Category Archive for: Politics [Return to Main]

Tuesday, March 29, 2016

'Trump, Cruz Tax-Cut Plans Would Force Historically Dramatic Cuts'

From the CBPP:

Trump, Cruz Tax-Cut Plans Would Force Historically Dramatic Cuts: The tax-cut proposals from Republican presidential candidates Donald Trump and Ted Cruz, in conjunction with their calls for balancing the budget, would dictate low levels of government spending not seen since about 1950, as we explain in a new paper.  Programs that receive support across the political spectrum and are important to the well-being of most Americans would dramatically shrink or disappear altogether.  Even if policymakers didn’t achieve budget balance under their tax-cut plans but simply offset the costs of the plans themselves, the consequences to essential programs — and to low- and middle-income Americans — would be severe. 
These conclusions emerge from an analysis of the Urban-Brookings Tax Policy Center’s (TPC) revenue estimates of the Trump and Cruz tax plans — which would reduce revenues by $9.5 trillion and $8.7 trillion over the next ten years, respectively, according to TPC — and CBPP estimates of what such revenue levels imply for government spending.  This analysis examines only the Trump and Cruz plans because TPC has not analyzed John Kasich’s proposals and because the proposals of Democratic candidates Hillary Clinton and Bernie Sanders would raise revenues, not reduce them.  The specific findings include...
As dramatic as these figures are, they understate the pressure that the two candidates’ proposals would place on many government programs.  Both have proposed large spending increases in certain areas, including Senator Cruz’s proposal to increase defense spending by $2.7 trillion over the next decade and Mr. Trump’s proposal to increase spending on veterans by $500 billion to $1 trillion over this period.  Offsetting the cost of such increases, as well as the tax cuts, would require even deeper cuts to other programs. ...

Monday, March 28, 2016

Paul Krugman: Trade, Labor, and Politics

Why have Republican been more protectionist than Democrats?:

Trade, Labor, and Politics, by Paul Krugman, Commentary, NY Times: There’s a lot of things about the 2016 election that nobody saw coming, and one of them is that international trade policy is likely to be a major issue... What’s more, the positions of the parties will be the reverse of what you might have expected: Republicans, who claim to stand for free markets, are likely to nominate a crude protectionist, leaving Democrats, with their skepticism about untrammeled markets, as the de facto defenders of relatively open trade.
But this isn’t as peculiar a development as it seems. ... It’s true that globalization puts downward pressure on the wages of many workers — but progressives can offer a variety of responses to that pressure, whereas on the right, protectionism is all they’ve got.
When I say that Republicans have been more protectionist than Democrats, I’m not talking about the distant past... Reagan, after all, imposed an import quota on automobiles that ended up costing consumers billions of dollars. And Mr. Bush imposed tariffs on steel that were in clear violation of international agreements, only to back down after the European Union threatened to impose retaliatory sanctions. ...
But protectionism isn’t the only way to fight that downward pressure. ... Consider, for example, the case of Denmark... As a member of the European Union, Denmark is subject to the same global trade agreements as we are... Yet Denmark has much lower inequality than we do. Why?
Part of the answer is that workers in Denmark, two-thirds of whom are unionized, still have a lot of bargaining power. If U.S. corporations were able to use the threat of imports to smash unions, it was only because our political environment supported union-busting. Even Canada, right next door, has seen nothing like the union collapse that took place here.
And the rest of the answer is that Denmark (and, to a lesser extent, Canada) has a much stronger social safety net than we do. In America, we’re constantly told ... we can’t even afford even the safety net we have; strange to say, other rich countries don’t seem to have that problem. ...
And there’s a lesson here that goes beyond this election. If you’re generally a supporter of open world markets — which you should be, mainly because market access is so important to poor countries — you need to know that whatever they may say, politicians who espouse rigid free-market ideology are not on your side.

Friday, March 25, 2016

Paul Krugman: Crazy About Money

 "Mr. Cruz has staked out positions on crucial issues that are, not to put too fine a point on it, crazy":

Crazy About Money, by Paul Krugman, Commentary, NY Times: In this year of Trump, the land is loud with the wails of political commentators ... crying out, “How can this be happening?” But a few brave souls are willing to whisper the awful truth: Many voters support Donald Trump because they actually agree with his ideas.
This is not, however, a column about Mr. Trump. It is, instead, about Ted Cruz, who has emerged as the favored candidate of the G.O.P. elite...
In a way, that’s quite a remarkable development. For Mr. Cruz has staked out positions on crucial issues that are, not to put too fine a point on it, crazy. How can elite Republicans back him?
The answer is the same for Mr. Cruz and the elite as it is for Mr. Trump and the base: Leading Republicans support Mr. Cruz, not despite his policy positions, but because of them. ... Establishment Republicans may wince at the candidate’s fondness for talking about “carpet bombing” or his choice of a noted anti-Muslim bigot and conspiracy theorist as an adviser.
But both Jeb Bush and Marco Rubio chose foreign policy teams dominated by the very people who pushed America into the Iraq debacle, and learned nothing from the experience. ...
And then there’s ... monetary policy. ... Mr. Cruz has staked out a distinctive position, by calling for a return to the gold standard. .... Mr. Cruz’s obsession with gold is one reason to believe that he would do even more economic damage in the White House than Mr. Trump...
Take, as a not at all arbitrary example, Paul Ryan,... the de facto leader of the Republican establishment ...Mr. Ryan is fundamentally a con man on his signature issue, fiscal policy. Incidentally, for what it’s worth, Mr. Cruz has been relatively honest by his party’s standards..., openly declaring his intention to raise taxes that hit the poor and the middle class even as he slashes them on the rich.
But Mr. Ryan seems to be a true believer on monetary policy... But what, exactly, is the nature of his monetary faith? The same as ... Mr. Cruz’s beliefs: Both men are devotees of Ayn Rand ...
The moral here is that we shouldn’t be surprised by the Republican establishment’s willingness to rally behind Mr. Cruz..., while his policy ideas are extreme, they reflect the same extremism that pervades the party’s elite.
There are no moderates, or for that matter, sensible people, anywhere in this story.

Will the Donor Class Still be at the Front of the Line When the Election is Over?

I have something at MoneyWatch:

Will Election 2016 Soothe Americans' Fears?:... The extent to which employment can recover further depends in large part on the availability of jobs and the wage rate, both of which will be affected by the course of monetary and fiscal policy. If the Fed raises interest rates too fast and too soon, wages and employment will be suppressed, and valuable members of the workforce will never return.
If Congress continues to serve the interests of the donor class rather than the working class, fails to provide the economy with the infrastructure it needs and the jobs that come with it, and forces further reductions in social services through tax cuts and demagoguery over the national debt, the discouragement so many people feel will only get worse. ...
Events in this year's presidential campaign have made it clear that people are unhappy with the present state of the economy. They believe policy has been tilted too much toward the interests of the financial industry, big business and the wealthy -- and that they've been forgotten.
But these problems won't be solved by closing the door to international trade and immigration, by enacting huge tax cuts for the wealthy or by embracing politics that divide us as a nation.
Policymakers at the Fed and in Congress must do all that they can to create jobs and opportunity for those who feel overlooked and forgotten. People are speaking clearly this election cycle: They want jobs, they want opportunity, they want wages to go up and they want inequality in to go down. ...

[The beginning was changed by the editor...]

Wednesday, March 23, 2016

'Cruz Seeks Economic Wisdom in the Wrong Place'

Barry Ritholtz:

Cruz Seeks Economic Wisdom in the Wrong Place:

Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action. -- former U.S. Senator Phil Gramm, Nov. 16, 2008

...Gramm has been brought on as a senior economic adviser to Republican presidential candidate Ted Cruz. This isn't a promising development for Cruz... Not to put too fine a point on it, but I believe -- as do many others -- that Gramm was one of the major figures who helped set the stage for the crisis. ...

Gramm was a key sponsor of the ... Gramm-Leach-Bliley Act, which effectively repealed the piece of the Glass-Steagall Act... The damage caused by rolling back Glass-Steagall pales compared with ... the Commodity Futures Modernization Act of 2000. Gramm was a co-sponsor of the legislation, which exempted many derivatives and swaps from regulation.  Not only was the law problematic, but it veered into potential conflict-of-interest territory. ...

We got a chance to see those consequences a few years later when American International Group failed, thanks in part to swaps ... on $441 billion of securities that turned out to be junk. AIG wasn't required to put up much in the way of collateral, set aside capital or hedge its risk on the swaps. Why would it, when the law said it didn’t have to? The taxpayers were then called upon to bailout AIG to the tune of more than $180 billion.

