Economist's View

Trade, Facts, and Politics

Paul Krugman responds to Tim Duy:

Trade, Facts, and Politics: I see that Tim Duy is angry at me again. The occasion is rather odd: I produced a little paper on trade and jobs, which I explicitly labeled “wonkish”; the point of the paper was, as I said, to reconcile what seemed to be conflicting assessments of the impacts of trade on overall manufacturing employment.

But Duy is mad, because “dry statistics on trade aren’t working to counter Trump.” Um, that wasn’t the point of the exercise. This wasn’t a political manifesto, and never claimed to be. Nor was it a defense of conventional views on trade. It was about what the data say about a particular question. Are we not allowed to do such things in the age of Trump? ...

Paul Krugman: The Art of the Scam

Republicans have promised to repeal Obamacare, but they haven't told us what their replacement would look like. Why not?:

The Art of the Scam, by Paul Krugman, NY Times: ...While many Americans say they disapprove of Obamacare, large majorities approve of the things the Affordable Care Act does, notably ensuring that people with pre-existing medical conditions can still buy insurance. And there’s no way to achieve these things without either a major expansion of government health programs — hardly a Republican priority — or something very much like the law Democrats passed.

Worse yet, from the Republican point of view, Obamacare has worked. .. And Americans newly insured thanks to Obamacare are highly satisfied with their coverage.

So what can the G.O.P. offer as an alternative? We know what Republicans want: a free-for-all in which insurance companies can discriminate as they like, with minimal regulation and drastic cuts in government aid. Going there would, however, cause millions of Americans — many of them people who voted for Trump, believing that their recent gains were safe — to lose coverage. The political blowback would be terrible.

Yet failing to repeal Obamacare would also bring heavy political costs. So the emerging Republican health care strategy, according to news reports, is “repeal and delay” — vote to kill Obamacare, but with the effective date pushed back until after the 2018 midterm elections. By then, G.O.P. leaders promise, they’ll have come up with the replacement they haven’t been able to devise over the past seven years.

There will, of course, be no replacement. And there’s likely to be chaos in health care markets well before Obamacare’s official expiration date, as insurance companies exit markets they know will soon collapse. But the political thinking seems to be that they can find a way to blame Democrats for the debacle.

It’s all very Trumpian, if you think about it. An honest memoir of the president-elect’s business career would be titled “The art of the scam.” After all, his hallmark has been turning a profit on failed business projects, because he finds a way to leave other people holding the bag.

In this case, the effort to replace Obamacare will clearly fail miserably in terms of serving the American people... But it could nonetheless be a political success if the public can be convinced to blame the wrong people.

You might think that this would be impossible, given the obviousness of the ploy. But given what we’ve seen so far, you have to take seriously the possibility that they’ll get away with it.

Desperately Searching For A New Strategy

Tim Duy:

Desperately Searching For A New Strategy, by Tim Duy: President-Donald Trump’s renewed call for a 35% import tax on firms that ship jobs out of the United States triggered the expected round of derision from an array of critics, both on the left and the right. The critics are correct. It is indeed a terrible idea. One sure way to discourage job creation in the US is to guarantee that firms will be punished if they need to layoff employees in the future. It is just bad policy, plain and simple.

But if that’s your takeaway, I think you are making a mistake.

Whether or not Trump can or should attempt to reverse the decline in manufacturing jobs is not the big story here. He can’t. The real story is that he continues to tap into the anger of his voters about being left behind. That will give him much more power than our criticisms will take away.

Politicians, aided by economists, have long ignored the negative impacts of trade-induced structural change. Indeed, they have even cheered it on. After all, the process “releases resources” for use in other, more productive parts of the economy. Those workers are just “low-skilled” workers. The US needs more “high-skilled” workers anyway.

Fact: Workers hate being referred to as “low-skilled.”

How we respond to Trump is important. If we simply fall back on our standard numbers, we lose. If we confidently predict that TPP is a big win because it will add 0.5% to GDP by 2030, we lose. If we just use this as an opportunity to reiterate the importance of a college degree, we lose. We have been doing this for decades, and it helped deliver Trump to office.

As an example, take Paul Krugman’s latest on trade. I don’t want to keep picking on Krugman, but he epitomizes traditional economic thinking on international trade. He concludes with this:

But what about the now-famous Autor-Dorn-Hanson paper on the “China shock”? It’s actually consistent with these numbers. Autor et al only estimate the effects of the, um, China shock, which they suggest led to the loss of 985,000 manufacturing jobs between 1999 and 2011. That’s less than a fifth of the absolute loss of manufacturing jobs over that period, and a quite small share of the long-term manufacturing decline.

I’m not saying that the effects were trivial: Autor and co-authors [sic] show that the adverse effects on regional economies were large and long-lasting. But there’s no contradiction between that result and the general assertion that America’s shift away from manufacturing doesn’t have much to do with trade, and even less to do with trade policy.

Nothing is wrong with the analysis here. But I think Krugman is downplaying the transition costs, especially regional impacts. Politically, that is the important part. Economists tend to just play lip-service to the negative effects as we seek what is perceived to be the bigger prize, the aggregate effects. Fundamentally. Krugman is looking for what we got right in trade theory, and he finds it in Autor et al.

For me, Autor et al is not about what we got right in trade theory, but what we got wrong. Spectacularly wrong:

The importance of location for evaluating trade gains depends on how long it takes for regional adjustment to occur. A presumption that US labor markets are smoothly integrated across space has long made regional equilibration the starting point for welfare analysis. The US experience of trade with China makes this starting point less compelling. Labor-market adjustment to trade shocks is stunningly slow, with local labor-force participation rates remaining depressed and local unemployment rates remaining elevated for a full decade or more after a shock commences. The persistence of local decline perhaps explains the breadth of public transfer programs whose uptake increases in regions subject to rising trade exposure. The mobility costs that rationalize slow adjustment imply that short-run trade gains may be much smaller than long-run gains and that spatial heterogeneity in the magnitudes of the net benefits may be much greater than previously thought. Using a quantitative theoretical model, Caliendo et al. (2015) find that in the immediate aftermath of a trade shock, constructed to mimic the effects of growth in US imports from China, US net welfare gains are close to zero. The ultimate and sizable net gains are realized only once workers are able to reallocate across regions to move from declining to expanding industries. Establishing the speed of regional labor-market adjustment to trade shocks should capture considerably more attention from trade and labor economists.

The speed of regional labor market adjustment to shocks is agonizingly slow in any area that lacks a critical mass of population. Rural and semi-rural areas remain impacted by negative shocks for at least a decade, but often longer. Relative to life spans, in many cases the shocks might as well be permanent.

And note that this is not just about negative trade shocks. Trade is an easy punching bag for Trump, but his message carries wider because we are really talking about structural shocks in general. For example, rural towns in Oregon where devastated by the collapsed of the timber industry in the mid-80s. Here is what the New York Times wrote about Oakridge, Oregon a decade ago:

For a few decades, this little town on the western slope of the Cascades hopped with blue-collar prosperity, its residents cutting fat Douglas fir trees and processing them at two local mills.

Into the 1980’s, people joked that poverty meant you didn’t have an RV or a boat. A high school degree was not necessary to earn a living through logging or mill work, with wages roughly equal to $20 or $30 an hour in today’s terms.

But by 1990 the last mill had closed, a result of shifting markets and a dwindling supply of logs because of depletion and tighter environmental rules. Oakridge was wrenched through the rural version of deindustrialization, sending its population of 4,000 reeling in ways that are still playing out.

Residents now live with lowered expectations, and a share of them have felt the sharp pinch of rural poverty. The town is an acute example of a national trend, the widening gap in pay between workers in urban areas and those in rural locales, where much of any job growth has been in low-end retailing and services.

Trump is speaking to all of these workers, not just the trade-impacted workers. And you can complain that they don’t matter, they aren’t high-skilled workers, that the economy is shifting away to urban areas, that they should just move. In the rural Oregon case, you can add in that the big (and labor-intensive) trees were almost gone anyway, that technology was taking over at the logging site and at the mill, that falling transportation costs meant you didn’t need to mill locally.

None of that works because all you are doing is telling people they have no value relative to the lives they knew.

We don’t have answers for these communities. Rural and semi-rural economic development is hard. Those regions have received only negative shocks for decades; the positive shocks have accrued to the urban regions. Of course, Trump doesn’t have any answers either. But he at least pretends to care.

Just pretending to care is important. At a minimum, the electoral map makes it important.

These issues apply to more than rural and semi-rural areas. Trump’s message – that firms need to consider something more than bottom line – resonates in middle and upper-middle class households as well. They know that their grip on their economic life is tenuous, that they are the future “low-skilled” workers. And they know they will be thrown under the bus for the greater good just like “low-skilled” workers before them.

The dry statistics on trade aren’t working to counter Trump. They make for good policy at one level and terrible policy (and politics) at another. The aggregate gains are irrelevant to someone suffering a personal loss. Critics need to find an effective response to Trump. I don’t think we have it yet. And here is the hardest part: My sense is that Democrats will respond by offering a bigger safety net. But people don’t want a welfare check. They want a job. And this is what Trump, wrongly or rightly, offers.

Paul Krugman: Seduced and Betrayed by Donald Trump

Be careful what you vote for:

Seduced and Betrayed by Donald Trump, by Paul Krugman, NY Times: Donald Trump won the Electoral College (though not the popular vote) on the strength of overwhelming support from working-class whites, who feel left behind by a changing economy and society. And they’re about to get their reward... Yes, the white working class is about to be betrayed.

The evidence of that coming betrayal is obvious in the choice of an array of pro-corporate, anti-labor figures for key positions. In particular..., the selection of Tom Price, an ardent opponent of Obamacare and advocate of Medicare privatization, as secretary of health and human services probably  ... means that the Affordable Care Act is doomed...

What the choice of Mr. Price suggests is that the Trump administration is, in fact, ready to see millions lose insurance. And many of those losers will be Trump supporters...., we’re probably looking at more than five million ... who just voted to make their lives nastier, more brutish, and shorter. ...

And ... no, Mr. Trump can’t bring back the manufacturing jobs ... lost mainly to technological change, not imports...

There will be nothing to offset the harm workers suffer when Republicans rip up the safety net.

Will there be a political backlash, a surge of buyer’s remorse? Maybe. ... But we do need to consider the tactics that he will use to obscure the scope of his betrayal.

One tactic, which we’ve already seen with ... Carrier..., will be to distract the nation with bright, shiny, trivial objects. True, this tactic will work only if news coverage is both gullible and innumerate.

No, Mr. Trump didn’t “stand up” to Carrier — he seems to have offered it a bribe. And we’re talking about a thousand jobs in a huge economy...

But judging from the coverage of the deal so far, assuming that the news media will be gullible and innumerate seems like a good bet.

