Archive for the ‘Krugman’ Category

Blow and Krugman

August 18, 2014

In “Frustration in Ferguson” Mr. Blow says beneath the protests over the killing of Michael Brown are deep layers of injustice.  In “Why We Fight Wars” Prof. Krugman says conquest doesn’t pay, but political leaders don’t seem to care.  Here’s Mr. Blow:

The response to the killing of the unarmed teenager Michael Brown — whom his family called the “gentle giant” — by the Ferguson, Mo., police officer Darren Wilson — who was described by his police chief as “a gentle, quiet man” and “a gentleman” — has been anything but genteel.

There have been passionate but peaceful protests to be sure, but there has also been some violence and looting. Police forces in the town responded with an outlandish military-like presence more befitting Baghdad than suburban Missouri.

There were armored vehicles, flash grenades and a seemingly endless supply of tear gas — much of it Pentagon trickle-down. There were even officers perched atop vehicles, in camouflage and body armor, pointing weapons in the direction of peaceful protesters.

Let me be clear here: Pointing a gun at an innocent person is an act of violence and provocation.

Americans were aghast at the images, and condemnation was swift and bipartisan. The governor put the state’s Highway Patrol in charge of security. Tensions seemed to subside, for a day.

But then on Friday, when releasing the name of the officer who did the shooting, the police chief also released details and images of a robbery purporting to show Brown stealing cigars from a local convenience store and pushing a store employee in the process.

The implication seemed to be that Wilson was looking for the person who committed the convenience store crime when he encountered Brown. But, later in the day, the chief said Wilson didn’t know Brown was a robbery suspect when they encountered each other.

Something seemed off. The police chief’s decision to release the details of the robbery and the images — without releasing an image of Wilson — struck many as perfidious. In a strongly worded statement, Brown’s family and attorneys accused the chief of attempting to assassinate the character of the dead teen.

Some also deemed it an attempt at distraction from the central issue: An officer shot an unarmed teenager who witnesses claim had raised his hands in surrender when at least some of the shots were fired, which the family and its attorneys called “a brutal assassination of his person in broad daylight.”

The Justice Department is even investigating whether Brown’s civil rights were violated. This would include the excessive use of force. As the department makes clear, this “does not require that any racial, religious, or other discriminatory motive existed.”

It’s impossible to truly know the chief’s motives for his decision to release the robbery information at the same time as the officer’s name, but the effect was clear: That night, a fragile peace was shattered. There was more looting, although peaceful protesters struggled heroically to block the violent ones.

On Saturday, the governor issued a midnight curfew for the town. A small band of protesters defied it and some were arrested.

The community is struggling to find its way back to normalcy, but it would behoove us to dig a bit deeper into the underlying frustrations that cause a place like Ferguson to erupt in the first place and explore the untenable nature of our normal.

Yes, there are the disturbingly repetitive and eerily similar circumstances of many cases of unarmed black people being killed by police officers. This reinforces black people’s beliefs — supportable by actual data — that blacks are treated less fairly by the police.

But I submit that this is bigger than that. The frustration we see in Ferguson is about not only the present act of perceived injustice but also the calcifying system of inequity — economic, educational, judicial — drawn largely along racial lines.

In 1951, Langston Hughes began his poem “Harlem” with a question: “What happens to a dream deferred?” Today, I must ask: What happens when one desists from dreaming, when the very exercise feels futile?

The discussion about issues in the black community too often revolves around a false choice: systemic racial bias or poor personal choices. In fact, these factors are interwoven like the fingers of clasped hands. People make choices within the context of their circumstances and those circumstances are affected — sometimes severely — by bias.

These biases do material damage as well as help breed a sense of disenfranchisement and despair, which in turn can have a depressive effect on aspiration and motivation. This all feeds back on itself.

If we want to truly address the root of the unrest in Ferguson, we have to ask ourselves how we can break this cycle.

Otherwise, Hughes’s last words of “Harlem,” referring to the dream deferred, will continue to be prophetic: “does it explode?”

Now here’s Prof. Krugman:

A century has passed since the start of World War I, which many people at the time declared was “the war to end all wars.” Unfortunately, wars just kept happening. And with the headlines from Ukraine getting scarier by the day, this seems like a good time to ask why.

Once upon a time wars were fought for fun and profit; when Rome overran Asia Minor or Spain conquered Peru, it was all about the gold and silver. And that kind of thing still happens. In influential research sponsored by the World Bank, the Oxford economist Paul Collier has shown that the best predictor of civil war, which is all too common in poor countries, is the availability of lootable resources like diamonds. Whatever other reasons rebels cite for their actions seem to be mainly after-the-fact rationalizations. War in the preindustrial world was and still is more like a contest among crime families over who gets to control the rackets than a fight over principles.