Maybe it isn't too surprising that Cruz would seek advice from Gramm. Cruz, after all, seems to want to hobble modern economic policy by returning to the gold standard. ... We have seen these movies before, and they end in tragedy and tears. 

He also talks about Gramm's sad performance in his brief appearance as one of McCain's advisors in 2008.

The State of American Politics

Paul Ryan, in a speech on the state of American politics, says:

We don’t lock ourselves in an echo chamber, where we take comfort in the dogmas and opinions we already hold.

Followed by:

... in 1981 the Kemp-Roth bill was signed into law, lowering tax rates, spurring growth, and putting millions of Americans back to work.

Bruce Bartlett:

... I was the staff economist for Rep. Jack Kemp (R-N.Y.) in 1977, and it was my job to draft what came to be the Kemp-Roth tax bill, which Reagan endorsed in 1980 and enacted the following year. ...
Republicans like to say that massive growth followed the Reagan tax cut. But average real GDP growth during Reagan’s eight years in the White House was only slightly above the rate of the previous eight years: 3.4 percent per year vs. 2.9 percent. The average unemployment rate was actually higher under Reagan than it was during the previous eight years: 7.5 percent vs. 6.6 percent. ...

Tuesday, March 22, 2016

'Trumpism, the Economic Wrecking Ball'

Alan Blinder:

Trumpism, the Economic Wrecking Ball: For much of the past six months, I’ve tried to ignore the political ascent of Donald Trump. Too horrible to be true, I assured myself. But the unthinkable has happened, and Mr. Trump is now the likely nominee of the Republican Party. So what might a Trump presidency bring?
To be frank, the most horrifying aspects of Trumpism are not his economic policies. The worst he could do there would be to precipitate a global depression. It’s far scarier to contemplate an erratic, blustering demagogue taking command of the most powerful military force on earth. Or the foreign-policy calamities that might befall us.
But I’m an economist, so I’ll stick with economics. ...
Let’s tote up the score. Mr. Trump’s tax plan is doable, if Congress is sufficiently pliant. But it would exacerbate income inequality and explode the federal deficit. Mr. Trump’s immigration plans are heartless, hugely expensive and incredibly disruptive to the U.S. economy. His positions on international trade display abysmal ignorance, are economically harmful and threaten America’s standing in the world.
And remember: These are the best parts of what Mr. Trump has to offer.

Why Republican Elites are Threatened

New Column:

Why Republican Elites are Threatened, by Mark Thoma: ... Donald Trump’s tax plan will result in a fall in revenue of 9.5 trillion dollars over the next ten years, yet somehow he will fulfill his promise to protect Social Security and Medicare and balance the budget? When push comes to shove (or worse – this is Trump after all), who do you think he will protect, social insurance programs the working class relies upon for economic security or his own and his party’s wealthy interests? Ted Cruz has proposed an 8.6 trillion dollar tax cut. How, exactly, will that be financed without large cuts to social insurance programs or huge increases in the budget deficit?
Republicans have fooled people into thinking budget deficits can be reduced substantially by eliminating waste and fraud in government, cutting foreign aid, or that it is the fault of lazy, undeserving “others” who sponge off of government programs. ...

I am very happy that the Republican con is starting to come to light. Members of the working class who support Trump are beginning to see that the elites in the Republican Party do not have their best interests at heart. I am not pleased at all, however, that people are still being led to believe that there are simple answers to budget problems that do not require raising taxes, or, alternatively, reducing their hard-earned benefits from programs such as Social Security or Medicare. ...

Monday, March 21, 2016

'Goodbye to Pluralism? Studying Power in Contemporary American Politics'

Paul Pierson:

Goodbye to Pluralism? Studying Power in Contemporary American Politics, by Paul Pierson: The efforts of contemporary political scientists to understand American politics reveal a striking paradox. On the one hand, “Americanists” have documented a rapid increase in the inequality of political resources. On the other, they have largely failed to detect inequalities of power. Most political scientists continue to insist that we lack clear evidence that the inequality of political resources translates systematically into markedly unequal influence over American government.
For most non-inhabitants of the political science village the inference is probably obvious: so much the worse for political science. I’m inclined to agree, but as a fellow villager I’m forced to pause. These are very smart folks working at this very hard, and they are inclined to let their data do the talking. Moreover, many of them went looking for unequal influence. Nonetheless, they were unable to track it down in a manner that met their standards of evidence. That leaves two possibilities. One is that they’re largely right – which would suggest that concerns about rapidly rising political inequality are overblown. Or they’re mostly wrong, which is the argument I want to make today.
This isn’t just a quarrel among villagers. Explaining why I think the political scientists are mostly wrong requires a careful examination of how power is exercised in the American political system. Political scientists have mostly missed unequal influence because they’ve looked in the wrong places. If influence is hiding then we need to know where it is hiding. Looking in the right places reveals not just political inequality, but a distinctive take on the processes that are at the heart of modern governance. This in turn has implications for how we think about whether influence has become more unequal, and what needs to be done if we in fact consider inequalities of power to be a problem.
After briefly describing the central paradox in a bit more detail, the bulk of this essay explores how best to think about influence and how best to assess its distribution. I then briefly apply the argument to one important realm in American society, the provision of health care, before drawing out a few tentative conclusions about the distribution of influence in contemporary American politics. ...

Paul Krugman: On Invincible Ignorance

Republicans are in denial:

On Invincible Ignorance, by Paul Krugman, Commentary, NY Times: Remember Paul Ryan? The speaker of the House... I was interested to read what Mr. Ryan said in a recent interview with John Harwood. What has he learned from recent events?
And the answer is, nothing.
Like just about everyone in the Republican establishment, Mr. Ryan is in denial about the roots of Trumpism, about the extent to which the party deliberately cultivated anger and racial backlash, only to lose control of the monster it created. ...
You might think that Republican thought leaders would be engaged in some soul-searching about their party’s obsession with cutting taxes on the wealthy. ...
But here’s what Mr. Ryan said about all those tax cuts for the top 1 percent: “I do not like the idea of buying into these distributional tables. What you’re talking about is what we call static distribution. It’s a ridiculous notion.”
Aha. The income mobility zombie strikes again.
Ever since income inequality began its sharp rise in the 1980s, one favorite conservative excuse has been that it doesn’t mean anything, ... statistics showing that many people who are in the top 1 percent in any given year are out of that category the next year.
But a closer look at the data shows that there is less to this observation than it seems. These days, it takes an income of around $400,000 a year to put you in the top 1 percent, and most of the fluctuation in incomes we see involves people going from, say, $350,000 to $450,000 or vice versa..., which means that tax cuts that mainly benefit the rich are indeed targeted at a small group of people, not the public at large.
And here’s the thing: This isn’t a new observation. ...
Appalled Republicans may rail against Donald Trump’s arrogant ignorance. But how different, really, are the party’s mainstream leaders? Their blinkered view of the world has the veneer of respectability, may go along with an appearance of thoughtfulness, but in reality it’s just as impervious to evidence — maybe even more so, because it has the power of groupthink behind it. ...
What we’re getting ... is at least the possibility of a cleansing shock — of a period in the political wilderness that will finally force the Republican establishment to rethink its premises. That’s a good thing — or it would be, if it didn’t also come with the risk of President Trump.

Friday, March 18, 2016

Paul Krugman: Republican Elite’s Reign of Disdain

Why have Republican elites "lost control of the nominating process"?:

Republican Elite’s Reign of Disdain, by Paul Krugman, Commentary, NY Times: ... There has been a lot of buzz over the past few days about an article by Kevin Williamson in National Review, vigorously defended by other members of the magazine’s staff, denying that the white working class — “the heart of Trump’s support” — is in any sense a victim of external forces. A lot has gone wrong in these Americans’ lives — “the welfare dependency, the drug and alcohol addiction, the family anarchy” — but “nobody did this to them. They failed themselves.”
O.K., we’re just talking about a couple of writers at a conservative magazine. But ... this attitude is widely shared on the right. ...
The ... writers at National Review are right to link these social ills to the Trump phenomenon. ... The question, however, is why this is happening. ...
Stripped down to its essence, the G.O.P. elite view is that working-class America faces a crisis, not of opportunity, but of values. ... And this crisis of values, they suggest, has been aided and abetted by social programs that make life too easy on slackers.
The problems with this diagnosis should be obvious. Tens of millions of people don’t suffer a collapse in values for no reason. Remember, several decades ago the sociologist William Julius Wilson argued that the social ills of America’s black community ... were the result of disappearing economic opportunity. If he was right, you would have expected declining opportunity to have the same effect on whites, and sure enough, that’s exactly what we’re seeing.
Meanwhile,... every other advanced country has a more generous social safety net than we do, yet the rise in mortality among middle-aged whites in America is unique: Everywhere else, it is continuing its historic decline.
But the Republican elite can’t handle the truth. It’s too committed to an Ayn Rand story line about heroic job creators versus moochers to admit either that trickle-down economics can fail to deliver good jobs, or that sometimes government aid is a crucial lifeline. So it ends up lashing out at its own voters when they refuse to buy into that story line.
Just to be clear, I’m not suggesting that Donald Trump has any better idea about what the country needs; he’s just peddling another fantasy, this one involving the supposed power of belligerence. But at least he’s acknowledging the real problems ordinary Americans face, not lecturing them on their moral failings. And that’s an important reason he’s winning.

