6. ... In terms of conventional monetary and fiscal policy, academic economists got the response to the crisis right, and policymakers got it very wrong. Central banks, full of economists, relaxed monetary policy to its full extent. They created additional money, rightly ignoring those who said it would bring rapid inflation. Many economists, almost certainly a majority, supported fiscal stimulus for as long as interest rates were stuck at their lower bound, were ignored by policymakers in 2010, and have again been proved right.
7. So given all this, why do some continue to attack economists? On the left there are heterodox economists who want nothing less than revolution, the overthrow of mainstream economics. It is the same revolution that their counterparts were saying was about to happen in the early 1970s when I learnt my first economics. They want people to believe that the bowdlerised version of economics used by neoliberals to support their ideology is in fact mainstream economics.
8. The right on the other hand is uncomfortable when evidence based economics conflicts with their politics. Their response is to attack economists. This is not a new phenomenon, as I showed in connection with the famous letter from 364 economists. With austerity they cherry picked the minority of economists who supported it, and then implemented a policy that even some of them would have disagreed with. (Rogoff did not support the cuts in public investment in 2010/11 which did most of the damage to the UK economy.) The media did the rest of the job for them by hardly ever talking about the majority of economists who did not support austerity.
9. The economic costs of Brexit is just the latest example. Critics have focused on the most uncertain and least important predictions about Brexit, made only by a few, to attack all Brexit analysis. The fact that this prediction involved an unconditional macro forecast, while the assessment made by a number of groups about the long term cost involves a conditional projection based largely on trade equations, seems to have completely escaped the critics. More important, the fact that the predicted depreciation in sterling happened, and is in the process of already causing a large drop in living standards, is completely ignored by these critics.
10. Attacking economists over Brexit is designed to discredit those who point out awkward and uncomfortable truths. Continuing to attack economists over not predicting the financial crisis, but failing to ignore their successes, has the effect of distracting people from the group who actually caused this crisis, and the fact that very little has been done to prevent a similar crisis happening in the future.
Saturday, January 21, 2017
Friday, January 20, 2017
Disillusioned in Davos: Edmund Burke famously cautioned that “the only thing necessary for the triumph of evil is for good men to do nothing.” I have been reminded of Burke’s words as I have observed the behavior of US business leaders in Davos over the last few days. They know better but in their public rhetoric they have embraced and enabled our new President and his policies.
I understand and sympathize with the pressures they feel. ... Businesses who get on the wrong side of the new President have lost billions of dollars of value in sixty seconds because of a tweet. ...
Yet I am disturbed by (i) the spectacle of financiers who three months ago were telling anyone who would listen that they would never do business with a Trump company rushing to praise the new Administration (ii) the unwillingness of business leaders who rightly take pride in their corporate efforts to promote women and minorities to say anything about Presidentially sanctioned intolerance (iii) the failure of the leaders of global companies to say a critical word about US efforts to encourage the breakup of European unity and more generally to step away from underwriting an open global system (iv) the reluctance of business leaders who have a huge stake in the current global order to criticize provocative rhetoric with regard to China, Mexico or the Middle East (v) the willingness of too many to praise Trump nominees who advocate blatant protection merely because they have a business background.
I have my differences with the new Administration’s economic policies and suspect the recent market rally and run of economic statistics is a sugar high. Reasonable people who I respect differ and time will tell. My objection is not to disagreements over economic policy. It is to enabling if not encouraging immoral and reckless policies in other spheres that ultimately bear on our prosperity. Burke was right. It is a lesson of human experience whether the issue is playground bullying, Enron or Europe in the 1930s that the worst outcomes occur when good people find reasons to accommodate themselves to what they know is wrong. That is what I think happened much too often in Davos this week.
The Trump administration's readiness and fitness for office:
Donald the Unready, by Paul Krugman, NY Times: Betsy DeVos, whom Donald Trump has nominated as education secretary, doesn’t know basic education terms, doesn’t know about federal statutes governing special education, but thinks school officials should carry guns to defend against grizzly bears.
Monica Crowley, selected as deputy national security adviser, withdrew after it was revealed that much of her past writing was plagiarized. ...
Meanwhile Rex Tillerson, selected as secretary of state, casually declared that America would block Chinese access to bases in the South China Sea, apparently unaware that he was in effect threatening to go to war if China called his bluff.
Do you see a pattern here?...
The ... typical Trump nominee, in everything from economics to diplomacy to national security, is ethically challenged, ignorant about the area of policy he or she is supposed to manage and deeply incurious. Some, like Michael Flynn, Mr. Trump’s choice as national security adviser, are even as addicted as their boss to internet conspiracy theories. This isn’t a team that will compensate for the commander in chief’s weaknesses..., it’s a team that will amplify them. ...
If you want a model for how the Trump-Putin administration is likely to function (or malfunction), it’s helpful to recall what happened during the Bush-Cheney years.
People tend to forget the extent to which the last Republican administration was also characterized by cronyism, the appointment of unqualified but well-connected people to key positions. ... Remember “Brownie, you’re doing a heck of a job”? And it caused very real damage..., Katrina was the event that finally revealed the costs of Bush-era cronyism to all.
Crises of some kind are bound to occur on any president’s watch. They appear especially likely given the crew that’s coming in and their allies in Congress...
Real crises need real solutions. They can’t be resolved with a killer tweet, or by having your friends in the F.B.I. or the Kremlin feed the media stories that take your problems off the front page. What the situation demands are knowledgeable, levelheaded people in positions of authority.
But as far as we know, almost no people meeting that description will be in the new administration, except possibly the nominee for defense secretary — whose nickname just happens to be “Mad Dog.”
So there you have it: an administration unprecedented in its corruption, but also completely unprepared to govern. It’s going to be terrific, let me tell you.
Thursday, January 19, 2017
Economy under Trump: Plan for the worst: ...There has not been so much anxiety about U.S. global leadership or about the sustainability of market-oriented democracy at any time in the past half-century. Yet with markets not only failing to swoon as predicted, but actually rallying strongly after both the Brexit vote and Trump’s victory, the animal spirits of business are running hot.
Many chief executives are coming to believe that, whatever the president-elect’s infirmities, the strongly pro-business attitude of his administration, combined with Republican control of Congress, will lead to a new era of support for business, along with much lower taxes and regulatory burdens. This in turn, it is argued, will drive major increases in investment and hiring, setting off a virtuous circle of economic growth and rising confidence.
While it has to be admitted that such a scenario looks more plausible today than it did on Election Day, I believe that it is very much odds-off. More likely is that the current run of happy markets and favorable sentiment will be seen, with the benefit of hindsight, as a sugar high. John Maynard Keynes was right to emphasize the great importance of animal spirits, but other economists have also been right to emphasize that it is political and economic fundamentals that dominate in the medium and long terms. History is replete with examples of populist authoritarian policies that produced short-run benefits but poor long-run outcomes. ...
Tuesday, January 17, 2017
Dean Baker at INET:
The Economics of the Affordable Care Act: The Affordable Care Act (ACA), which President-elect Donald Trump and the Republican-controlled Congress have vowed to repeal, was crafted to overcome two basic problems in the provision of health care... First, the costs are incredibly skewed, with just 10 percent of patients accounting for almost two thirds of the nation’s healthcare spending. The other problem is asymmetric information: Patients have far more knowledge about the state of their own health than insurers do. This means that the people with the largest costs are the ones most likely to sign up for insurance. These two problems make it impossible to get to universal coverage under a purely market-based system. ...
Covering the least costly 90 percent of patients is manageable, but the cost of covering the least healthy 10 percent is exorbitant. ...
The ACA gets around this problem by requiring that everyone buy insurance — a mandate that allows people with serious health problems to get insurance at a reasonably affordable price. Since many people cannot afford an insurance policy even if it’s based on average costs, the ACA also provided subsidies to low and moderate income people. It pays for the subsidies primarily through a tax on the wealthiest households, those with incomes over $200,000.
Thus far, the ACA has actually worked better than expected in most respects. ...
Insofar as the ACA has run into problems, those have been attributable to too few healthy people in the health care exchanges, and too little competition among insurers. Many commentators have wrongly blamed the problem in the exchanges on a failure of young healthy people to sign up for insurance. This is not the cause of the problem, since more people are getting insured than had been projected. The reason fewer healthy people are showing up on the exchanges is that fewer employers dropped insurance than had been projected. ... By continuing to provide insurance for their workers despite the ACA, employers are effectively keeping healthy people out of the exchanges.
The other problem with the exchanges has been limited competition, as many insurers have dropped out after the first few years. The loss of competition has meant higher prices. ...
One way to make insurance more affordable would be to reduce the costs of the health care system as a whole. Americans pay twice as much per person as people in other wealthy countries, with few obvious benefits in terms of outcomes. But such cost cutting would mean reducing the incomes of drug companies, doctors, and insurance companies — the big winners under the current system. It seems unlikely the Republicans will go this route. They are more likely to restore a version of the pre-ACA situation, in which many more people are uninsured and most workers know that their insurance is only as secure as their job.
Monday, January 16, 2017
People are saying that Donald Trump is an illegitimate president:
With All Due Disrespect, by Paul Krugman, NY Times: As a young man, Congressman John Lewis, who represents most of Atlanta, literally put his life on the line in pursuit of justice. As a key civil rights leader, he endured multiple beatings. Most famously, he led the demonstration that came to be known as Bloody Sunday, suffering a fractured skull at the hands of state troopers. Public outrage over that day’s violence helped lead to the enactment of the Voting Rights Act.
Now Mr. Lewis says that he won’t attend the inauguration of Donald Trump, whom he regards as an illegitimate president.
As you might expect, this statement provoked a hysterical, slanderous reaction from the president-elect – who, of course, got his start in national politics by repeatedly, falsely questioning President Obama’s right to hold office. ...
But let’s not talk about Mr. Trump’s ravings. Instead, let’s ask... Is it O.K., morally and politically, to declare the man about to move into the White House illegitimate?
Yes, it is. In fact, it’s an act of patriotism.
By any reasonable standard, the 2016 election was deeply tainted. It wasn’t just the effects of Russian intervention...; Hillary Clinton would almost surely have won if the F.B.I. hadn’t conveyed the false impression that it had damaging new information about her, just days before the vote. This was grotesque, delegitimizing malfeasance, especially in contrast with the agency’s refusal to discuss the Russia connection.