If you’re a modern, wealthy nation, however, war — even easy, victorious war — doesn’t pay. And this has been true for a long time. In his famous 1910 book “The Great Illusion,” the British journalist Norman Angell argued that “military power is socially and economically futile.” As he pointed out, in an interdependent world (which already existed in the age of steamships, railroads, and the telegraph), war would necessarily inflict severe economic harm even on the victor. Furthermore, it’s very hard to extract golden eggs from sophisticated economies without killing the goose in the process.

We might add that modern war is very, very expensive. For example, by any estimate the eventual costs (including things like veterans’ care) of the Iraq war will end up being well over $1 trillion, that is, many times Iraq’s entire G.D.P.

So the thesis of “The Great Illusion” was right: Modern nations can’t enrich themselves by waging war. Yet wars keep happening. Why?

One answer is that leaders may not understand the arithmetic. Angell, by the way, often gets a bum rap from people who think that he was predicting an end to war. Actually, the purpose of his book was to debunk atavistic notions of wealth through conquest, which were still widespread in his time. And delusions of easy winnings still happen. It’s only a guess, but it seems likely that Vladimir Putin thought that he could overthrow Ukraine’s government, or at least seize a large chunk of its territory, on the cheap — a bit of deniable aid to the rebels, and it would fall into his lap.

And for that matter, remember when the Bush administration predicted that overthrowing Saddam and installing a new government would cost only $50 billion or $60 billion?

The larger problem, however, is that governments all too often gain politically from war, even if the war in question makes no sense in terms of national interests.

Recently Justin Fox of the Harvard Business Review suggested that the roots of the Ukraine crisis may lie in the faltering performance of the Russian economy. As he noted, Mr. Putin’s hold on power partly reflects a long run of rapid economic growth. But Russian growth has been sputtering — and you could argue that the Putin regime needed a distraction.

Similar arguments have been made about other wars that otherwise seem senseless, like Argentina’s invasion of the Falkland Islands in 1982, which is often attributed to the then-ruling junta’s desire to distract the public from an economic debacle. (To be fair, some scholars are highly critical of this claim.)

And the fact is that nations almost always rally around their leaders in times of war, no matter how foolish the war or how awful the leaders. Argentina’s junta briefly became extremely popular during the Falklands war. For a time, the “war on terror” took President George W. Bush’s approval to dizzying heights, and Iraq probably won him the 2004 election. True to form, Mr. Putin’s approval ratings have soared since the Ukraine crisis began.

No doubt it’s an oversimplification to say that the confrontation in Ukraine is all about shoring up an authoritarian regime that is stumbling on other fronts. But there’s surely some truth to that story — and that raises some scary prospects for the future.

Most immediately, we have to worry about escalation in Ukraine. All-out war would be hugely against Russia’s interests — but Mr. Putin may feel that letting the rebellion collapse would be an unacceptable loss of face.

And if authoritarian regimes without deep legitimacy are tempted to rattle sabers when they can no longer deliver good performance, think about the incentives China’s rulers will face if and when that nation’s economic miracle comes to an end — something many economists believe will happen soon.

Starting a war is a very bad idea. But it keeps happening anyway.

Brooks and Krugman

August 15, 2014

In “The Bacall Standard” Bobo says that with her steel spine, gutsy flirtation, and unmistakable presence, Lauren Bacall created a new film noir feminine ideal.  Prof. Krugman, in “The Forever Slump,” says the United States should learn from Europe’s experience of raising interest rates too soon.   Here’s Bobo:

“I believe the really good people would be reasonably successful in any circumstance,” the detective writer Raymond Chandler wrote in his notebook in 1949. If Shakespeare came back today, “he would have refused to die in a corner.”

Shakespeare, Chandler theorized, would have gone into the movie business and made its tired formulas fresh. He wouldn’t have cared about the vulgarity of Hollywood, Chandler thought, “because he would know that without some vulgarity there is no complete man. He would have hated refinement, as such, because it is always a withdrawal, a shrinking, and he was much too tough to shrink from anything.”

Chandler had a tough, urban sensibility, and he created his own vision of the complete modern man, especially in the image of his most famous character, Philip Marlowe. Every new type of hero is like a new word added to the common vocabulary. It gives people a new possibility to emulate and a new standard of excellence. Chandler succeeded in giving his era a compelling male ideal.

Chandler was not particularly kind to women, though. It was up to the director Howard Hawks and his star, Lauren Bacall — who died this week — to give that era a counterpart female ideal, a hero both tough and tender, urbane and fast-talking, but also vulnerable and amusing.

Vivian Rutledge, the lead female character in the movie version of Chandler’s “The Big Sleep,” is stuck in a classic film noir world. Every situation is confusing, shadowed and ambiguous. Every person is dappled with virtue and vice. Society rewards the wrong things, so the ruthless often get rich while the innocent get it in the neck.