Thursday, March 17, 2016

'House Republicans Cling to False Promise of Austerity in their Budget Resolution'

The EPI's Hunter Blair:

House Republicans cling to false promise of austerity in their budget resolution: This week, the House Budget Committee reported out, on a party-line vote, their fiscal year 2017 budget resolution. Infighting between House Republicans, centered on the idea that proposed spending cuts should be even more drastic, suggests that this year’s budget resolution is unlikely to pass. However, with all the media attention focused on the House Republican’s inability to come to an agreement, we shouldn’t lose sight of just how austere their budget resolution already is, and how much damage the cuts it calls for would do to the economy over both the short and long run.
For example, the cuts over the first two years would impose a significantly larger fiscal drag on economic recovery than previous Republican budgets. ...
GOP House budget resolutions for the past several years have been obsessed with eliminating the budget deficit by the end of the ten year budget window. This was already a quixotic and damaging goal, and it has become even more so thanks to changes in the CBO’s baseline. And while deficits are created from revenue minus spending, congressional Republicans’ outright refusal to raise any taxes means that spending cuts—and thereby low- and middle- income people—must bear the entire brunt of the budget resolution’s burden. They bear this burden to the tune of $6.5 trillion in spending cuts to vital programs over ten years—programs that overwhelmingly serve those most in need. The cuts would take away affordable health insurance coverage from the millions that have gained it under the Affordable Care Act and then further erode the safety net with cuts to Medicaid, unemployment benefits, and nutrition assistance. Besides making the economic lives of vulnerable populations harder, focusing cuts on this group imposes a large fiscal drag, since these are households that tend to spend (not save) additional dollars of resources back into the economy. ...
In years beyond 2017, the fiscal drag would remain considerable (and would likely damage growth and job creation), but we’re unable to forecast these impacts precisely because the Fed may have regained some scope to (at least partially) offset fiscal cuts in later years. Looking forward, while it is hard to precisely quantify by how much, the deeper budget cuts throughout the ten year window in the House GOP budget resolution would almost surely further hinder and delay a full economic recovery, especially in the near-term.1 ...
1.The cuts in fiscal 2017 of the House GOP budget resolution total $186 billion. We assume a very conservative multiplier of 1.25—Medicaid and SNAP have very high multipliers (between 1.5-2 or even higher), so 1.25 strikes us as quite conservative. This 1.25 multiplier implies that the House budget cuts will place a 1.2 percent drag on a GDP growth in the next year. This loss in GDP means, all else equal, that job-growth in the next year will be 1.4 million less. Putting that in context, job-growth in 2015 was 2.7 million, so the pace of job-growth would be cut by more than half in the coming year. We should note that we are quite confident about this impact for 2017, given that there is little scope or obvious appetite for monetary policymakers to provide enough stimulus with their policy tools to offset this fiscal drag. Cuts totaling $321 billion in fiscal 2018 will also likely drag significantly on growth, but uncertainty about other economic influences on recovery (particularly the response of the Federal Reserve) makes calculating exactly how much hard to quantify.

Monday, March 14, 2016

Paul Krugman: Trump Is No Accident

Establishment Republicans "had it coming":

Trump Is No Accident, by Paul Krugman, Commentary, NY Times: Establishment Republicans who are horrified by the rise of Donald Trump...
The truth is that the road to Trumpism began long ago, when movement conservatives — ideological warriors of the right — took over the G.O.P. And it really was a complete takeover. Nobody seeking a career within the party dares to question any aspect of the dominating ideology, for fear of facing not just primary challenges but excommunication.
You can see the continuing power of the orthodoxy in the way all of the surviving contenders for the Republican nomination, Mr. Trump included, have dutifully proposed huge tax cuts for the wealthy, even though a large majority of voters, including many Republicans, want to see taxes on the rich increased instead.
But how does a party in thrall to a basically unpopular ideology — or at any rate an ideology voters would dislike if they knew more about it — win elections? Obfuscation helps. But demagogy and appeals to tribalism help more. Racial dog whistles and suggestions that Democrats are un-American if not active traitors aren’t things that happen now and then, they’re an integral part of Republican political strategy.
During the Obama years Republican leaders cranked the volume on that strategy up to 11 (although it was pretty bad during the Clinton years too.) Establishment Republicans generally avoided saying in so many words that the president was a Kenyan Islamic atheist socialist friend of terrorists ... but they tacitly encouraged those who did, and accepted their endorsements. And now they’re paying the price.
For the underlying assumption behind the establishment strategy was that voters could be fooled again and again: persuaded to vote Republican out of rage against Those People, then ignored after the election while the party pursued its true, plutocrat-friendly priorities. Now comes Mr. Trump, turning the dog whistles into fully audible shouting, and telling the base that it can have the bait without the switch. And the establishment is being destroyed by the monster it created. ...
Let’s dispel with this fiction that the Trump phenomenon represents some kind of unpredictable intrusion into the normal course of Republican politics. On the contrary, the G.O.P. has spent decades encouraging and exploiting the very rage that is now carrying Mr. Trump to the nomination. That rage was bound to spin out of the establishment’s control sooner or later.
Donald Trump is not an accident. His party had it coming.

Sunday, March 13, 2016

'Thank You Donald Trump'

Kevin Grier:

Thank you Donald Trump: People, I believe that Donald Trump is teaching many of us a valuable lesson. He's performing an important public service, and I for one am grateful.

I'm one of those guys who thought, hey we really don't need affirmative action anymore, women are treated with respect and dignity now, facism is a relic of a bygone age.

But Trump is showing me/us that a large chunk of US adults (what like 25-30% or so?) are racist, sexist, xenophobic, economically illiterate morons.

I guess even in a red state like Oklahoma, living in a University town helps to insulate you from the "common man" (thank god).

But Trump's campaign has made it clear to me that we still have serious human rights / equality / logical reasoning issues in our country.

So I say to all you SJWs out there, live long and prosper. You have a lot of work left to do.

And to my libertarian friends I say, continued affirmative action and gender equity programs are needed and important.

We still have a very long way to go in this country. Trump is showing me/us just how far.

Friday, March 11, 2016

Paul Krugman: Trade and Tribulation

"Politicians should be honest and realistic about trade":

Trade and Tribulation, by Paul Krugman, Commentary NY Times: Why did Bernie Sanders win a narrow victory in Michigan, when polls showed Hillary Clinton with a huge lead? Nobody really knows, but there’s a lot of speculation that Mr. Sanders may have gained traction by hammering on the evils of trade agreements. Meanwhile, Donald Trump, while directing most of his fire against immigrants, has also been bashing the supposedly unfair trading practices of China and other nations.
So, has the protectionist moment finally arrived? Maybe, maybe not...
To make sense of the debate over trade, there are three things you need to know.
The first is that we have gotten to where we are — a largely free-trade world — through ... diplomacy, going all the way back to F.D.R. This process combines a series of quid pro quos — I’ll open my markets if you open yours — with rules to prevent backsliding.
The second is that protectionists almost always exaggerate the adverse effects of trade liberalization. Globalization is only one of several factors behind rising income inequality, and trade agreements are, in turn, only one factor in globalization. ...
And yes, Mr. Sanders is demagoguing the issue...
That said, not all free-trade advocates are paragons of intellectual honesty. In fact, the elite case for ever-freer trade ... is largely a scam..., in general, agreements that lead to more trade neither create nor destroy jobs; that they usually make countries more efficient and richer, but that the numbers aren’t huge; and that they can easily produce losers as well as winners. In principle ... the winners could compensate the losers, so that everyone gains. In practice, especially given the scorched-earth obstructionism of the G.O.P., that’s not going to happen.
Why, then, did we ever pursue these agreements? A large part of the answer is foreign policy... And anyone ragging on about those past deals, like Mr. Trump or Mr. Sanders, should be asked what, exactly, he proposes doing now. Are they saying that we should rip up America’s international agreements? Have they thought about what that would do to our credibility and standing in the world? ...
The larger point in this election season is, however, that politicians should be honest and realistic about trade, rather than taking cheap shots. Striking poses is easy; figuring out what we can and should do is a lot harder. But you know, that’s a would-be president’s job.