Was there even more to it? Did the Trump campaign actively coordinate with a foreign power? Did a cabal within the F.B.I. deliberately slow-walk investigations into that possibility? Are the lurid tales about adventures in Moscow true? We don’t know... Even given what we do know, however, no previous U.S. president-elect has had less right to the title. So why shouldn’t we question his legitimacy? ...
Now, anyone questioning Mr. Trump’s legitimacy will be accused of being unpatriotic — because that’s what people on the right always say about anyone who criticizes a Republican president. (Strangely, they don’t say this about attacks on Democratic presidents.) But patriotism means standing up for your country’s values, not pledging personal allegiance to Dear Leader.
No, we shouldn’t get into the habit of delegitimizing election results we don’t like. But this time really is exceptional...
So let’s be thankful that John Lewis had the courage to speak out. It was the patriotic, heroic thing to do. And America needs that kind of heroism, now more than ever.
I have a new column:
Blind Trust in Donald Trump Could Be Costly: Donald Trump has refused to divest himself of his business interests before being inaugurated as president and has instead said he would hand control over to his sons. However, as the director of the Office of Government Ethics, Walter Shaub, Jr., said in a letter last December, a point he reiterated after Trump announced his plan to turn control over to his sons last week, “Transferring operational control of a company to one's children would not constitute the establishment of a qualified blind trust, nor would it eliminate conflicts of interest."
In response, Trump argues that his numerous conflicts of interest won’t affect his decisions as president. But there have already been instances where meetings with foreign leaders had a clear connection to his business pursuits, his nominations for important government positions show a strong bias toward favoring business interests, and his proposed legislative agenda, while touted as a populist, contains the standard Republican pro-business slate of policies. The stage is set for those coming into power to use their government offices to enrich themselves, and if they do, it has the potential to undermine US competitiveness and reduce long-term economic growth. ...
Saturday, January 14, 2017
Ben Bernanke has a longish post about fiscal policy in the
CaligulaTrump era. It’s not the most entertaining read; perhaps because of the political fraughtness of the moment, Bernanke has reverted a bit to Fedspeak. But there’s some solid insight, a lot of it pretty much in line with what I have been saying.
Notably, Bernanke, like yours truly, argues that the fiscal-stimulus case for deficit spending has gotten much weaker, but there’s still a case for borrowing to build infrastructure...
But he gently expresses doubt that this kind of thing is actually going to happen...
Let me be less gentle: there will be no significant public investment program, for two reasons.
First, Congressional Republicans have no interest in such a program. They’re hell-bent on depriving millions of health care and cutting taxes at the top; they aren’t even talking about public investment...
But this then raises the obvious question: who really believes that this crew is going to come up with a serious plan? Trump has no policy shop, nor does he show any intention of creating one; he’s too busy tweeting about perceived insults from celebrities, and he’s creating a cabinet of people who know nothing about their responsibilities. Any substantive policy actions will be devised and turned into legislation by Congressional Republicans who, again, have zero interest in a public investment program.
So investors betting on a big infrastructure push are almost surely deluding themselves. We may see some conspicuous privatizations, especially if they come with naming opportunities: maybe putting in new light fixtures will let him rename Hoover Dam as Trump Dam? But little or no real investment is coming.
Friday, January 13, 2017
Repeal and hope to blame the Democrats:
Donald Trump’s Medical Delusions, by Paul Krugman, NY Times: ...Some Republicans appear to be realizing that their long con on Obamacare has reached its limit. Chanting “repeal and replace” may have worked as a political strategy, but coming up with a conservative replacement for the Affordable Care Act — one that doesn’t take away coverage from tens of millions of Americans — isn’t easy. In fact, it’s impossible.
But it seems that nobody told Mr. Trump. In Wednesday’s news conference, he asserted that he would submit a replacement plan, “probably the same day” as Obamacare’s repeal — “could be the same hour” — that will be “far less expensive and far better”; also, with much lower deductibles.
This is crazy, on multiple levels.
The truth is that even if Republicans were settled on the broad outlines of a health care plan — the way Democrats were when President Obama took office — turning such an outline into real legislation is a time-consuming process.
In any case, however, the G.O.P. has spent seven years denouncing the Affordable Care Act without ever producing even the ghost of an alternative. That’s not going to change in the next few weeks, or ever. For the anti-Obamacare campaign has always been based on lies that can’t survive actual repeal. ...
Republicans don’t have a health care plan, but they do have a philosophy — and it’s all about less. Less regulation, so that insurers can turn you down if you have a pre-existing condition. Less government support, so if you can’t afford coverage, too bad. And less coverage in general: Republican ideas about cost control are all about “skin in the game,” requiring people to pay more out of pocket (which somehow doesn’t stop them from complaining about high deductibles).
Implementing this philosophy would deliver a big windfall to the wealthy, who would get a huge tax cut from Obamacare repeal...
But the idea that it would lead to big cost savings over all is pure fantasy, and it would have a devastating effect on the millions who have gained coverage during the Obama years.
As I said, it looks as if some Republicans realize this. They may go ahead with repeal-but-don’t-replace anyway, but they’ll probably do it because they believe they can find some way to blame Democrats for the ensuing disaster.
Mr. Trump, on the other hand, gives every impression of having no idea whatsoever what the issues are. But then, is there any area of policy where he does?
Me, at MoneyWatch:
Making America's risk of a financial crisis great again: In the decades prior to the financial crisis, the U.S. underwent a period of financial deregulation under the assumption that market forces would prevent financial institutions from taking excessive risk. In particular, the shadow banking system -- financial institutions that don’t operate as traditional banks -- was lightly regulated.
However, as Alan Greenspan admitted in testimony on Capital Hill after the financial crisis, that assumption turned out to be wrong. The traditional banking sector, which is highly regulated, weathered the storm fairly well, but the shadow banking system came crashing down -- and brought the economy with it.
Nevertheless, Republicans are determined to roll back financial regulation, particularly measures implemented under the Dodd-Frank financial reform package passed in the aftermath of the financial crisis. I believe that’s a mistake. ...
Tuesday, January 10, 2017
Me, at MoneyWatch:
Here's what really caused the housing crisis: One story of the housing crisis goes like this: Government programs that helped low-income households purchase houses led to widespread defaults on the subprime loans they held, sparking the entire the financial meltdown.
For example, Lawrence Kudlow and Stephen Moore, both of whom have been named as economic advisers to Donald Trump, argue that the financial crisis and recession were caused by policies Bill Clinton implemented that were designed to stop discrimination in housing loans, known as “red-lining,” in poor areas. In particular, they argue that the Community Reinvestment Act (CRA), legislated in 1977, is to blame:
“Under Clinton’s Housing and Urban Development (HUD) secretary, Andrew Cuomo, Community Reinvestment Act regulators gave banks higher ratings for home loans made in ‘credit-deprived’ areas. Banks were effectively rewarded for throwing out sound underwriting standards and writing loans to those who were at high risk of defaulting.What’s more, in the Clinton push to issue home loans to lower income borrowers, Fannie Mae and Freddie Mac made a common practice to virtually end credit documentation, low credit scores were disregarded, and income and job history was also thrown aside. The phrase “subprime” became commonplace. What an understatement. … Tragically, when prices fell, lower-income folks who really could not afford these mortgages under normal credit standards, suffered massive foreclosures and personal bankruptcies.”
However..., that isn’t what happened. ...
There Will Be No Obamacare Replacement: You may be surprised at the evident panic now seizing Republicans, who finally — thanks to James Comey and Vladimir Putin — are in a position to do what they always wanted, and kill Obamacare. How can it be that they’re not ready with a replacement plan?
That is, you may be surprised if you spent the entire Obama era paying no attention to the substantive policy issues — which is a pretty good description of the Republicans, now that you think about it.
From the beginning, those of us who did think it through realized that anything like universal coverage could only be achieved in one of two ways: single payer, which was not going to be politically possible, or a three-legged stool of regulation, mandates, and subsidies. Here’s how I put it exactly 7 years ago...
It’s actually amazing how thoroughly the right turned a blind eye to this logic, and some — maybe even a majority — are still in denial. But this is as ironclad a policy argument as I’ve ever seen; and it means that you can’t tamper with the basic structure without throwing tens of millions of people out of coverage. You can’t even scale back the spending very much — Obamacare is somewhat underfunded as is.
Will they decide to go ahead anyway, and risk opening the eyes of working-class voters to the way they’ve been scammed? I have no idea. But if Republicans do end up paying a big political price for their willful policy ignorance, it couldn’t happen to more deserving people.
Monday, January 09, 2017
Republicans are planning to "blow up the deficit mainly by cutting taxes on the wealthy":
Deficits Matter Again, by Paul Krugman, NY Times: Not long ago prominent Republicans like Paul Ryan ... liked to warn in apocalyptic terms about the dangers of budget deficits, declaring that a Greek-style crisis was just around the corner. But ... tax cuts ... would, according to their own estimates, add $9 trillion in debt over the next decade. Hey, no problem. ...
All that posturing about the deficit was obvious flimflam, whose purpose was to hobble a Democratic president... But running big deficits is no longer harmless, let alone desirable.
The way it was: Eight years ago, with the economy in free fall, I wrote that we had entered an era of “depression economics,” in which the usual rules of economic policy no longer applied... In particular, deficit spending was essential to support the economy, and attempts to balance the budget would be destructive.
This diagnosis ... was ... always conditional, applying only to an economy far from full employment. That was the kind of economy President Obama inherited; but the Trump-Putin administration will, instead, come into power at a time when full employment has been more or less restored. ...
What changes once we’re close to full employment? Basically, government borrowing once again competes with the private sector for a limited amount of money. This means that deficit spending no longer provides much if any economic boost, because it drives up interest rates and “crowds out” private investment.
Now, government borrowing can still be justified if it serves an important purpose..., infrastructure is still a very good idea... But while candidate Trump talked about increasing public investment, there’s no sign at all that congressional Republicans are going to make such investment a priority.
No, they’re going to blow up the deficit mainly by cutting taxes on the wealthy. And that won’t do anything significant to boost the economy or create jobs. In fact, by crowding out investment it will somewhat reduce long-term economic growth. Meanwhile, it will make the rich richer, even as cuts in social spending make the poor poorer and undermine security for the middle class. But that, of course, is the intention. ...
But back to deficits: the crucial point is not that Republicans were hypocritical. It is, instead, that their hypocrisy made us poorer. They screamed about the evils of debt at a time when bigger deficits would have done a lot of good, and are about to blow up deficits at a time when they will do harm.