And if and when the reality that workers are losing ground starts to sink in, I worry that the Trumpists will do what authoritarian governments often do to change the subject away from poor performance: go find an enemy. ... Even as he took a big step toward taking health insurance away from millions, Mr. Trump started ranting about taking citizenship away from flag-burners. This was not a coincidence.

The point is to keep your eye on what’s important. Millions of Americans have just been sucker-punched. They just don’t know it yet.

One Tax Policy Americans Yugely Favor

Gerald E. Scorse:

One tax policy Americans yugely favor, The Hill: Nobody likes taxes, but roughly nine out of 10 Americans want income from investments to be taxed at least as much as other income. Republican leaders, tone-deaf,... close their eyes to a reform enacted under President Ronald Reagan: equal taxes on capital gains, dividends, and ordinary income such as wages. It’s one policy the country would love to have back, yugely. ...

The landslide national preference for at least equal taxes on investments—for tax fairness, not tax breaks—meshes perfectly with the populist belief that the system is rigged in favor of the rich. ... According to an analysis by the non-partisan Tax Policy Center, the top 1 percent of Americans receives over 62 percent of the benefits from lower rates on capital gains, dividends and related tax preferences; for the top 10 percent, the total benefit share is just short of 80 percent.

That’s more than alright with Republicans, whose tax plans will likely drive those percentages even higher—in exactly the opposite direction of the reform ushered in a generation ago by President Reagan. He took Main Street’s side on taxing Wall Street gains, but the GOP likes to pretend it never happened. ...

Donald Trump rode the populist tide all the way to the White House. Let’s see if President Trump listens to the populist yearning—the yuge populist yearning—for equal taxes on income from wealth and income from work.

Paul Krugman: Why Corruption Matters

 "So how bad will the effects of Trump-era corruption be?":

Why Corruption Matters, by Paul Krugman, NY Times: Remember all the news reports suggesting, without evidence, that the Clinton Foundation’s fund-raising created conflicts of interest? Well, now the man who benefited from all that innuendo is ... giving us an object lesson in what real conflicts of interest look like as authoritarian governments around the world shower favors on his business empire. ...

And his early appointments suggest that he won’t be the only player using political power to build personal wealth. ... America has just entered an era of unprecedented corruption at the top. ...

Normally, policy reflects some combination of practicality — what works? — and ideology — what fits my preconceptions? And our usual complaint is that ideology all too often overrules the evidence.

But now we’re going to see a third factor powerfully at work: What policies can officials, very much including the man at the top, personally monetize? And the effect will be disastrous. ...

But what’s truly scary is the potential impact of corruption on foreign policy. Again, foreign governments are already trying to buy influence by adding to Mr. Trump’s personal wealth, and he is welcoming their efforts.

In case you’re wondering, yes, this is illegal, in fact unconstitutional, a clear violation of the emoluments clause. But who’s going to enforce the Constitution? Republicans in Congress? Don’t be silly.

Destruction of democratic norms aside, however, think about the tilt this de facto bribery will give to U.S. policy. What kind of regime can buy influence by enriching the president and his friends? The answer is, only a government that doesn’t adhere to the rule of law.

Think about it: Could Britain or Canada curry favor with the incoming administration by waiving regulations to promote Trump golf courses or directing business to Trump hotels? No — those nations have free presses, independent courts, and rules designed to prevent exactly that kind of improper behavior. On the other hand, someplace like Vladimir Putin’s Russia can easily funnel vast sums to the man at the top in return for, say, the withdrawal of security guarantees for the Baltic States.

One would like to hope that national security officials are explaining to Mr. Trump just how destructive it would be to let business considerations drive foreign policy. But reports say that Mr. Trump has barely met with those officials, refusing to get the briefings that are normal for a president-elect.

So how bad will the effects of Trump-era corruption be? The best guess is, worse than you can possibly imagine.

On Krugman And The Working Class

Tim Duy:

On Krugman And The Working Class, by Tim Duy: Paul Krugman on the election:

The only way to make sense of what happened is to see the vote as an expression of, well, identity politics — some combination of white resentment at what voters see as favoritism toward nonwhites (even though it isn’t) and anger on the part of the less educated at liberal elites whom they imagine look down on them.

To be honest, I don’t fully understand this resentment.

To not understand this resentment is to pretend this never happened:

“You know, to just be grossly generalistic, you could put half of Trump’s supporters into what I call the basket of deplorables. Right?” she said to applause and laughter. “The racist, sexist, homophobic, xenophobic, Islamaphobic — you name it. And unfortunately there are people like that. And he has lifted them up.”

Clinton effectively wrote off nearly half the country at that point. Where was the liberal outrage at this gross generalization? Nowhere – because Clinton’s supporters believed this to be largely true. The white working class had already been written off. Hence the applause and laughter.

In hindsight, I wonder if the election was probably over right then and there.

Krugman continues:

In particular, I don’t know why imagined liberal disdain inspires so much more anger than the very real disdain of conservatives who see the poverty of places like eastern Kentucky as a sign of the personal and moral inadequacy of their residents.

But they do know the disdain of conservatives. Clinton followed right along the path of former Presidential candidate Mitt Romney:

It was the characterization of “half of Trump’s supporters” on Friday that struck some Republicans as similar to the damning “47 percent” remark made by their own nominee, Mitt Romney, in his 2012 campaign against President Obama. At a private fund-raiser Mr. Romney, who Democrats had already sought to portray as a cold corporate titan, said 47 percent of voters were “dependent upon government, who believe that they are victims” and who “pay no income tax.”

There was, of course, liberal outrage at Romney.

Krugman forgets that Trump was not the choice of mainstream Republicans. Trump’s base overthrew the mainstream – they felt the disdain of mainstream Republicans just as they felt the disdain of the Democrats, and returned the favor.

I doubt very much that these voters are looking for the left’s paternalistic attitude:

One thing is clear, however: Democrats have to figure out why the white working class just voted overwhelmingly against its own economic interests, not pretend that a bit more populism would solve the problem.

That Krugman can wonder at the source of the disdain felt toward the liberal elite while lecturing Trump’s voters on their own self-interest is really quite remarkable.

I don’t know that the white working class voted against their economic interest. I don’t pretend that I can define their preferences with such accuracy. Maybe they did. But the working class may reasonably believe that neither party offers them an economic solution. The Republicans are the party of the rich; the Democrats are the party of the rich and poor. Those in between have no place.

That sense of hopelessness would be justifiably acute in rural areas. Economic development is hard work in the best of circumstances; across the sparsely populated vastness of rural America, it is virtually impossible. The victories are – and will continue to be – few and far between.

The tough reality of economic development is that it will always be easier to move people to jobs than the jobs to people. Which is akin to telling many, many voters the only way possible way they can live an even modest lifestyle is to abandon their roots for the uniformity of urban life. They must sacrifice their identities to survive. You will be assimilated. Resistance is futile. Follow the Brooklyn hipsters to the Promised Land.

This is a bitter pill for many to swallow. To just sit back and accept the collapse of your communities. And I suspect the white working class resents being told to swallow that pill when the Democrats eagerly celebrate the identities of everyone else.

And it is an especially difficult pill given that the decline was forced upon the white working class; it was not a choice of their own making. The tsunami of globalization washed over them with nary a concern on the part of the political class. To be sure, in many ways it was inevitable, just as was the march of technology that had been eating away at manufacturing jobs for decades. But the damage was intensified by trade deals that lacked sufficient redistributive policies. And to add insult to injury, the speed of decline was hastened further by the refusal of the US Treasury to express concern about currency manipulation twenty years ago. Then came the housing crash and the ensuing humiliation of the foreclosure crisis.

The subsequent impact on the white working class – the poverty, the opioid epidemic, the rising death rates – are well documented. An environment that serves as fertile breeding ground for resentment, hatred and racism, a desire to strike back at someone, anyone, simply to feel some control, to be recognized. Hence Trump.

Is there a way forward for Democrats? One strategy is to do nothing and hope that the fast growing Sunbelt shifts the electoral map in their favor. Not entirely unreasonable. Maybe even the white working class turns on Trump when it becomes evident that he has no better plan for the white working class than anyone else (then again maybe he skates by with a few small but high profile wins). But who do they turn to next?

And how long will a "hold the course" strategy take? One more election cycle? Or ten? How much damage to our institutions will occur as a result? Can the Democrats afford the time? Or should they find a new standard bearer that can win the Sunbelt states and bridge the divide with the white working class? I tend to think the latter strategy has the higher likelihood of success. But to pursue such a strategy, the liberal elite might find it necessary to learn some humility. Lecturing the white working class on their own self-interest hasn’t worked in the past, and I don’t see how it will work in the future.

Paul Krugman: The Populism Perplex

 What should Democrats do to win the votes of the white working class?:

The Populism Perplex, by Paul Krugman, NY Times: ...what put Donald Trump in striking distance was overwhelming support from whites without college degrees. So what can Democrats do to win back at least some of those voters?

Recently Bernie Sanders offered an answer: Democrats should “go beyond identity politics.” What’s needed, he said, are candidates who understand that working-class incomes are down, who will “stand up to Wall Street, to the insurance companies, to the drug companies, to the fossil fuel industry.”

But is there any reason to believe that this would work? Let me offer some reasons for doubt. ...

Any claim that changed policy positions will win elections assumes that the public will hear about those positions. How is that supposed to happen, when most of the news media simply refuse to cover policy substance? ...

Beyond this, the fact is that Democrats have already been pursuing policies that are much better for the white working class... Yet this has brought no political reward. ...

Now, you might say that health insurance is one thing, but what people want are good jobs. Eastern Kentucky used to be coal country, and Mr. Trump, unlike Mrs. Clinton, promised to bring the coal jobs back. ... But it’s a nonsensical promise..., there may be a backlash when the coal and manufacturing jobs don’t come back, while health insurance disappears.

But maybe not. Maybe a Trump administration can keep its supporters on board, not by improving their lives, but by feeding their sense of resentment.

For let’s be serious here: You can’t explain the votes of places like Clay County as a response to disagreements about trade policy. The only way to make sense of what happened is to see the vote as an expression of, well, identity politics — some combination of white resentment at what voters see as favoritism toward nonwhites (even though it isn’t) and anger ... at liberal elites whom they imagine look down on them.

To be honest, I don’t fully understand this resentment. In particular, I don’t know why imagined liberal disdain inspires so much more anger than the very real disdain of conservatives who see the poverty of places like eastern Kentucky as a sign of ... personal and moral inadequacy...

One thing is clear, however: Democrats have to figure out why the white working class just voted overwhelmingly against its own economic interests, not pretend that a bit more populism would solve the problem.

Populists as Snake Oil Sellers

Chris Dillow:

Populists as Snake Oil Sellers: Simon wonders why disenchantment with globalization has caused people to turn to what he calls snake oil salesmen. That phrase is apt, because snake oil salesmen thrived for decades. And some of the reasons they did so might be relevant today.