Tuesday, March 08, 2016

The 'Strong Case' Against Central Bank Independence Critically Examined

Simon Wren-Lewis has a follow-up to his recent post on central bank independence:

The 'strong case' critically examined: Perhaps it was too unconventional setting out an argument (against independent central banks, ICBs) that I did not agree with, even though I made it abundantly clear that was what I was doing. It was too much for one blogger, who reacted by deciding that I did agree with the argument, and sent a series of tweets that are best forgotten. But my reason for doing it was also clear enough from the final paragraph. The problem it addresses is real enough, and the problem appears to be linked to the creation of ICBs.

The deficit obsession that governments have shown since 2010 has helped produce a recovery that has been far too slow, even in the US. It would be nice if we could treat that obsession as some kind of aberration, never to be repeated, but unfortunately that looks way too optimistic. The Zero Lower Bound (ZLB) raises an acute problem for what I call the consensus assignment (leaving macroeconomic stabilisation to an independent, inflation targeting central bank), but add in austerity and you get major macroeconomic costs. ICBs appear to rule out the one policy (money financed fiscal expansion) that could combat both the ZLB and deficit obsession. I wanted to put that point as strongly as I could. Miles Kimball does something similar here, although without the fiscal policy perspective ...

Skipping ahead (and omitting quite a bit of the argument):

... The basic flaw with my strong argument against ICBs is that the ultimate problem (in terms of not ending recessions quickly) lies with governments. There would be no problem if governments could only wait until the recession was over (and interest rates were safely above the ZLB) before tackling their deficit, but the recession was not over in 2010. Given this failure by governments, it seems odd to then suggest that the solution to this problem is to give governments back some of the power they have lost. Or to put the same point another way, imagine the Republican Congress in charge of US monetary policy.

But if abolishing ICBs is not the answer to the very real problem I set out, does that mean we have to be satisfied with the workarounds? One possibility that a few economists like Miles Kimball have argued for is to effectively abolish paper money as we know it, so central banks can set negative interest rates. Another possibility is that the government (in its saner moments) gives ICBs the power to undertake helicopter money. Both are complete solutions to the ZLB problem rather than workarounds. Both can be accused of endangering the value of money. But note also that both proposals gain strength from the existence of ICBs: governments are highly unlikely to ever have the courage to set negative rates, and ICBs stop the flight times of helicopters being linked to elections.       
These are big (important and complex) issues. There should be no taboos that mean certain issues cannot be raised in polite company. I still think blog posts are the best medium we have to discuss these issues, hopefully free from distractions like partisan politics.

Monday, March 07, 2016

Paul Krugman: When Fallacies Collide

Does protectionism cause recessions?:

When Fallacies Collide, by Paul Krugman, Commentary, NY Times: The formal debates among the Republicans who would be president have exceeded all expectations. Even the most hardened cynics couldn’t have imagined that the candidates would sink so low, and stay so focused on personal insults. Yet last week, offstage, there was in effect a real debate about economic policy between Donald Trump and Mitt Romney, who is trying to block his nomination.
Unfortunately, both men are talking nonsense. Are you surprised?
The starting point for this debate is Mr. Trump’s deviation from free-market orthodoxy on international trade. Attacks on immigrants are still the central theme of the Republican front-runner’s campaign, but he has opened a second front on trade deficits, which he asserts are being caused by the currency manipulation of other countries, especially China. This manipulation, he says, is “robbing Americans of billions of dollars of capital and millions of jobs.”
His solution is “countervailing duties” — basically tariffs — similar to those we routinely impose when foreign countries are found to be subsidizing exports in violation of trade agreements.
Mr. Romney claims to be aghast. In his stop-Trump speech last week he warned that if The Donald became president America would “sink into prolonged recession.” Why? The only specific reason he gave was that those duties would “instigate a trade war and that would raise prices for consumers, kill our export jobs and lead entrepreneurs and businesses of all stripes to flee America.”
This is pretty funny if you remember anything about the 2012 campaign. ... Mr. Romney was saying almost exactly the same things Mr. Trump is saying now. ...
More important than Mr. Romney’s awkward history here, however, is the fact that his economic analysis is all wrong. Protectionism can do real harm, making economies less efficient and reducing long-run growth. But it doesn’t cause recessions.
Why not? ... In fact, a worldwide trade war would, by definition, reduce imports by exactly the same amount that it reduces exports. There’s no reason to assume that the net effect on employment would be strongly negative.
But didn’t protectionism cause the Great Depression? No, it didn’t — protectionism was a result of the Depression, not its cause. ...

So there you have it. The good news is that there was a real policy debate going on within the G.O.P. last week. The bad news is that it was junk economics on both sides.

Saturday, March 05, 2016

'Forecasting Elections'

Rajiv Sethi has been assessing the performance of prediction markets:

Forecasting Elections: This wild and crazy election cycle is generating an enormous amount of data that social scientists will be pondering for years to come. We are learning about the beliefs, preferences, and loyalties of the American electorate, and possibly witnessing a political realignment of historic proportions. Several prominent republicans have vowed not to support their nominee if it it happens to be Trump, while a recent candidate for the Democratic nomination has declared a preference for Trump over his own party's likely nominee. Crossover voting will be rampant come November, but the flows will be in both directions and the outcome remains quite uncertain. 
Among the issues that the emerging data will be called upon to address is the accuracy of prediction markets relative to more conventional poll and model based forecasts.
... The results are in, with Cruz taking Kansas and Maine and Trump holding on to Kentucky and Louisiana. The only missed call by the prediction markets was therefore Maine. Still, the significant margins of victory for Cruz in Kansas and Maine suggest to me that traders in the aggregate continue to have somewhat inflated expectations regarding Trump's prospects. And I'm even more confident than I was early this morning that Rubio faces a humbling and humiliating loss in his home state of Florida, though he may have no option now but to soldier on.

Friday, March 04, 2016

'Trade, Trump, and Downward Class Warfare'

This is from Mark Kleiman (via Brad DeLong):

Trade, Trump, and Downward Class Warfare, by Mark Kleiman: A conversation with my Marron Institute colleague Paul Romer yesterday crystallized an idea I’d been toying with for some time. In a nutshell: opponents of taxing the rich have destroyed, on a practical level, the theoretical basis for believing that free trade benefits everyone.
The Econ-101 case for free trade is straightforward: Trade benefits those who produce exports and those who consume imports (including producers who use imported goods as inputs). It hurts the producers of goods which can be made better or more cheaply abroad. But the gains to the winners exceed the gains to the losers: that is, the winners could make the losers whole and still come out ahead themselves. Therefore, trade passes the Pareto test.
[Yes, this elides a number of issues, including path-dependency in increasing-returns and learning-by-doing markets on the pure-economics side and the salting of actual agreements with provisions that create or protect economic rents on the political-economy side. It also ignores the biggest gainers from trade: workers in low-wage countries, most notably the Chinese factory workers whose parents were barefoot peasants.]
So when the modern Republican Party (R.I.P), in the name of “small government” and opposition to “class warfare,” set its face against policies to redistribute the gains from economic growth, it destroyed the theoretical basis for thinking that a rising tide would lift all the boats, rather than lifting the yachts and swamping the trawlers. Free trade without redistribution (especially the corrupt version of “free trade” with corporate rent-seeking written into it) is basically class warfare waged downwards. ...