Sunday, January 08, 2017
Who Will Donald Trump Turn Out To Be?: We have very little indication of what policies Donald Trump will try to follow or even what kind of president he will be. The U.S. press corps did an extraordinarily execrable job in covering the rise of Trump--even worse than it usually does. Even the most sophisticated of audiences--those interested in asset prices and how they are affected by government policies--have very little insight into Trump's views or those of his key associates.
Will Donald Trump turn out to be the equivalent of Ronald Reagan--someone who comes into office from the world of celebrity with a great many unfixed policy intuitions, but no consistent plan? Will he turn out to be the equivalent of Silvio Berlusconi, who regards the presidency as an opportunity to wreak his kleptocratic will on the country? Or will he turn out to be someone worse than Berlusconi?
I would say that Trump could be any of four figures...
Friday, January 06, 2017
Don't let Trump distract you from his real agenda:
The Age of Fake Policy, by Paul Krugman, NY Times: On Thursday, at a rough estimate, 75,000 Americans were laid off or fired by their employers. Some of those workers will find good new jobs, but many will end up earning less, and some will remain unemployed for months or years.
If that sounds terrible to you..., I’m just assuming that Thursday was a normal day in the job market. ... In an average month, there are 1.5 million “involuntary” job separations (as opposed to voluntary quits), or 75,000 per working day. Hence my number. ...
Real policy ... involves large sums of money and affects broad swathes of the economy. Repealing the Affordable Care Act ... would certainly qualify.
Consider, by contrast, the story that dominated several news cycles a few weeks ago: Donald Trump’s intervention to stop Carrier from moving jobs to Mexico. Some reports say that 800 U.S. jobs were saved; others suggest that the company will simply replace workers with machines. But even accepting the most positive spin, for every worker whose job was saved in that deal, around a hundred others lost their jobs the same day. ...
This was fake policy — a show intended to impress the rubes, not to achieve real results.
The same goes for the hyping of Ford’s decision to add 700 jobs in Michigan...
The incoming administration’s incentive to engage in fake policy is obvious... Mr. Trump won overwhelming support from white working-class voters, who believed that he was on their side. Yet his real policy agenda, aside from the looming trade war, is standard-issue modern Republicanism: huge tax cuts for billionaires and savage cuts to public programs, including those essential to many Trump voters. ...
Still, none of this would work without the complicity of the news media. ...
Sorry, folks, but headlines that repeat Trump claims about jobs saved, without conveying the essential fakeness of those claims, are a betrayal of journalism. This is true even if ... the articles eventually, quite a few paragraphs in, get around to debunking the hype: many if not most readers will take the headline as validation of the claim.
And it’s even worse if headlines inspired by fake policy crowd out coverage of real policy.
It is, I suppose, possible that fake policy will eventually produce a media backlash — that news organizations will begin treating stunts like the Carrier episode with the ridicule they deserve. But nothing we’ve seen so far inspires optimism.
Tuesday, January 03, 2017
Trying to Remain Positive: With inauguration day in the United States just two weeks away, it is difficult to harbor optimism about what the Trump presidency will mean for this country and for the world in realms ranging from economic progress to national security to personal liberty... In the wake of the election, expectations are no better, including in the environmental realm... And since then, the President-elect’s announced nominations for key positions in the administration have probably eliminated whatever optimism some progressives may have been harboring.
Remarkably, the least worrisome development in regard to anticipated climate change policy may be the nomination of Rex Tillerson to become U.S. Secretary of State. Two months ago it would have been inconceivable to me that I would write this about the CEO of Exxon-Mobil taking over the State Department (and hence the international dimensions of U.S. climate change policy). But, think about the other likely candidates. And unlike many of the other top nominees, Mr. Tillerson is at least an adult, and – in the past (before the election) – he had led his company to reverse course and recognize the scientific reality of human-induced climate change (unlike the President-elect), support the use of a carbon tax when and if the U.S. puts in place a meaningful national climate policy, and characterize the Paris Climate Agreement as “an important step forward by world governments in addressing the serious risks of climate change.”
It’s fair to say that it is little more than damning with faint praise to characterize this pending appointment as “the least worrisome development in regard to climate change policy,” but the reality remains. ... Of course, whether Mr. Tillerson will maintain and persevere with his previously stated views on climate change is open to question. And if he does, can he succeed in influencing Oval Office policy when competing with Scott Pruitt, Trump’s pick to run EPA, not to mention Rick Perry, Trump’s bizarre choice to become Secretary of Energy?
In the face of all this (and much else), is it possible to offer any statement of optimism or at least hope? The answer may be found in the reality that U.S. policy – in many issue areas – consists of much more than the policies of the Federal government. In a variety of policy realms, the states play an exceptionally important role. One might not normally think about this in the context of addressing a global commons problem, such as climate change, but these are not normal times.
And so I will try to rescue myself from my current mental state – at least temporarily – by focusing today on policy developments in the State of California. To do this, I offer an op-ed I recently wrote with Professor Lawrence Goulder of Stanford University, which was published in the Sacramento Bee a week before the November election. Good policy developments at the state level are, of course, even more important now than they were then. ...
Monday, January 02, 2017
"This debacle didn’t come out of nowhere":
America Becomes a Stan, by Paul Krugman, NY Times: In 2015 the city of Ashgabat, the capital of Turkmenistan, was graced with a new public monument: a giant gold-plated sculpture portraying the country’s president on horseback. This may strike you as a bit excessive. But cults of personality are actually the norm in the “stans,” the Central Asian countries that emerged after the fall of the Soviet Union, all of which are ruled by strongmen who surround themselves with tiny cliques of wealthy crony capitalists.
Americans used to find the antics of these regimes, with their tinpot dictators, funny. But who’s laughing now?
We are, after all, about to hand over power to a man who has spent his whole adult life trying to build a cult of personality around himself; remember, his “charitable” foundation spent a lot of money buying a six-foot portrait of its founder. ... So we can expect lots of self-aggrandizement once he’s in office. I don’t think it will go as far as gold-plated statues, but really, who knows?
Meanwhile, with only a couple of weeks until Inauguration Day, Donald Trump has done nothing substantive to reduce the unprecedented — or, as he famously wrote on Twitter, “unpresidented” — conflicts of interest created by his business empire. Pretty clearly, he never will — in fact, he’s already in effect using political office to enrich himself...
This means that Mr. Trump will be in violation of the spirit, and arguably the letter, of the Constitution’s emoluments clause... But who’s going to hold him accountable? Some prominent Republicans are already suggesting that, rather than enforcing the ethics laws, Congress should simply change them to accommodate the great man.
And the corruption won’t be limited to the very top: The new administration seems set to bring blatant self-dealing into the center of our political system..., assembling a team of cronies, choosing billionaires with obvious, deep conflicts of interest for many key positions in his administration.
In short, America is rapidly turning into a stan. ...
But this debacle didn’t come out of nowhere...: an increasingly radical G.O.P., willing to do anything to gain and hold power, has been undermining our political culture for decades. ...
The only question now is whether the rot has gone so deep that nothing can stop America’s transformation into Trumpistan. One thing is for sure: It’s destructive as well as foolish to ignore the uncomfortable risk, and simply assume that it will all be O.K. It won’t.
Monday, December 26, 2016
I have a new post at CBS MoneyWatch:
Commentary: Can Trump grow the economy as much as he promises?: File this under promises that will be next to impossible to keep: President-elect Donald Trump’s vow to create 25 million new jobs over the next decade and boost economic growth to 3.5 percent annually, and perhaps as high as 4 percent. ...
Trade war. What is it good for?:
And the Trade War Came, by Paul Krugman, NY Times: Donald Trump got ... overwhelming support from white working-class voters. These voters trusted his promise to bring back good manufacturing jobs while disbelieving his much more credible promise to take away their health care. They have a rude shock coming.
But white workers aren’t alone in their gullibility: Corporate America is still in denial about the prospects for a global trade war, even though protectionism was a central theme of the Trump campaign. ... The ... relevant legislation gives the occupant of the White House remarkable leeway should he choose to go protectionist. ...
Oh, and don’t expect attempts by experts to point out the holes in this view ... to make any impression. Members of the Trump team believe that all criticism of their economic ideas reflects a conspiracy among think tanks that are out to undermine them. ...
There will be retaliation, big time. When it comes to trade, America is not that much of a superpower...
And retaliation isn’t the whole story; there’s also emulation. Once America decides that the rules don’t apply, world trade will become a free-for-all.
Will this cause a global recession? Probably not — those risks are, I think, exaggerated. ...
What the coming trade war will do, however, is cause a lot of disruption. Today’s world economy is built around “value chains” that spread across borders: your car or your smartphone contain components manufactured in many countries, then assembled or modified in many more. A trade war would force a drastic shortening of those chains, and quite a few U.S. manufacturing operations would end up being big losers, just as happened when global trade surged in the past.
An old joke tells of a motorist who runs over a pedestrian, then tries to fix the damage by backing up — and runs over the victim a second time. Well, the effects of the Trumpist trade war on U.S. workers will be a lot like that.
Given these prospects, you might think that someone will persuade the incoming administration to rethink its commercial belligerence. That is, you might think that if you have paid no attention to the record and character of the protectionist in chief. Someone who won’t take briefings on national security because he’s “like, a smart person” and doesn’t need them isn’t likely to sit still for lessons on international economics.
No, the best bet is that the trade war is coming. Buckle your seatbelts.
Friday, December 23, 2016
"Trumpism ... is anything but populist":
Populism, Real and Phony, by Paul Krugman, NY Times: Authoritarians with an animus against ethnic minorities are on the march across the Western world. ... But what should we call these groups? Many reporters are using the term “populist,” which seems both inadequate and misleading..., are the other shared features of this movement — addiction to conspiracy theories, indifference to the rule of law, a penchant for punishing critics — really captured by the “populist” label?
Still, the European members of this emerging alliance — an axis of evil? — have offered some real benefits to workers. ... Trumpism is, however, different..., the emerging policy agenda is anything but populist.
All indications are that we’re looking at huge windfalls for billionaires combined with savage cuts in programs that serve not just the poor but also the middle class. And the white working class, which provided much of the 46 percent Trump vote share, is shaping up as the biggest loser. ...
Both his pick as budget director and his choice to head Health and Human Services want to dismantle the Affordable Care Act and privatize Medicare. His choice as labor secretary is a fast-food tycoon who has been a vociferous opponent both of Obamacare and of minimum wage hikes. And House Republicans have already submitted plans for drastic cuts in Social Security, including a sharp rise in the retirement age. ...
In other words..., European populism is at least partly real, while Trumpist populism is turning out to be entirely fake, a scam sold to working-class voters who are in for a rude awakening. Will the new regime pay a political price?
