Category Archive for: Politics [Return to Main]

Friday, February 05, 2016

Paul Krugman: Who Hates Obamacare?

The left's attack on Obamacare could be harmful:

Who Hates Obamacare?, by Paul Krugman, Commentary, NY Times: ...the Affordable Care Act is already doing enormous good. ... Why, then, do we hear not just conservatives but also many progressives trashing President Obama’s biggest policy achievement?
Part of the answer is that Bernie Sanders has chosen to make re-litigating reform, and trying for single-payer, a centerpiece of his presidential campaign. So some Sanders supporters have taken to attacking Obamacare as a failed system. ... And some of these critiques have merit. Others don’t.
Let’s start with the good critiques...
The number of uninsured Americans has dropped sharply... But millions are still uncovered, and in some cases high deductibles make coverage less useful than it should be.
This isn’t inherent in a non-single-payer system: Other countries with Obamacare-type systems, like the Netherlands and Switzerland, do have near-universal coverage even though they rely on private insurers. But Obamacare as currently constituted doesn’t seem likely to get there, perhaps because it’s somewhat underfunded.
Meanwhile, although cost control is looking better than even reform advocates expected, America’s health care remains much more expensive than anyone else’s.
So yes, there are real issues with Obamacare. The question is how to address those issues in a politically feasible way.
But a lot of what I hear from the left is not so much a complaint about how the reform falls short as outrage that private insurers get to play any role. The idea seems to be that any role for the profit motive taints the whole effort.
That is, however, a really bad critique..., the fact that some insurers are making money from reform (and their profits are not ... all that large) isn’t a reason to oppose that reform. The point is to help the uninsured, not to punish or demonize insurance companies.
And speaking of demonization: One unpleasant, ugly side of this debate has been the tendency of some Sanders supporters, and sometimes the campaign itself, to suggest that anyone raising questions about the senator’s proposals must be a corrupt tool of vested interests. ...
And let’s be clear: This kind of thing can do real harm. The truth is that whomever the Democrats nominate, the general election is mainly going to be a referendum on whether we preserve the real if incomplete progress we’ve made on health, financial reform and the environment. The last thing progressives should be doing is trash-talking that progress and impugning the motives of people who are fundamentally on their side.

Wednesday, February 03, 2016

'The Costs of Inequality: When a Fair Shake Isn’t'

The beginning of a relatively long discussion:

The costs of inequality: When a fair shake isn’t, by Alvin Powell, Harvard Staff Writer: It’s a seemingly nondescript chart, buried in a Harvard Business School (HBS) professor’s academic paper.
A rectangle, divided into parts, depicts U.S. wealth for each fifth of the population. But it appears to show only three divisions. The bottom two, representing the accumulated wealth of 124 million people, are so small that they almost don’t even show up.
Other charts in other journals illustrate different aspects of American inequality. They might depict income, housing quality, rates of imprisonment, or levels of political influence, but they all look very much the same.
Perhaps most damning are those that reflect opportunity — whether involving education, health, race, or gender — because the inequity represented there belies our national identity. America, we believe, is a land where everyone gets a fair start and then rises or falls according to his or her own talent and industry. But if you’re poor, if you’re uneducated, if you’re black, if you’re Hispanic, if you’re a woman, there often is no fair start. ...

Tuesday, February 02, 2016

'Post-Iowa Notes'

In case you want to talk about the primaries, here's something to get you started:

Post-Iowa Notes, by Paul Krugman: ...Sanders is tapping into something that moves a lot of Democrats, and which Clinton needs to try for as well. Can she?
Certainly taking a harder line on the corruption of our politics by big money is important — and no, giving some paid speeches doesn’t disqualify her from making that case. (Cue furious attack from the Bernie bros.) Substantively, her financial reform ideas are as tough as his, just different in focus. What is true, though, is that simply by having been in the world of movers and shakers for so long, Clinton can’t project the kind of purity that someone who has been an outsider (even while sitting in the Senate) can manage.
The bigger problem, though, to my mind at least, is the ability to deliver a message of dramatic uplift, the promise that electing your favorite candidate will cause a dramatic change in the world. How do you do that if your reality sense tells you that only incremental progress is possible, at least for now? You probably can’t. (I’m pretty bad at the uplift thing myself). To be blunt, I think Sanders is selling an illusion, but it’s an illusion many people want to believe in, and there’s no easy way to counter that.
In the end, again, Clinton’s tell-it-like-it-is approach will probably be enough to clinch the nomination. And then she’ll be in a very different position, running as the champion of real if limited progress against, well, look at those top three on the other side.

Monday, February 01, 2016

Predictions?

I don't have anything to post presently, so let me ask:

What are your predictions for the outcome of the Iowa caucuses tonight?

Paul Krugman: Wind, Sun and Fire

 "We can have an energy revolution even if the crazies retain control of the House":

Wind, Sun and Fire, by Paul Krugman, Commentary, NY Times: So what’s really at stake in this year’s election? Well, among other things, the fate of the planet.
Last year was the hottest on record..., climate change just keeps getting scarier; it is, by far, the most important policy issue facing America and the world. ...
Most people who think about the issue at all probably imagine that achieving a drastic reduction in greenhouse gas emissions would necessarily involve big economic sacrifices. This view is required orthodoxy on the right, where it forms a sort of second line of defense against action, just in case denial of climate science and witch hunts against climate scientists don’t do the trick. ...
But things are actually much more hopeful than that, thanks to remarkable technological progress in renewable energy.
The numbers are really stunning..., the cost of electricity generation using wind power fell 61 percent from 2009 to 2015, while the cost of solar power fell 82 percent. These numbers ... put the cost of renewable energy into a range where it’s competitive with fossil fuels. ...
So what will it take to achieve a large-scale shift from fossil fuels to renewables, a shift to sun and wind instead of fire? Financial incentives, and they don’t have to be all that huge. Tax credits for renewables that were part of the Obama stimulus plan, and were extended under the recent budget deal, have already done a lot to accelerate the energy revolution. The Environmental Protection Agency’s Clean Power Plan, which if implemented will create strong incentives to move away from coal, will do much more.
And none of this will require new legislation; we can have an energy revolution even if the crazies retain control of the House.
Now, skeptics may point out that even if all these good things happen, they won’t be enough...
But I’d argue that the kind of progress now within reach could produce a tipping point, in the right direction. Once renewable energy becomes an obvious success and, yes, a powerful interest group, anti-environmentalism will start to lose its political grip. And an energy revolution in America would let us take the lead in global action.
Salvation from climate catastrophe is, in short, something we can realistically hope to see happen, with no political miracle necessary. But failure is also a very real possibility. Everything is hanging in the balance.

Sunday, January 31, 2016

'Freedom: Three Varieties and a Caveat'

Highlighting something from yesterday's links:

Freedom: Three Varieties and a Caveat, by Peter Dorman, Econospeak: What follows is a very brief summary of an appendix in my micro textbook that addresses the libertarian case for free markets. It was triggered by the comment of Tyler Cowen that the left needs more Mill.
There are three kinds of freedom, each valid. The first is negative freedom, “freedom from”, which means simply freedom from external coercion.  This is what underlies the libertarian attachment to free markets.  The second is positive freedom, “freedom to”, which seeks to provide people the means to realize their (feasible) objectives. Traditionally the left has seized on this notion to justify redistributive institutions and policies. The third is “inner freedom”, freedom from habit, custom, and unreflected assumptions, which was the core message of German idealism, English and French Romanticism and American Transcendentalism (and, at its best, rock and roll).
In a perfect world we would bask in all three of them. Unfortunately, each makes demands on the others, and there is no universal criterion for striking a balance. The first step toward a reasonable politics of freedom, however, is to simply recognize that no one conception is sufficient by itself.
Finally, it’s important to recognize that freedom, according to any interpretation, is always limited by obligation. In particular, we have obligations toward children, the very old or disabled and others who depend on us for the necessities of life. One way collective action can widen the domain of freedom is by helping us to meet these responsibilities more efficiently. Consider, for instance, how public education and pension systems (like Social Security) widen the scope for parents and children of their elderly parents to be freer in other aspects of their lives.

Comments?

Friday, January 29, 2016

Paul Krugman: Plutocrats and Prejudice

Where does all the "political ugliness" come from, and what does it mean for Democrats?:

Plutocrats and Prejudice, by Paul Krugman, Commentary, NY Times: Every time you think that our political discourse can’t get any worse, it does. ... But where is all the nastiness coming from?
Well, there’s debate about that — and it’s a debate that is at the heart of the Democratic contest. ...
To oversimplify a bit — but only, I think, a bit — the Sanders view is that money is the root of all evil. Or more specifically, the corrupting influence of big money, of the 1 percent and the corporate elite, is the overarching source of the political ugliness...
The Clinton view, on the other hand, seems to be that money is the root of some evil, maybe a lot of evil, but it isn’t the whole story. Instead, racism, sexism and other forms of prejudice are powerful forces in their own right. ...
As you might guess, I’m on the many-evils side of this debate. ... But ... the question for progressives is what all of this says about political strategy.
If the ugliness in American politics is all, or almost all, about the influence of big money, then working-class voters who support the right are victims of false consciousness. And it might — might — be possible for a candidate preaching economic populism to break through this false consciousness ... by making a sufficiently strong case that he’s on their side. ...
On the other hand, if the divisions in American politics aren’t just about money, if they reflect deep-seated prejudices that progressives simply can’t appease, such visions of radical change are naïve. And I believe that they are.
That doesn’t say that movement toward progressive goals is impossible — America is becoming both more diverse and more tolerant over time. Look, for example, at how quickly opposition to gay marriage has gone from a reliable vote-getter for the right to a Republican liability.
But there’s still a lot of real prejudice out there, and probably enough so that political revolution from the left is off the table. Instead, it’s going to be a hard slog at best.
Is this an unacceptably downbeat vision? Not to my eyes. After all, one reason the right has gone so berserk is that the Obama years have in fact been marked by significant if incomplete progressive victories, on health policy, taxes, financial reform and the environment. And isn’t there something noble, even inspiring, about fighting the good fight, year after year, and gradually making things better?