Paul Krugman: Clash of Republican Con Artists

"Why, exactly, the Republican establishment is really so horrified by Mr. Trump?":

Clash of Republican Con Artists, by Paul Krugman, Commentary, NY Times: So Republicans are going to nominate a candidate who talks complete nonsense on domestic policy; who believes that foreign policy can be conducted via bullying and belligerence; who cynically exploits racial and ethnic hatred for political gain.
But that was always going to happen, however the primary season turned out. The only news is that the candidate in question is probably going to be Donald Trump.
Establishment Republicans denounce Mr. Trump as a fraud... In fact, you have to wonder why, exactly, the Republican establishment is really so horrified by Mr. Trump. Yes, he’s a con man, but they all are. ...
The answer, I’d suggest, is that the establishment’s problem with Mr. Trump isn’t the con he brings; it’s the cons he disrupts.
First, there’s the con Republicans usually manage to pull off in national elections ... where they pose as a serious, grown-up party honestly trying to grapple with America’s problems. The truth is that that party died a long time ago, that these days it’s voodoo economics and neocon fantasies all the way down. But the establishment wants to preserve the facade, which will be hard if the nominee is someone who refuses to play his part. ...
Equally important, the Trump phenomenon threatens the con the G.O.P. establishment has been playing on its own base..., the bait and switch in which white voters are induced to hate big government by dog whistles about Those People, but actual policies are all about rewarding the donor class.
What Donald Trump has done is tell the base that it doesn’t have to accept the whole package. He promises to make America white again — surely everyone knows that’s the real slogan, right? — while simultaneously promising to protect Social Security and Medicare, and hinting at (though not actually proposing) higher taxes on the rich. Outraged establishment Republicans splutter that he’s not a real conservative, but neither, it turns out, are many of their own voters.
Just to be clear, I find the prospect of a Trump administration terrifying... But you should also be terrified by the prospect of a President Rubio, sitting in the White House with his circle of warmongers, or a President Cruz, whom one suspects would love to bring back the Spanish Inquisition.
As I see it, then, we should actually welcome Mr. Trump’s ascent. Yes, he’s a con man, but he is also effectively acting as a whistle-blower on other people’s cons. That is, believe it or not, a step forward in these weird, troubled times.

Thursday, March 03, 2016

'Cameron’s Chickens'

Simon Wren-Lewis:

Cameron’s chickens: As many have written, although Donald Trump is despised by the Republican party establishment, he is an unintended and unfortunate creation of that party. They built up a system where you needed money to enter politics, because they controlled the money. (It is to Sanders’ credit, and the popular will behind his campaign, that he has overcome this hurdle.) But that allowed someone very rich to highjack the system. The Republicans have exploited prejudice to win votes, which allowed someone to throw away the dog whistle and openly attack those from other religions. [1] And so on. In these ways, Trump represents the Republican’s chickens coming home to roost. As Matt Taibbi writes (sorry about ad in link), Trump is a rather good con man and so for him the US political system is an easy mark.
Will the EU referendum be the moment David Cameron’s chickens come home? Although economic arguments are central, and the case for staying is strong and the case for leaving weak, how much will voters without any economics background be able to come to that conclusion? Most newspapers will push the weak arguments, or more generally just try and muddy the waters as they do all the time on climate change. The visual media’s natural format is to set this up as a two-sided debate, and if the leave campaign can find enough credible advocates to put the economic case for leaving the main outcome might be confusion. [2] ...
The EU referendum is therefore another test of how much economic expertise can influence public opinion. As regular readers will know, we have been here before, and not just on austerity. The overwhelming evidence was that independence would initially leave Scottish people worse off, but for many this evidence was successfully counteracted by the SNP’s wishful thinking projections. From recent experience, therefore, I am not too optimistic that the economic evidence will prevail. [3] For a Prime Minister who has preferred the economics of the Swabian housewife to anything taught in universities, this too is a chicken come home to roost.

Tuesday, March 01, 2016

'Trump’s Rise Illustrates How Democratic Processes Can Lose Their Way'

Larry Summers:

Trump’s rise illustrates how democratic processes can lose their way: While comparisons between Donald Trump and Mussolini or Hitler are overwrought, Trump’s rise does illustrate how democratic processes can lose their way and turn dangerously toxic when there is intense economic frustration and widespread apprehension about the future. ...
The possible election of Donald Trump as President is the greatest present threat to the prosperity and security of the United States. I have had a strong point of view on each of the last ten presidential elections, but never before had I feared that what I regarded as the wrong outcome would in the long sweep of history risk grave damage to the American project.
The problem is not with Trump’s policies, though they are wacky in the few areas where they are not indecipherable. It is that he is ... demagogically offering the power of his personality as a magic solution to all problems—and making clear that he is prepared to run roughshod over anything or anyone who stands in his way. ...
Donald Trump’s rise goes beyond his demagogic appeal. It is a reflection of the political psychology of frustration – people see him as responding to their fears about the modern world order, an outsider fighting for those who have been left behind. If we are to move past Trumpism, it will be essential to develop convincing responses to economic slowdown.
The United States has always been governed by the authority of ideas, rather than the idea of authority. Nothing is more important than to be clear to all Americans that the tradition of vigorous political debate and compromise will continue. The sooner Donald Trump is relegated to the margins of our national life, the better off we and the world will be.

Monday, February 29, 2016

Paul Krugman: Planet on the Ballot

 "Salvation is clearly within our grasp":

Planet on the Ballot, by Paul Krugman, Commentary, NY Times: We now have a pretty good idea who will be on the ballot in November: Hillary Clinton, almost surely..., and Donald Trump, with high likelihood.... But even if there’s a stunning upset in what’s left of the primaries, we already know very well what will be at stake — namely, the fate of the planet.
Obviously, the partisan divide on environmental policy has been growing ever wider..., denial of climate science and opposition to anything that might avert catastrophe have become essential pillars of Republican identity..., even a blowout Democratic victory this year probably wouldn’t create a political environment in which anything ... could pass Congress.
But here’s the thing: the next president won’t need to pass comprehensive legislation... Dramatic progress in energy technology has put us in a position where executive action ... can achieve great things. All we need is an executive willing to take that action, and a Supreme Court that won’t stand in its way.
And this year’s election will determine whether those conditions hold.
Many people ... still seem oddly oblivious to the ongoing revolution in renewable energy...: the cost of electricity generated by wind and sun has dropped dramatically, while costs of storage ... are plunging as we speak.
The result is that we’re only a few years from a world in which carbon-neutral sources of energy could replace much of our consumption of fossil fuels at quite modest cost. ... All it would take to push us across the line would be moderately pro-environment policies. ...
I don’t know about you, but this situation makes me very nervous. As long as the prospect of effective action on climate seemed remote, sheer despair kept me, and I’m sure many others, comfortably numb — you knew nothing was going to happen, so you just soldiered on. Now, however, salvation is clearly within our grasp, but it remains all too possible that we’ll manage to snatch defeat from the jaws of victory. And this is by far the most important issue there is; it, er, trumps even such things as health care, financial reform, and inequality.
So I’m going to be hanging on by my fingernails all through this election. No doubt there will be plenty of entertainment along the way, given the freak show taking place on one side of the aisle. But I won’t forget that the stakes this time around are deadly serious. And neither should you.

Sunday, February 28, 2016

'An Open Letter to the Republican Establishment'

Robert Reich:

An Open Letter to the Republican Establishment: You are the captains of American industry, the titans of Wall Street, and the billionaires who for decades have been the backbone of the Republican Party.
You’ve invested your millions in the GOP in order to get lower taxes, wider tax loopholes, bigger subsidies, more generous bailouts, less regulation, lengthier patents and copyrights and stronger market power allowing you to raise prices, weaker unions and bigger trade deals allowing you outsource abroad to reduce wages, easier bankruptcy for you but harder bankruptcy for homeowners and student debtors, and judges who will let you to engage in insider trading and who won’t prosecute you for white-collar crimes.  
All of which have made you enormously wealthy. Congratulations.
But I have some disturbing news for you. You’re paying a big price – and about to pay far more. ...

Skipping to the end:

... Finally, by squeezing wages and rigging the economic game in your favor, you have invited an unprecedented political backlash – against trade, immigration, globalization, and even against the establishment itself.
The pent-up angers and frustrations of millions of Americans who are working harder than ever yet getting nowhere, and who feel more economically insecure than ever, have finally erupted. American politics has become a cesspool of vitriol.
Republican politicians in particular have descended into the muck of bigotry, hatefulness, and lies. They’re splitting America by race, ethnicity, and religion. The moral authority America once had in the world as a beacon of democracy and common sense is in jeopardy. And that’s not good for you, or your businesses.
Nor is the uncertainty all this is generating. A politics based on resentment can lurch in any direction at almost any time. Yet you and your companies rely on political stability and predictability. ...
You forgot the values of a former generation of Republican establishment that witnessed the devastations of the Great Depression and World War II, and who helped build the great post-war American middle class.
That generation did not act mainly out of generosity or social responsibility. They understood, correctly, that broad-based prosperity would be good for them and their businesses over the long term.
So what are you going to do now? ...

Friday, February 26, 2016

'My View on the Controversy over Sander's Economic Plan'

Here's my view on the controversy over Sander's economic plan:

I do not believe that we can sustain 5% growth over the next eight years. In the short-run -- over the next two to four years -- the situation is different. In that timeframe, our ability to achieve rapid growth depends upon the size of the output gap, the effectiveness of monetary and fiscal policy at boosting the economy (fiscal policy in particular), the difficulty in overcoming the factors that caused the recession in the first place, and the responsiveness of potential output to policy measures and the recovery itself (i.e. how much of the decline in potential output is permanent, and how much is cyclical).