My source here is a wonderful paper (pdf) by Werner Troesken which describes the massive growth in patent medicines in 19^th century America. This suggests to me four points of similarity between snake oil salesmen and populist politicians....

The Political Winds in Economics

I have a new column:

The Political Winds in Economics: In recent years, much has been written about how the economics profession is drifting to the left. For example, Noah Smith writes: 

“…almost all of the most prominent economists in the public sphere -- Paul Krugman, Summers, Thomas Piketty, and the rest -- lean to the left, and lean significantly more to the left than in years past. Conservative economists are largely hiding out in academia…” 

But like Noah, I am skeptical that this represents a permanent change. ...

Paul Krugman: The Medicare Killers

Why do Republicans want to dismantle Medicare?:

The Medicare Killers, by Paul Krugman, NY Times: During the campaign, Donald Trump often promised to ... represent the interests of working-class voters who depend on major government programs. “I’m not going to cut Social Security like every other Republican and I’m not going to cut Medicare or Medicaid,” he declared, under the headline “Why Donald Trump Won’t Touch Your Entitlements.”

It was, of course, a lie. The transition team’s point man on Social Security is a longtime advocate of privatization, and all indications are that the incoming administration is getting ready to kill Medicare, replacing it with vouchers that can be applied to the purchase of private insurance. Oh, and it’s also likely to raise the age of Medicare eligibility. ...

While Medicare is an essential program for a great majority of Americans, it’s especially important for the white working-class voters who supported Mr. Trump most strongly. ... People like Paul Ryan ... have often managed to bamboozle the media into believing that their efforts to dismantle Medicare and other programs are driven by valid economic concerns. They aren’t.

It has been obvious for a long time that Medicare is actually more efficient than private insurance, mainly because it doesn’t spend large sums on overhead and marketing, and, of course, it needn’t make room for profits.

What’s not widely known is that the cost-saving measures included in ... Obamacare, have been remarkably successful in their efforts to ... rein in the long-term rise in Medicare expenses. ... This success is one main reason long-term budget projections have dramatically improved.

So why try to destroy this successful program...? ... It would be very helpful for opponents of government to do away with a program that clearly demonstrates the power of government to improve people’s lives.

And there’s an additional benefit to the right from Medicare privatization: It would create a lot of opportunities for private profits, earned by diverting dollars that could have been used to provide health care. ...

You might think this would make the whole idea a non-starter. And this push will, in fact, fail — just like Social Security privatization in 2005 — if voters realize what’s happening.

What’s crucial now is to make sure that voters do, in fact, realize what’s going on. And this isn’t just a job for politicians. It’s also a chance for the news media, which failed so badly during the campaign, to start doing its job.

Winning an Election Does Not Entitle One to Upend Basic Values

This is by Larry Summers. Comments?:

Winning an election does not entitle one to upend basic values: I will never again use the term “political correctness.” Whatever rhetorical value the term may have once had is far more than offset by what has been unleashed in the name of resistance to it since the presidential election.

I have made no secret over the years of my conviction that the sensitivities of individuals or members of various group should not be permitted to chill free speech on college campuses. I have the scars to show for speaking out against overdoing the idea of microaggression, the regulation of Halloween costumes and the prosecution of students for taking part in sombrero parties – all of which have struck me as “political correctness” run amok.

But the events of the last week are giving me pause about that term and its usage and the complex issues underlying it. It’s not that I now think speech codes are wise or that we should stamp out microaggressions wherever they are perceived. Rather, my reaction is to the way the President-elect has been heard during the campaign and the terrifying events his election has set off. ...

Black students, gay students, Hispanic students, Muslim students, disabled students, female students – all of them now fear that the basic security and acceptance on which they relied is at risk. Help lines are flooded with calls. Those who seek to count hateful incidents report an upsurge. I cannot convince myself that that fear is irrational. ...

In the face of all this, the President-elect and his staff ... have allowed, without adequate response and rejection, the celebration of victory to metastasize into something dark and evil. It is surely wrong to hold the President-elect personally responsible for all the words and deeds of all who support him. Equally, the President-elect has a moral obligation to stand up for tolerance and against intolerance whatever its source.

The fight for academic freedom and for ideological diversity on college campuses should and will go on. But given what opposition to “political correctness” has licensed, it time to retire the term.

More importantly, democracy does not mean electrocracy. Winning an election does not entitle one to upend our basic values. The refusal to tolerate blatant racism, bigotry and misogyny are beyond compromise. The first obligation of anyone currently in a leadership position is not to find common ground with our new President-elect now that the ballots have been counted and the election is over. It is instead to once again make it possible for all who live in our country to feel safe.

Blanchard on the Election: Recession, Expansion, and Inequality

Olivier Blanchard:

In the Light of the Elections: Recession, Expansion, and Inequality: Will the economic program of President-elect Donald Trump lead to a recession or to an expansion? ... It is obviously hard to tell..., what happens to the US economy depends mainly on the balance between macroeconomic and trade measures.

On the macroeconomic front, signs point to larger fiscal deficits, as a result of both higher infrastructure spending and corporate and personal tax cuts. ...

If deficits take place, they will lead to higher spending and higher growth for some time. And with the US economy already operating close to potential, deficits will lead to higher inflation..., potentially leading the US Federal Reserve to react by increasing interest rates faster than it intended to before the election. ...

To the extent that both growth and interest rates are higher, the dollar is likely to appreciate, leading, ironically, to larger US trade deficits, which Donald Trump the candidate indicated he wanted to fight. This leads me to trade issues and trade measures. ... Imposing tariffs on a major scale would decrease growth and make a recession more likely. ... Tariffs by themselves may indeed reduce imports, increase the demand for domestic goods, and increase output... But the "by themselves" assumption is just not right: Tariffs ... would most likely lead to a tariff war and thus decrease exports. And the decrease in imports and exports would not be a wash. ...

So, in the end, expansion or recession will depend on the balance between macroeconomic and trade measures. My own guess is the first will dominate, and growth will be sustained, at least for some time. Will it be enough to satisfy those who voted for Donald Trump, worried about their incomes and their futures? I am not so sure. Growth will indeed lift most boats. But many measures will push in the opposite direction. Lower corporate taxes, lower personal taxes on the rich, and financial deregulation will increase the share of output going to capital... The (now partial?) dismantling of Obamacare, if it is to happen, will not help the twenty or so million who benefit from it today. Tariffs on foreign goods may save some middle class jobs but will destroy others and increase the cost of living for those at the bottom end of the income distribution. Inequality may well go up, not down.

Take these remarks for what they are, an early analysis of a still unknown set of measures, all with complex effects. ... But predictions of recession were too pessimistic. If macro measures dominate trade measures, we may be in for a Trump expansion, at least for a time. 

Paul Krugman: Trump Slump Coming?

The consequences of Trumpism:

Trump Slump Coming?, by Paul Krugman, NY Times: Let’s be clear: Installing Donald Trump in the White House is an epic mistake. ...

But will the extent of the disaster become apparent right away? It’s ... tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night... But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest.

In fact, don’t be surprised if economic growth actually accelerates for a couple of years.

Why am I, on reflection, relatively sanguine about the short-term effects of putting such a terrible man, with such a terrible team, in power? ...

First,... take the signature Trump issue of trade policy. A return to protectionism and trade wars would make the world economy poorer over time... But predictions that Trumpist tariffs will cause a recession never made sense: Yes, we’ll export less, but we’ll also import less, and the overall effect on jobs will be more or less a wash. We’ve already had a sort of dress rehearsal for this ... in ... Brexit, ...

Beyond these general principles,... a Trump administration might actually end up doing the right thing for the wrong reasons. ...

Donald Trump isn’t proposing huge, budget-busting tax cuts for the wealthy and corporations because he understands macroeconomics. But those tax cuts would add $4.5 trillion to U.S. debt over the next decade...

True, handing out windfalls to rich people and companies that will probably sit on a lot of the money is a bad, low-bang-for-the-buck way to boost the economy... But an accidental, badly designed stimulus would still, in the short run, be better than no stimulus at all.

In short, don’t expect an immediate Trump slump.

Now, in the longer run Trumpism will be a very bad thing for the economy... For one thing,... if we ... face a new economic crisis — perhaps as a result of the dismantling of financial reform — it’s hard to think of people less prepared to deal with it.

And Trumpist policies will, in particular, hurt, not help, the American working class... More on that in future columns.

But all of this will probably take time; the consequences of the new regime’s awfulness won’t be apparent right away. Opponents of that regime need to be prepared for the real possibility that good things will happen to bad people, at least for a while.

Paul Krugman: Thoughts for the Horrified

I started blogging a few months after George Bush was reelected. I didn't feel like I has done enough before the election, so I decided to do whatever I could to try and make a difference.

When Trump was elected, I felt like I had failed, that all the effort over the last 12 years (it takes an immense amount of time each day to do this, and the opportunity cost has been high) had been for nothing. I felt like hanging it up. But I knew deep down I couldn't do that. So time to regroup, drop the complacency I fell into over time (I don't write anywhere near as much as I once did), and do what I can.

The most disappointing part of this is about my plans for the future. I have (tentatively) been thinking of retiring in two years, and cutting back considerably on blogging, writing columns, etc. The time to stop and smell the roses is near. Now those plans are in doubt. If Trump and the Republicans proceed as I think they will, it may be much longer than that before I can scale back and live with myself.

Anyway, here' Paul Krugman:

Thoughts for the Horrified, by Paul Krugman, NY Times: So what do we do now? By “we” I mean all those left, center and even right who saw Donald Trump as the worst man ever to run for president and assumed that a strong majority of our fellow citizens would agree.

I’m not talking about rethinking political strategy. There will be a time for that.... For now, however, I’m talking about personal attitude and behavior in the face of this terrible shock. ...

Unfortunately, we’re not just talking about four bad years. Tuesday’s fallout will last for decades, maybe generations.

I particularly worry about climate change..., the damage may well be irreversible.

The political damage will extend far into the future, too. The odds are that some terrible people will become Supreme Court justices. States will feel empowered to engage in even more voter suppression... At worst, we could see a slightly covert form of Jim Crow become the norm all across America.

And you have to wonder about civil liberties, too. The White House will soon be occupied by a man with obvious authoritarian instincts...

What about the short term? My own first instinct was to say that Trumponomics would quickly provoke an immediate economic crisis, but after a few hours’ reflection I decided that this was probably wrong. I’ll write more about this in the coming weeks...

So where does this leave us? What, as concerned and horrified citizens, should we do?

One natural response would be quietism, turning one’s back on politics. It’s definitely tempting... But I don’t see how you can hang on to your own self-respect unless you’re willing to stand up for the truth and fundamental American values.

Will that stand eventually succeed? No guarantees. Americans, no matter how secular, tend to think of themselves as citizens of a nation with a special divine providence, one that may take wrong turns but always finds its way back, one in which justice always prevails in the end.

Yet it doesn’t have to be true. ... Maybe America isn’t special, it’s just another republic that had its day, but is in the process of devolving into a corrupt nation ruled by strongmen.