Thursday, January 28, 2016

'We Desperately Need Major Tax Reform! Or Maybe Not…'

Jared Bernstein:

We desperately need major tax reform! Or maybe not…: It is an article of faith in national politics that the reform of the federal tax code is what’s standing between us and faster growth, higher productivity, better jobs, and whatever other good outcome you want to ascribe to this endeavor. ...
The changes in the Federal tax code since 1986, including the substantial increases to the EITC and CTC…boosted the aftertax income of households in the first two quintiles of the income distribution by about seven percent without even counting any benefits from the additional labor force participation... These gains are an order of magnitude larger than the estimated gains from fundamental tax reform, which are generally measured in the tenths of a percent.
So, let’s stop being distracted by the “fundamental reform fairy,” and pursue incremental reforms:
— Close the carried interest loophole that privileges the earnings of investment fund managers. ...
— Block corporate tax inversions, where U.S. companies merge with overseas companies just to move their tax mailbox to a low tax country.
— End the “step-up basis” provision by which the wealthy can pass capital gains on to their heirs tax free.
— Stop incentivizing multinationals to keep, or at least book, their profits overseas by letting companies repatriate their foreign earnings after paying a minimum tax (the Obama administration suggest a 19 percent minimum rate).
— Increase the EITC for childless adults, who now get very little from it, an idea supported by both Obama and House Speaker Paul Ryan (R).
Above, I called these “tweaks” as opposed to major reforms. Though the contrast is apt, it’s the wrong word, as any such changes are hugely heavy lifts. But heavy lifts are at least in the realm of the possible. And that’s the right realm to be in if we actually want to improve our tax code.

Tuesday, January 26, 2016

You Say You Want a Revolution?

New column:

You Say You Want a Revolution?, by Mark A. Thoma: What, exactly, does Democratic presidential candidate Bernie Sanders have in mind when he asks on his website if we are “Ready to Start a Political Revolution?” He has proclaimed unabashedly that he is a socialist, a statement that has raised eyebrows about his electability. He wants to turn us into the Soviet Union!! Is that what he has in mind?
Far from it. He has qualified his statements to make it clear that he is a democratic socialist, but that term fails to convey what he really has in mind, or at least I think it does. ...

Monday, January 25, 2016

'The Volcanic Core Fueling the 2016 Election'

Robert Reich:

The Volcanic Core Fueling the 2016 Election: ...as I talked with ... people, I kept hearing the same refrains. They wanted to end “crony capitalism.” They detested “corporate welfare,” such as the Wall Street bailout.
They wanted to prevent the big banks from extorting us ever again. Close tax loopholes for hedge-fund partners. Stop the drug companies and health insurers from ripping off American consumers. End trade treaties that sell out American workers. Get big money out of politics.
Somewhere in all this I came to see the volcanic core of what’s fueling this election.
If you’re one of the tens of millions of Americans who are working harder than ever but getting nowhere, and who understand that the political-economic system is rigged against you and in favor of the rich and powerful, what are you going to do?
Either you’re going to be attracted to an authoritarian son-of-a-bitch who promises to make America great again by keeping out people different from you and creating “great” jobs in America, who sounds like he won’t let anything or anybody stand in his way, and who’s so rich he can’t be bought off.
Or you’ll go for a political activist who tells it like it is, who has lived by his convictions for fifty years, who won’t take a dime of money from big corporations or Wall Street or the very rich, and who is leading a grass-roots “political revolution” to regain control over our democracy and economy.
In other words, either a dictator who promises to wrest power back to the people, or a movement leader who asks us to join together to wrest power back to the people.
You don’t care about the details of proposed policies and programs.
You just want a system that works for you.

Paul Krugman: Michigan’s Great Stink

The "poisonous interaction between ideology and race":

Michigan’s Great Stink, by Paul Krugman, Commentary, NY Times: ...Modern politicians, no matter how conservative, understand that public health is an essential government role. Right? No, wrong — as illustrated by the disaster in Flint, Mich.
What we know so far is that in 2014 the city’s emergency manager — appointed by Rick Snyder, the state’s Republican governor — decided to switch to an unsafe water source, with lead contamination and more, in order to save money. And it’s becoming increasingly clear that state officials knew that they were damaging public health...
This story ... would be a horrifying outrage even if it were an accident or an isolated instance of bad policy. But it isn’t. ...
In the modern world, much government spending goes to social insurance programs — things like Social Security, Medicare and so on, that are supposed to protect citizens from the misfortunes of life. Such spending is the subject of fierce political debate, and understandably so. ...
There should, however, be much less debate about spending on ... public goods — things that benefit everyone and can’t be provided by the private sector. ...
Yet ... hard-line conservatives have ... sought to cut social insurance spending on the poor. ... But what we also see is extreme penny pinching on public goods. ...
Nor are we talking only about a handful of cases. Public construction spending as a share of national income has fallen sharply... And this includes sharp cuts in spending on water supply.
So are we just talking about the effects of ideology? Didn’t Flint find itself in the cross hairs of austerity because it’s a poor, mostly African-American city? Yes, that’s definitely part of what happened — it would be hard to imagine something similar happening to Grosse Pointe.
But these really aren’t separate stories. What we see in Flint is an all too typically American situation of (literally) poisonous interaction between ideology and race, in which small-government extremists are empowered by the sense of too many voters that good government is simply a giveaway to Those People.
Now what? Mr. Snyder has finally expressed some contrition, although he’s still withholding much of the information we need to fully understand what happened. And meanwhile we are, inevitably, being told that we shouldn’t make the poisoning of Flint a partisan issue.
But you can’t understand what happened in Flint, and what will happen in many other places if current trends continue, without understanding the ideology that made the disaster possible.

Sunday, January 24, 2016

Banks' Influence on Congressional ''Reform'' of the Fed

Narayana Kocherlakota:

Banks' Influence on Congressional “Reforms” of the Fed: Senator Sanders’ December 23 NYT op-ed expressed concern about what he perceived to be an undue influence of the financial sector on the Federal Reserve. In my last post, I explained how the Fed could allay these concerns through greater transparency about the role of the Board of Governors. In this post, I elaborate on what I see as a much bigger problem: the financial sector’s influence on Congress as it seeks to “reform” the Fed.
Here’s an example of what I mean. Last year, Congress amended Section 10.1 of the Federal Reserve Act. That section now requires a person who is experienced with community banks to be on the Board of Governors. There is no other explicit sectoral requirement of this kind in the Act.
How should one interpret this new statutory requirement? The issue is not whether it is often beneficial to have a Board member who has prior experience with community banks. I fully agree that it is. But that’s true of many other sectors in the US economy. So why is Congress picking this particular sector as being one that needs to be represented on the Board?
Unfortunately, the answer is clear to me (as I suspect that it will be to anyone who fills this new slot): Congress wants the Fed to tilt supervision, regulation, and monetary policy to be more favorable to community banks. This interpretation is consistent with the fact that the passage of this statutory change came after six years of lobbying from the Independent Community Bankers of America.
This statutory preference for community banks is disturbing. It’s true that community banks are often located on Main Street. But the interests of community banks are absolutely not the same as the interests of Main Street.
In terms of supervision and regulation: lax supervision and regulation increases the probability of bank failure. Bank failures impose a cost on the FDIC which is, ultimately, backstopped by the taxpayer. Community banks operating in the interests of their shareholders should not - and don’t - fully internalize these taxpayer costs. Accordingly, community banks systematically favor less supervision and regulation than would be in the public interest.
In terms of monetary policy, the profits that banks derive from many of their products are positively correlated with the overall level of interest rates in the economy. For this reason, community bankers typically favor higher interest rates than is in the general public interest. (Of course, this preference is shared by larger financial institutions for similar reasons.)
In writing the above, I’m not intending to be critical of community banks. They’re private businesses. No one should expect the interests of a given private business to coincide with the general public interest.
The problem is with Congress. Congress is supposed to act in the interest of the public. But this law is not in the public interest. Instead, it is a rather clear attempt to influence the Fed so that it acts more in the interest of (part of) the financial sector.
In his op-ed, Senator Sanders says that he wants to reform the Fed so that “the foxes would no longer guard the henhouse”. The first step in this agenda should be to repeal the recent amendment to section 10.1 of the Federal Reserve Act. This step will not be easy to accomplish. The amendment passed with overwhelming support from both parties in both Houses of Congress.

Tuesday, January 19, 2016

'Who Lost the White Working Class?'

Robert Reich:

Who Lost the White Working Class: Why did the white working class abandon the Democrats? The conventional answer is that Republicans skillfully played the race card. In the wake of the Civil Rights Act, segregationists like Alabama Governor George C. Wallace led southern whites out of the Democratic Party. Later, Republicans charged Democrats with coddling black “welfare queens” (Ronald Reagan popularized the term), being soft on black crime (George W. Bush’s “Willie Horton” ads in 1988), and trying to give jobs to less-qualified blacks over more-qualified whites (the battle over affirmative action).
The bigotry now spewing forth from Donald Trump and several of his Republican rivals is an extension of this old race card, now applied to Mexicans and Muslims – with much the same effect on the white working class voters, who don’t trust Democrats to be as “tough.”  
But this doesn’t tell the whole story. Democrats also abandoned the white working class. ...
In part, it was because Democrats bought the snake oil of the “suburban swing voter” – so-called “soccer moms” in the 1990s and affluent politically-independent professionals in the 2000s – who supposedly determined electoral outcomes.
Meanwhile, as early as the 1980s they began drinking from the same campaign funding trough as the Republicans – big corporations, Wall Street, and the very wealthy. ...
Nothing in politics is ever final. Democrats could still win back the white working class – putting together a coalition of the working class and poor, of whites, blacks, and Latinos.
This would give them the political clout to restructure the economy – rather than merely enact palliative programs papering over the increasing concentration of wealth and power in America.  
But to do this they’d have to stop obsessing over upper-income suburban swing voters, and end their financial dependence on big corporations, Wall Street, and the wealthy. Will they? If not, a third party might emerge that does it instead.

Monday, January 18, 2016

Paul Krugman: Health Reform Realities

Would it be worth it to try to enact single-payer health care system?:

Health Reform Realities, by Paul Krugman, Commentary, NY Times: ... Obamacare is ... a somewhat awkward, clumsy device with lots of moving parts. This makes it more expensive than it should be, and will probably always cause a significant number of people to fall through the cracks.
The question for progressives — a question that is now central to the Democratic primary — is whether these failings mean that they should re-litigate their own biggest political success in almost half a century, and try for something better.
My answer ... is that they shouldn’t, that they should seek incremental change on health care (Bring back the public option!) and focus their main efforts on other issues...
If we could start from scratch, many, perhaps most, health economists would recommend single-payer, a Medicare-type program covering everyone. But single-payer wasn’t a politically feasible goal in America, for three big reasons...
First, like it or not, incumbent players have a lot of power. ...
Second, single-payer would require a lot of additional tax revenue — and we would be talking about taxes on the middle class...
Finally, and I suspect most important, switching to single-payer would impose a lot of disruption on tens of millions of families who currently have good coverage through their employers. ...
What this means, as the health policy expert Harold Pollack points out, is that a simple, straightforward single-payer system just isn’t going to happen. ...
Which brings me to the Affordable Care Act, which was designed to bypass these obstacles. ... Even so, achieving this reform was a close-run thing: Democrats barely got it through during the brief period when they controlled Congress. Is there any realistic prospect that a drastic overhaul could be enacted any time soon — say, in the next eight years? No.
You might say that it’s still worth trying. But politics, like life, involves trade-offs.
There are many items on the progressive agenda, ranging from an effective climate change policy, to making college affordable for all, to restoring some of the lost bargaining power of workers. Making progress on any of these items is going to be a hard slog, even if Democrats hold the White House and, less likely, retake the Senate. ...
So progressives must set some priorities. And it’s really hard to see, given this picture, why it makes any sense to spend political capital on a quixotic attempt at a do-over, not of a political failure, but of health reform — their biggest victory in many years.