The main point of emphasis is familiar: it would be a bigger mistake not to try and increase output if there actually is more room to expand than we think than it would be to push for expansion and find the gap is small. In the first case, we’d have people who could be employed remaining idle, a costly error, in the second inflation which the Fed can reverse fairly quickly. So it’s the same asymmetric cost tradeoff many of us have been pounding the Fed about.

I’m worried people will accept without question that the gap is small due to the pushback against Friedman's analysis of the Sander's plan, and that will justify policy passivity when we need just the opposite. So let's stop arguing, put the policies we need in place, and push as hard as we can to increase employment until inflation reveals that we have, in fact, hit capacity constraints. Maybe that happens quickly, but maybe not and we owe it to those who remain unemployed, have dropped out of the labor force but would return, or took a job with lousy wages to try. People who had nothing to do with causing the recession have paid the costs for it, and if we experience a short bout of above target inflation I can live with that. We've been wrong about this before in the 1990s, and we may very well be wrong about this again.

'A New Deal for Europe'

Thomas Piketty:

A New Deal for Europe, NYRB: The far right has surged in just a few years from 15 percent to 30 percent of the vote in France, and now has the support of up to 40 percent in a number of districts. Many factors conspired to produce this result: rising unemployment and xenophobia, a deep disappointment over the left’s record in running the government, the feeling that we’ve tried everything and it’s time to experiment with something new. These are the consequences of the disastrous handling of the financial meltdown that began in the United States in 2008, a meltdown that we in Europe transformed by our own actions into a lasting European crisis. The blame for that belongs to institutions and policies that proved wholly inadequate, particularly in the eurozone, consisting of nineteen countries. We have a single currency with nineteen different public debts, nineteen interest rates upon which the financial markets are completely free to speculate, nineteen corporate tax rates in unbridled competition with one another, without a common social safety net or shared educational standards—this cannot possibly work, and never will.
Only a genuine social and democratic refounding of the eurozone, designed to encourage growth and employment, arrayed around a small core of countries willing to lead by example and develop their own new political institutions, will be sufficient to counter the hateful nationalistic impulses that now threaten all Europe. ...[continue]...

Paul Krugman: Twilight of the Apparatchik

Why is the Republican Party is such disarray?:

Twilight of the Apparatchik, by Paul Krugman, Commentary, NY Times: ... As many have noted, it’s remarkable how shocked — shocked! — that establishment has been at the success of Donald Trump’s racist, xenophobic campaign. Who knew that this kind of thing would appeal to the party’s base? ...
Seriously, Republican political strategy has been exploiting racial antagonism, getting working-class whites to despise government because it dares to help Those People, for almost half a century. So it’s amazing to see the party’s elite utterly astonished by the success of a candidate who is just saying outright what they have consistently tried to convey with dog whistles.
What I find even more amazing, however, are the Republican establishment’s delusions about what its own voters are for. ...
Here’s an example: Last summer,... when Mr. Trump ... promised not to cut Social Security,... insiders like William Kristol gleefully declared that he was “willing to lose the primary to win the general.” In reality, however, Republican voters don’t at all share the elite’s enthusiasm for entitlement cuts...
Oh, and the G.O.P. establishment was also sure that Mr. Trump would pay a heavy price for asserting that we were misled into Iraq — evidently unaware just how widespread that (correct) belief is among Americans of all political persuasions.
So what’s the source of this obliviousness? ... Most Republican officeholders hold safe seats, which they can count on keeping if they are sufficiently orthodox. Moreover, if they should stumble, they can fall back on “wingnut welfare,” the array of positions at right-wing media organizations, think tanks and so on that are always there for loyal spear carriers. ... They know that people outside their party disagree, but that doesn’t matter much for their careers.
Now, however, they face the reality that most voters inside their party don’t agree with the orthodoxy, either. And all signs are that they still can’t wrap their minds around that fact. ... Even now, when it’s almost too late to stop the Trump Express, they still imagine that “But he’s not a true conservative!” is an effective attack.
Things would be very different, obviously, if Mr. Trump were in fact to lock in the Republican nomination (which could happen in a few weeks). Would his raw appeal to white Americans’ baser instincts continue to work? I don’t think so. But given the ineffectuality of his party’s elite, my guess is that we will get a chance to find out.

Thursday, February 25, 2016

'Senator Sander's Proposed Policies and Economic Growth'

This is the conclusion to Christina and David Romer's detailed evaluation and critique of Gerald Friedman's analysis of Senator Sander's economic plan:

Senator Sander's Proposed Policies and Economic Growth: ...IV. CONCLUSION The bottom line of our evaluation of Professor Friedman’s analysis is that it is highly deficient. The estimated demand - induced effects of Senator Sanders’s policies are not just implausibly large but literally incredible. Moreover, even if they were not deeply flawed, Freidman’s enormous estimates of demand - fueled growth could not and would not come to pass. Even very generous estimates of the amount of slack still present in the American economy would not be enough to accommodate demand - driven growth of anything near what Friedman is estimating. As a result, inflation would soar and monetary policy would swing strongly to counteract them. Finally, a realistic evaluation of the impact of Senator Sanders’s policies on productive capacity (something that is neglected in Friedman’s analysis) suggests that those impacts are likely small and possibly negative.
Though we have been frankly critical of Professor Friedman’s analysis, he has provided a service to public debate by posting his analysis so that other economists can evaluate its validity. We are posting our evaluation in the same spirit.

'A Letter to Tony Blair'

From Simon Wren-Lewis:

A letter to Tony Blair: Dear Mr. Blair
We have not met, but I have talked to your former colleague Gordon a few times and I did some academic work on his 5 tests for Euro entry. I saw a report that you were mystified by the popularity of Jeremy Corbyn and Bernie Sanders. I have an article today in The Independent that might help you understand your puzzle.
I know you find it strange that people that appear to you like those your predecessor Neil Kinnock did battle with over the future of the Labour Party in the 1980s are now running the party. It must also seem strange that in the US where socialism once seemed to be regarded as a perversion, large numbers should be supporting a socialist candidate. You suggest some explanations, but you do not mention the power of finance, inequality and the senselessness of austerity. You say that these new leaders will not be electable. But if the alternative is to try and elect leaders from the centre who will do nothing to confront these great issues, and will instead cut spending, accept stagnation and wait for the next financial crisis, is it any wonder that many people would rather take their chance with someone different? ...
There are many Labour MPs and left leaning journalists who seem to share your puzzlement, and have decided that they have to fight again the battles of the 1980s by doing everything to undermine their new Labour leadership. ... Rather than celebrating the enthusiasm and interest of the many young people that have recently joined (even if they regard some of their aspirations as naive), and who will be vital in future election campaigns, this overtly anti-Corbyn group seem to regard them as a threat. ...
Please tell them to stop. I fear they need someone they respect like you to point out the foolishness of their actions.
Yours
Simon Wren-Lewis

Tuesday, February 23, 2016

'Donald Trump, Crony Capitalist'

Luigi Zingales:

Donald Trump, Crony Capitalist: Four years ago, in the first draft of my book “A Capitalism for the People,” I had a section dedicated to how worrisome a Donald J. Trump presidential bid would be for America. I was not prescient. It’s just that having grown up in Italy, I knew how a real estate tycoon — in this case, Silvio Berlusconi — whose career exemplified crony capitalism could become the leader of supposed pro-market forces, and I knew what it meant for the country.
I cut this section after being told that my point was irrelevant: In America, there was no chance that a character like Mr. Trump would ever be seriously considered as a candidate.
Then 2016 happened. ...
Mr. Trump ... is, in short, the essence of that commingling of big business and government that goes under the name of crony capitalism. ...

Is 5% Growth Possible?

I have a new column:

Here’s Why Bernie Sanders’ 5% Growth Plan Isn’t Crazy After All: Controversy erupted last week when University of Massachusetts Professor Gerald Friedman produced estimates showing that under the Sander’s economic plan, “The growth rate of the real gross domestic product will rise from 2.1 percent per annum to 5.3 percent so that real GDP per capita will be over $20,000 higher in 2026 than is projected under the current policy.” The reaction from critics is exemplified by a letter from four former heads of the Council of Economic Advisors under Democratic presidents, Alan Krueger, Austan Goolsbee, Christina Romer, and Laura D’Andrea Tyson:
“As much as we wish it were so, no credible economic research supports economic impacts of these magnitudes. Making such promises runs against our party’s best traditions of evidence-based policy making and undermines our reputation as the party of responsible arithmetic.”
Defenders such as Jamie Galbraith, an economist at the University of Texas, argued that there is nothing “magical” or outlandish about the estimates, Professor Friedman used a defensible model to obtain his results:
“What the Friedman paper shows, is that under conventional assumptions, the projected impact of Senator Sanders' proposals stems from their scale and ambition.
When you dare to do big things, big results should be expected. The Sanders program is big, and when you run it through a standard model, you get a big result.”
Is it possible for the economy to reach such a high rate of economic growth? ...