But I’m not ready to accept that this is inevitable — because accepting it as inevitable would become a self-fulfilling prophecy. The road back to what America should be is going to be longer and harder than any of us expected, and we might not make it. But we have to try.

What Does the Trump Victory Mean for Climate Change Policy?

Robert Stavins:

What Does the Trump Victory Mean for Climate Change Policy?: Those of you who have read my previous essay at this blog, “This is Not a Time for Political Neutrality” (October 9, 2016), know that my greatest concerns about a Trump presidency (then a possibility, now a certainty), were not limited to environmental policy, but rather were “about what a Trump presidency would mean for my country and for the world in realms ranging from economic progress to national security to personal liberty,” based on his “own words in a campaign in which he substituted impulse and pandering for thoughtful politics” … and “built his populist campaign on false allegations about others, personal insults of anyone who disagrees with him, and displays of breathtaking xenophobia, veiled racism, and unapologetic sexism.”

That’s a broad indictment, to be sure, but whatever real expertise I may have is actually limited to environmental, resource, and energy economics and policy, and so that has and will continue to be the real focus of this blog, “An Economic View of the Environment.”  With that in mind, I return today from last month’s brief immersion in partisan politics to discuss climate change policy.

Yesterday, an editor at The New York Times asked me to write a 500-word essay giving my view of what the Trump victory will mean for climate policy.  This morning, my very brief essay was published under the headline, “Goodbye to the Climate.”  Given the brevity of the piece, it does not touch on many issues and subtleties (I come back to that at the end of today’s blog post)...

Comments on the Election

I case you have something to say...

Paul Krugman: The Economic Fallout

Paul Krugman:

Paul Krugman: TheEconomic Fallout: It really does now look like President Trump, and markets are plunging. When might we expect them to recover?

Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear.

Still, I guess people want an answer: if the question is when markets will recover, a first-pass answer is never.

Under any circumstances, putting an irresponsible, ignorant man who takes his advice from all the wrong people in charge of the nation with the world’s most important economy would be very bad news. What makes it especially bad right now, however, is the fundamentally fragile state much of the world is still in, 8 years after the great financial crisis. ...

Now comes the mother of all adverse effects – and what it brings with it is a regime that will be ignorant of economic policy and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence, and be bullied by cranks.

So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened.

The Opportunity Cost (and Benefit?) of Brexit

Chris Dillow:

The opportunity cost of Brexit: There’s one possible effect of Brexit that I suspect hasn’t had the consideration it merits – the opportunity cost.

What I mean is that all of us – politicians, journalists and regular folk – have limited attention and mental resources. Attention devoted to Brexit is therefore attention that’s taken away from other matters. ... Brexit steals cognitive bandwidth.

For example, in a better world, we’d devote our political attention to overcoming secular stagnation, welfare reform, combating inequalities of power and income, improving workers’ rights and so on. ... Rather than turn our attention to progress, we’re wearing ourselves out trying to avoid regress.

Brexit distorts the policy agenda in other ways. For example, industrial policy should be concerned with increasing productivity and innovation. But in fact, it’s focused upon limiting the damage of Brexit, perhaps by offering handouts to favoured big firms whilst letting smaller ones swivel in the wind.

And then there’s the question of the values promoted by the Brexit debate. Brexit fuels nativism and even perhaps mercantilism, whilst the policies it squeezes out would focus instead upon more enlightened ideals such as liberty and equality. ...

He goes on to discuss the possibility that there might also be an "opportunity benefit."

...had we not had Brexit Cameron and Osborne would still be in office so we’d be stuck with fiscal austerity. As it is, their departure has created space for a “reset” of policy. If Johnson and Fox were not tied up with Brexit negotiations, they’d probably find some ways to damage our polity. And a government whose energies and political capital weren’t sapped by Brexit might well have even more ability to hurt the worst off.

Which brings me to a paradox. We lefties can be quite relaxed about the opportunity cost of Brexit. Yes, Brexit is regrettable, but it has the silver lining of distracting the Tories from doing damage elsewhere. Tory supporters, however, have no such comfort. They should regard Brexit as a distraction of government energy which could be well-employed elsewhere. In this sense, it is intelligent Tories who should most regret Brexit.

Paul Krugman: How to Rig an Election

Yes, the election was rigged:

How to Rig an Election, by Paul Krugman, NY Times: It’s almost over. Will we heave a sigh of relief, or shriek in horror? Nobody knows for sure, although early indications clearly lean Clinton. Whatever happens..., let’s be clear: this was, in fact, a rigged election.

The election was rigged by state governments that did all they could to prevent nonwhite Americans from voting: ...

The election was rigged by Russian intelligence, which was almost surely behind the hacking of Democratic emails, which WikiLeaks then released with great fanfare. Nothing truly scandalous emerged, but the Russians judged, correctly, that the news media would hype the revelation ... as somehow damning.

The election was rigged by James Comey... He abused his office, shamefully.

The election was also rigged by people within the F.B.I. ... who clearly felt that under Mr. Comey they had a free hand to indulge their political preferences. ... The agency clearly needs a major housecleaning...

The election was rigged by partisan media, especially Fox News, which trumpeted falsehoods...

The election was rigged by mainstream news organizations, many of which simply refused to report on policy issues, a refusal that clearly favored the candidate who lies about these issues all the time, and has no coherent proposals to offer. ...

The election was rigged by the media obsession with Hillary Clinton’s emails. She shouldn’t have used her own server, but there is no evidence at all that she did anything unethical, let alone illegal. ...

It’s a disgraceful record. Yet Mrs. Clinton still seems likely to win.

If she does, you know what will happen. Republicans will ... deny her legitimacy from day one...

So in the days ahead it will be important to remember two things. First, Mrs. Clinton has actually run a remarkable campaign, demonstrating her tenacity in the face of unfair treatment and remaining cool under pressure that would have broken most of us. Second..., if she wins it will be thanks to Americans who stood up for our nation’s principles — who waited for hours on voting lines contrived to discourage them, who paid attention to the true stakes in this election rather than letting themselves be distracted by fake scandals and media noise.

Those citizens deserve to be honored, not disparaged, for doing their best to save the nation from the effects of badly broken institutions. Many people have behaved shamefully this year — but tens of millions of voters kept their faith in the values that truly make America great.

A Voter’s Guide to Economic Policy

I have a new column:

A Voter’s Guide to Economic Policy: The election will be over tomorrow, and I am very much looking forward to it coming to an end. Now we can finally come together as a nation and begin to make progress on important economic, social, and political issues (I can dream, can’t I?) 

For those of you who haven’t voted yet and are trying to quickly learn about the candidates for local, state, and federal level office, here’s a summary of the economic policies and ideologies of Democrats and Republicans. These are general tendencies, candidates from both parties will differ in some ways from the principles their party supports, but the policies that actually get enacted must be supported by a broad swath of the party so they usually reflect the general view among party members. ...

More Jobs, a Strong Economy, and a Threat to Institutions

Adam Davidson in the New Yorker:

More Jobs, a Strong Economy, and a Threat to Institutions: ...Institutions are significant to economists, who have come to see that countries become prosperous not because they have bounteous natural resources or an educated population or the most advanced technology but because they have good institutions. Crucially, formal structures are supported by informal, often unstated, social agreements. A nation not only needs courts; its people need to believe that those courts can be fair. ...

Over most of history, a small élite confiscated wealth from the poor. Subsistence farmers lived under rules designed to tax them so that the rulers could live in palaces and pay for soldiers to maintain their power. Every now and then, though, a system appeared in which leaders were forced to accommodate the needs of at least some of their citizens. ... The societies with the most robust systems for forcing the powerful to accommodate some of the needs of the powerless became wealthier and more peaceful. ... Most nations without institutions to check the worst impulses of the rich and powerful stay stuck in poverty and dysfunction. ...

This year’s Presidential election has alarmed economists for several reasons. No economist, save one, supports Donald J. Trump’s stated economic plans, but an even larger concern is that, were he elected, Trump would attack the very institutions that have provided our economic stability. In his campaign, Trump has shown outright contempt for courts, free speech, international treaties, and many other pillars of the American way of life. There is little reason to think that, if granted the Presidency, Trump would soften his stand. ...

...it’s easy to imagine a President Trump refusing to heed our own highest court, which, as President Andrew Jackson observed, has no way, other than respect of institutions, to enforce its decisions. No one knows what Trump would do as President, but, based on his statements on the campaign trail, it’s possible to imagine a nation where people have less confidence in the courts, the military, and their rights to free speech and assembly. When this happens, history tells us, people stop dreaming about what they could have if they invest in education, new businesses, and new ideas. They focus, instead, on taking from others and holding tightly to what they’ve already amassed. Those societies, without the institutions that protect us from our worst impulses, become poorer, uglier, more violent. That is how nations fail.

Paul Krugman: Who Broke Politics?

 "Republican leaders have spent the past couple of decades ... trashing democratic norms in pursuit of economic benefits for their donor class":

Who Broke Politics?, by Paul Krugman, NY Times: ...This has been an election in which almost every week sees some longstanding norm in U.S. political life get broken. ... So how did all our political norms get destroyed? Hint: It started long before Donald Trump.

On one side, Republicans decided long ago that anything went in the effort to delegitimize and destroy Democrats. Those of us old enough to remember the 1990s also remember the endless series of accusations hurled against the Clintons. ...

When Mrs. Clinton famously spoke of a “vast right-wing conspiracy” out to undermine her husband’s presidency, she wasn’t being hyperbolic; she was simply describing the obvious reality.

And since accusations of Democratic scandal, not to mention congressional “investigations” that started from a presumption of guilt, had become the norm, the very idea of bad behavior independent of politics disappeared: The flip side of the obsessive pursuit of a Democratic president was utter refusal to investigate even the most obvious wrongdoing by Republicans in office.

There were multiple real scandals during the administration of George W. Bush, ranging from what looked like a political purge in the Justice Department to the deceptions that led us into invading Iraq; nobody was ever held accountable.

The erosion of norms continued after President Obama took office. ...

What was the purpose of this assault on the implicit rules and understandings that we need to make democracy work? Well, when Newt Gingrich shut down the government in 1995, he was trying to, guess what, privatize Medicare. The rage against Bill Clinton partly reflected the fact that he raised taxes modestly on the wealthy.

In other words, Republican leaders have spent the past couple of decades ... trashing democratic norms in pursuit of economic benefits for their donor class.

So we shouldn’t really be too surprised that Mr. Comey, who turns out to be a Republican first and a public servant, well, not so much, decided to politically weaponize his position on the eve of the election...

Despite Mr. Comey’s abuse of power, Mrs. Clinton will probably win. But Republicans won’t accept it. ... And no matter what Mrs. Clinton does, the barrage of fake scandals will continue, now with demands for impeachment.