Tuesday, January 12, 2016

'Republican Candidates Turn to a Touchy Topic: Poverty'

Eduardo Porter:

Republican Candidates Turn to a Touchy Topic: Poverty: On Saturday ... six Republican hopefuls gathered at a convention center here to talk about poverty. Donald Trump and Ted Cruz, the top two, weren’t there. But still, poverty?

Not even Democrats, who by Republicans’ own admission pretty much own the subject, have dedicated this kind of campaign time to those at the very bottom of the ladder. The votes simply aren’t there. And that’s especially true for Republicans.

What’s going on? ...Republicans ... have a coherent theory about the causes of America’s entrenched poverty that fits well with their underlying worldview: it’s largely the government’s fault. ...

“From the government standpoint, we have actually been building a trap,” Mr. Ryan said.

Trouble is, the evidence doesn’t much mesh with this view. ...

And:

... Consider the huge tax cuts offered up by most Republican candidates. ... All of them provide most of their benefits to the rich.

Meanwhile, the House Republicans’ 2016 budget plan, drafted largely by Mr. Ryan, includes some $3 trillion, over 10 years, in cuts to programs that serve people of limited means.

As an antipoverty strategy, it’s impossible to square the circle of the largess of Republican tax plans and military spending plans with their parsimony everywhere else. As Senator Rubio of Florida noted: “What the other side is going to say is the Republicans, the conservatives, they are just looking to gut the antipoverty programs.”

Yes, they will. And Republicans’ priorities are helping the other side make its case.

Monday, January 11, 2016

Paul Krugman: The Obama Boom

"The conservative economic orthodoxy dominating the Republican Party is very, very wrong":

The Obama Boom, by Paul Krugman, Commentary, NY Times: Do you remember the “Bush boom”? Probably not. Anyway, the administration of George W. Bush began its tenure with a recession, followed by an extended “jobless recovery.” By the summer of 2003, however, the economy began adding jobs again. The pace of job creation wasn’t anything special..., but conservatives insisted that the job gains ... represented a huge triumph, a vindication of the Bush tax cuts.
So what should we say about the Obama job record? Private-sector employment ... hit its low point in February 2010. Since then we’ve gained 14 million jobs,... roughly double the number of jobs added during the supposed Bush boom...
The point ... is that ... Mr. Obama ... has been attacked at every stage of his presidency for policies that his critics allege are “job-killing”...
What did Mr. Obama do that was supposed to kill jobs? ... He signed the 2010 Dodd-Frank financial reform... He raised taxes on high incomes... And he enacted a health reform...
Yet none of the dire predicted consequences of these policies have materialized. ...
So what do we learn from this impressive failure to fail? That the conservative economic orthodoxy dominating the Republican Party is very, very wrong. In a way, that should have been obvious. ...
On one side, this elite is presumed to be a bunch of economic superheroes, able to deliver universal prosperity by summoning the magic of the marketplace. On the other side, they’re depicted as incredibly sensitive flowers who wilt in the face of adversity — raise their taxes a bit, subject them to a few regulations, or for that matter hurt their feelings in a speech or two, and they’ll stop creating jobs and go sulk in their tents, or more likely their mansions.
It’s a doctrine that doesn’t make much sense, but it ... turns out to be very convenient for the elite: namely, that injustice is a law of nature, that we’d better not do anything to make our society less unequal or protect ordinary families from financial risks. Because if we do ... we’ll be severely punished by the invisible hand, which will collapse the economy. ...
The ... Obama economy offers a powerful lesson... From a conservative point of view, Mr. Obama did everything wrong, afflicting the comfortable (slightly) and comforting the afflicted (a lot), and nothing bad happened. We can, it turns out, make our society better after all.

Thursday, January 07, 2016

'Confidence as a Political Device'

Simon Wren-Lewis:

Confidence as a political device: This is a contribution to the discussion about models started by Krugman, DeLong and Summers, and in particular to the use of confidence. (Martin Sandbu has an excellent summary, although as you will see I think he is missing something.) The idea that confidence can on occasion be important, and that it can be modeled, is not (in my view) in dispute. For example the very existence of banks depends on confidence (that depositors can withdraw their money when they wish), and when that confidence disappears you get a bank run.
But the leap from the statement that ‘in some circumstances confidence matters’ to ‘we should worry about bond market confidence in an economy with its own central bank in the middle of a depression’ is a huge one...
When people invoke the idea of confidence, other people (particularly economists) should be automatically suspicious. The reason is that it frequently allows those who represent the group whose confidence is being invoked to further their own self interest. The financial markets are represented by City or Wall Street economists, and you invariably see market confidence being invoked to support a policy position they have some economic or political interest in. Bond market economists never saw a fiscal consolidation they did not like, so the saying goes, so of course market confidence is used to argue against fiscal expansion. Employers drum up the importance of maintaining their confidence whenever taxes on profits (or high incomes) are involved. As I argue in this paper, there is a generic reason why financial market economists play up the importance of market confidence, so they can act as high priests. (Did these same economists go on about the dangers of rising leverage when confidence really mattered, before the global financial crisis?)
The general lesson I would draw is this. If the economics point towards a conclusion, and people argue against it based on ‘confidence’, you should be very, very suspicious. You should ask where is the model (or at least a mutually consistent set of arguments), and where is the evidence that this model or set of arguments is applicable to this case? Policy makers who go with confidence based arguments that fail these tests because it accords with their instincts are, perhaps knowingly, following the political agenda of someone else.

Tuesday, January 05, 2016

'The Conservative Case for Solar Subsidies'

Ben Ho, a member of the Council of Economic Advisers under George W. Bush:

The Conservative Case for Solar Subsidies: To many skeptics, particularly on the right, the spectacular failure of the solar-panel manufacturer Solyndra ... demonstrated the industry’s shaky future and the danger of government efforts to subsidize it to success.
Fast forward to today. Solar energy prices have continued to fall rapidly, twice as many Americans work in the solar industry as in coal mining, and last year one-third of new electricity generation came from solar power. ...
Conservatives ... need to take another look at solar. The case for solar isn’t limited to prices and jobs. Consumers want choice..., electricity is still one of the few areas where we have virtually no choice over our supplier. ...
Solar also solves an efficiency challenge..., demand peaks during the daytime... To meet demand, we have invested in a great deal of spare capacity. ... Fortunately, we need energy most during the daytime — making rooftop solar a smart choice...
And there’s nothing in free-market economic theory that precludes government support. Markets tend to underproduce what economists call positive externalities... Solar panels ... are replete with such benefits...
The kerfuffle over the Solyndra collapse aside, many conservatives already agree, and have for years. When I was at the Council of Economic Advisers under President George W. Bush, we believed that an across-the-board energy policy was by far the best approach — and that included solar. From both a market and an environmental point of view, supporting the solar industry should make sense, no matter which side of the aisle you come from.

Monday, January 04, 2016

Paul Krugman: Elections Have Consequences

As the title says, elections matter:

Elections Have Consequences, by Paul Krugman, Commentary, NY Times: ...I’m a big geek... I was eagerly awaiting the I.R.S.’s tax tables for 2013... And what these tables show is that elections really do have consequences.
You might think that this is obvious. But on the left, in particular, there are some people who, disappointed by the limits of what President Obama has accomplished, minimize the differences between the parties. Whoever the next president is, they assert — or at least ... if it’s not Bernie Sanders — things will remain pretty much the same, with the wealthy continuing to dominate the scene. ...
But the truth is that Mr. Obama’s election ... had some real, quantifiable consequences. ...
If Mitt Romney had won, we can be sure that Republicans would have found a way to prevent these tax hikes. ...
Mr. Obama has effectively rolled back not just the Bush tax cuts but Ronald Reagan’s as well..., about $70 billion a year in revenue. This happens to be in the same ballpark as both food stamps and ... this year’s net outlays on Obamacare. So we’re not talking about something trivial.
Speaking of Obamacare, that’s another thing Republicans would surely have killed if 2012 had gone the other way. ... And the effect on health care has been huge...
Now, to be fair, some widely predicted consequences of Mr. Obama’s re-election — predicted by his opponents — didn’t happen. Gasoline prices didn’t soar. Stocks didn’t plunge. The economy didn’t collapse..., and the unemployment rate is a full point lower than the rate Mr. Romney promised to achieve by the end of 2016.
In other words, the 2012 election didn’t just allow progressives to achieve some important goals. It also gave them an opportunity to show that achieving these goals is feasible. No, asking the rich to pay somewhat more in taxes while helping the less fortunate won’t destroy the economy.
So now we’re heading for another presidential election. And once again the stakes are high. Whoever the Republicans nominate will be committed to destroying Obamacare and slashing taxes on the wealthy — in fact, the current G.O.P. tax-cut plans make the Bush cuts look puny. Whoever the Democrats nominate will, first and foremost, be committed to defending the achievements of the past seven years.
The bottom line is that presidential elections matter, a lot, even if the people on the ballot aren’t as fiery as you might like. Don’t let anyone tell you otherwise.

