism of all the “trust Obama’s secret plan” rhetoric, in this case, it seems hardy to deny that the strategy he had all along has worked.

I look forward to seeing your take on the stimulus process and what this says about the dynamic we can expect enacting the rest of Obama’s agenda.

It pains me to say this. But Sen. John Cornyn doesn’t seem to be too bright. Cornyn was just on MSNBC explaining that spending in a severe economic downturn doesn’t make sense and should be replaced by tax cuts since individuals can spend money “more efficiently” than government. I guess he doesn’t get that the whole point of a stimulus bill is that in a severe recession individuals — acting on rationale individual economic motives — aren’t spending. And only government, as a policy decision, can spend at a high rate notwithstanding the state of the economy.

He also claimed a 3x multiplier for tax cuts, which I don’t think anyone believes. But I’m more interested in his point about the relative efficiency of private vs. public sector spending since it seemed to show that he doesn’t understand what a recession, let alone a severe recession (which has qualitatively different dynamics), even is.

I know there are contrary theories of how economies work. But not grappling with the high level of risk in the economy that makes businesses and people unwilling to spend … not sure you can enter the conversation without getting that.