Can anything be done to limit the damage? It would help if the media finally learned its lesson, and stopped treating Republican scandal-mongering as genuine news. And it would also help if Democrats won the Senate, so that at least some governing could get done.

Paul Krugman: Working the Refs

"They’re trying to create bias, not end it":

Working the Refs, by Paul Krugman, NY Times: The cryptic letter James Comey, the F.B.I. director, sent to Congress on Friday looked bizarre at the time — seeming to hint at a major new Clinton scandal, but offering no substance. Given what we know now, however, it was worse than bizarre, it was outrageous. Mr. Comey apparently had no evidence suggesting any wrongdoing...; he violated longstanding rules about commenting on politically sensitive investigations close to an election; and he did so despite being warned by other officials that he was doing something terribly wrong.

So what happened? We may never know the full story, but the best guess is that Mr. Comey ... let himself be bullied by the usual suspects. Working the refs — screaming about bias and unfair treatment, no matter how favorable the treatment actually is — has been a consistent, long-term political strategy on the right. And the reason it keeps happening is because it so often works. ...

The desire to get right-wing critics off one’s back may also explain why the news media keep falling for fake scandals. ...

Sure enough, much of the initial coverage of the Comey letter was based not on what the letter said, which was very little, but on a false, malicious characterization of the letter by Jason Chaffetz, the Republican chairman of the House Committee on Oversight and Government Reform. You might think reporters would have learned by now not to take what people like Mr. Chaffetz say at face value. Apparently not. ...

Which brings us back to Mr. Comey. ... Mr. Comey was subjected to a constant barrage of demands that he prosecute her for … something. ...

And it looks as if he tried to buy them off by throwing them a bone just a few days before the election. Whether it will matter politically remains to be seen, but one thing is clear: he destroyed his own reputation.

The moral of the story is that appeasing the modern American right is a losing proposition. Nothing you do convinces them that you’re being fair, because fairness has nothing to do with it. The right long ago ran out of good ideas that can be sold on their own merits, so the goal now is to remove merit from the picture.

Or to put it another way, they’re trying to create bias, not end it, and weakness — the kind of weakness Mr. Comey has so spectacularly displayed — only encourages them to do more.

Paul Krugman: It’s Trump’s Party

It's Trump's party, so cry if you want to:

It’s Trump’s Party, by Paul Krugman, NY Times: ...Everyone who endorsed Mr. Trump in the past owns him now... And voters should realize that voting for any Trump endorser is, in effect, a vote for Trumpism, whatever happens at the top of the ticket.

First of all, nobody who was paying attention can honestly claim to have learned anything new about Mr. Trump in the last few weeks. It was obvious from the beginning that he was a “con artist”... His racism and sexism were apparent from the beginning...; his vindictiveness and lack of self-discipline were on full display in his tirades against Judge Gonzalo Curiel and Khizr Khan.

So any politicians who try after the election to distance themselves from the Trump phenomenon — or even unendorse in these remaining few days — have already failed the character test. They knew who he was all along..., they will do whatever it takes to guarantee their own political survival.

And what this means in practice is that they will remain Trumpists after the election, even if the Orange One himself vanishes from the scene.

After all, what we learned during the Republican primary was that the party’s base doesn’t care at all about ... supposed conservative principles like small government.

What Republican voters wanted, instead, were candidates who channeled their anger and fear, who demonized nonwhites and played into dark conspiracy theories. ...

This lesson hasn’t been lost on Republican politicians. ...

So you can ignore all the efforts to portray Mr. Trump as a deviation from the G.O.P.’s true path: Trumpism is what the party is all about..., the underlying nastiness is now part of Republican DNA.

And the immediate consequences will be very ugly. Assuming that Hillary Clinton wins, she will face an opposing party that demonizes her and denies her legitimacy...

In fact, it’s likely to be so bad that America’s governability may hang in the balance. A Democratic recapture of the Senate would be a very big deal, but they are unlikely to take the House, thanks to the clustering of their voters. So how will basic business like budgeting get done? Some observers are already speculating about a regime in which the House is effectively run by Democrats in cooperation with a small rump of rational Republicans. Let’s hope so — but it’s no way to manage a great nation.

Still, it’s hard to see an alternative. For the modern G.O.P. is Mr. Trump’s party, with or without the man himself.

The Election Matters for the Future of the Economy

My latest column:

The Election Matters for the Future of the Economy: We are entering into a time period when economic growth may be lower than we are accustomed to, the likelihood of recessions may increase, and income will continue to be very unequally distributed.

Our response to these problems, which depends upon who wins the presidential election and which party controls the House and Senate, will play a critical role in determining how well our economy performs, who benefits from economic growth, and how we respond if the economy enters into a recession.

The following graph illustrates some of the challenges we face. ...

Debt, Diversion, Distraction

Paul Krugman:

Debt, Diversion, Distraction: ...So, about that supposed debt crisis...

Yes, the population is getting older, which means more spending on Medicare and Social Security. But ... quite a few baby boomers are already drawing on those programs; by 2020 we’ll be about halfway through the demographic transition, and current estimates don’t suggest a big budget problem.

Why, then, do you see projections of a large debt increase? The answer lies not in a known factor — an aging population — but in assumed growth in health care costs and rising interest rates. And the truth is that we don’t know that these are going to happen. In fact, health costs have grown much more slowly since 2010 than previously projected, and interest rates have been much lower. As the chart above shows, taking these favorable surprises into account has already drastically reduced long-run debt projections. These days the long-run outlook looks vastly less scary than people used to imagine. ...

...yes, it’s possible that we may at some point in the future have to cut benefits. But deficit scolds talk as if they offer a way to avoid this fate, when in fact their solution to the prospect of future benefit cuts is … to cut future benefits. ...

By putting the debt question aside, we are NOT in any material way making the future worse. And that is a total contrast with climate change, where our failure to act means pouring vast quantities of greenhouse gases into the atmosphere, materially increasing the odds of catastrophe with every year we wait.

So my message to the deficit scolds is this: yes, we may face some hard choices a couple of decades from now. But we might not, and in any case there aren’t any choices that must be made now. Meanwhile, there are genuinely scary things happening as we speak, which we should be taking on but aren’t. And your fear-mongering is distracting us from these real problems. Therefore, I would respectfully request that you people just go away.

Why Trade Deals Lost Legitimacy

Dani Rodrik:

The Walloon mouse: ...Instead of decrying people's stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I'd put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people's concerns with earlier trade agreements. 

The elites minimized distributional concerns, though they turned out to be significant for the most directly affected communities. They oversold aggregate gains from trade deals, though they have been smallish since at least NAFTA. They said sovereignty would not be diminished though it clearly was in some instances. They claimed democratic principles would not be undermined, though they are in places. They said there'd be no social dumping though there clearly is at times. They advertised trade deals (and continue to do so) as "free trade" agreements, even though Adam Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.

And because they failed to provide those distinctions and caveats now trade gets tarred with all kinds of ills even when it's not deserved. If the demagogues and nativists making nonsensical claims about trade are getting a hearing, it is trade's cheerleaders that deserve some of the blame.

One more thing. The opposition to trade deals is no longer solely about income losses. The standard remedy of compensation won't be enough -- even if carried out. It's about fairness, loss of control, and elites' loss of credibility. It hurts the cause of trade to pretend otherwise.

Neoliberalism and Austerity

Simon Wren-Lewis:

Neoliberalism and austerity: I like to treat neoliberalism not as some kind of coherent political philosophy, but more as a set of interconnected ideas that have become commonplace in much of our discourse. That the private sector entrepreneur is the wealth creator, and the state typically just gets in their way. That what is good for business is good for the economy, even when it increases monopoly power or involves rent seeking. Interference in business or the market, by governments or unions, is always bad. And so on. ...

I do not think austerity could have happened on the scale that it did without this dominance of this neoliberal ethos. Mark Blyth has described austerity as the biggest bait and switch in history. It took two forms. In one the financial crisis, caused by an under regulated financial sector lending too much, led to bank bailouts that increased public sector debt. This leads to an outcry about public debt, rather than the financial sector. In the other the financial crisis causes a deep recession which - as it always does - creates a large budget deficit. Spending like drunken sailors goes the cry, we must have austerity now.

In both cases the nature of what was going on was pretty obvious to anyone who bothered to find out the facts. That so few did so, which meant that the media largely went with the austerity narrative, can be partly explained by a neoliberal ethos. Having spent years seeing the big banks lauded as wealth creating titans, it was difficult for many to comprehend that their basic business model was fundamentally flawed and required a huge implicit state subsidy. On the other hand they found it much easier to imagine that past minor indiscretions by governments were the cause of a full blown debt crisis. ...

While in this sense austerity might have been a useful distraction from the problems with neoliberalism made clear by the financial crisis, I think a more important political motive was that it appeared to enable the more rapid accomplishment of a key neoliberal goal: shrinking the state. It is no coincidence that austerity typically involved cuts in spending rather than higher taxes... In that sense too austerity goes naturally with neoliberalism. ...

An interesting question is whether the same applies to right wing governments in the UK and US that used immigration/race as a tactic for winning power. We now know for sure, with both Brexit and Trump, how destructive and dangerous that tactic can be. As even the neoliberal fantasists who voted Leave are finding out, Brexit is a major setback for neoliberalism. Not only is it directly bad for business, it involves (for both trade and migration) a large increase in bureaucratic interference in market processes. To the extent she wants to take us back to the 1950s, Theresa May’s brand of conservatism may be very different from Margaret Thatcher’s neoliberal philosophy.

Paul Krugman: Why Hillary Wins

 "Maybe Mrs. Clinton is winning because she possesses some fundamental political strengths":

Why Hillary Wins, by Paul Krugman, NY Times: Hillary Clinton is a terrible candidate. Hey, that’s what pundits have been saying ever since this endless campaign began. You have to go back to Al Gore in 2000 to find a politician who faced as much jeering from the news media...

Strange to say, however, Mrs. Clinton won the Democratic nomination fairly easily, and now, having pummeled her opponent in three successive debates, is an overwhelming favorite to win in November, probably by a wide margin. How is that possible?

The usual suspects are already coalescing around an answer..., she just got lucky. If only the Republicans hadn’t nominated Donald Trump, the story goes, she’d be losing badly.

But here’s a contrarian thought: Maybe Mrs. Clinton is winning because she possesses some fundamental political strengths — strengths that fall into many pundits’ blind spots. ...

When political commentators praise political talent, what they seem to have in mind is the ability of a candidate to match one of a very limited set of archetypes: the heroic leader, the back-slapping regular guy you’d like to have a beer with, the soaring orator. Mrs. Clinton is none of these things...

Yet the person tens of millions of viewers saw in this fall’s debates was hugely impressive all the same: self-possessed, almost preternaturally calm under pressure, deeply prepared, clearly in command of policy issues. ...

Oh, and the strengths she showed in the debates are also strengths that would serve her well as president. ... And maybe ordinary citizens noticed the same thing; maybe obvious competence and poise in stressful situations can add up to a kind of star quality, even if it doesn’t fit conventional notions of charisma.