Friday, January 01, 2016

Paul Krugman: Privilege, Pathology and Power

Our "narcisstocracy?":

Privilege, Pathology and Power, by Paul Krugman: Wealth can be bad for your soul. That’s ... a conclusion from serious social science... The affluent are, on average, less likely to exhibit empathy, less likely to respect norms and even laws, more likely to cheat, than those occupying lower rungs on the economic ladder. ...
America is a society in which a growing share of income and wealth is concentrated in the hands of a small number of people,... these people have huge political influence.., and that is surely the biggest problem.
But ... those empowered by money-driven politics include a disproportionate number of spoiled egomaniacs. ...
Donald Trump would probably have been a blowhard and a bully whatever his social station. But his billions have insulated him from the external checks that limit most people’s ability to act out their narcissistic tendencies; nobody has ever been in a position to tell him, “You’re fired!” ...
But Mr. Trump isn’t the only awesomely self-centered billionaire playing an outsized role in the 2016 campaign.
There have been ... reports lately about Sheldon Adelson, the Las Vegas gambling magnate. Mr. Adelson has been involved in ... court proceedings ... around claims of misconduct in his operations in Macau, including links to organized crime and prostitution. ... What was surprising was his behavior in court, ... he refused to answer routine questions and argued with the judge, Elizabeth Gonzales. That, as she rightly pointed out, isn’t something witnesses get to do.
Then Mr. Adelson bought Nevada’s largest newspaper..., reporters ... were told to drop everything and start monitoring ... Ms. Gonzales. And while the paper never published any results..., an attack on Judge Gonzales, with what looks like a fictitious byline, did appear in a small Connecticut newspaper owned by one of Mr. Adelson’s associates.
O.K., but why do we care? Because Mr. Adelson’s political spending has made him a huge player in Republican politics...
Are there other cases? Yes indeed...
Just to be clear, the biggest reason to oppose the power of money in politics is the way it lets the wealthy rig the system and distort policy priorities. ... The fact that some of those buying influence are also horrible people is secondary.
But it’s not trivial. Oligarchy, rule by the few, also tends to become rule by the monstrously self-centered. Narcisstocracy? Jerkigarchy? Anyway, it’s an ugly spectacle, and it’s probably going to get even uglier over the course of the year ahead.

Tuesday, December 29, 2015

'The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed'

This is the beginning of a long response from Larry Summers to an op-ed by Bernie Sanders:

The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed: Bernie Sanders had an op Ed in the New York Times on Fed reform last week that provides an opportunity to reflect on the Fed and financial reform more generally. I think that Sanders is right in his central point that financial policy is overly influenced by financial interests to its detriment and that it is essential that this be repaired. At the same time, reform requires careful reflection if it is not to be counterproductive. And it is important in approaching issues of reform not to give ammunition to right wing critics of the Fed who would deny it the capacity to engage in the kind of crisis responses that have judged in their totality been successful in responding to the financial crisis.  The most important policy priority with respect to the Fed is protecting it from stone age monetary ideas like a return to the gold standard, or turning policymaking over to a formula, or removing the dual mandate commanding the Fed to worry about unemployment as well as inflation. ...

Monday, December 28, 2015

Paul Krugman: Doubling Down on W

 "There are no moderates in the Republican primary":

Doubling Down on W, by Paul Krugman, commentary, NY Times: 2015 was, of course, the year of Donald Trump, whose rise has inspired horror among establishment Republicans and, let’s face it, glee — call it Trumpenfreude — among many Democrats. But Trumpism has in one way worked to the G.O.P. establishment’s advantage: it has distracted pundits and the press from the hard right turn even conventional Republican candidates have taken, a turn whose radicalism would have seemed implausible not long ago.
After all, you might have expected the debacle of George W. Bush’s presidency ... to inspire some reconsideration of W-type policies. What we’ve seen instead is a doubling down, a determination to take whatever didn’t work from 2001 to 2008 and do it again, in a more extreme form.
Start with the example that’s easiest to quantify, tax cuts..., it’s harder than ever to claim that tax cuts are the key to prosperity. ... In fact, however, establishment candidates like Marco Rubio and Jeb Bush are proposing much bigger tax cuts than W ever did. ...
What about other economic policies? The Bush administration’s determination to dismantle any restraints on banks ... looks remarkably bad in retrospect. But conservatives ... have declared their determination to repeal Dodd-Frank...
The only real move away from W-era economic ideology has been on monetary policy, and it has been a move toward right-wing fantasyland. ...
Last but not least, there’s foreign policy. You might have imagined that the story of the Iraq war ... would inspire some caution about military force as the policy of first resort. Yet swagger-and-bomb posturing is more or less universal among the leading candidates. ...
The point is that ... the mainstream contenders ... are frighteningly radical, and that none of them seem to have learned anything from past disasters.
Why does this matter? Right now conventional wisdom ... suggests even or better-than-even odds that Mr. Trump or Mr. Cruz will be the nominee, in which case everyone will be aware of the candidate’s extremism. But there’s still a substantial chance that the outsiders will falter and someone less obviously out there — probably Mr. Rubio — will end up on top.
And if this happens, it will be important to realize that not being Donald Trump doesn’t make someone a moderate, or even halfway reasonable. The truth is that there are no moderates in the Republican primary, and being reasonable appears to be a disqualifying characteristic for anyone seeking the party’s nod.

Monday, December 21, 2015

Paul Krugman: The Donald and the Decider

Nothing comes from nowhere:

The Donald and the Decider, by Paul Krugman, Commentary, NY Times: Almost six months have passed since Donald Trump overtook Jeb Bush in polls of Republican voters. At the time, most pundits dismissed the Trump phenomenon as a blip... Instead, however, his lead just kept widening. Even more striking, the triumvirate of trash-talk — Mr. Trump, Ben Carson, and Ted Cruz — now commands the support of roughly 60 percent of the primary electorate.
But how can this be happening? After all, the antiestablishment candidates now dominating the field, aside from being deeply ignorant about policy, have a habit of making false claims, then refusing to acknowledge error. Why don’t Republican voters seem to care?
Well, part of the answer has to be that the party taught them not to care. Bluster and belligerence as substitutes for analysis, disdain for any kind of measured response, dismissal of inconvenient facts reported by the “liberal media” didn’t suddenly arrive on the Republican scene last summer. On the contrary, they have long been key elements of the party brand. So how are voters supposed to know where to draw the line?. ...
Donald Trump as a political phenomenon is very much in a line of succession that runs from W. through Mrs. Palin, and in many ways he’s entirely representative of the Republican mainstream. For example, were you shocked when Mr. Trump revealed his admiration for Vladimir Putin? He was only articulating a feeling that was already widespread in his party.
Meanwhile, what do the establishment candidates have to offer as an alternative? On policy substance, not much. Remember, back when he was the presumed front-runner, Jeb Bush assembled a team of foreign-policy “experts,” ... dominated by neoconservative hard-liners, people committed, despite past failures, to the belief that shock and awe solve all problems.
In other words, Mr. Bush wasn’t articulating a notably different policy than what we’re now hearing from Trump et al...
In case you’re wondering, nothing like this process has happened on the Democratic side. When Hillary Clinton and Bernie Sanders debate..., it’s a real discussion... American political discourse as a whole hasn’t been dumbed down, just its conservative wing.
Going back to Republicans, does this mean that Mr. Trump will actually be the nominee? I have no idea. But it’s important to realize that he isn’t someone who suddenly intruded into Republican politics from an alternative universe. He, or someone like him, is where the party has been headed for a long time.

Friday, December 18, 2015

Paul Krugman: 'The Big Short,' Housing Bubbles and Retold Lies

Why are Murdoch-controlled newspapers attacking "The Big Short?"

‘The Big Short,’ Housing Bubbles and Retold Lies, by Paul krugman, Commentary, NY Times: In May 2009 Congress created a special commission to examine the causes of the financial crisis. The idea was to emulate the celebrated Pecora Commission of the 1930s, which used careful historical analysis to help craft regulations that gave America two generations of financial stability.
But some members of the new commission had a different goal. ... Peter Wallison of the American Enterprise Institute, wrote to a fellow Republican on the commission ... it was important that what they said “not undermine the ability of the new House G.O.P. to modify or repeal Dodd-Frank”...; the party line, literally, required telling stories that would help Wall Street do it all over again.
Which brings me to a new movie the enemies of financial regulation really, really don’t want you to see.
The Big Short” ... does a terrific job of making Wall Street skulduggery entertaining, of exploiting the inherent black humor of how it went down. ... But you don’t want me to play film critic; you want to know whether the movie got the underlying ... story right. And the answer is yes, in all the ways that matter. ...
The ...housing ... bubble ... was inflated largely via opaque financial schemes that in many cases amounted to outright fraud — and it is an outrage that basically nobody ended up being punished ... aside from innocent bystanders, namely the millions of workers who lost their jobs and the millions of families that lost their homes.
While the movie gets the essentials of the financial crisis right, the true story ... is deeply inconvenient to some very rich and powerful people. They and their intellectual hired guns have therefore spent years disseminating an alternative view ... that places all the blame ... on ... too much government, especially government-sponsored agencies supposedly pushing too many loans on the poor.
Never mind that the supposed evidence for this view has been thoroughly debunked..., constant repetition, especially in captive media, keeps this imaginary history in circulation no matter how often it is shown to be false.
Sure enough, “The Big Short” has already been the subject of vitriolic attacks in Murdoch-controlled newspapers...
The ... people who made “The Big Short” should consider the attacks a kind of compliment: The attackers obviously worry that the film is entertaining enough that it will expose a large audience to the truth. Let’s hope that their fears are justified.

Tuesday, December 15, 2015

Donald Trump’s Divisiveness Is Bad for the Economy

My latest column:

Donald Trump’s Divisiveness Is Bad for the Economy: White House spokesperson Josh Earnest described Donald Trump as “offensive and toxic,” though that only begins to describe the corrosive effect his bigotry, divisiveness, and xenophobia have on our society. It is at odds with our values as a nation.
It’s also bad for the economy. ...

Monday, December 14, 2015

Paul Krugman: Hope From Paris

"Paris gives us real reason to hope":

Hope From Paris, by Paul Krugman, Commentary, NY Times: Did the Paris climate accord save civilization? Maybe. That may not sound like a ringing endorsement, but it’s actually the best climate news we’ve had in a very long time. ...
Until very recently there were two huge roadblocks in the way of any kind of global deal on climate: China’s soaring consumption of coal, and the implacable opposition of America’s Republican Party. ... But there have been important changes on both fronts.
On one side, there is a visible shift in Chinese attitudes... China faces a huge air quality crisis, brought on largely by coal-burning, which makes it far more willing to wean itself from the worst form of fossil fuel consumption. And China’s ... rapidly growing middle class ... demands a higher quality of life, including air that’s relatively safe to breathe. ...
Which brings us to the U.S. Republican attitudes...: the G.O.P. is spiraling ever deeper into a black hole of denial and anti-science conspiracy theorizing. The game-changing news is that this may not matter as much as we thought..., new technology has fundamentally changed the rules.
Many people still seem to believe that renewable energy is hippie-dippy stuff, not a serious part of our future. ... The reality, however, is that costs of solar and wind power have fallen dramatically, to the point where they are close to competitive with fossil fuels even without special incentives — and progress on energy storage has made their prospects even better. Renewable energy has also become a big employer...
This energy revolution has two big implications. The first is that the cost of sharp emission reductions will be much less than even optimists used to assume... The second is that given a moderate boost — the kind that the Paris accord could provide — renewable energy could quickly give rise to new interest groups with a positive stake in saving the planet, offering an offset to the Kochs and suchlike.
Of course, it could easily go all wrong. President Cruz or President Rubio might scuttle the whole deal, and by the time we get another chance to do something about climate it could be too late.
But it doesn’t have to happen. I don’t think it’s naïve to suggest that what came out of Paris gives us real reason to hope in an area where hope has been all too scarce. Maybe we’re not doomed after all.