The lead character, played by Bacall, emerges from an ambiguous past, but rises aristocratically above it. She has her foibles; she’s manipulative and spoiled. But she’s strong. She seems physically towering, with broad shoulders and a rich, mature voice that is astounding, given that Bacall was all of 20 years old when she made the picture.

She projects a hardened wisdom about the way the world works, and an ironic gaze. Her most outstanding feature is near perfect self-possession. She is composed and self-assured under stress. You get the sense that she has spent her life effortlessly wrapping men around her fingers. Her self-command must have seemed simultaneously masculine and feminine at the time.

The movie’s plot is famously incomprehensible. But you get to watch Vivian meet her equal. The badinage between Bacall’s Vivian and Humphrey Bogart’s Marlowe is a cross between swordplay and foreplay. (They were married during the drawn-out filming process.)

The heiress greets Marlowe with a put-down: “So you’re a private detective. I didn’t know they existed, except in books, or else they were greasy little men snooping around hotel corridors.”

But he’s self-sufficient enough to stand up to her. He wins her over with a series of small rejections. And he can match her verbal pyrotechnics. When she says she doesn’t like his manners, he comes straight back at her: “I’m not crazy about yours. … I don’t mind if you don’t like my manners. I don’t like them myself. They’re pretty bad. I grieve over them long winter evenings.”

A connoisseur of love games, she’s soon enjoying the competition. The verbal dueling becomes a way of testing each other’s composure and finally turns into pure come-on, which, of course, she leads. The most famous exchange in the movie is allegedly about horse racing:

Bacall: “Speaking of horses, I like to play them myself. But I like to see them work out a little first. See if they’re front-runners or come-from-behind. … I’d say you don’t like to be rated. You like to get out in front, open up a lead, take a little breather in the back stretch and then come home free.”

Bogart: “You’ve got a touch of class, but I don’t know how far you can go.”

Bacall: “A lot depends on who’s in the saddle.”

By the end, they are united by a moral sensibility. Both characters are constantly making character distinctions, identifying who’s legit and who’s not. The distinctions that matter in their world are not between rich and poor, or pure and impure; they are between those who are faithful to the code of their professions and those who aren’t; between those who are loyal and honest and those who are petty, snobbish and phony.

The feminine ideal in “The Big Sleep” is, of course, dated now. But what’s lasting is a way of being in a time of disillusion. At a cynical moment when many had come to distrust institutions, and when the world seemed incoherent, Bacall and Bogart created a non-self-righteous way to care about virtue. Their characters weren’t prissy or snobbish in the slightest. They were redeemed by their own honor code, which they kept up, cocktail after cocktail.

Bobo apparently couldn’t bring himself to mention the fact that Bacall was a life-long liberal…  Now here’s Prof. Krugman:

It’s hard to believe, but almost six years have passed since the fall of Lehman Brothers ushered in the worst economic crisis since the 1930s. Many people, myself included, would like to move on to other subjects. But we can’t, because the crisis is by no means over. Recovery is far from complete, and the wrong policies could still turn economic weakness into a more or less permanent depression.

In fact, that’s what seems to be happening in Europe as we speak. And the rest of us should learn from Europe’s experience.

Before I get to the latest bad news, let’s talk about the great policy argument that has raged for more than five years. It’s easy to get bogged down in the details, but basically it has been a debate between the too-muchers and the not-enoughers.

The too-muchers have warned incessantly that the things governments and central banks are doing to limit the depth of the slump are setting the stage for something even worse. Deficit spending, they suggested, could provoke a Greek-style crisis any day now — within two years, declared Alan Simpson and Erskine Bowles some three and a half years ago. Asset purchases by the Federal Reserve would “risk currency debasement and inflation,” declared a who’s who of Republican economists, investors, and pundits in a 2010 open letter to Ben Bernanke.

The not-enoughers — a group that includes yours truly — have argued all along that the clear and present danger is Japanification rather than Hellenization. That is, they have warned that inadequate fiscal stimulus and a premature turn to austerity could lead to a lost decade or more of economic depression, that the Fed should be doing even more to boost the economy, that deflation, not inflation, was the great risk facing the Western world.

To say the obvious, none of the predictions and warnings of the too-muchers have come to pass. America never experienced a Greek-type crisis of soaring borrowing costs. In fact, even within Europe the debt crisis largely faded away once the European Central Bank began doing its job as lender of last resort. Meanwhile, inflation has stayed low.