Not a big fan of the title they gave this -- I didn't address the specifics of Sander's economic program.

Monday, February 22, 2016

Paul Krugman: Cranks on Top

"Establishment-approved crankery":

Cranks on Top, by Paul Krugman, Commentary, NY Times: ... Marco Rubio has yet to win anything, but by losing less badly than other non-Trump candidates he has become the overwhelming choice of the Republican establishment. Does this give him a real chance of overtaking the man who probably just won all of South Carolina’s delegates? I have no idea.
But what I do know is that one shouldn’t treat establishment support as an indication that Mr. Rubio is moderate and sensible. On the contrary, not long ago someone holding his policy views would have been considered a fringe crank.
Let me leave aside Mr. Rubio’s terrifying statements on foreign policy and his evident willingness to make a bonfire of civil liberties, and focus on what I know best, economics.
You probably know that Mr. Rubio is proposing big tax cuts..., for example,... Mitt Romney would end up owing precisely zero in federal taxes. What you may not know is that Mr. Rubio’s tax cuts would be almost twice as big as George W. Bush’s...
But not to worry: Mr. Rubio insists that his tax cuts would pay for themselves... Never mind the complete absence of any evidence for this claim...
Then there’s Mr. Rubio’s call for a balanced-budget amendment, which, aside from making no sense at the same time he is calling for budget-busting tax cuts, would have been catastrophic during the Great Recession.
Finally, there’s monetary policy. Republicans have spent years inveighing against the Fed’s efforts to stave off economic disaster, warning again and again that runaway inflation is just around the corner — and being wrong all the way. But Mr. Rubio hasn’t changed his monetary tune at all, declaring a few days ago that it’s “not the Fed’s job to stimulate the economy” (although the law says that it is).
In short, Mr. Rubio is peddling crank economics. What’s interesting, however, is  ... he’s not pandering to ignorant voters; he’s pandering to an ignorant elite. Donald Trump’s rise has confirmed ... that most Republican voters don’t actually subscribe to much of the party’s official orthodoxy. ...
In the G.O.P., crank doctrines in economics and elsewhere aren’t bubbling up from below, they’re being imposed from the top down. ...
So don’t let anyone tell you that the Republican primary is a fight between a crazy guy and someone reasonable. It’s idiosyncratic, self-invented crankery versus establishment-approved crankery, and it’s not at all clear which is worse.

Friday, February 19, 2016

Paul Krugman: Varieties of Voodoo

"Sorry, but there’s just no way to justify this stuff":

Varieties of Voodoo, by Paul Krugman, Commentary, NY Times: America’s two big political parties are very different from each other... Republicans routinely engage in deep voodoo, making outlandish claims about the positive effects of tax cuts for the rich. Democrats tend to be cautious and careful about promising too much...
But is all that about to change?
On Wednesday four former Democratic chairmen and chairwomen of the president’s Council of Economic Advisers ... released a stinging open letter to Bernie Sanders and Gerald Friedman, a University of Massachusetts professor... The economists called out the campaign for citing “extreme claims” by Mr. Friedman that “exceed even the most grandiose predictions by Republicans” and could “undermine the credibility of the progressive economic agenda.” ...
Sorry, but there’s just no way to justify this stuff. For wonks like me, it is, frankly, horrifying. ...
Mr. Sanders is calling for a large expansion of the U.S. social safety net... But ... such a move ... would probably create many losers as well as winners — a substantial number of Americans, mainly in the upper middle class, who would end up paying more in additional taxes than they would gain in enhanced benefits.
By endorsing outlandish economic claims, the Sanders campaign is basically signaling that it doesn’t believe its program can be sold on the merits, that it has to invoke a growth miracle to minimize the downsides of its vision. It is, in effect, confirming its critics’ worst suspicions.
What happens now? In the past, the Sanders campaign has responded to critiques by impugning the motives of the critics. But ... Alan Krueger is one of the founders of modern research on minimum wages, which shows that moderate increases in the minimum don’t cause major job loss. Christina Romer was a strong advocate for stimulus during her time in the White House, and a major figure in the pushback against austerity in the years that followed.
The point is that if you dismiss the likes of Mr. Krueger or Ms. Romer as Hillary shills or compromised members of the “establishment,” you’re excommunicating most of the policy experts who should be your allies.
So Mr. Sanders really needs to crack down on his campaign’s instinct to lash out. More than that, he needs to disassociate himself from voodoo of the left — not just because of the political risks, but because getting real is or ought to be a core progressive value.

Tuesday, February 16, 2016

'My Unicorn Problem'

Paul Krugman:

My Unicorn Problem: It has been an interesting few months on the progressive side of the political debate, and I mean that in the worst way. A significant number of progressives are very, very excited by the unexpected support for Bernie Sanders, and are shocked and horrified to find many — I think most — liberal policy wonks rather skeptical. For me this is somewhat familiar territory: I was skeptical about Barack Obama’s promises of transcendence back in 2008, too. And then as now a fair number of enthusiasts took no time at all to declare that I was a corrupt villain, a tool of the oligarchs, desperate for a job with Hillary etc.. OK, this too shall pass. But I thought it might be worth saying a bit more about where people like me find ourselves. ...

Unemployment ''Truthers''

Bruce Bartlett:

Donald Trump and Other Republicans Are Unemployment “Truthers”, The Big Picture: Among Donald Trump’s stump sound bites is that the national unemployment rate is far, far higher than the official rate of 4.9 percent. He is not alone in making such claims. Both former Texas Governor Rick Perry, who dropped out of the presidential race last year, and retired surgeon Ben Carson have repeated this claim during this election cycle. Its origin dates back to the 2012 election when many Republicans believed that Barack Obama had ordered the Bureau of Labor Statistics to report a much lower unemployment rate in October, just before the election, than seemed plausible. It also feeds into a growing distrust for government statistical data that parallels a denial of scientific facts such as climate change.
The first to make an explicit conspiracy charge was former GE CEO Jack Welch...

The reason people like Trump can get away with making up numbers and making baseless charges is because many Americans are receptive to his message. An August 2014 survey found that on average people thought the unemployment rate was 32 percent rather than the official rate of 6 percent.

But even numbers people who should know better have made absurd claims about the unemployment rate and other government data. The CEO of Gallup, Jim Clifton, called the official rate “misleading” and implied that the White House has engaged in manipulation. Former Reagan Office of Management and Budget Director Dave Stockman, who now peddles conspiracy theories for almost everything, also claimed that the true unemployment rate was 43 percent in June 2015. Billionaire investor Paul Singer, a big Republican Party contributor, has said that virtually all government data, including the inflation rate, are faked and unreliable.

Why Republicans seem so willing to believe statistical nonsense as well as conspiracies about Obama’s birthplace and global warming is unclear. But there is no doubt that it is extensive and seemingly immune from refutation.

[There is quite a bit more in the original post.]

Monday, February 15, 2016

Paul Krugman: How America Was Lost

What is wrong with our political system? Can it be fixed?:

How America Was Lost, by Paul Krugman, Commentary, NY Times: Once upon a time, the death of a Supreme Court justice wouldn’t have brought America to the edge of constitutional crisis. ...Republicans have more or less unanimously declared that President Obama has no right even to nominate a replacement for Mr. Scalia...
And there’s no telling how long that situation may last. ... How did we get into this mess?
At one level the answer is the ever-widening partisan divide. ... But simply pointing to rising partisanship..., while not exactly wrong, can be deeply misleading. First, decrying partisanship can make it seem as if we’re just talking about bad manners, when we’re really looking at huge differences on substance. Second, it’s really important not to engage in false symmetry: only one of our two major political parties has gone off the deep end.
On the substantive divide between the parties:... Even if you’re disappointed in what President Obama accomplished, he substantially raised taxes on the rich and dramatically expanded the social safety net; significantly tightened financial regulation; encouraged and oversaw a surge in renewable energy; moved forward on diplomacy with Iran.
Any Republican would undo all of that... When we talk about partisanship, then, we’re not talking about arbitrary teams, we’re talking about a deep divide on values and policy. ...
And it’s up to you to decide which version you prefer. So why do I say that only one party has gone off the deep end?
One answer is, compare last week’s Democratic debate with Saturday’s Republican debate. Need I say more?
Beyond that, there are huge differences in tactics and attitudes. Democrats never tried to extort concessions by threatening to cut off U.S. borrowing and create a financial crisis; Republicans did. Democrats don’t routinely deny the legitimacy of presidents from the other party; Republicans did it to both Bill Clinton and Mr. Obama. ...
So how does this get resolved? One answer could be a Republican sweep — although you have to ask, did the men on that stage Saturday convey the impression of a party that’s ready to govern? Or maybe you believe — based on no evidence I’m aware of — that a populist rising from the left is ready to happen any day now. But if divided government persists, it’s really hard to see how we avoid growing chaos.
Maybe we should all start wearing baseball caps that say, “Make America governable again.”