Friday, December 11, 2015

'Why It's Tricky for Fed Officials to Talk Politically'

I think I disagree with Brad DeLong:

Why it's tricky for Fed officials to talk politically: Should speeches by Federal Reserve officials be limited to topics concerning monetary policy and financial stability, or should they be free to speak on any topic, no matter how politically charged it might be? It's an important question as the Fed prepares to announce next week what's looking like a significant change in its eight-year policy of zero-perecent interest rates.
Fed Chair Janet Yellen, for example, was sharply criticized for a speech last year highlighting what economists know about rising inequality and what might be done to overcome it.
This speech, which Yellen gave in October 2014, is still creating controversy. This week, it erupted again when UC Berkeley economist Brad DeLong defended Yellen against the charge that she's a "partisan hack," a description in the headline of a Washington Post story by Michael Strain after Yellen's speech. ...

Paul Krugman: Empowering the Ugliness

Reaping what they've sown:

Empowering the Ugliness, by Paul Krugman, Commentary, NY Times: We live in an era of political news that is, all too often, shocking but not surprising. The rise of Donald Trump definitely falls into that category. And so does the electoral earthquake that struck France in Sunday’s regional elections, with the right-wing National Front winning more votes than either of the major mainstream parties. ...
Let me start with ... Europe..., from an American perspective it looks as if Europe’s establishment has tried to freeze the xenophobic right, not just out of political power, but out of any role in acceptable discourse. ...
What the European establishment may not have realized, however, is that its ability to define the limits of discourse rests on the perception that it knows what it is doing. ...The European project ... has never had deep popular support...
And there’s nothing quite like sustained poor economic performance ... brought on by Europe’s austerity and hard-money obsessions ... to undermine the elite’s reputation for competence. That’s probably why one recent study found a consistent historical relationship between financial crises and the rise of right-wing extremism. And history is repeating itself.
The story is quite different in America, because the Republican Party hasn’t tried to freeze out the kind of people who vote National Front in France. Instead, it has tried to exploit them, mobilizing their resentment via dog whistles to win elections. ...
But there is a strong element of bait-and-switch to this strategy. Whatever dog whistles get sent during the campaign, once in power the G.O.P. has made serving the interests of a small, wealthy economic elite, especially through big tax cuts, its main priority...
Sooner or later the angry whites who make up a large fraction, maybe even a majority, of the G.O.P. base were bound to rebel...
So along comes Donald Trump, saying bluntly the things establishment candidates try to convey in coded, deniable hints, and sounding as if he really means them. And he shoots to the top of the polls. Shocking..., but hardly surprising. ...
What I am saying ... is that this ugliness has been empowered by the very establishments that now act so horrified... In Europe the problem is the arrogance and rigidity of elite figures who refuse to learn from economic failure; in the U.S. it’s the cynicism of Republicans who summoned up prejudice to support their electoral prospects. And now both are facing the monsters they helped create.

Friday, November 27, 2015

'What Is Holding Back the Economy?'

The rise of the crazies is not unrelated:

What Is Holding Back the Economy?: ...for many if not most people, the standard of living that can be achieved by working has been permanently reduced — by long bouts of unemployment and underemployment, by unstable and insecure employment, by long-term stagnation of wages and, perhaps most significantly, by the failure of Congress to use fiscal policy, consistently and aggressively, to counteract the devastation of the recession and its corrosive effects on the economy.
For some people in some places, steady work is simply no longer a way of life, if it ever was. In several states where jobless rates have fallen to pre-recession levels, including Illinois and Ohio, the drop is due mainly to shrinking labor forces, not increases in hiring. When unemployment rates go down because people have despaired of ever finding a job, the economy is not really improving. Rather, it is downshifting to a less prosperous level.
There are two related ways to counter that downshift. One is to make productivity-enhancing investments that create jobs today and lay the foundation for future growth. Such investments would include bolstered spending for education, transportation, environmental protection, basic science and other fields that are the purview of government. The other is to enact policies to ensure that pay and profits from enhanced productivity are broadly shared, rather than concentrated at the top of the income-and-wealth ladder. Such policies would include strict anti-trust enforcement, steeply progressive taxes, a higher minimum wage and support for labor unions. ...
But for now, there is mostly talk..., and much of the talk, especially from Republicans, is about how government should not step up to the nation’s economic challenges. The economy has recovered from the worst and proven resilient, but it is being held back by what government at all levels has failed to do.

Not the first to say this, but the problem is that Republicans have misrepresented the causes of the distress so many households feel, in particular scapegoating those who have it even worse as somehow responsible for their problems (and the decline of America more generally). And then they sell the solutions as benefiting the middle class (trickle down anyone?) when they are really directed at reducing taxes for those at the top, and reducing the government services that people rely upon to survive in this economy to support the tax cuts.

But there is something else I'd like to note. The problem is blamed on government at all levels, and fiscal policy. We hear, when Republicans are named at all, that it is "especially" Republicans as though the balance only tilts in one direction. No, it's not especially Republicans, or even mostly Republicans that are standing in the way of doing more to help those who are struggling to make ends meet. It is Republicans. It's not congressional gridlock based upon reasonable differences over policy that cannot be resolved through compromise, it's an active attempt by one party to block anything the other party tries to do, even if it might help people economically. So long as the political benefits of this behavior -- benefits based upon selling snake oil for the most part -- exceed the economic costs of inaction, Republicans will stand in the way (all the while trying to convince those who are hurt the most by their actions that they will actually be helped). It's time to stop blaming "government" as though that is what is dysfunctional. The dysfunction, as evidenced by the slate of, and preferences over Republican presidential candidates, is in the Republican party. Their actions since the onset of the Great Recession have, in my view, hurt people who should have been helped, slowed the recovery, and diverted our attention from the true problems we face making it impossible to solve them (not that Republicans would have gone along with the solutions anyway). If this election tears Republicans apart and strips them of this ability to stand in the way of helping the working class, a dream I know, I will not be shedding tears. Quite the opposite.

Tuesday, November 24, 2015

'Economists and the Eurozone: Wake Up Calls and Political Capture'

Simon Wren-Lewis:

Economists and the Eurozone: wake up calls and political capture: ... It is natural at this point to talk about Germany, and the fact that as a result of low wage increases undercutting Eurozone neighbours before the recession, Germany is not suffering as much from this recession as other countries. But I have often tried to avoid stopping there, and instead to ask whether Germany's strange stance on these macro issues simply reflects this different conjunctural position. I think the answer is no.

I'm increasingly drawn to the view that Germany's stance reflects similar political economy pressures as you will find in other OECD economies: there is no German exceptionalism, but rather that the forces that everywhere are pushing austerity and tighter monetary policy happen for various reasons to be stronger in Germany. From this perspective, this post from Frances Coppola is particularly interesting. Perhaps the problem at the heart of the Eurozone is that economic policy advice in Germany has been effectively captured by employers' interests, and perhaps the interests of banks in particular.

 Economic policy effectively captured by business and financial interests? That could never happen here...

Saturday, November 21, 2015

'The Political Aftermath of Financial Crises: Going to Extremes'

At Vox EU:

The political aftermath of financial crises: Going to extremes, by Manuel Funke, Moritz Schularick, and Christoph Trebesch: Summary Recent events in Europe provide ample evidence that the political aftershocks of financial crises can be severe. This column uses a new dataset that covers elections and crises in 20 advanced economies going back to 1870 to systematically study the political aftermath of financial crises. Far-right parties are the biggest beneficiaries of financial crises, while the fractionalization of parliaments complicates post-crisis governance. These effects are not observed following normal recessions or severe non-financial macroeconomic shocks.

Friday, November 20, 2015

Paul Krugman: The Farce Awakens

 Why do Republicans have so many panic attacks?:

The Farce Awakens, by Paul Krugman, Commentary, NY Times: Erick Erickson, the editor in chief of the website RedState.com, is a serious power in right-wing circles. ... So it’s worth paying attention to what Mr. Erickson says. And ... his response to the attack in Paris was a bit startling. The French themselves are making a point of staying calm, indeed of going out to cafes to show that they refuse to be intimidated. But Mr. Erickson declared on his website that he won’t be going to see the new “Star Wars” movie on opening day, because “there are no metal detectors at American theaters.”
It’s a bizarre reaction — but when you think about it, it’s part of a larger pattern. These days, panic attacks after something bad happens are the rule rather than the exception, at least on one side of the political divide. ...
But we shouldn’t really be surprised, because we’ve seen this movie before (unless we were too scared to go to the theater). Remember the great Ebola scare of 2014? The threat of a pandemic, like the threat of a terrorist attack, was real. But it was greatly exaggerated, thanks in large part to hype from the same people now hyping the terrorist danger.
What’s more, the supposed “solutions” were similar, too, in their combination of cruelty and stupidity. ...
What explains the modern right’s propensity for panic? Part of it, no doubt, is the familiar point that many bullies are also cowards. But I think it’s also linked to the apocalyptic mind-set that has developed among Republicans during the Obama years.
Think about it. From the day Mr. Obama took office, his political foes have warned about imminent catastrophe. Fiscal crisis! Hyperinflation! Economic collapse, brought on by the scourge of health insurance! And nobody on the right dares point out the failure of the promised disasters to materialize, or suggest a more nuanced approach.
Given this context, it’s only natural that the right would seize on a terrorist attack in France as proof that Mr. Obama has left America undefended and vulnerable. Ted Cruz ... goes so far as to declare that the president “does not wish to defend this country.” ...
The point is that at this point panic is what the right is all about, and the Republican nomination will go to whoever can most effectively channel that panic. Will the same hold true in the general election? Stay tuned.