Well, don’t count on it..., you know that there will be huge efforts to shift the blame. These will include claims that the collapse of health care is really President Obama’s fault; claims that the failure of alternatives is somehow the fault of recalcitrant Democrats; and an endless series of attempts to distract the public.
Expect more Carrier-style stunts that don’t actually help workers but dominate a news cycle. Expect lots of fulmination against minorities. And it’s worth remembering what authoritarian regimes traditionally do to shift attention from failing policies, namely, find some foreigners to confront. Maybe it will be a trade war with China, maybe something worse.
Opponents need to do all they can to defeat such strategies of distraction. Above all, they shouldn’t let themselves be sucked into cooperation that leaves them sharing part of the blame. The perpetrators of this scam should be forced to own it.
Tuesday, December 20, 2016
Jeb Hensarling and the Allure of Economism: The Wall Street Journal has a profile up on Mike Crapo and Jeb Hensarling, the key committee chairs (likely in Crapo’s case) who will repeal or rewrite the Dodd-Frank Wall Street Reform and Consumer Protection Act. It’s clear that both are planning to roll back or dilute many of the provisions of Dodd-Frank, particularly those that protect consumers from toxic financial products and those that impose restrictions on banks (which, together, make up most of the act).
Hensarling is about as clear a proponent of economism—the belief that the world operates exactly as described in Economics 101 models—as you’re likely to find. He majored in economics at Texas A&M, where one of his professors was none other than Phil Gramm. Hensarling described his college exposure to economics this way:
“Even though I had grown up as a Republican, I didn’t know why I was a Republican until I studied economics. I suddenly saw how free-market economics provided the maximum good to the maximum number, and I became convinced that if I had an opportunity, I’d like to serve in public office and further the cause of the free market.”
This is not a unique story...
Introductory economics, and particularly the competitive market model, can be seductive that way. The models are so simple, logical, and compelling that they seem to unlock a whole new way of seeing the world. And, arguably, they do: there are real insights you can gain from a working understanding of supply and demand curves.
The problem, however, is that the people ... forget that the power of a theory in the abstract bears no relationship to its accuracy in practice. ...
Hensarling, who likes to quote market principles in the abstract, doesn’t appear to have moved on much from Economics 101. ... This ritual invocation of markets ignores the fact that there is no way to design a contemporary financial system that even remotely resembles the textbook competitive market: perfect information, no barriers to entry, a large number of suppliers such that no supplier can affect the market price, etc. ...
Regulatory policy that presumes well-functioning markets that don’t exist is unlikely to work well in the real world. Actually, Bill Clinton and George W. Bush tried that already, and we got the financial crisis. But to people who believe in economism, theory can never be disproved by experience. Hensarling is “always willing to compromise policies to advance principles,” he actually said to the Journal. That’s a useful trait in an ideologue. It’s frightening in the man who will write the rules for our financial system.
Monday, December 19, 2016
"The process of destroying democratic substance while preserving forms is already underway":
How Republics End, by Paul Krugman, NY Times: ...Lately I’ve been reading a lot about the ancient world. Initially..., I was doing it for entertainment and as a refuge from news that gets worse with each passing day. But I couldn’t help noticing the contemporary resonances of some Roman history — specifically, the tale of how the Roman Republic fell.
Here’s what I learned: Republican institutions don’t protect against tyranny when powerful people start defying political norms. And tyranny, when it comes, can flourish even while maintaining a republican facade.
On the first point: Roman politics involved fierce competition among ambitious men. But ... “However important it was for an individual to win fame and add to his and his family’s reputation, this should always be subordinated to the good of the Republic … no disappointed Roman politician sought the aid of a foreign power.”
America used to be like that, with prominent senators declaring that we must stop “partisan politics at the water’s edge.” But now we have a president-elect who openly asked Russia to help smear his opponent..., the good of the republic be damned.
And what happens to the republic as a result? Famously..., the transformation of Rome from republic to empire never happened. Officially, imperial Rome was still ruled by a Senate that just happened to defer to the emperor ... on everything that mattered. We may not go down exactly the same route..., but the process of destroying democratic substance while preserving forms is already underway. ...
Why is this happening? ... And let’s be clear: This is a Republican story, not a case of “both sides do it.” ..., what directly drives the attack on democracy, I’d argue, is simple careerism on the part of people who are apparatchiks within a system insulated from outside pressures by gerrymandered districts, unshakable partisan loyalty, and lots and lots of plutocratic financial support.
For such people, toeing the party line and defending the party’s rule are all that matters. ...
One thing all of this makes clear is that the sickness of American politics didn’t begin with Donald Trump, any more than the sickness of the Roman Republic began with Caesar. The erosion of democratic foundations has been underway for decades, and there’s no guarantee that we will ever be able to recover.
But if there is any hope of redemption, it will have to begin with a clear recognition of how bad things are. American democracy is very much on the edge.
Friday, December 16, 2016
"There were a lot of useful idiots this year, and they made the election hack a success":
Useful Idiots Galore, by Paul Krugman, NY Times: On Wednesday an editorial in The Times described Donald Trump as a “useful idiot” serving Russian interests. That may not be exactly right. After all, useful idiots are supposed to be unaware of how they’re being used, but Mr. Trump probably knows very well how much he owes to Vladimir Putin. ...
But let’s be honest: Mr. Trump is by no means the only useful idiot in this story..., bad guys couldn’t have hacked the U.S. election without a lot of help, both from U.S. politicians and from the news media. ...
The pro-Putin tilt of Mr. Trump and his advisers was obvious months before the election... By midsummer the close relationship between WikiLeaks and Russian intelligence was also obvious, as was the site’s growing alignment with white nationalists.
Did Republican politicians, so big on flag waving and impugning their rivals’ patriotism, reject this foreign aid to their cause? No...
This shouldn’t come as a surprise. It has long been obvious ... that the modern G.O.P. is a radical institution that is ready to violate democratic norms in the pursuit of power. ...
The bigger surprise was the behavior of the news media, and I don’t mean fake news; I mean big, prestigious organizations. Leaked emails ... were breathlessly reported as shocking revelations, even when they mostly revealed nothing more than the fact that Democrats are people.
Meanwhile, the news media dutifully played up the Clinton server story, which never involved any evidence of wrongdoing...
And then there was the Comey letter. The F.B.I. literally found nothing at all. But the letter dominated front pages and TV coverage, and that coverage — by news organizations that surely knew that they were being used as political weapons — was almost certainly decisive on Election Day.
So as I said, there were a lot of useful idiots this year, and they made the election hack a success.
Now what? If we’re going to have any hope of redemption, people will have to stop letting themselves be used... And the first step is to admit the awful reality of what just happened. ...
And it means not acting as if this was a normal election whose result gives the winner any kind of a mandate, or indeed any legitimacy beyond the bare legal requirements. It might be more comfortable to pretend that things are O.K., that American democracy isn’t on the edge. But that would be taking useful idiocy to the next level.
Monday, December 12, 2016
"This election was an outrage":
The Tainted Election, by Paul Krugman, NY Times: The C.I.A. ... has now determined that hackers working for the Russian government worked to tilt the 2016 election to Donald Trump. This has actually been obvious for months, but the agency was reluctant to state that conclusion before the election out of fear that it would be seen as taking a political role.
Meanwhile, the F.B.I. went public 10 days before the election, dominating headlines and TV coverage across the country with a letter strongly implying that it might be about to find damning new evidence against Hillary Clinton — when it turned out, literally, to have found nothing at all.
Did the combination of Russian and F.B.I. intervention swing the election? Yes. Mrs. Clinton lost three states – Michigan, Wisconsin, and Pennsylvania – by less than a percentage point, and Florida by only slightly more. If she had won any three of those states, she would be president-elect. Is there any reasonable doubt that Putin/Comey made the difference? ...
So this was a tainted election. ...
Democratic norms have been and continue to be violated, and anyone who refuses to acknowledge this reality is, in effect, complicit in the degradation of our republic. This president will have a lot of legal authority, which must be respected. But beyond that, nothing: he doesn’t deserve deference, he doesn’t deserve the benefit of the doubt. ...
Will acknowledging the taint on the incoming administration do any good? Maybe it will stir the consciences of at least a few Republicans. Remember, many ... of the things Mr. Trump will try to do can be blocked by just three Republican senators.
Politics being what it is, moral backbones on Capitol Hill will be stiffened if there are clear signs that the public is outraged by what is happening. And there will be a chance to make that outrage felt directly in two years — not just in congressional elections, but in votes that will determine control of many state governments.
Now, outrage over the tainted election past can’t be the whole of opposition politics. It will also be crucial to maintain the heat over actual policies. ...
But we ought to be able to look both forward and back, to criticize both the way Mr. Trump gained power and the way he uses it. Personally, I’m still figuring out how to keep my anger simmering — letting it boil over won’t do any good, but it shouldn’t be allowed to cool. This election was an outrage, and we should never forget it.
Friday, December 09, 2016
Economists Are Out. Goldman Is Back In: It looks like Gary Cohn will be leaving Goldman Sachs Group Inc., where he is president and chief operating officer, to become director of Donald Trump's National Economic Council. This is not a unique career trajectory!
The first director of the NEC, which President Bill Clinton created in 1993 to coordinate economic policy among the sometimes-warring government agencies responsible for it, was Robert Rubin... Stephen Friedman, became director of George W. Bush's NEC. If Cohn in fact takes the job, there will have been as many former top Goldman executives in charge of the NEC as Ph.D. economists.
The continuing prominence of Goldman Sachs alumni in Washington is a remarkable thing. In the throes of the financial crisis it seemed hard to imagine that the old Goldman-to-Washington pipeline could continue to operate. ...
So Government Sachs is back! ...
Thursday, December 08, 2016
Thomas Cooley, Ben Griffy, and Peter Rupert (not endorsing or questioning -- but seems worth noting):
Electronic Voting Machines and the Election: Three states are facing or currently undergoing a recount of votes cast, after a number of computer scientists reported some evidence of problems with the electronic voting. This finding was heavily disputed in the media, and seemingly little evidence was produced to support the conclusion that there was malfeasance in counties with electronic voting. Indeed, following the initial media response, the lead computer scientist backed down from initial reports, saying that there are flaws in electronic voting that could be easily exploited, and that an audit is important, but there isn’t direct evidence. We use our data to explore the claim that counties with electronic voting exhibited different voting patterns than their paper peers. What we find is definitely troubling: in some of the swing states, and specifically in states that were projected to vote Democratic at the top of the ticket, those with electronic voting had a decrease in the percent of the total vote going for the Clinton-Kaine campaign, and an increase for the Trump-Pence campaign. We try to determine if this is spurious by checking for patterns in other places with electronic voting, as well as during the 2012 election. We only find this correlation for swing states during the 2016 election. ...