Furthermore, there’s one thing Mrs. Clinton brought to this campaign that no establishment Republican could have matched: She truly cares about her signature issues, and believes in the solutions she’s pushing.

I know, we’re supposed to see her as coldly ambitious and calculating, and on some issues — like macroeconomics — she does sound a bit bloodless, even when she clearly understands the subject and is talking good sense. But when she’s talking about women’s rights, or racial injustice, or support for families, her commitment, even passion, are obvious. She’s genuine, in a way nobody in the other party can be.

So let’s dispel with this fiction that Hillary Clinton is only where she is through a random stroke of good luck. She’s a formidable figure, and has been all along.

Paul Krugman: Their Dark Fantasies

"Why does the modern right hate America?":

Their Dark Fantasies, by Paul Krugman, NY Times: I’m a baby boomer, which means that I’m old enough to remember conservatives yelling “America — love it or leave it!” at people on the left who criticized racism and inequality. But that was a long time ago. These days, disdain for America — the America that actually exists, not an imaginary “real America” in which minorities and women know their place — is concentrated on the right..., you increasingly find prominent figures describing our society as a nightmarish dystopia.

This is obviously true for Donald Trump... In his vision of America — clearly derived largely from white supremacist and neo-Nazi sources — crime is running wild, inner cities are war zones, and hordes of violent immigrants are pouring across our open border. In reality, murder is at a historic low, we’re seeing a major urban revival and net immigration from Mexico is negative. But I’m only saying that because I’m part of the conspiracy.

Meanwhile, you find almost equally dark visions, just as much at odds with reality, among establishment Republicans, people like Paul Ryan...

...consider the portrait of America Mr. Ryan painted last week, in a speech to the College Republicans. For it was, in its own way, as out of touch with reality as the ranting of Donald Trump (whom Mr. Ryan never mentioned).

...Mr. Ryan claimed to be describing the future — what will happen if Hillary Clinton wins... According to him, it’s very grim. There will, he said, be “a gloom and grayness to things,” ruled by a “cold and unfeeling bureaucracy.” We will become a place “where passion — the very stuff of life itself — is extinguished.” And this is the kind of America Mrs. Clinton “will stop at nothing to have.”

...We have many problems, but we’re hardly living in a miasma of despair. ...Mr. Ryan’s vision of America looks nothing like reality. It is, however, completely familiar to anyone who read Ayn Rand’s “Atlas Shrugged” as a teenager. ...

So why does the modern right hate America? There’s not much overlap in substance between Mr. Trump’s fear-mongering and Mr. Ryan’s, but there’s a clear alignment of interests. The people Mr. Trump represents want to suppress and disenfranchise you-know-who; the big-money interests that support Ryan-style conservatism want to privatize and generally dismantle the social safety net, and they’re willing to do whatever it takes to get there.

The big question is whether trash-talking America can actually be a winning political strategy. We’ll soon find out.

What’s Behind a Rise in Ethnic Nationalism? Maybe the Economy

Robert Shiller:

What’s Behind a Rise in Ethnic Nationalism? Maybe the Economy: Global economic weakness and a rise in inequality appear to be causing a disturbing growth in ethnic nationalism. ...

In the United States, despite his attempts to woo minority voters, Donald J. Trump appears to derive support from such sentiment. In Moscow, Vladimir V. Putin has used Russian nationalist sentiment to inspire many of his countrymen. And we see growing ethnic political parties inspired by national identity in countless other countries.

It is natural to ask whether something so broad might have a common cause, other than the obvious circumstantial causes like the gradual fading of memories about the horrors of ethnic conflict in World War II or the rise in this century of forms of violent ethnic terrorism.

Economics is my specialty, and I think economic factors may explain at least part of the trend. ...

Paul Krugman: The Clinton Agenda

The presidential race may be all but over, but many others are not -- your vote still matters:

The Clinton Agenda, by Paul Krugman, NY Times: It ain’t over until the portly gentleman screams, but it is ... highly likely that Hillary Clinton will win this election...

But what will our first female president actually be able to accomplish? That depends...

Consider, first, the effects of a minimal victory: Mrs. Clinton becomes president, but Republicans hold on to both houses of Congress.

Such a victory wouldn’t be meaningless. It would avert the nightmare of a Trump presidency, and it would also block the radical tax-cutting, privatizing agenda that Paul Ryan ... has made clear he will steamroll through if Mr. Trump somehow wins. But it would leave little room for positive action.

Things will be quite different if Democrats retake the Senate. ...

Now, even a Democratic Senate wouldn’t enable Mrs. Clinton to pass legislation in the face of an implacably obstructionist Republican majority in the House. It would, however, allow her to fill the Supreme Court seat left vacant by the death of Antonin Scalia.

Doing that would have huge consequences..., the most important ... the Clean Power Plan ... is currently on hold, thanks to a stay imposed by the Supreme Court. Democratic capture of the Senate would remove this roadblock. ... Quite simply, if Democrats take the Senate, we might take the minimum action needed to avoid catastrophe; if they don’t, we won’t.

What about the House? ... Until the last few days, the chances of flipping the House seemed low...

But a sufficiently big Clinton victory could change that, especially if suburban women desert a G.O.P. that has turned into the gropers-owned party. And that would let her pursue a much more expansive agenda.

There’s not much mystery about what that agenda would be. ... Broadly speaking, she would significantly strengthen the social safety net, especially for the very poor and children, with an emphasis on family-related issues like parental leave. Such programs would cost money...; she proposes, credibly, to raise that money with higher taxes on top incomes, so that the overall effect would be to reduce inequality.

Democratic control of the House would also open the door for large-scale infrastructure investment. ...

In any case, the bottom line is that if you’re thinking of staying home on Election Day because the outcome is assured, don’t. Barring the political equivalent of a meteor strike, Hillary Clinton will be our next president, but the size of her victory will determine what kind of president she can be.

Paul Krugman: Predators in Arms

"The Trump-Ailes axis of abuse":

Predators in Arms, by Paul Krugman, NY Times: As many people are pointing out, Republicans now trying to distance themselves from Donald Trump need to explain why The Tape was a breaking point, when so many previous incidents weren’t. ...

Meanwhile, the Trump-Ailes axis of abuse raises another question: Is sexual predation by senior political figures — which Mr. Ailes certainly was, even if he pretended to be in the journalism business — a partisan phenomenon?

Just to be clear, I’m not talking about bad behavior in general... Yes, Bill Clinton had affairs; but there’s a world of difference between consensual sex, however inappropriate, and abuse of power to force those less powerful to accept your urges. ...

Take, for example, what ... was happening politically in 2006..., it looked as if Republicans might retain control of Congress despite public revulsion at the Bush administration. But then came the Foley scandal: ...Representative Mark Foley, had been sending sexually explicit messages to pages, and his party had failed to take any action despite warnings..., the scandal seems to have ... led to a Democratic wave.

But think about how much bigger that wave might have been if voters had known ... that Dennis Hastert, who had been speaker of the House since 1999, himself had a long history of molesting teenage boys.

Why do all these stories involve Republicans? One answer may be structural. The G.O.P. is, or was until this election, a monolithic, hierarchical institution, in which powerful men could cover up their sins much better than they could in the far looser Democratic coalition.

There is also, I’d suggest, an underlying cynicism... We’re talking about a party that has long exploited white backlash to mobilize working-class voters, while enacting policies that actually hurt those voters but benefit the wealthy. Anyone participating in that scam ... has to have the sense that politics is a sphere in which you can get away with a lot if you have the right connections. ...

Assuming that Mr. Trump loses, many Republicans will try to pretend that he was a complete outlier, unrepresentative of the party. But he isn’t. He won the nomination fair and square, chosen by voters who had a pretty good idea of who he was. He had solid establishment support until very late in the game. And his vices are, dare we say, very much in line with his party’s recent tradition.

Mr. Trump, in other words, isn’t so much an anomaly as he is a pure distillation of his party’s modern essence.

This is Not a Time for Political Neutrality

Robert Stavins:

This is Not a Time for Political Neutrality: I have been writing essays at this blog for over seven years, and throughout that time, through perhaps 100 more-or-less-monthly essays, I have tried very hard to keep politics at bay, and to view each and every issue I discussed from a politically neutral, yet analytical economic perspective. But I find that I can no longer remain neutral.

Since before the summer, I had resolved to write today’s essay, but I decided to wait until one month before the November U.S. election to post it, simply because I thought this was the point in time when people would be paying most attention to the upcoming election but would not yet have completely made up their minds. In particular, I want to address this message to people who – like me – are political independents.

Background

I have been teaching at Harvard for close to 30 years, and every year I take pride in the fact that at the conclusion of my 13-week course in environmental economics and policy, my students cannot say – on the basis of what I have said in lectures or what they have read in the assigned readings – whether I am a tree-hugging environmental advocate from the political left, or an industry apologist from the political right (actually, I am neither, although hostile voices in the blogosphere have sometimes wanted to peg me as being on the opposite of whatever extreme they occupy).

Likewise, I have remained bipartisan in politics, ever since I directed Project 88 more than 25 years ago for the bipartisan coalition of former Democratic Senator Timothy Wirth and the late Republican Senator John Heinz. Starting with the White House of President George H. W. Bush, and continuing with every administration – of both political parties – since then, I have worked on substantive matters of environmental and energy policy, in some cases closely and intensively, and in some cases indirectly and on the periphery.

Such professional bipartisanship and political neutrality have been important to me, and have been consistent with my voter registration, as I am officially registered as an independent (in Massachusetts, this goes by the designation of “unenrolled”).

So, over the years, I have voted for Democrats and I have voted for Republicans, for various offices ranging from the Mayor of my town to the President of my country. And in each and every one of those elections, although I preferred one of the two principal candidates (sometimes very strongly), in no case did I fear for the future of my community, my state, or my country if my candidate lost and the other candidate won.

This time is different. I fear for the United States and I fear for the world if Donald Trump is elected President. The time for my professional bipartisanship and political neutrality has ended – at least temporarily. And so I apologize to my readers for using this platform – An Economic View of the Environment – to express my broader, personal views on the upcoming election. This is a departure that I hope never again will be necessary. ...

Paul Krugman: What About the Planet?

Why haven't we heard more about Clinton and Trump's positions on climate change?:

What About the Planet?, by Paul Krugman, NY Times: Our two major political parties are at odds on many issues, but nowhere is the gap bigger or more consequential than on climate.

If Hillary Clinton wins, she will move forward with the Obama administration’s combination of domestic clean-energy policies and international negotiation — a one-two punch that offers some hope of reining in greenhouse gas emissions before climate change turns into climate catastrophe.

If Donald Trump wins, the paranoid style in climate politics — the belief that global warming is a hoax perpetrated by a vast international conspiracy of scientists — will become official doctrine, and catastrophe will become all but inevitable. ...