Wednesday, November 18, 2015

'A More Inflexible Fed Would Cause More Crises'

Adam Posen:

A More Inflexible Fed Would Cause More Crises: Having saved the US economy from a second Great Depression, the Federal Reserve has become a political scapegoat in the Congress for its own failures to secure the recovery. Rather than improving our tax code, investing in our future, or simply passing a budget that is little more than avoiding default, the House is prioritizing so-called “reform” of the Fed.  Just as throughout the global financial crisis and recovery, Congress is abdicating its economic responsibilities to the American people and attacking one of the few policy institutions that worked instead.
Both Republicans and Democrats have already curtailed the ability of the US central bank to respond proactively to any financial crisis... They have done this by restricting the Fed’s ability to lend to troubled institutions in a crisis—even though such lending is the very essence of why the central bank exists: ...
Now, there are new legislative efforts trying to force the Fed to follow strictly a narrow policy rule when setting monetary policy even in normal times—and report to Congress in a very literal-minded short-term way about any deviations from that rule. ...
More closely examined, any imposition of a simplistic rigid policy rule with mechanistic monitoring will only serve to politicize monetary policy to an unprecedented extent. And that, for good reason, is almost universally seen in the economics profession as something that would inevitably lead to ongoing higher inflation and bigger, more frequent boom-bust cycles. ...
Any effort to limit US monetary policy to an inflexible rule with politicized short-term oversight should be opposed..., doing so would bring severe harm to the workers, savers, and investors in the US economy.

Monday, November 16, 2015

'Clinton is Both Right and Wrong about Glass-Steagall'

Me, at MoneyWatch:

Clinton is Both Right and Wrong about Glass-Steagall: In the Democratic presidential debate, Hillary Clinton said she opposed the reimplementation of the Glass-Steagall act. The Act was repealed in 1999, and many people believe easing the restrictions the Act imposed on banks caused the financial crisis. As I will explain shortly, the evidence does not support this claim, but that doesn’t mean the repeal of Glass-Steagall was a good idea...

Friday, November 13, 2015

'Where Fed's Critics Got it Wrong in GOP Debate'

Couldn't resist commenting on this:

Where Fed's critics got it wrong in GOP debate, by Mark Thoma: The Federal Reserve was instrumental in easing the impact of the Great Recession. As bad as the downturn was, it could have have been worse if central bankers hadn't aggressively used monetary policy to curb the severity of the crisis and help put the U.S. economy on the path to recovery.
So it has been disappointing to hear Republican presidential candidates bash the Fed in their debates and on the campaign trail. ...

Paul Krugman: Republicans’ Lust for Gold

Why have Republican candidates for president embraced hard money policies?:

Republicans’ Lust for Gold, by Paul Krugman, Commentary, NY Times: It’s not too hard to understand why everyone seeking the Republican presidential nomination is proposing huge tax cuts for the rich. Just follow the money...
But what we saw in Tuesday’s presidential debate was something relatively new on the policy front: an increasingly unified Republican demand for hard-money policies, even in a depressed economy. Ted Cruz demands a return to the gold standard. Jeb Bush ... is open to the idea. Marco Rubio wants the Fed to focus solely on price stability, and stop worrying about unemployment. Donald Trump and Ben Carson see a pro-Obama conspiracy behind the Federal Reserve’s low-interest rate policy.
And let’s not forget that Paul Ryan ... has spent years berating the Fed for policies that, he insisted, would “debase” the dollar and lead to high inflation. Oh, and he has flirted with Carson/Trump-style conspiracy theories, too...
As I said, this hard-money orthodoxy is relatively new. ... George W. Bush’s economists praised the “aggressive monetary policy”... And Mr. Bush appointed Ben Bernanke... But now it’s hard money all the way. ...
This turn wasn’t driven by experience. The new Republican monetary orthodoxy has already failed the reality test with flying colors... But years of predictive failure haven’t stopped the orthodoxy from tightening its grip on the party. What’s going on?
My main answer would be that the Friedman compromise — trash-talking government activism in general, but asserting that monetary policy is different — has proved politically unsustainable. You can’t, in the long run, keep telling your base that government bureaucrats are invariably incompetent, evil or both, then say that the Fed, which is ... basically a government agency run by bureaucrats, should be left free to print money as it sees fit. ...
The interesting question is what will happen to monetary policy if a Republican wins next year’s election. As best as I can tell, most economists believe that it’s all talk, that once in the White House someone like Mr. Rubio or even Mr. Cruz would return to Bush-style monetary pragmatism. Financial markets seem to believe the same. At any rate, there’s no sign in current asset prices that investors see a significant chance of the catastrophe that would follow a return to gold.
But I wouldn’t be so sure. True, a new president who looked at the evidence and listened to the experts wouldn’t go down that path. But evidence and expertise have a well-known liberal bias.

Wednesday, November 11, 2015

Trickle Down, Starve the Beast, Supply-Side, and Sound Money Fantasies

From the WSJ editorial page:

...On the other hand, Mr. Cruz’s pitch for “sound money” that helps the middle class stands out in the GOP field and deserves more elaboration. It’s also notable that nearly all of the GOP candidates identify the Federal Reserve’s post-crisis monetary policy as a source of rising inequality that has favored the wealthy. This is a populist note that has the added benefit of being true. ...

Rising inequality for four decades can be blamed on the Fed's response to the financial crisis? Seriously? On taxes:

Then there’s tax policy, in which all of the candidates offered up reform plans that would be an improvement over the status quo.

But it has to be the right kind of tax policy (tax cuts or credits for the wealthy:

Marco Rubio was challenged on his child tax credit, which he would increase to $2,500 from $1,000. ... Mr. Rubio’s diagnosis of the changing economy has particular appeal to anxious voters. It’s too bad his tax credit is such an expensive political pander.

But of course cutting taxes on the wealthy is not an expensive pander, it will generate growth!!! Tax revenue will rise and the deficit will fall!!! The benefits will trickle down to the middle class (unless that evil Fed gets in the way decades later)!!! None of which has actually happened according to the empirical evidence. Republicans seem to have a talent for telling economic stories about how their policies will benefit the middle class all the while disguising the true intent of the legislation. So long as it can be true in theory (the confidence fairy comes to mind), the actual evidence doesn't matter.

James Pethokoukis says it's time to end the supply-side charade:

A last hurrah for Republican tax slashers: The Republican party’s raison d’être is cutting taxes. ... Republicans should pray for a new purpose. Their standing with middle-class voters is little improved from 2012. ... Their “supply-side” orthodoxy would merit much of the blame. Big tax cuts, particularly for the wealthiest, do not work in an age of high inequality and heavy debt. ...
Many of the party’s 2016 candidates seem to disagree that change is needed. ... Almost all have released economic plans built around “pro-growth” tax cuts costing trillions. ... But there are good reasons to view the next election as a last hurrah for Republican-style supply-side policy.
First, voters do not much care about taxes. ... Second, America’s fiscal situation makes deep tax cuts implausible. ... Third, tax cuts look like an answer desperately searching for a problem. Today’s top US marginal tax rate is 39.6 per cent...
There are signs candidates are starting to wriggle out of the supply-side straitjacket. At this week’s Republican presidential debate in Wisconsin, Marco Rubio said a larger tax credit for families was just as important as tax cuts for business. ... While 1980s-style supply-side doctrine still rules the Republican roost, it may not beyond November 2016.

There are also signs that these proposals, while perhaps helping candidates draw votes, have little chance of success in Congress. Republicans may need a new cover story -- a new "economic" argument or the middle class that obscures the true intent of the policy -- but it's not clear there's anything as magical as trickle down, starve the beast, supply-side, sound money fantasies that have served them so well.

Update: From Kevin Drum:

...Well, the Tax Foundation is a right-leaning outfit, so you have to figure they're going to give Republican plans a fair shake. And their distributional analysis of Rubio, Bush, Trump, and Cruz shows that their tax plans are all pretty similar: tiny gains for middle-income workers and huge gains for the top 1 percent. I've used the static analysis, since it's the most tethered to reality, but even if you use the magic dynamic estimates you get roughly the same result: the rich make out a whole lot better than the middle class.
That said, you really have to give Ted Cruz credit. When it comes to giving huge handouts to the rich, he's the true Republican leader.

Blog_gop_tax_plans_middle_class

'Friction is Now Between Global Financial Elite and the Rest of Us'

Robert Reich at Comment is Free:

Friction is now between global financial elite and the rest of us, The Guardian: The standard explanation for why average working people in advanced nations such as Britain and the United States have failed to gain much ground over the past several decades and are under increasing economic stress is that globalization and technological change have made most people less competitive. The tasks we used to perform can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.
The left’s standard solution has been an activist government that taxes the wealthy, invests the proceeds in excellent schools and in other means that people need to become more productive, and redistributes to those in need. These prescriptions have been opposed vigorously by those on the right, who believe the economy will function better for everyone if government is smaller, public debt is reduced and taxes and redistributions are curtailed.
But the standard explanation, as well as the standard debate, overlooks the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs. ...

Monday, November 09, 2015

'Budgetary Sleight-of-Hand'

Congress enjoys a "political free lunch," budgetary illusions that make it appear that tax cuts, new spending -- whatever -- will not require cuts in other spending, an increase in taxes, or change the deficit. Ben Bernanke reveals the trickery behind the latest attempt at deception:

Budgetary sleight-of-hand: The House voted Thursday to pay for planned highway construction by drawing on the Federal Reserve’s capital. The idea of using Fed capital to pay for government spending, which comes up periodically, is a bad one, for several reasons. ... More substantively—and this is what I want to focus on in this post—“paying” for highway spending with Fed capital is not paying for it at all in any economically meaningful sense. Rather, this maneuver is a form of budgetary sleight-of-hand that would count funds that are already designated for the Treasury as “new” revenue.

To see why, first note that the Fed, as a side effect of its other activities, is already a major source of revenue for the federal government. The Fed earns interest on its portfolio of securities. This income, less the Fed’s operating expenses and interest paid on Fed liabilities, is sent to the Treasury on a pretty much continuous basis. These remittances are large: Over the past half dozen years the Fed has sent nearly half a trillion dollars to the Treasury, funds which directly reduce the government’s budget deficit. ... The Fed’s capital account provides a buffer that absorbs any losses on the Fed’s portfolio and allows the payments to the Treasury to be smoothed over time.

Unlike the Fed’s remittances, which are real resources whose availability reduces the burden on the taxpayer, drawing down the Fed’s capital provides no net new funding for the government. ...

Legislators who care about the integrity of the budgeting process should not support this budgetary sleight-of-hand.