... It’s tough to draw precise conclusions as to what these correlations mean. It’s still possible that there are other factors driving our results, other than electronic voting. But, what we do know is that results in key swing states differ in counties with electronic voting. Further, the patterns in these counties are not exhibited by other similar but not electorally important counties across the country. Additionally, electronic voting had no impact in swing states during the 2012 election. Taken together, it seems tough to dismiss the correlations that we have found in the data. While we don’t know how to interpret the findings practically, it certainly lends credence to the efforts to initiate recounts in several of the swing states.
Tuesday, December 06, 2016
Why not centrism?: Some people want to revive centrism. Tony Blair wants to “build a new policy agenda for the centre ground”. And the Lib Dems’ victory in Richmond Park is being seen as a warning to the Tories that it must “keep the votes of the middle ground.”
This poses the question: does the idea of political centre ground even make sense? It does, if you think of political opinion being distributed like a bell curve with a few extremists at either end and lots of moderates in the middle. But this doesn’t seem to apply today, and not just because political opinion has always been multi-dimensional. What we have now is a split between Leavers and Remainers, and the ideas correlated with those positions such as openness versus authoritarianism. Where does the “centre ground” fit into this? ...
This, I think, is the essence of centrism. It accepts that globalization and free markets (within limits) bring potential benefits, but that these benefits must be spread more evenly via the tax and welfare system. This stands in contrast to nativism and some forms of leftism which oppose globalization and favour market intervention. It also contrasts to libertarianism and Thatcherism which emphasize freeish markets whilst underplaying redistribution. It’s also what New Labour stood for. ...
I have a ... beef. It’s that this form of centrism offers too etiolated a vision of equality. Inequality isn’t simply a matter of pay packets but of power too. Centrism fails to tackle the latter. This is a big failing... For me, therefore, a centrism which ignores inequalities of power must be inadequate.
Herein, though, lies the sadness: even this form of centrism would be a big improvement upon a lot of today’s politics.
Team Trump’s New Pledge on Tax Cuts: ...Last week..., Steven Mnuchin said something unexpected on CNBC in his first interview after becoming Donald Trump’s choice for Treasury secretary. A friendly host invited Mnuchin to respond to the liberal charge that Trump’s tax cut was a sop to the rich. Mnuchin, a financier and former Goldman Sachs partner, refused — and made news instead.
“It’s not the case at all,” he said. “Any reductions we have in upper-income taxes will be offset by less deductions, so that there will be no absolute tax cut for the upper class. There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.” ...
Of course, a single comment from Trump’s orbit — even from the captain of the economic team, who repeated it for emphasis — deserves skepticism. ...
Most Americans oppose a tax cut for the rich, polls indicate. History shows that the economic rationale is nonsense, which means it would not help the working-class voters who elected Trump. And the incoming president’s own Treasury secretary said it would not happen: “There will be no absolute tax cut for the upper class.”
It’s a simple, yes-or-no standard. Call it the Mnuchian standard. Any plan that cuts taxes for the rich falls short and deserves to fail.
Monday, December 05, 2016
Paul Krugman responds to Tim Duy:
Trade, Facts, and Politics: I see that Tim Duy is angry at me again. The occasion is rather odd: I produced a little paper on trade and jobs, which I explicitly labeled “wonkish”; the point of the paper was, as I said, to reconcile what seemed to be conflicting assessments of the impacts of trade on overall manufacturing employment.
But Duy is mad, because “dry statistics on trade aren’t working to counter Trump.” Um, that wasn’t the point of the exercise. This wasn’t a political manifesto, and never claimed to be. Nor was it a defense of conventional views on trade. It was about what the data say about a particular question. Are we not allowed to do such things in the age of Trump? ...
Republicans have promised to repeal Obamacare, but they haven't told us what their replacement would look like. Why not?:
The Art of the Scam, by Paul Krugman, NY Times: ...While many Americans say they disapprove of Obamacare, large majorities approve of the things the Affordable Care Act does, notably ensuring that people with pre-existing medical conditions can still buy insurance. And there’s no way to achieve these things without either a major expansion of government health programs — hardly a Republican priority — or something very much like the law Democrats passed.
Worse yet, from the Republican point of view, Obamacare has worked. .. And Americans newly insured thanks to Obamacare are highly satisfied with their coverage.
So what can the G.O.P. offer as an alternative? We know what Republicans want: a free-for-all in which insurance companies can discriminate as they like, with minimal regulation and drastic cuts in government aid. Going there would, however, cause millions of Americans — many of them people who voted for Trump, believing that their recent gains were safe — to lose coverage. The political blowback would be terrible.
Yet failing to repeal Obamacare would also bring heavy political costs. So the emerging Republican health care strategy, according to news reports, is “repeal and delay” — vote to kill Obamacare, but with the effective date pushed back until after the 2018 midterm elections. By then, G.O.P. leaders promise, they’ll have come up with the replacement they haven’t been able to devise over the past seven years.
There will, of course, be no replacement. And there’s likely to be chaos in health care markets well before Obamacare’s official expiration date, as insurance companies exit markets they know will soon collapse. But the political thinking seems to be that they can find a way to blame Democrats for the debacle.
It’s all very Trumpian, if you think about it. An honest memoir of the president-elect’s business career would be titled “The art of the scam.” After all, his hallmark has been turning a profit on failed business projects, because he finds a way to leave other people holding the bag.
In this case, the effort to replace Obamacare will clearly fail miserably in terms of serving the American people... But it could nonetheless be a political success if the public can be convinced to blame the wrong people.
You might think that this would be impossible, given the obviousness of the ploy. But given what we’ve seen so far, you have to take seriously the possibility that they’ll get away with it.
Sunday, December 04, 2016
Desperately Searching For A New Strategy, by Tim Duy: President-Donald Trump’s renewed call for a 35% import tax on firms that ship jobs out of the United States triggered the expected round of derision from an array of critics, both on the left and the right. The critics are correct. It is indeed a terrible idea. One sure way to discourage job creation in the US is to guarantee that firms will be punished if they need to layoff employees in the future. It is just bad policy, plain and simple.
But if that’s your takeaway, I think you are making a mistake.
Whether or not Trump can or should attempt to reverse the decline in manufacturing jobs is not the big story here. He can’t. The real story is that he continues to tap into the anger of his voters about being left behind. That will give him much more power than our criticisms will take away.
Politicians, aided by economists, have long ignored the negative impacts of trade-induced structural change. Indeed, they have even cheered it on. After all, the process “releases resources” for use in other, more productive parts of the economy. Those workers are just “low-skilled” workers. The US needs more “high-skilled” workers anyway.
Fact: Workers hate being referred to as “low-skilled.”
How we respond to Trump is important. If we simply fall back on our standard numbers, we lose. If we confidently predict that TPP is a big win because it will add 0.5% to GDP by 2030, we lose. If we just use this as an opportunity to reiterate the importance of a college degree, we lose. We have been doing this for decades, and it helped deliver Trump to office.
As an example, take Paul Krugman’s latest on trade. I don’t want to keep picking on Krugman, but he epitomizes traditional economic thinking on international trade. He concludes with this:
But what about the now-famous Autor-Dorn-Hanson paper on the “China shock”? It’s actually consistent with these numbers. Autor et al only estimate the effects of the, um, China shock, which they suggest led to the loss of 985,000 manufacturing jobs between 1999 and 2011. That’s less than a fifth of the absolute loss of manufacturing jobs over that period, and a quite small share of the long-term manufacturing decline.
I’m not saying that the effects were trivial: Autor and co-authors [sic] show that the adverse effects on regional economies were large and long-lasting. But there’s no contradiction between that result and the general assertion that America’s shift away from manufacturing doesn’t have much to do with trade, and even less to do with trade policy.
Nothing is wrong with the analysis here. But I think Krugman is downplaying the transition costs, especially regional impacts. Politically, that is the important part. Economists tend to just play lip-service to the negative effects as we seek what is perceived to be the bigger prize, the aggregate effects. Fundamentally. Krugman is looking for what we got right in trade theory, and he finds it in Autor et al.
For me, Autor et al is not about what we got right in trade theory, but what we got wrong. Spectacularly wrong:
The importance of location for evaluating trade gains depends on how long it takes for regional adjustment to occur. A presumption that US labor markets are smoothly integrated across space has long made regional equilibration the starting point for welfare analysis. The US experience of trade with China makes this starting point less compelling. Labor-market adjustment to trade shocks is stunningly slow, with local labor-force participation rates remaining depressed and local unemployment rates remaining elevated for a full decade or more after a shock commences. The persistence of local decline perhaps explains the breadth of public transfer programs whose uptake increases in regions subject to rising trade exposure. The mobility costs that rationalize slow adjustment imply that short-run trade gains may be much smaller than long-run gains and that spatial heterogeneity in the magnitudes of the net benefits may be much greater than previously thought. Using a quantitative theoretical model, Caliendo et al. (2015) find that in the immediate aftermath of a trade shock, constructed to mimic the effects of growth in US imports from China, US net welfare gains are close to zero. The ultimate and sizable net gains are realized only once workers are able to reallocate across regions to move from declining to expanding industries. Establishing the speed of regional labor-market adjustment to trade shocks should capture considerably more attention from trade and labor economists.
The speed of regional labor market adjustment to shocks is agonizingly slow in any area that lacks a critical mass of population. Rural and semi-rural areas remain impacted by negative shocks for at least a decade, but often longer. Relative to life spans, in many cases the shocks might as well be permanent.
And note that this is not just about negative trade shocks. Trade is an easy punching bag for Trump, but his message carries wider because we are really talking about structural shocks in general. For example, rural towns in Oregon where devastated by the collapsed of the timber industry in the mid-80s. Here is what the New York Times wrote about Oakridge, Oregon a decade ago:
For a few decades, this little town on the western slope of the Cascades hopped with blue-collar prosperity, its residents cutting fat Douglas fir trees and processing them at two local mills.
Into the 1980’s, people joked that poverty meant you didn’t have an RV or a boat. A high school degree was not necessary to earn a living through logging or mill work, with wages roughly equal to $20 or $30 an hour in today’s terms.