Friday, February 12, 2016

Paul Krugman: On Economic Stupidity

Going "off the deep end on macroeconomic policy":

On Economic Stupidity, by Paul Krugman, Commentary, NY Times: ... If you’ve been following the financial news, you know that there’s a lot of market turmoil out there. It’s nothing like 2008, at least so far, but it’s worrisome. ... So how well do we think the various presidential wannabes would deal with those challenges?
Well, on the Republican side, the answer is basically, God help us. ... Leading the charge of the utterly crazy is ... Donald Trump, who ... asserted that Janet Yellen ... hadn’t raised rates “because Obama told her not to.” ... Yet ... Mr. Trump’s position isn’t that far from the Republican mainstream. After all, Paul Ryan ... not only berated Ben Bernanke ... for policies that allegedly risked inflation (which never materialized), but he also dabbled in conspiracy theorizing, accusing Mr. Bernanke of acting to “bail out fiscal policy.”
And even superficially sensible-sounding Republicans go off the deep end on macroeconomic policy. John Kasich’s signature initiative is a balanced-budget amendment that would cripple the economy in a recession, but he’s also a monetary hawk, arguing, bizarrely, that the Fed’s low-interest-rate policy is responsible for wage stagnation.
On the Democratic side, both contenders talk sensibly about macroeconomic policy... But Mr. Sanders has also attacked the Federal Reserve in a way Mrs. Clinton has not — and that difference illustrates in miniature both the reasons for his appeal and the reasons to be very worried about his approach.
You see, Mr. Sanders argues that the financial industry has too much influence on the Fed, which is surely true. But his solution is more congressional oversight — and he was one of the few non-Republican senators to vote for a bill, sponsored by Rand Paul, that called for “audits” of Fed monetary policy decisions. ...
Now, the idea of making the Fed accountable sounds good. But ... such a bill would essentially empower the cranks — the gold-standard-loving, hyperinflation-is-coming types who dominate the modern G.O.P., and have spent the past five or six years trying to bully monetary policy makers into ceasing and desisting from their efforts to prevent economic disaster. Given the economic risks we face, it’s a very good thing that Mr. Sanders’s support wasn’t enough to push the bill over the top.
But even without Mr. Paul’s bill, one shudders to think about how U.S. policy would respond to another downturn if any of the surviving Republican candidates make it to the Oval Office.

Thursday, February 11, 2016

'Instead of Working to Demonize Struggling Families...'

This is from Congresswoman Gwen Moore's website:

The Use of Political Stunts to Attack Social Programs: Today, Budget Committee members Congresswoman Gwen Moore (WI-04) and Congresswoman Barbara Lee (CA-13) sent a letter to Chairman Tom Price expressing their collective concern regarding reports that House Republicans intend to use the budget reconciliation process to attack critical social safety net programs.
“Both Congresswoman Lee and I were once recipients of the very social services that are currently being targeted by our Republican colleagues,” said Congresswoman Moore. “Our distinct perspectives and firsthand experiences with these vital public assistance programs add unique and empathetic voices to a debate overpowered by crass sentiments and hostile attitudes. With 46.7 million Americans battling poverty, we should be able to engage in an open debate about these life-saving programs in the light of day, not behind closed doors or with the help of political stunts.” 
“Today, more than 46 million Americans are living in poverty, including one in five American children. Republican proposals to use the budget process to make misguided and sweeping changes to our nation’s proven anti-poverty programs are destined to repeat the mistakes of the past while furthering eroding our social safety net. Their actions will result in more poverty, more hunger and less hope in America,” said Congresswoman Barbara Lee. “Attempts to use the budget process to push this extreme, Tea Party agenda is frankly disingenuous. Instead of working to demonize struggling families, we should be investing in programs that create more opportunity and build pathways into the middle class.”
The full text of letter can be found below...

Tuesday, February 09, 2016

'Why the Working Class Is Choosing Trump and Sanders'

New column:

Why the Working Class Is Choosing Trump and Sanders, by Mark Thoma:  Donald Trump recently defended Social Security, Medicare, and Medicaid:
“Every Republican wants to do a big number on Social Security, they want to do it on Medicare, they want to do it on Medicaid. And we can’t do that. And it’s not fair to the people that have been paying in for years and now all of the sudden they want to be cut.”
An opinion piece in the Wall Street Journal reflects the negative reaction to Trump’s remarks from many Republicans:
“Mr. Trump is a political harbinger here of a new strand of populist Republicanism, largely empowered by Obamacare, in which the ‘conservative’ position is to defend the existing entitlement programs from a perceived threat posed by a new-style Obama coalition of handout seekers that includes the chronically unemployed, students, immigrants, minorities and women … who typically vote Democrat.”
But is it true that our economic system redistributes substantial sums away from the middle class to “handout seekers”? ...

Monday, February 08, 2016

Paul Krugman: The Time-Loop Part

"It feels as if you’ve entered a different intellectual and moral universe":

The Time-Loop Part, by Paul Krugman, Commentary, NY Times: By now everyone who follows politics knows about Marco Rubio’s software-glitch performance in Saturday’s Republican debate. ... Mr. Rubio’s inability to do anything besides repeat canned talking points was startling. ... But really, isn’t everyone in his party doing pretty much the same thing, if not so conspicuously?
The truth is that the whole G.O.P. seems stuck in a time loop,... and ... shows no sign of learning anything from experience. ... Think about the doctrines every Republican politician now needs to endorse, on pain of excommunication.
First, there’s the ritual denunciation of Obamacare as a terrible, very bad, no good, job-killing law. ... Strange to say, this line hasn’t changed at all despite the fact that we’ve gained 5.7 million private-sector jobs since ... the Affordable Care Act went into full effect.
Then there’s the assertion that taxing the rich has terrible effects on economic growth, and conversely that tax cuts at the top can be counted on to produce an economic miracle. This doctrine was tested... But Republican faith in tax cuts as a universal economic elixir has, if anything, grown stronger...
Meanwhile, on foreign policy the required G.O.P. position has become one of utter confidence in the effectiveness of military force. How did that work in Iraq? ... And diplomacy, no matter how successful, is denounced as appeasement. ...
But don’t all politicians spout canned answers that bear little relationship to reality? No.
Like her or not, Hillary Clinton is a genuine policy wonk... Bernie Sanders is much more of a one-note candidate, but at least his signature issue — rising inequality and the effects of money on politics — reflects real concerns. When you revisit Democratic debates after what went down Saturday..., it feels as if you’ve entered a different intellectual and moral universe.
So how did this happen to the G.O.P.? In a direct sense, I suspect that it has a lot to do with Foxification, the way Republican primary voters live in a media bubble into which awkward facts can’t penetrate. But there must be deeper causes behind the creation of that bubble.
Whatever the ultimate reason, however, the point is that while Mr. Rubio did indeed make a fool of himself on Saturday, he wasn’t the only person on that stage spouting canned talking points that are divorced from reality. They all were, even if the other candidates managed to avoid repeating themselves word for word.

Friday, February 05, 2016

Paul Krugman: Who Hates Obamacare?

The left's attack on Obamacare could be harmful:

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

Wednesday, February 03, 2016

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

The beginning of a relatively long discussion:

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

Tuesday, February 02, 2016

'Post-Iowa Notes'

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

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

Monday, February 01, 2016

Predictions?

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

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

Paul Krugman: Wind, Sun and Fire

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

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

Sunday, January 31, 2016

'Freedom: Three Varieties and a Caveat'

Highlighting something from yesterday's links:

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

Comments?

Friday, January 29, 2016

Paul Krugman: Plutocrats and Prejudice

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

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

Thursday, January 28, 2016

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

Jared Bernstein:

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

Tuesday, January 26, 2016

You Say You Want a Revolution?

New column:

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

Monday, January 25, 2016

'The Volcanic Core Fueling the 2016 Election'

Robert Reich:

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