Sunday, November 08, 2015

'Grasp the Reality of China’s Rise'

Larry Summers:

Grasp the reality of China’s rise: ...In the years ahead, China is likely to account for between one-third and one-half of growth in global incomes, trade and commodity demand, and its significance will only increase... I returned last week from a trip to China with the dispiriting conclusion that the world lacks shared understandings regarding goals for the evolution of the Chinese economy...
The first issue ... is whether it is the objective of the United States and the global community to see China succeed economically..., or whether it is our objective to contain and weaken China economically so that it has less capacity to mount global threats. This is seen in Beijing as a live question... The world cannot expect economic cooperation from Beijing if its objective is to inhibit Chinese economic performance. ... None of this is to say the United States does not have valid concerns...
Second,... the ... reforms that are necessary if China is to grow sustainably and strongly over the next decade ... will surely take a toll on growth in the short run. This ... will reduce demand for imports from the rest of the world and raise China’s trade surplus. ...
The world is likely to be well-served by recognizing that its deepest interests lie in China pursuing ... reform, even at the expense of modest reductions in China’s contribution to global demand ... and possibly more exchange rate depreciation than we would prefer. ...
Finally,... the United States’ failure to provide the necessary congressional approval to allow China’s voting power in the International Monetary Fund to rise above that of Belgium’s suggests a troubling indifference to global reality. ...
Today the perils of the future have much to do with China’s rise and with the worlds of commerce and economics. Let us hope that we find the wisdom to manage them well.

Saturday, November 07, 2015

'Economic Policy Splits Democrats'

Anyone think this is correct?:

Economic Policy Splits Democrats, WSJ: The old guard of a party that laid the groundwork for the election of a two-term president watches with unease at what’s happening to their electoral prospects and economic policy proposals. ...
That alarm shines through in a new 52-page report from centrist Democratic think tank the Third Way...
“The right cares only about growth, hoping it will trickle down,” says Jonathan Cowan, president of Third Way. The left, meanwhile, is too focused on “redistribution to address income inequality.”
Third Way says a better agenda focuses on growth by promoting skills, job growth and wealth creation without adding to deficits or raising taxes on the middle class. Its report outlines a series of policies it says can do this...
The gist of the report concludes that the economic problems facing the American middle class have less to do with unfairness—or the idea that the system is fundamentally “rigged” against workers—and more to do with technological and globalization forces that can’t be reversed.

[That statement will drive Larry Mishel nuts.]

The report spotlights a divide on the left in both substance and style. ...
Progressives want to see a more fundamental rewrite of the rules to break up political power, on par with President Theodore Roosevelt‘s “trust-busting” of a century ago. “This country is in real trouble,” Ms. Warren said at the May event. “The game is rigged and we are running out of time.”
That kind of rhetoric gives Mr. Cowan fits because he says it isn’t a winning political message. ...
He says that leading economic ideas on the left, including advocacy for a $15 minimum wage, expanded Social Security benefits and a single-payer health-care system, won’t play well with independent voters. The report cites focus group research in advancing its argument that Americans, particularly independents and moderate voters, are more anxious than they are angry about these changes.
Third Way cites the failures of main street icons such as Kodak, Borders Books and Tower Records as proof that new technologies and delivery systems, as opposed to a “stacked deck” in Washington, are primarily responsible for economic upheaval.

Tower Records explains inequality? Seriously? From Larry Mishel (linked above):

Many economists contend that technology is the primary driver of the increase in wage inequality since the late 1970s, as technology-induced job skill requirements have outpaced the growing education levels of the workforce. The influential “skill-biased technological change” (SBTC) explanation claims that technology raises demand for educated workers, thus allowing them to command higher wages—which in turn increases wage inequality. A more recent SBTC explanation focuses on computerization’s role in increasing employment in both higher-wage and lower-wage occupations, resulting in “job polarization.” This paper contends that current SBTC models—such as the education-focused “canonical model” and the more recent “tasks framework” or “job polarization” approach mentioned above—do not adequately account for key wage patterns (namely, rising wage inequality) over the last three decades.

So, should I adopt a message I don't think is true because it sells with independents who have been swayed by Very Serious People, or should I say what I believe and try to convince people they are barking up the wrong tree? (For the most part anyway, I believe both the technological/globalization and institutional/unfairness explanations have validity -- but how do workers capture the gains Third Way wants to create through growth and wealth creation without the bargaining power they have lost over time with the decline in unionization, threats of offshoring, etc.? That's the bigger problem.) It is unfair when, say, economic or political power redirects income away from those who created it to those who did not (I am using the normative equity principle that each person has a right to keep what he or she produces, to reap what they have sowed, and I have little doubt that workers have been paid less than their productivity, and those at the top more. That's unfair, and redirecting income -- redistributing if you will -- to those who actually earned it is not harmful. It is just, and it creates the correct economic incentives). Wealth creation/growth has not been the biggest problem over the last four decades (i.e. since inequality started to increase), it is how the gains have been distributed. I'd rather convince people of the truth that more growth and more wealth creation won't solve the problem if we don't address workers' bargaining power at the same time than gain their support by patronizing their views. In the meantime redistributing income from those who didn't earn it to those who did can serve as a temporary solution until we get the more fundamental underlying problems fixed (e.g. level the playing field on bargaining power between workers and firms).

Maybe politicians have to tell people what they want to hear, I'll let them figure that out, but I will continue to call it as I see it even if "independents and moderate voters are more anxious than they are angry about these changes." That won't change if we play into those anxieties instead of explaining why new approaches are needed, and explaining how they will benefit from a system that does a better job of rewarding hard work instead of ownership, connections, and power.

Friday, November 06, 2015

Paul Krugman: Austerity’s Grim Legacy

Austerity did not lead to prosperity:

Austerity’s Grim Legacy, by Paul Krugman, Commentary, NY Times: When economic crisis struck in 2008, policy makers by and large did the right thing. The Federal Reserve and other central banks realized that supporting the financial system took priority over conventional notions of monetary prudence. The Obama administration and its counterparts realized that in a slumping economy budget deficits were helpful, not harmful. And the money-printing and borrowing worked: A repeat of the Great Depression, which seemed all too possible..., was avoided.
Then it all went wrong. ... In 2010, more or less suddenly, the policy elite on both sides of the Atlantic decided to stop worrying about unemployment and start worrying about budget deficits instead.
This ... was very much at odds with basic economics. Yet ominous talk about the dangers of deficits became something everyone said because everyone else was saying it, and dissenters were no longer considered respectable...
Yet there’s growing evidence that we critics actually underestimated just how destructive the turn to austerity would be. Specifically, it now looks as if austerity policies didn’t just impose short-term losses of jobs and output, but they also crippled long-run growth. ...
What this suggests is that ... austerity had truly catastrophic effects, going far beyond the jobs and income lost in the first few years. In fact, the long-run damage ... is easily big enough to make austerity a self-defeating policy even in purely fiscal terms: Governments that slashed spending ... hurt their economies, and hence their future tax receipts, so much that even their debt will end up higher...
And the bitter irony ... is that this catastrophic policy was undertaken in the name of long-run responsibility, that those who protested ... were dismissed as feckless.
There are a few obvious lessons from this debacle. “All the important people say so” is not, it turns out, a good way to decide on policy... Also, calling for sacrifice (by other people, of course) doesn’t mean you’re tough-minded.
But will these lessons sink in? Past economic troubles, like the stagflation of the 1970s, led to widespread reconsideration of economic orthodoxy. But one striking aspect of the past few years has been how few people are willing to admit having been wrong about anything. It seems all too possible that the Very Serious People who cheered on disastrous policies will learn nothing from the experience. And that is, in its own way, as scary as the economic outlook.

Wednesday, November 04, 2015

'60% of Ted Cruz‘s Tax Cut Goes to the Top 1%'

James Kwak at The Baseline Scenario:

60% of Ted Cruz‘s Tax Cut Goes to the Top 1%: I haven’t been commenting on Republican tax plans this season because, well, it takes a lot to impress me when it comes to absurd tax cut proposals. Ted Cruz has done it. The major components of Cruz’s plan amount to this:

  • A flat 10% tax on individual income (labor and investments)—down from top rates today of 43.4% on labor and 23.8% on capital gains and dividends
  • No payroll taxes (15.3% for most people today), corporate income tax (average rate about 13% today), or estate tax
  • A 19% value-added tax (16% of gross business receipts, including the tax)

There are two big things that are crazy about this plan. The first is that it eliminates an enormous amount of tax revenue: $3.6 trillion over ten years, according to the right-wing Tax Foundation’s “static” analysis—that is, before the growth fairy waves her magic wand. To put that in context, that’s more than we plan to spend on the military over the next ten years.

The second is the astonishingly naked handout to the very rich:

60% of the tax cut goes to the top 1%.

That leaves only 40% for everyone else. This number is so embarrassing that you won’t find it in the Tax Foundation’s analysis. ...

Of course, none of this should be any surprise. Republican tax proposals became completely divorced from reality long ago. More importantly, the Republican nomination lies in the hands of a handful of donors who are in the 0.001%, so the rational thing for any candidate to do is pander to them as enthusiastically as possible.

The only policies we have that limit the transmission of wealth from generation to generation are the estate tax and taxes on investment income. Eliminating one and slashing the other, as Ted Cruz proposes, is the single biggest step we can take toward becoming an aristocracy of inherited wealth. As a member of the 1%, that would be good for my grandchildren—but it would be bad for the country.

[I left out quite a bit of the original post.]

Monday, November 02, 2015

Paul Krugman: Partisan Growth Gaps

The economy does better when the president is a Democrat:

Partisan Growth Gaps, by Paul Krugman, Commentary, NY Times: Last week The Wall Street Journal published an op-ed article by Carly Fiorina titled “Hillary Clinton Flunks Economics,” ridiculing Mrs. Clinton’s assertions that the U.S. economy does better under Democrats. ...
Mrs. Clinton is completely right... Last year the economists Alan Blinder and Mark Watson circulated a paper comparing economic performance under Democratic and Republican presidents since 1947. Under Democrats, the economy grew, on average, 4.35 percent per year; under Republicans, only 2.54 percent. ...
Why is the Democratic record so much better? The short answer is that we don’t know. ... Certainly no Democratic candidate would be justified in promising dramatically higher growth if elected. And in fact, Democrats never do.
Republicans, however, always make such claims: Every candidate with a real chance of getting the G.O.P. nomination is claiming that his tax plan would produce a huge growth surge — a claim that has no basis in historical experience. Why?
Part of the answer is epistemic closure: modern conservatives generally live in a bubble into which inconvenient facts can’t penetrate. ... Beyond that..., Republicans need to promise economic miracles as a way to sell policies that overwhelmingly favor the donor class.
It would be nice, for variety’s sake, if even one major G.O.P. candidate would come out against big tax cuts for the 1 percent. But none have..., all of the major players have called for cuts that would subtract trillions from revenue. To make up for this lost revenue, it would be necessary to make sharp cuts in big programs — that is, in Social Security and/or Medicare.
But Americans overwhelmingly believe that the wealthy pay less than their fair share of taxes, and even Republicans are closely divided on the issue. And the public wants to see Social Security expanded, not cut. So how can a politician sell the tax-cut agenda? The answer is, by promising those miracles, by insisting that tax cuts on high incomes would both pay for themselves and produce wonderful economic gains.
Hence the asymmetry between the parties. Democrats can afford to be cautious in their economic promises precisely because their policies can be sold on their merits. Republicans must sell an essentially unpopular agenda by confidently declaring that they have the ultimate recipe for prosperity — and hope that nobody points out their historically poor track record.
And if someone does point to that record, you know what they’ll do: Start yelling about media bias.