But by 1990 the last mill had closed, a result of shifting markets and a dwindling supply of logs because of depletion and tighter environmental rules. Oakridge was wrenched through the rural version of deindustrialization, sending its population of 4,000 reeling in ways that are still playing out.
Residents now live with lowered expectations, and a share of them have felt the sharp pinch of rural poverty. The town is an acute example of a national trend, the widening gap in pay between workers in urban areas and those in rural locales, where much of any job growth has been in low-end retailing and services.
Trump is speaking to all of these workers, not just the trade-impacted workers. And you can complain that they don’t matter, they aren’t high-skilled workers, that the economy is shifting away to urban areas, that they should just move. In the rural Oregon case, you can add in that the big (and labor-intensive) trees were almost gone anyway, that technology was taking over at the logging site and at the mill, that falling transportation costs meant you didn’t need to mill locally.
None of that works because all you are doing is telling people they have no value relative to the lives they knew.
We don’t have answers for these communities. Rural and semi-rural economic development is hard. Those regions have received only negative shocks for decades; the positive shocks have accrued to the urban regions. Of course, Trump doesn’t have any answers either. But he at least pretends to care.
Just pretending to care is important. At a minimum, the electoral map makes it important.
These issues apply to more than rural and semi-rural areas. Trump’s message – that firms need to consider something more than bottom line – resonates in middle and upper-middle class households as well. They know that their grip on their economic life is tenuous, that they are the future “low-skilled” workers. And they know they will be thrown under the bus for the greater good just like “low-skilled” workers before them.
The dry statistics on trade aren’t working to counter Trump. They make for good policy at one level and terrible policy (and politics) at another. The aggregate gains are irrelevant to someone suffering a personal loss. Critics need to find an effective response to Trump. I don’t think we have it yet. And here is the hardest part: My sense is that Democrats will respond by offering a bigger safety net. But people don’t want a welfare check. They want a job. And this is what Trump, wrongly or rightly, offers.
Friday, December 02, 2016
Be careful what you vote for:
Seduced and Betrayed by Donald Trump, by Paul Krugman, NY Times: Donald Trump won the Electoral College (though not the popular vote) on the strength of overwhelming support from working-class whites, who feel left behind by a changing economy and society. And they’re about to get their reward... Yes, the white working class is about to be betrayed.
The evidence of that coming betrayal is obvious in the choice of an array of pro-corporate, anti-labor figures for key positions. In particular..., the selection of Tom Price, an ardent opponent of Obamacare and advocate of Medicare privatization, as secretary of health and human services probably ... means that the Affordable Care Act is doomed...
What the choice of Mr. Price suggests is that the Trump administration is, in fact, ready to see millions lose insurance. And many of those losers will be Trump supporters...., we’re probably looking at more than five million ... who just voted to make their lives nastier, more brutish, and shorter. ...
And ... no, Mr. Trump can’t bring back the manufacturing jobs ... lost mainly to technological change, not imports...
There will be nothing to offset the harm workers suffer when Republicans rip up the safety net.
Will there be a political backlash, a surge of buyer’s remorse? Maybe. ... But we do need to consider the tactics that he will use to obscure the scope of his betrayal.
One tactic, which we’ve already seen with ... Carrier..., will be to distract the nation with bright, shiny, trivial objects. True, this tactic will work only if news coverage is both gullible and innumerate.
No, Mr. Trump didn’t “stand up” to Carrier — he seems to have offered it a bribe. And we’re talking about a thousand jobs in a huge economy...
But judging from the coverage of the deal so far, assuming that the news media will be gullible and innumerate seems like a good bet.
And if and when the reality that workers are losing ground starts to sink in, I worry that the Trumpists will do what authoritarian governments often do to change the subject away from poor performance: go find an enemy. ... Even as he took a big step toward taking health insurance away from millions, Mr. Trump started ranting about taking citizenship away from flag-burners. This was not a coincidence.
The point is to keep your eye on what’s important. Millions of Americans have just been sucker-punched. They just don’t know it yet.
Wednesday, November 30, 2016
Gerald E. Scorse:
One tax policy Americans yugely favor, The Hill: Nobody likes taxes, but roughly nine out of 10 Americans want income from investments to be taxed at least as much as other income. Republican leaders, tone-deaf,... close their eyes to a reform enacted under President Ronald Reagan: equal taxes on capital gains, dividends, and ordinary income such as wages. It’s one policy the country would love to have back, yugely. ...
The landslide national preference for at least equal taxes on investments—for tax fairness, not tax breaks—meshes perfectly with the populist belief that the system is rigged in favor of the rich. ... According to an analysis by the non-partisan Tax Policy Center, the top 1 percent of Americans receives over 62 percent of the benefits from lower rates on capital gains, dividends and related tax preferences; for the top 10 percent, the total benefit share is just short of 80 percent.
That’s more than alright with Republicans, whose tax plans will likely drive those percentages even higher—in exactly the opposite direction of the reform ushered in a generation ago by President Reagan. He took Main Street’s side on taxing Wall Street gains, but the GOP likes to pretend it never happened. ...
Donald Trump rode the populist tide all the way to the White House. Let’s see if President Trump listens to the populist yearning—the yuge populist yearning—for equal taxes on income from wealth and income from work.
Monday, November 28, 2016
"So how bad will the effects of Trump-era corruption be?":
Why Corruption Matters, by Paul Krugman, NY Times: Remember all the news reports suggesting, without evidence, that the Clinton Foundation’s fund-raising created conflicts of interest? Well, now the man who benefited from all that innuendo is ... giving us an object lesson in what real conflicts of interest look like as authoritarian governments around the world shower favors on his business empire. ...
And his early appointments suggest that he won’t be the only player using political power to build personal wealth. ... America has just entered an era of unprecedented corruption at the top. ...
Normally, policy reflects some combination of practicality — what works? — and ideology — what fits my preconceptions? And our usual complaint is that ideology all too often overrules the evidence.
But now we’re going to see a third factor powerfully at work: What policies can officials, very much including the man at the top, personally monetize? And the effect will be disastrous. ...
But what’s truly scary is the potential impact of corruption on foreign policy. Again, foreign governments are already trying to buy influence by adding to Mr. Trump’s personal wealth, and he is welcoming their efforts.
In case you’re wondering, yes, this is illegal, in fact unconstitutional, a clear violation of the emoluments clause. But who’s going to enforce the Constitution? Republicans in Congress? Don’t be silly.
Destruction of democratic norms aside, however, think about the tilt this de facto bribery will give to U.S. policy. What kind of regime can buy influence by enriching the president and his friends? The answer is, only a government that doesn’t adhere to the rule of law.
Think about it: Could Britain or Canada curry favor with the incoming administration by waiving regulations to promote Trump golf courses or directing business to Trump hotels? No — those nations have free presses, independent courts, and rules designed to prevent exactly that kind of improper behavior. On the other hand, someplace like Vladimir Putin’s Russia can easily funnel vast sums to the man at the top in return for, say, the withdrawal of security guarantees for the Baltic States.
One would like to hope that national security officials are explaining to Mr. Trump just how destructive it would be to let business considerations drive foreign policy. But reports say that Mr. Trump has barely met with those officials, refusing to get the briefings that are normal for a president-elect.
So how bad will the effects of Trump-era corruption be? The best guess is, worse than you can possibly imagine.
Sunday, November 27, 2016
The only way to make sense of what happened is to see the vote as an expression of, well, identity politics — some combination of white resentment at what voters see as favoritism toward nonwhites (even though it isn’t) and anger on the part of the less educated at liberal elites whom they imagine look down on them.
To be honest, I don’t fully understand this resentment.
To not understand this resentment is to pretend this never happened:
“You know, to just be grossly generalistic, you could put half of Trump’s supporters into what I call the basket of deplorables. Right?” she said to applause and laughter. “The racist, sexist, homophobic, xenophobic, Islamaphobic — you name it. And unfortunately there are people like that. And he has lifted them up.”
Clinton effectively wrote off nearly half the country at that point. Where was the liberal outrage at this gross generalization? Nowhere – because Clinton’s supporters believed this to be largely true. The white working class had already been written off. Hence the applause and laughter.
In hindsight, I wonder if the election was probably over right then and there.
In particular, I don’t know why imagined liberal disdain inspires so much more anger than the very real disdain of conservatives who see the poverty of places like eastern Kentucky as a sign of the personal and moral inadequacy of their residents.
But they do know the disdain of conservatives. Clinton followed right along the path of former Presidential candidate Mitt Romney:
It was the characterization of “half of Trump’s supporters” on Friday that struck some Republicans as similar to the damning “47 percent” remark made by their own nominee, Mitt Romney, in his 2012 campaign against President Obama. At a private fund-raiser Mr. Romney, who Democrats had already sought to portray as a cold corporate titan, said 47 percent of voters were “dependent upon government, who believe that they are victims” and who “pay no income tax.”
There was, of course, liberal outrage at Romney.
Krugman forgets that Trump was not the choice of mainstream Republicans. Trump’s base overthrew the mainstream – they felt the disdain of mainstream Republicans just as they felt the disdain of the Democrats, and returned the favor.
I doubt very much that these voters are looking for the left’s paternalistic attitude:
One thing is clear, however: Democrats have to figure out why the white working class just voted overwhelmingly against its own economic interests, not pretend that a bit more populism would solve the problem.
That Krugman can wonder at the source of the disdain felt toward the liberal elite while lecturing Trump’s voters on their own self-interest is really quite remarkable.
I don’t know that the white working class voted against their economic interest. I don’t pretend that I can define their preferences with such accuracy. Maybe they did. But the working class may reasonably believe that neither party offers them an economic solution. The Republicans are the party of the rich; the Democrats are the party of the rich and poor. Those in between have no place.
That sense of hopelessness would be justifiably acute in rural areas. Economic development is hard work in the best of circumstances; across the sparsely populated vastness of rural America, it is virtually impossible. The victories are – and will continue to be – few and far between.
The tough reality of economic development is that it will always be easier to move people to jobs than the jobs to people. Which is akin to telling many, many voters the only way possible way they can live an even modest lifestyle is to abandon their roots for the uniformity of urban life. They must sacrifice their identities to survive. You will be assimilated. Resistance is futile. Follow the Brooklyn hipsters to the Promised Land.
This is a bitter pill for many to swallow. To just sit back and accept the collapse of your communities. And I suspect the white working class resents being told to swallow that pill when the Democrats eagerly celebrate the identities of everyone else.