So there is a huge, incredibly consequential divide on climate policy. Not only is there a vast gap between the parties and their candidates, but this gap arguably matters more for the future than any of their other disagreements. So why don’t we hear more about it?

I’m not saying that there has been no reporting on the partisan climate divide, but there has been nothing like, say, the drumbeat of stories about Mrs. Clinton’s email server. And it’s really stunning that in the three nationally televised forums we’ve had so far — the “commander in chief” forum involving Mrs. Clinton and Mr. Trump, the first presidential debate and the vice-presidential debate — the moderators have asked not a single question about climate. ...

And this blind spot matters a lot. Polling suggests that millennial voters, in particular, care a lot about environmental protection and renewable energy. But it also suggests that more than 40 percent of young voters believe that there is no difference between the candidates on these issues.

Yes, I know, people should be paying more attention — but this nonetheless tells us how easy it is for voters who rely on TV news or don’t read stories deep inside the paper to miss what should be a central issue in this campaign.

The good news is that there are still two debates to go, offering the opportunity to make some amends.

It’s time to end the blackout on climate change as an issue. It needs to be front and center — and questions must be accompanied by real-time fact-checking, not relegated to the limbo of he-said-she-said, because this is one of the issues where the truth often gets lost in a blizzard of lies.

There is, quite simply, no other issue this important, and letting it slide would be almost criminally irresponsible.

The Anti-Trust Election

I have a new column:

The Anti-Trust Election of 2016: A report on the “Benefits of Competition and Indicators of Market Power” from the White House Council of Economic Advisors documents that monopoly power has been increasing the last few decades, and it argues persuasively “that consumers and workers would benefit from additional policy actions by the government to promote competition within a variety of industries.” The report is part of an initiative by the Obama administration last spring to promote a “fair, efficient, and competitive marketplace” through stricter enforcement of antitrust regulations, and through other measures such as patent reform and the reform of occupational licensing. 

To those who believe more aggressive enforcement of antitrust laws is needed, and I am one of them, Hillary Clinton’s recent announcement of “A new commitment to promote competition, address excessive concentration and the abuse of economic power, and strengthen antitrust laws and enforcement” is an encouraging sign that if Clinton is elected the Obama administration’s initiative will not end when he leaves office. 

The presence of monopoly power harms the economy in several ways. ...

Donald Trump has promised to make deregulation one of the focal points of his presidency. If Trump is elected, the trend toward rising market concentration and all of the problems that come with it are likely to continue. We’ll hear the usual arguments about ineffective government and the magic of markets to justify ignoring the problem. If Clinton is elected, it’s unlikely that her administration would be active enough in antitrust enforcement for my taste. But at least she acknowledges that something needs to be done about this growing problem, and any movement toward more aggressive enforcement of antitrust regulation would be more than welcome.

Trump’s Mudslinging Puts the Fed in Danger

An editorial at the FT:

Trump’s mudslinging puts the Fed in danger: So many extraordinary accusations and denunciations emanate from Donald Trump... One of the more potentially damaging is the contention that the Federal Reserve is setting policy to ensure the election of his opponent, Hillary Clinton.

Political criticism of the US central bank has been going on for decades. ...

Yet it is offensive and absurd to suggest that Janet Yellen, the Fed chair, and her colleagues are deliberately trying to engineer the election of another Democratic president. At a time when the Fed has a low standing in the public mind, perhaps more disturbing than Mr Trump’s eccentric claims is that congressional Republicans, who should know better, are joining in. ...

It is beyond hope that Mr Trump will see sense and moderate his attacks. His fellow Republicans, unless they are ready to endanger one of the pillars of US economic stability, should resist the urge to follow his example.

Paul Krugman: Trump’s Fellow Travelers

Don't waste your vote:

Trump’s Fellow Travelers, by Paul Krugman, NY Times: Donald Trump has just had an extraordinarily bad week, and Hillary Clinton an extraordinarily good one... But both Mrs. Clinton’s virtues and Mr. Trump’s vices have been obvious all along. How, then, did the race manage to get so close on the eve of the debate?

A lot of the answer, I’ve argued, lies in the behavior of the news media... But let us not let everyone else off the hook. Mr. Trump couldn’t have gotten as far as he has without the support, active or de facto, of many people who understand perfectly well ... what his election would mean, but have chosen not to take a stand.

Let’s start with the Republican political establishment, which is supporting Mr. Trump just as if he were a normal presidential nominee...

While almost all Republican officeholders have endorsed Mr. Trump, the same isn’t true of ... the G.O.P. intelligentsia..., policy experts, opinion writers, and so on. For the most part,... members of this group haven’t spoken up in support of this year’s Republican nominee. ...

But if you think that electing Mr. Trump would be a disaster, shouldn’t you be urging your fellow Americans to vote for his opponent, even if you don’t like her? After all, not voting for Mrs. Clinton — whether you don’t vote at all, or make a purely symbolic vote for a third-party candidate — is, in effect, giving half a vote to Mr. Trump.

To be fair, quite a few conservative intellectuals have accepted that logic, especially among foreign-policy types... But there have also been many who balked at doing the right thing...

And the response from sane Republican economists has been especially disappointing. Only charlatans and cranks have endorsed Mr. Trump, but only a handful have ... been willing to say that if keeping him out of the White House is important, you need to vote for Mrs. Clinton.

Finally, it’s dismaying to see the fecklessness of those on the left supporting third-party candidates. ... If polls are to be believed, something like a third of young voters intend to, in effect, opt out of this election. If they do, Mr. Trump might yet win.

In fact, the biggest danger from Mr. Trump’s terrible week is that it might encourage complacency and self-indulgence among voters who really, really wouldn’t want to see him in the White House. So remember: Your vote only counts if you cast it in a meaningful way.

Paul Krugman: How the Clinton-Trump Race Got Close

Hillary Clinton "got Gored":

How the Clinton-Trump Race Got Close, by Paul Krugman, NY Times: Monday’s presidential debate was a blowout... Hillary Clinton was knowledgeable, unflappable and — dare we say it? — likable. Donald Trump was ignorant, thin-skinned and boorish.

Yet on the eve of the debate, polls showed a close race. How ... could someone like Mr. Trump have been in striking position for the White House? (He may still be there, since we have yet to see what effect the debate had on the polls.)

Part of the answer is that a lot more Americans than we’d like to imagine are white nationalists... Indeed, implicit appeals to racial hostility have long been at the core of Republican strategy...

But while racially motivated voters are a bigger minority than we’d like to think, they are a minority. And as recently as August Mrs. Clinton held a commanding lead. Then her polls went into a swoon.

What happened? ... As I’ve written before, she got Gored. That is, like Al Gore in 2000, she ran into a buzz saw of adversarial reporting from the mainstream media, which treated relatively minor missteps as major scandals, and invented additional scandals out of thin air.

Meanwhile, her opponent’s genuine scandals and various grotesqueries were downplayed or whitewashed...

I still don’t fully understand this hostility, which wasn’t ideological. Instead, it had the feel of the cool kids in high school jeering at the class nerd. Sexism was surely involved but may not have been central, since the same thing happened to Mr. Gore.

In any case, those of us who remember the 2000 campaign expected the worst would follow the first debate: Surely much of the media would declare Mr. Trump the winner even if he lied repeatedly. ...

Then came the debate itself, which was almost unspinnable. Some people tried...

But ... tens of millions of Americans saw the candidates in action, directly, without a media filter. For many, the revelation wasn’t Mr. Trump’s performance, but Mrs. Clinton’s: The woman they saw bore little resemblance to the cold, joyless drone they’d been told to expect.

How much will it matter? My guess — but I could very well be completely wrong — is that it will matter a lot. ...

But things should never have gotten to this point, where so much depended on defying media expectations over the course of an hour and a half. And those who helped bring us here should engage in some serious soul-searching.

Trumponomics

Greg Mankiw:

Trumponomics: Regular readers of this blog know that I often disagree with Paul Krugman. But I come here today agree with a recent post of his on the analysis put out by two Trump economic advisers. The Trump advisers' analysis is truly disappointing (though perhaps not surprisingly so, given what the candidate has said over the course of the campaign).

Their analysis of trade deficits, starting on page 18, boils down to the following: We know that GDP=C+I+G+NX. NX is negative (the trade deficit). Therefore, if we somehow renegotiate trade deals and make NX rise to zero, GDP goes up! They calculate this will bring in $1.74 trillion in tax revenue over a decade.

But of course you can't model an economy just using the national income accounts identity. Even a freshman at the end of ec 10 knows that trade deficits go hand in hand with capital inflows. So an end to the trade deficit means an end to the capital inflow, which would affect interest rates, which in turn influence consumption and investment. ...

A General Theory Of Austerity?

Paul Krugman:

A General Theory Of Austerity?: Simon Wren-Lewis has an excellent new paper trying to explain the widespread resort to austerity in the face of a liquidity trap, which is exactly the moment when such policies do the most harm. His bottom line is that austerity was the result of right-wing opportunism, exploiting instinctive popular concern about rising government debt in order to reduce the size of the state.

I think this is right; but I would emphasize more than he does the extent to which both the general public and Very Serious People always assume that reducing deficits is the responsible thing to do. ...

Meanwhile, as someone who was in the trenches during the US austerity fights, I was struck by how readily mainstream figures who weren’t especially right-wing in general got sucked into the notion that debt reduction was THE central issue. Ezra Klein documented this phenomenon with respect to Bowles-Simpson:

For reasons I’ve never quite understood, the rules of reportorial neutrality don’t apply when it comes to the deficit. On this one issue, reporters are permitted to openly cheer a particular set of highly controversial policy solutions. At Tuesday’s Playbook breakfast, for instance, Mike Allen, as a straightforward and fair a reporter as you’ll find, asked Simpson and Bowles whether they believed Obama would do “the right thing” on entitlements — with “the right thing” clearly meaning “cut entitlements.” ...

VAT of Deplorables

Paul Krugman:

VAT of Deplorables: I’ve been writing about Donald Trump’s claim that Mexico’s value-added tax is an unfair trade policy, which is just really bad economics. ...

But it turns out that Trump wasn’t saying ignorant things off the top of his head: he was saying ignorant things fed to him by his incompetent economic advisers. Here’s the campaign white paper on economics. The VAT discussion is on pages 12-13 — and it’s utterly uninformed.

And it’s not the worst thing: there’s lots of terrible stuff in the white paper, at every level.

Should we be reassured that Trump wasn’t actually winging it here, just taking really bad advice? Not at all. This says that if he somehow becomes president, and decides to take the job seriously, it won’t help — because his judgment in advisers, his notion of who constitutes an expert, is as bad as his judgment on the fly.