'The Rigging of the American Market'

When I tweeted a link to this post by Robert Reich, it received an unusually large number of retweets:

The Rigging of the American Market: Much of the national debate about widening inequality focuses on whether and how much to tax the rich and redistribute their income downward.
But this debate ignores the upward redistributions going on every day, from the rest of us to the rich. These redistributions are hidden inside the market.
The only way to stop them is to prevent big corporations and Wall Street banks from rigging the market. ...

After explaining how concentrated many industries are, and the monopoly/pricing power that gives firms in these industries (which they exploit), he concludes:

... Add it up – the extra money we’re paying for pharmaceuticals, Internet communications, home mortgages, student loans, airline tickets, food, and health insurance – and you get a hefty portion of the average family’s budget.
Democrats and Republicans spend endless time battling over how much to tax the rich and then redistribute the money downward.
But if we didn’t have so much upward redistribution inside the market, we wouldn’t need as much downward redistribution through taxes and transfer payments.
Yet as long as the big corporations, Wall Street banks, their top executives and wealthy shareholders have the political power to do so, they’ll keep redistributing much of the nation’s income upward to themselves.
Which is why the rest of us must gain political power to stop the collusion, bust up the monopolies, and put an end to the rigging of the American market.

Sunday, November 01, 2015

'Defending The Bush Deficits'

This is telling, and kind of funny. This is how the National Review Online talks about budget deficits when a Republican is in office (this is from September, 2004 -- keep in mind that the recovery from the recession under Obama has been stronger than under Bush)

Defending The Bush Deficits, by Aman Verjee, NRO: It’s not hard to do if you look at the data.
Since President Bush took office in 2000, the economy has gone through at least three major shocks that were not of his making: a major terrorist attack that damped consumer confidence; the depression in business spending that followed the bursting of the stock market bubble; and a series of accounting scandals that afflicted some of the largest and most visible corporations in the United States.
Yet, the U.S. economy has outperformed that of every other G7 country since 2001. ... This remarkable record on the economy owes much to the pro-growth policies of the Bush administration. ...
Like Chicken Little, who caviled because she mistook a tumbling acorn for a crashing sky, President Bush’s critics are unjustified when they foretell of an impending economic doom. Alarmists who worry about the historical heights to which deficits have climbed need to review the historical data for some context. ...
At the end of 2003, federal debt stood at 36 percent of GDP. It is currently projected by the Congressional Budget Office to reach 40 percent of GDP by 2005 before it begins to decline again. By historical and international standards, these levels of debt are very modest. For instance, the debt burdens of Germany and France are over 60 percent of GDP; in Japan, debt is almost 150 percent of GDP. ... The president’s critics might suggest that economic growth should have been better in the low-debt years than in the high-debt years, but in fact, real GDP growth averaged 4.44 percent in the high-debt years and just 3.14 percent in the low-debt years. ...
Looking back at American history, it is apparent that economic prosperity can continue even if the federal government maintains a debt burden that is much higher than it is today as a percentage of GDP. ...
The lesson is clear: Economic prosperity can continue even if the federal government never balances its budget. ...

Saturday, October 31, 2015

A Very Scary Halloween Thought

Image6

 

'The GOP Circus: Truth-Defying Feats'

Rick Perlstein:

The GOP Circus: Truth-Defying Feats, by Rick Perlstein: ...Step right up! Be amazed, be enchanted, by the magic GOP unicorn-and-rainbow-producing tax cut machine!
It takes a lot of energy to sustain a lie. When enough people do it together, over a sustained period of time, it wears on them. It also produces a certain kind of culture: one cut loose from the norms of fair conduct and trust that any organization requires in order to survive as something more than a daily, no-holds-barred war of all against all. A battle royale. A circus, if you prefer.
And the act in the center ring? The Amazing Death Spiral. One performer does something so outrageous that anyone else who wishes to further hold the audience’s attention has to match or top it––even if they know it’s insane. Listen to the warning of the one guy who dares grab the ringmaster’s microphone and say that if this keeps on going everyone will end up dead. That’s what poor old John Kasich did. Hear him cry about his “great concern that we are on the verge, perhaps, of picking someone who cannot do this job. I’ve watched people say that we should dismantle Medicare and Medicaid. . . . I’ve heard them talking about deporting 10 or 11 [million] people from this country. . . . I’ve heard about tax schemes that don’t add up.”
And what happened to him? Read the snap poll from Gravis research. Only 3 percent of Republicans thought he won the debate. (First place was Trump with 26.7; second was Rubio with 21.1; third was Cruz with 17.3; and fourth was Ben Carson with 12.5.) Only 2.4 percent said they would vote for Kasich for president. When the clowns are running the show, of course it’s going to be in disarray.

David Brooks says not to worry if candidates are lying about their economic plans, they are just exaggerating to make themselves more attractive to conservative voters (they couldn't possible be lying about who their true allegiance, could they?):

At this stage it’s probably not sensible to get too worked up about the details of any candidate’s plans. They are all wildly unaffordable. What matters is how a candidate signals priorities. Rubio talks specifically about targeting policies to boost middle- and lower-middle-class living standards.

Paul Krugman is, shall we say, unconvinced:

...My experience is that the best way to figure out a candidate’s true priorities — and his or her character — is to look hard at policy proposals.
My view here is strongly influenced by the story of George W. Bush. Younger readers may not know or remember how it was back in 2000, but back then the universal view of the commentariat was that W was a moderate, amiable, bluff and honest guy. I was pretty much alone taking his economic proposals — on taxes and Social Security — seriously. And what I saw was a level of dishonesty and irresponsibility, plus radicalism, that was unprecedented in a major-party presidential candidate. So I was out there warning that Bush was a bad, dangerous guy no matter how amiable he seemed.
How did that work out?
So now we have candidates proposing “wildly unaffordable” tax cuts. Can we start by noting that this isn’t a bipartisan phenomenon, that it’s not true that everyone does it? Hillary Clinton isn’t proposing wildly unaffordable stuff... And proposing wildly unaffordable stuff is itself a declaration of priorities: Rubio is saying that keeping the Hair Club for Growth happy is more important to him than even a pretense of fiscal responsibility. Or if you like, what we’ve seen is a willingness to pander without constraint or embarrassment.
Also, his insistence that the magic of supply-side economics would somehow pay for the cuts is a further demonstration of priorities: allegiance to voodoo trumps all.
At a more general level, I’d argue that it’s a really bad mistake to wave away policy silliness with a boys-will-be-boys attitude. Policy proposals tell us a lot about character — and the history of the past 15 years says that journalists who imagine that they can judge character from the way people come across on TV or in personal interviews are kidding themselves, and misleading everyone else.

"What matters is how a candidate signals priorities." Yes, and the priority seems to be lying is okay to get what you want. That's a great trait to have in a president who might fact the decision to send our kids to die in a war he or she wants. Oh wait.

Friday, October 30, 2015

Paul Krugman: Springtime for Grifters

Catherine Rampell blames the media for the behavior of Republicans during the debate (and more generally), but if the press called them on their "grifting,", would the Republican base listen?

Springtime for Grifters, by Paul Krugman, Commentary, NY Times: At one point during Wednesday’s Republican debate, Ben Carson was asked about his involvement with Mannatech, a nutritional supplements company that makes outlandish claims ... and has been forced to pay $7 million to settle a deceptive-practices lawsuit. The audience booed, and Mr. Carson denied being involved...
As it happens, Mr. Carson lied. ... But the Republican base doesn’t want to hear about it... These days, in his party, being an obvious grifter isn’t a liability, and may even be an asset. ...
About the grifters: Start with the lowest level, in which marketers use political affinity to sell get-rich-quick schemes, miracle cures, and suchlike. That’s the Carson phenomenon, and it’s just the latest example of a long tradition..., a “strategic alliance of snake-oil vendors and conservative true believers” goes back half a century. ...
At a somewhat higher level are marketing campaigns more or less tied to what purports to be policy analysis. Right-wing warnings of imminent hyperinflation, coupled with demands that we return to the gold standard, were fanned by media figures like Glenn Beck, who used his show to promote Goldline, a firm selling gold coins and bars at, um, inflated prices. ...
Oh, and former Congressman Ron Paul, who has spent decades warning of runaway inflation and is undaunted by its failure to materialize, is very much in the business of selling books and videos showing how you, too, can protect yourself from the coming financial disaster.
At a higher level still are operations that are in principle engaging in political activity, but mainly seem to be generating income for their organizers. ... For example, only 14 percent of what the Tea Party Leadership Fund spends is “candidate focused.”
You might think that such revelations would be politically devastating. But the targets of such schemes know, just know, that the liberal mainstream media can’t be trusted...
Furthermore, the success of the grifters ... defines respectability down.
Consider Mr. Rubio... There was a time when Mr. Rubio’s insistence that $6 trillion in tax cuts would somehow pay for themselves would have marked him as deeply unserious... But the Republican base doesn’t care what the mainstream media says. ...
The point is that we shouldn’t ask whether the G.O.P. will eventually nominate someone in the habit of saying things that are demonstrably untrue, and counting on political loyalists not to notice. The only question is what kind of scam it will be.

Thursday, October 29, 2015

'The Republicans are Right. We in the Media Do Suck.'

Catherine Rampell:

The Republican presidential candidates are right. The media does suck.
But not for the reasons the candidates complained about Wednesday night.
We in the media suck because we have rewarded their rampant dishonesty and buffoonery with nonstop news coverage. Which, of course, has encouraged more dishonesty and buffoonery.
Hence the aggravating behaviors that candidates doubled-down on during the debate, based on lessons that we in the media taught them. To wit...