And it is an especially difficult pill given that the decline was forced upon the white working class; it was not a choice of their own making. The tsunami of globalization washed over them with nary a concern on the part of the political class. To be sure, in many ways it was inevitable, just as was the march of technology that had been eating away at manufacturing jobs for decades. But the damage was intensified by trade deals that lacked sufficient redistributive policies. And to add insult to injury, the speed of decline was hastened further by the refusal of the US Treasury to express concern about currency manipulation twenty years ago. Then came the housing crash and the ensuing humiliation of the foreclosure crisis.
The subsequent impact on the white working class – the poverty, the opioid epidemic, the rising death rates – are well documented. An environment that serves as fertile breeding ground for resentment, hatred and racism, a desire to strike back at someone, anyone, simply to feel some control, to be recognized. Hence Trump.
Is there a way forward for Democrats? One strategy is to do nothing and hope that the fast growing Sunbelt shifts the electoral map in their favor. Not entirely unreasonable. Maybe even the white working class turns on Trump when it becomes evident that he has no better plan for the white working class than anyone else (then again maybe he skates by with a few small but high profile wins). But who do they turn to next?
And how long will a "hold the course" strategy take? One more election cycle? Or ten? How much damage to our institutions will occur as a result? Can the Democrats afford the time? Or should they find a new standard bearer that can win the Sunbelt states and bridge the divide with the white working class? I tend to think the latter strategy has the higher likelihood of success. But to pursue such a strategy, the liberal elite might find it necessary to learn some humility. Lecturing the white working class on their own self-interest hasn’t worked in the past, and I don’t see how it will work in the future.
Friday, November 25, 2016
What should Democrats do to win the votes of the white working class?:
The Populism Perplex, by Paul Krugman, NY Times: ...what put Donald Trump in striking distance was overwhelming support from whites without college degrees. So what can Democrats do to win back at least some of those voters?
Recently Bernie Sanders offered an answer: Democrats should “go beyond identity politics.” What’s needed, he said, are candidates who understand that working-class incomes are down, who will “stand up to Wall Street, to the insurance companies, to the drug companies, to the fossil fuel industry.”
But is there any reason to believe that this would work? Let me offer some reasons for doubt. ...
Any claim that changed policy positions will win elections assumes that the public will hear about those positions. How is that supposed to happen, when most of the news media simply refuse to cover policy substance? ...
Beyond this, the fact is that Democrats have already been pursuing policies that are much better for the white working class... Yet this has brought no political reward. ...
Now, you might say that health insurance is one thing, but what people want are good jobs. Eastern Kentucky used to be coal country, and Mr. Trump, unlike Mrs. Clinton, promised to bring the coal jobs back. ... But it’s a nonsensical promise..., there may be a backlash when the coal and manufacturing jobs don’t come back, while health insurance disappears.
But maybe not. Maybe a Trump administration can keep its supporters on board, not by improving their lives, but by feeding their sense of resentment.
For let’s be serious here: You can’t explain the votes of places like Clay County as a response to disagreements about trade policy. The only way to make sense of what happened is to see the vote as an expression of, well, identity politics — some combination of white resentment at what voters see as favoritism toward nonwhites (even though it isn’t) and anger ... at liberal elites whom they imagine look down on them.
To be honest, I don’t fully understand this resentment. In particular, I don’t know why imagined liberal disdain inspires so much more anger than the very real disdain of conservatives who see the poverty of places like eastern Kentucky as a sign of ... personal and moral inadequacy...
One thing is clear, however: Democrats have to figure out why the white working class just voted overwhelmingly against its own economic interests, not pretend that a bit more populism would solve the problem.
Thursday, November 24, 2016
Populists as Snake Oil Sellers: Simon wonders why disenchantment with globalization has caused people to turn to what he calls snake oil salesmen. That phrase is apt, because snake oil salesmen thrived for decades. And some of the reasons they did so might be relevant today.
My source here is a wonderful paper (pdf) by Werner Troesken which describes the massive growth in patent medicines in 19th century America. This suggests to me four points of similarity between snake oil salesmen and populist politicians....
Monday, November 21, 2016
I have a new column:
The Political Winds in Economics: In recent years, much has been written about how the economics profession is drifting to the left. For example, Noah Smith writes:
“…almost all of the most prominent economists in the public sphere -- Paul Krugman, Summers, Thomas Piketty, and the rest -- lean to the left, and lean significantly more to the left than in years past. Conservative economists are largely hiding out in academia…”
But like Noah, I am skeptical that this represents a permanent change. ...
Friday, November 18, 2016
Why do Republicans want to dismantle Medicare?:
The Medicare Killers, by Paul Krugman, NY Times: During the campaign, Donald Trump often promised to ... represent the interests of working-class voters who depend on major government programs. “I’m not going to cut Social Security like every other Republican and I’m not going to cut Medicare or Medicaid,” he declared, under the headline “Why Donald Trump Won’t Touch Your Entitlements.”
It was, of course, a lie. The transition team’s point man on Social Security is a longtime advocate of privatization, and all indications are that the incoming administration is getting ready to kill Medicare, replacing it with vouchers that can be applied to the purchase of private insurance. Oh, and it’s also likely to raise the age of Medicare eligibility. ...
While Medicare is an essential program for a great majority of Americans, it’s especially important for the white working-class voters who supported Mr. Trump most strongly. ... People like Paul Ryan ... have often managed to bamboozle the media into believing that their efforts to dismantle Medicare and other programs are driven by valid economic concerns. They aren’t.
It has been obvious for a long time that Medicare is actually more efficient than private insurance, mainly because it doesn’t spend large sums on overhead and marketing, and, of course, it needn’t make room for profits.
What’s not widely known is that the cost-saving measures included in ... Obamacare, have been remarkably successful in their efforts to ... rein in the long-term rise in Medicare expenses. ... This success is one main reason long-term budget projections have dramatically improved.
So why try to destroy this successful program...? ... It would be very helpful for opponents of government to do away with a program that clearly demonstrates the power of government to improve people’s lives.
And there’s an additional benefit to the right from Medicare privatization: It would create a lot of opportunities for private profits, earned by diverting dollars that could have been used to provide health care. ...
You might think this would make the whole idea a non-starter. And this push will, in fact, fail — just like Social Security privatization in 2005 — if voters realize what’s happening.
What’s crucial now is to make sure that voters do, in fact, realize what’s going on. And this isn’t just a job for politicians. It’s also a chance for the news media, which failed so badly during the campaign, to start doing its job.
Thursday, November 17, 2016
This is by Larry Summers. Comments?:
Winning an election does not entitle one to upend basic values: I will never again use the term “political correctness.” Whatever rhetorical value the term may have once had is far more than offset by what has been unleashed in the name of resistance to it since the presidential election.
I have made no secret over the years of my conviction that the sensitivities of individuals or members of various group should not be permitted to chill free speech on college campuses. I have the scars to show for speaking out against overdoing the idea of microaggression, the regulation of Halloween costumes and the prosecution of students for taking part in sombrero parties – all of which have struck me as “political correctness” run amok.
But the events of the last week are giving me pause about that term and its usage and the complex issues underlying it. It’s not that I now think speech codes are wise or that we should stamp out microaggressions wherever they are perceived. Rather, my reaction is to the way the President-elect has been heard during the campaign and the terrifying events his election has set off. ...
Black students, gay students, Hispanic students, Muslim students, disabled students, female students – all of them now fear that the basic security and acceptance on which they relied is at risk. Help lines are flooded with calls. Those who seek to count hateful incidents report an upsurge. I cannot convince myself that that fear is irrational. ...
In the face of all this, the President-elect and his staff ... have allowed, without adequate response and rejection, the celebration of victory to metastasize into something dark and evil. It is surely wrong to hold the President-elect personally responsible for all the words and deeds of all who support him. Equally, the President-elect has a moral obligation to stand up for tolerance and against intolerance whatever its source.
The fight for academic freedom and for ideological diversity on college campuses should and will go on. But given what opposition to “political correctness” has licensed, it time to retire the term.
More importantly, democracy does not mean electrocracy. Winning an election does not entitle one to upend our basic values. The refusal to tolerate blatant racism, bigotry and misogyny are beyond compromise. The first obligation of anyone currently in a leadership position is not to find common ground with our new President-elect now that the ballots have been counted and the election is over. It is instead to once again make it possible for all who live in our country to feel safe.
Monday, November 14, 2016
In the Light of the Elections: Recession, Expansion, and Inequality: Will the economic program of President-elect Donald Trump lead to a recession or to an expansion? ... It is obviously hard to tell..., what happens to the US economy depends mainly on the balance between macroeconomic and trade measures.
On the macroeconomic front, signs point to larger fiscal deficits, as a result of both higher infrastructure spending and corporate and personal tax cuts. ...
If deficits take place, they will lead to higher spending and higher growth for some time. And with the US economy already operating close to potential, deficits will lead to higher inflation..., potentially leading the US Federal Reserve to react by increasing interest rates faster than it intended to before the election. ...
To the extent that both growth and interest rates are higher, the dollar is likely to appreciate, leading, ironically, to larger US trade deficits, which Donald Trump the candidate indicated he wanted to fight. This leads me to trade issues and trade measures. ... Imposing tariffs on a major scale would decrease growth and make a recession more likely. ... Tariffs by themselves may indeed reduce imports, increase the demand for domestic goods, and increase output... But the "by themselves" assumption is just not right: Tariffs ... would most likely lead to a tariff war and thus decrease exports. And the decrease in imports and exports would not be a wash. ...
So, in the end, expansion or recession will depend on the balance between macroeconomic and trade measures. My own guess is the first will dominate, and growth will be sustained, at least for some time. Will it be enough to satisfy those who voted for Donald Trump, worried about their incomes and their futures? I am not so sure. Growth will indeed lift most boats. But many measures will push in the opposite direction. Lower corporate taxes, lower personal taxes on the rich, and financial deregulation will increase the share of output going to capital... The (now partial?) dismantling of Obamacare, if it is to happen, will not help the twenty or so million who benefit from it today. Tariffs on foreign goods may save some middle class jobs but will destroy others and increase the cost of living for those at the bottom end of the income distribution. Inequality may well go up, not down.
Take these remarks for what they are, an early analysis of a still unknown set of measures, all with complex effects. ... But predictions of recession were too pessimistic. If macro measures dominate trade measures, we may be in for a Trump expansion, at least for a time.
The consequences of Trumpism:
Trump Slump Coming?, by Paul Krugman, NY Times: Let’s be clear: Installing Donald Trump in the White House is an epic mistake. ...