Scoring the Trump Trade Plan: Magical Thinking

Marcus Noland at PIIE:

Scoring the Trump Trade Plan: Magical Thinking: Back in the 1970s, Gabriel Garcia Marquez, Isabelle Allende, and other Latin American writers developed a literary style featuring wild juxtapositions and metaphysical leaps that came to be known as magical realism. “Scoring the Trump Economic Plan: Trade, Regulatory, and Energy Policy Impacts (link is external),” by Peter Navarro and Wilbur Ross owes much to the genre.

It is a political document. The challenge for the authors is that ... Donald Trump will cost the US government $2.6 trillion in revenue over 10 years. Mr. Trump wants his tax proposal to be “revenue neutral” so his advisors need to fill that hole.

By their own reckoning they come close, finding $2.374 trillion in additional revenue. They do this by imputing positive growth effects to various trade, regulatory, and energy reforms and then calculating the tax raised on these increments to GDP. The imputed trade policy component of additional revenue is $1.74 trillion or almost three-quarters of the projected total. So trade policy is central to the Trump story.

Unfortunately, the thinking that gets them the $1.74 trillion figure is truly magical. The authors observe that between 1947 and 2001 (the good old days, when America was great), the economy grew at 3.5 percent annually. Since then it has grown at an average of 1.9 percent. They allude to the idea that demographics ... might have something to do with it, only to dismiss this explanation. They entirely ignore the ongoing debate about the sources of productivity growth and the possibility that the rate of technological change is slowing. Instead, they focus on trade. Or more specifically, “disastrous” trade agreements.

And how do they get that $1.74 trillion in revenue? They observe that the United States has a $500 billion deficit in merchandise goods and services…and then they make it disappear! (Luis Borges would be proud.) But don’t believe me, here it is in their own words (link is external)

...[long excerpt]...

Maybe it reads better in Spanish.

Economists generally believe that the magnitude of a nation’s trade deficit fundamentally reflects the difference between saving and investment—if you are consuming more than you produce, you run a deficit, if you produce more than you consume you run a surplus. Trade policy can affect the sectoral and geographic composition of the deficit, but in the long run, the trade balance is determined by the saving-investment balance. If you want to lower the nation’s trade deficit, increasing the saving rate, not launching a trade war would be the right place to start. But there is not a word of this in “Scoring the Trump Economic Plan: Trade, Regulatory, and Energy Policy Impacts.” It’s all perfidious foreigners and incompetent trade negotiators instead. Maybe that makes for a better plot. But it does not constitute a persuasive defense of a questionable tax plan or a solution to the trade deficit. Quite the opposite—it’s another instance of the type of magical thinking best reserved for fictional realities.

Trump On Trade

Paul Krugman:

Trump On Trade: For the most part,... the media consensus seems to be that Clinton won. This is a big deal: you know, just know, that they were primed to declare Trump the winner... But he was so bad and she so good that they couldn’t. ...

Trump on trade was ignorance all the way.

There were specifics: China is “devaluing” (not so — it was holding down the yuan five years ago, but these days it’s intervening to keep the yuan up, not down.) There was this, on Mexico:

Let me give you the example of Mexico. They have a VAT tax. We’re on a different system. When we sell into Mexico, there’s a tax. When they sell in — automatic, 16 percent, approximately. When they sell into us, there’s no tax. It’s a defective agreement. It’s been defective for a long time, many years, but the politicians haven’t done anything about it.

Gah. A VAT is basically a sales tax. It is levied on both domestic and imported goods, so that it doesn’t protect against imports — which is why it’s allowed under international trade rules, and not considered a protectionist trade policy. I get that Trump is not an economist — hoo boy, is he not an economist — but this is one of his signature issues, so you might have expected him to learn a few facts.

More broadly, Trump’s whole view on trade is that other people are taking advantage of us — that it’s all about dominance, and that we’re weak. And even if you think we’ve pushed globalization too far, even if you are worried about the effects of trade on income distribution, that’s just a foolish way to think about the problem.

So don’t score Trump as somehow winning on trade. Yes, he blustered more confidently on that subject than on anything else. But he was talking absolute garbage even there.

Trump Picks Top Climate Skeptic to Lead EPA Transition

Robin Bravender at Scientific American (originally at ClimateWire):

Trump Picks Top Climate Skeptic to Lead EPA Transition: Donald Trump has selected one of the best-known climate skeptics to lead his U.S. EPA transition team... Myron Ebell, director of the Center for Energy and Environment at the conservative Competitive Enterprise Institute, is spearheading Trump’s transition plans for EPA, the sources said. ... Ebell’s role is likely to infuriate environmentalists and Democrats but buoy critics of Obama’s climate rules.

Ebell ... is known for his prolific writings that question what he calls climate change “alarmism.” ...

Ebell has called the Obama administration’s Clean Power Plan for greenhouse gases illegal and said that Obama joining the Paris climate treaty “is clearly an unconstitutional usurpation of the Senate’s authority.”

He told Vanity Fair in 2007, “There has been a little bit of warming ... but it’s been very modest and well within the range for natural variability, and whether it’s caused by human beings or not, it’s nothing to worry about.”

Ebell’s views appear to square with Trump’s when it comes to EPA’s agenda. Trump has called global warming “bullshit” and he has said he would “cancel” the Paris global warming accord and roll back President Obama’s executive actions on climate change...

Paul Krugman: Progressive Family Values

"An attempt to focus on the problems of the real America":

Progressive Family Values, by Paul Krugman, NY Times: Here’s what happens every election cycle: pundits demand that politicians offer the country new ideas. Then, if and when a candidate actually does propose innovative policies, the news media pays little attention, chasing scandals or, all too often, fake scandals instead. Remember the extensive coverage last month, when Hillary Clinton laid out an ambitious mental health agenda? Neither do I. ...

Still, there really are some interesting new ideas coming from one of the campaigns, and they arguably tell us a lot about how Mrs. Clinton would govern.

Wait... Aren’t Republicans also offering new ideas? Well, I guess proposing to round up and deport 11 million people counts as a new idea. And Republicans ... seem to have moved past ... proposing tax cuts that deliver most of their benefits to the wealthy. Now they are, instead, proposing tax cuts that deliver all of their benefits to the 1 percent — O.K., actually just 99.6 percent, but who’s counting?

Back to Mrs. Clinton: Much of her policy agenda could be characterized as a third Obama term, building on the center-left policies of the past eight years. ... For example..., her proposed enhancements to the Affordable Care Act would extend health coverage to around 10 million more people, whereas Donald Trump’s proposed repeal ... would cause around 20 million people to lose coverage.

In addition..., Mrs. Clinton is pushing a distinctive agenda centered around support for working parents. ... One piece ... involves 12 weeks of paid family leave to care for new children, help sick relatives, or recover from illness or injury. ...

Another, even more striking piece involves helping families with young children in several ways, especially ... to hold down the cost of child care (the campaign sets a target of no more than 10 percent of income.) ...

But why should helping working parents be such a priority? It looks to me like an attempt to focus on the problems of the real America — not the white, rural “real America” of right-wing fantasies... And that America is one in which ... stay-at-home mothers are a distinct minority, and in which the problem of how to take care of children while making ends meet is central to many people’s lives. ...

So anyone who complains that there aren’t big new ideas in this campaign simply isn’t paying attention. One candidate, at least, has ideas that would make a big, positive difference to millions of American families.

Paul Krugman: The Lying Game

 

The press needs to tell the truth about lies:

The Lying Game, by Paul Krugman, NY Times: Here’s what we can be fairly sure will happen in Monday’s presidential debate: Donald Trump will lie repeatedly and grotesquely, on a variety of subjects. Meanwhile, Hillary Clinton might say a couple of untrue things. Or she might not.

Here’s what we don’t know: Will the moderators step in when Mr. Trump delivers one of his well-known, often reiterated falsehoods? If he claims, yet again, to have opposed the Iraq war from the beginning ... will he be called on it? If he claims to have renounced birtherism years ago, will the moderators note that he was still at it just a few months ago? (In fact, he already seems to be walking back his admission last week that President Obama was indeed born in America.) If he says one more time that America is the world’s most highly taxed country — which it isn’t — will anyone other than Mrs. Clinton say that it isn’t? And will media coverage after the debate convey the asymmetry of what went down?

You might ask how I can be sure that one candidate will be so much more dishonest than the other. ... PolitiFact has examined 258 Trump statements and 255 Clinton statements and classified them on a scale ranging from “True” to “Pants on Fire.” ... And they show two candidates living in different moral universes when it comes to truth-telling. Mr. Trump had 48 Pants on Fire ratings, Mrs. Clinton just six; the G.O.P. nominee had 89 False ratings, the Democrat 27. ...

And if the debate looks anything like the campaign so far, we know what that will mean: a news analysis that devotes at least five times as much space to Mr. Trump’s falsehoods as to Mrs. Clinton’s.

If your reaction is, “Oh, they can’t do that — it would look like partisan bias,” you have just demonstrated the huge problem with news coverage during this election. For I am not calling on the news media to take a side; I’m just calling on it to report what is actually happening, without regard for party. In fact, any reporting that doesn’t accurately reflect the huge honesty gap between the candidates amounts to misleading readers, giving them a distorted picture that favors the biggest liar. ...

I’m not calling on the news media to take sides; journalists should simply do their job, which is to report the facts. ...

Why Trump’s Economic Policies Would Be a Disaster

I have a new column:

4 Reasons Trump’s Economic Policies Would Be a Disaster: Donald Trump’s chances of becoming president are higher than I ever expected them to be, and there is a chance that he will be able to put his economic plans into place. He claims his economic policies will be good for the working class, but in reality his plans for high income tax cuts and deregulation adhere closely to standard Republican ideology that has favored the wealthy and powerful. Even his plans for international trade, an area where he claims populist support, would hurt far more people than it would help. Here are the four areas where Trump’s economic plans concern me the most...

[One of the four echoes what I wrote about yesterday at CBS.]

The Curious Confidence of Charlatans and Cranks

Paul Krugman:

The Curious Confidence of Charlatans and Cranks: Brad DeLong tells us about a letter being circulated by economists for Trump — although, as he notes, they don’t dare say that, and describe themselves only as critics of Clinton. Several things are notable about the letter, including the absence of many usually reliable Republican hired guns economists. But they do have a Nobelist, Eugene Fama, at the top. And the substance of the letter — government bad! taxes and regulation bad! free markets rool like Reagan! — is pretty standard.

What’s curious is why, exactly, anyone should believe this story. In recent memory, GW Bush failed to deliver the promised Bush boom and eventually presided over disaster; the Obama economy has not been all one might have hoped, but as many have noted, the job growth of the past three years and the income growth that has finally emerged would have been hailed as triumphs if Mitt Romney were president. Taking the longer view, Clinton > Reagan and Obama > Bush, by almost any measure. Why doesn’t this reality seem to register?

One big answer, I think, lies in profound ignorance, in the insistence that history is what it was supposed to be, not what it was. ...

And let’s be clear: this is a problem that won’t go away even if Trump goes down to defeat. People like Paul Ryan are barely more in touch with reality...