But will the extent of the disaster become apparent right away? It’s ... tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night... But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest.
In fact, don’t be surprised if economic growth actually accelerates for a couple of years.
Why am I, on reflection, relatively sanguine about the short-term effects of putting such a terrible man, with such a terrible team, in power? ...
First,... take the signature Trump issue of trade policy. A return to protectionism and trade wars would make the world economy poorer over time... But predictions that Trumpist tariffs will cause a recession never made sense: Yes, we’ll export less, but we’ll also import less, and the overall effect on jobs will be more or less a wash. We’ve already had a sort of dress rehearsal for this ... in ... Brexit, ...
Beyond these general principles,... a Trump administration might actually end up doing the right thing for the wrong reasons. ...
Donald Trump isn’t proposing huge, budget-busting tax cuts for the wealthy and corporations because he understands macroeconomics. But those tax cuts would add $4.5 trillion to U.S. debt over the next decade...
True, handing out windfalls to rich people and companies that will probably sit on a lot of the money is a bad, low-bang-for-the-buck way to boost the economy... But an accidental, badly designed stimulus would still, in the short run, be better than no stimulus at all.
In short, don’t expect an immediate Trump slump.
Now, in the longer run Trumpism will be a very bad thing for the economy... For one thing,... if we ... face a new economic crisis — perhaps as a result of the dismantling of financial reform — it’s hard to think of people less prepared to deal with it.
And Trumpist policies will, in particular, hurt, not help, the American working class... More on that in future columns.
But all of this will probably take time; the consequences of the new regime’s awfulness won’t be apparent right away. Opponents of that regime need to be prepared for the real possibility that good things will happen to bad people, at least for a while.
Friday, November 11, 2016
I started blogging a few months after George Bush was reelected. I didn't feel like I has done enough before the election, so I decided to do whatever I could to try and make a difference.
When Trump was elected, I felt like I had failed, that all the effort over the last 12 years (it takes an immense amount of time each day to do this, and the opportunity cost has been high) had been for nothing. I felt like hanging it up. But I knew deep down I couldn't do that. So time to regroup, drop the complacency I fell into over time (I don't write anywhere near as much as I once did), and do what I can.
The most disappointing part of this is about my plans for the future. I have (tentatively) been thinking of retiring in two years, and cutting back considerably on blogging, writing columns, etc. The time to stop and smell the roses is near. Now those plans are in doubt. If Trump and the Republicans proceed as I think they will, it may be much longer than that before I can scale back and live with myself.
Anyway, here' Paul Krugman:
Thoughts for the Horrified, by Paul Krugman, NY Times: So what do we do now? By “we” I mean all those left, center and even right who saw Donald Trump as the worst man ever to run for president and assumed that a strong majority of our fellow citizens would agree.
I’m not talking about rethinking political strategy. There will be a time for that.... For now, however, I’m talking about personal attitude and behavior in the face of this terrible shock. ...
Unfortunately, we’re not just talking about four bad years. Tuesday’s fallout will last for decades, maybe generations.
I particularly worry about climate change..., the damage may well be irreversible.
The political damage will extend far into the future, too. The odds are that some terrible people will become Supreme Court justices. States will feel empowered to engage in even more voter suppression... At worst, we could see a slightly covert form of Jim Crow become the norm all across America.
And you have to wonder about civil liberties, too. The White House will soon be occupied by a man with obvious authoritarian instincts...
What about the short term? My own first instinct was to say that Trumponomics would quickly provoke an immediate economic crisis, but after a few hours’ reflection I decided that this was probably wrong. I’ll write more about this in the coming weeks...
So where does this leave us? What, as concerned and horrified citizens, should we do?
One natural response would be quietism, turning one’s back on politics. It’s definitely tempting... But I don’t see how you can hang on to your own self-respect unless you’re willing to stand up for the truth and fundamental American values.
Will that stand eventually succeed? No guarantees. Americans, no matter how secular, tend to think of themselves as citizens of a nation with a special divine providence, one that may take wrong turns but always finds its way back, one in which justice always prevails in the end.
Yet it doesn’t have to be true. ... Maybe America isn’t special, it’s just another republic that had its day, but is in the process of devolving into a corrupt nation ruled by strongmen.
But I’m not ready to accept that this is inevitable — because accepting it as inevitable would become a self-fulfilling prophecy. The road back to what America should be is going to be longer and harder than any of us expected, and we might not make it. But we have to try.
Thursday, November 10, 2016
What Does the Trump Victory Mean for Climate Change Policy?: Those of you who have read my previous essay at this blog, “This is Not a Time for Political Neutrality” (October 9, 2016), know that my greatest concerns about a Trump presidency (then a possibility, now a certainty), were not limited to environmental policy, but rather were “about what a Trump presidency would mean for my country and for the world in realms ranging from economic progress to national security to personal liberty,” based on his “own words in a campaign in which he substituted impulse and pandering for thoughtful politics” … and “built his populist campaign on false allegations about others, personal insults of anyone who disagrees with him, and displays of breathtaking xenophobia, veiled racism, and unapologetic sexism.”
That’s a broad indictment, to be sure, but whatever real expertise I may have is actually limited to environmental, resource, and energy economics and policy, and so that has and will continue to be the real focus of this blog, “An Economic View of the Environment.” With that in mind, I return today from last month’s brief immersion in partisan politics to discuss climate change policy.
Yesterday, an editor at The New York Times asked me to write a 500-word essay giving my view of what the Trump victory will mean for climate policy. This morning, my very brief essay was published under the headline, “Goodbye to the Climate.” Given the brevity of the piece, it does not touch on many issues and subtleties (I come back to that at the end of today’s blog post)...
Wednesday, November 09, 2016
I case you have something to say...
Paul Krugman: TheEconomic Fallout: It really does now look like President Trump, and markets are plunging. When might we expect them to recover?
Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.
Still, I guess people want an answer: if the question is when markets will recover, a first-pass answer is never.
Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, 8 years after the great financial crisis. ...
Now comes the mother of all adverse effects – and what it brings with it is a regime that will be ignorant of economic policy and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence, and be bullied by cranks.
So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened.
Tuesday, November 08, 2016
The opportunity cost of Brexit: There’s one possible effect of Brexit that I suspect hasn’t had the consideration it merits – the opportunity cost.
What I mean is that all of us – politicians, journalists and regular folk – have limited attention and mental resources. Attention devoted to Brexit is therefore attention that’s taken away from other matters. ... Brexit steals cognitive bandwidth.
For example, in a better world, we’d devote our political attention to overcoming secular stagnation, welfare reform, combating inequalities of power and income, improving workers’ rights and so on. ... Rather than turn our attention to progress, we’re wearing ourselves out trying to avoid regress.
Brexit distorts the policy agenda in other ways. For example, industrial policy should be concerned with increasing productivity and innovation. But in fact, it’s focused upon limiting the damage of Brexit, perhaps by offering handouts to favoured big firms whilst letting smaller ones swivel in the wind.
And then there’s the question of the values promoted by the Brexit debate. Brexit fuels nativism and even perhaps mercantilism, whilst the policies it squeezes out would focus instead upon more enlightened ideals such as liberty and equality. ...
He goes on to discuss the possibility that there might also be an "opportunity benefit."
...had we not had Brexit Cameron and Osborne would still be in office so we’d be stuck with fiscal austerity. As it is, their departure has created space for a “reset” of policy. If Johnson and Fox were not tied up with Brexit negotiations, they’d probably find some ways to damage our polity. And a government whose energies and political capital weren’t sapped by Brexit might well have even more ability to hurt the worst off.
Which brings me to a paradox. We lefties can be quite relaxed about the opportunity cost of Brexit. Yes, Brexit is regrettable, but it has the silver lining of distracting the Tories from doing damage elsewhere. Tory supporters, however, have no such comfort. They should regard Brexit as a distraction of government energy which could be well-employed elsewhere. In this sense, it is intelligent Tories who should most regret Brexit.
Monday, November 07, 2016
Yes, the election was rigged:
How to Rig an Election, by Paul Krugman, NY Times: It’s almost over. Will we heave a sigh of relief, or shriek in horror? Nobody knows for sure, although early indications clearly lean Clinton. Whatever happens..., let’s be clear: this was, in fact, a rigged election.
The election was rigged by state governments that did all they could to prevent nonwhite Americans from voting: ...
The election was rigged by Russian intelligence, which was almost surely behind the hacking of Democratic emails, which WikiLeaks then released with great fanfare. Nothing truly scandalous emerged, but the Russians judged, correctly, that the news media would hype the revelation ... as somehow damning.
The election was rigged by James Comey... He abused his office, shamefully.
The election was also rigged by people within the F.B.I. ... who clearly felt that under Mr. Comey they had a free hand to indulge their political preferences. ... The agency clearly needs a major housecleaning...
The election was rigged by partisan media, especially Fox News, which trumpeted falsehoods...
The election was rigged by mainstream news organizations, many of which simply refused to report on policy issues, a refusal that clearly favored the candidate who lies about these issues all the time, and has no coherent proposals to offer. ...
The election was rigged by the media obsession with Hillary Clinton’s emails. She shouldn’t have used her own server, but there is no evidence at all that she did anything unethical, let alone illegal. ...
It’s a disgraceful record. Yet Mrs. Clinton still seems likely to win.
If she does, you know what will happen. Republicans will ... deny her legitimacy from day one...
So in the days ahead it will be important to remember two things. First, Mrs. Clinton has actually run a remarkable campaign, demonstrating her tenacity in the face of unfair treatment and remaining cool under pressure that would have broken most of us. Second..., if she wins it will be thanks to Americans who stood up for our nation’s principles — who waited for hours on voting lines contrived to discourage them, who paid attention to the true stakes in this election rather than letting themselves be distracted by fake scandals and media noise.
Those citizens deserve to be honored, not disparaged, for doing their best to save the nation from the effects of badly broken institutions. Many people have behaved shamefully this year — but tens of millions of voters kept their faith in the values that truly make America great.
I have a new column:
A Voter’s Guide to Economic Policy: The election will be over tomorrow, and I am very much looking forward to it coming to an end. Now we can finally come together as a nation and begin to make progress on important economic, social, and political issues (I can dream, can’t I?)
For those of you who haven’t voted yet and are trying to quickly learn about the candidates for local, state, and federal level office, here’s a summary of the economic policies and ideologies of Democrats and Republicans. These are general tendencies, candidates from both parties will differ in some ways from the principles their party supports, but the policies that actually get enacted must be supported by a broad swath of the party so they usually reflect the general view among party members. ...