However, while the not-enoughers were right to dismiss warnings about interest rates and inflation, our concerns about actual deflation haven’t yet come to pass. This has provoked a fair bit of rethinking about the inflation process (if there has been any rethinking on the other side of this argument, I haven’t seen it), but not-enoughers continue to worry about the risks of a Japan-type quasi-permanent slump.

Which brings me to Europe’s woes.

On the whole, the too-muchers have had much more influence in Europe than in the United States, while the not-enoughers have had no influence at all. European officials eagerly embraced now-discredited doctrines that allegedly justified fiscal austerity even in depressed economies (although America has de facto done a lot of austerity, too, thanks to the sequester and cuts at the state and local level). And the European Central Bank, or E.C.B., not only failed to match the Fed’s asset purchases, it actually raised interest rates back in 2011 to head off the imaginary risk of inflation.

The E.C.B. reversed course when Europe slid back into recession, and, as I’ve already mentioned, under Mario Draghi’s leadership, it did a lot to alleviate the European debt crisis. But this wasn’t enough. The European economy did start growing again last year, but not enough to make more than a small dent in the unemployment rate.

And now growth has stalled, while inflation has fallen far below the E.C.B.’s target of 2 percent, and prices are actually falling in debtor nations. It’s really a dismal picture. Mr. Draghi & Co. need to do whatever they can to try to turn things around, but given the political and institutional constraints they face, Europe will arguably be lucky if all it experiences is one lost decade.

The good news is that things don’t look that dire in America, where job creation seems finally to have picked up and the threat of deflation has receded, at least for now. But all it would take is a few bad shocks and/or policy missteps to send us down the same path.

The good news is that Janet Yellen, the Fed chairwoman, understands the danger; she has made it clear that she would rather take the chance of a temporary rise in the inflation rate than risk hitting the brakes too soon, the way the E.C.B. did in 2011. The bad news is that she and her colleagues are under a lot of pressure to do the wrong thing from the too-muchers, who seem to have learned nothing from being wrong year after year, and are still agitating for higher rates.

There’s an old joke about the man who decides to cheer up, because things could be worse — and sure enough, things get worse. That’s more or less what happened to Europe, and we shouldn’t let it happen here.

Blow and Krugman

August 11, 2014

In “Intervening in Our Name” Mr. Blow says Americans need to perk up and pay attention to global issues.  This is true, but unlikely to happen given the state of our media.  Prof. Krugman, in “Phosphorus and Freedom” Prof. Krugman says free markets can’t solve all our problems. Just ask Toledo.  Here’s Mr. Blow:

Americans, it must be admitted, are not always the most engaged people on world issues. It’s a sad truth.

But the world, at this moment, is aflame, and more Americans must perk up and pay attention. Before we know it, we will have already been drawn into these conflicts.

On Thursday, President Obama said he had authorized limited airstrikes against the Islamic State in Iraq and Syria, known as ISIS, which the president said threatens some citizens of northern Iraq with “genocide.” The president, ever-conscious of his own commitment to extract us from the war in Iraq and of American weariness about our re-engaging, added: “As commander in chief, I will not allow the United States to be dragged into another war in Iraq.”

Most Americans probably had not heard of ISIS until a few months ago, but we have known about the civil war in Syria for years. Many Americans, understandably, didn’t want to engage in another foreign conflict, but from this region sprang ISIS. We, understandably, were eager to exit Iraq, but into that void flowed ISIS.

Russia annexed the Crimea, a commercial airliner was shot down over eastern Ukraine — likely by Russian-backed Ukrainian separatists — and now Russia appears to be gathering a menacing troop presence on the Ukrainian border. As Reuters reported last week:

“Russia has amassed around 20,000 combat-ready troops on Ukraine’s eastern border and could use the pretext of a humanitarian or peacekeeping mission to invade, NATO said.”

The on-again-off-again cease-fires in Gaza have yet to produce a lasting peace. Before last week’s cease-fire,  according to United Nations figures, there had been “1,814 Palestinians killed, including at least 1,312 civilians, of whom 408 are children and 214 are women.” By comparison, the report said there were “67 Israelis killed, including 64 soldiers, two civilians and one foreign national.”

An NBC News/Wall Street Journal survey released last week asked Americans if they were satisfied with, dissatisfied with or didn’t know enough about how the United States was dealing with many of these topics, and the answers were thoroughly depressing.

On ISIS in Iraq, Syria, the Russia-Ukraine conflict and Israel and Hamas, at least 32 percent — and as high as 42 percent in the case of Syria — said they didn’t know enough to have an opinion. Of respondents who did have an opinion, those who were dissatisfied far outnumbered those who were satisfied, and most of the dissatisfied said their dissatisfaction was rooted in their belief that the United States wasn’t involved enough.

More Americans need to be more engaged, because these conflicts are complicated. There are no easy answers. Sometimes there will be no clear choices between good guys and bad guys but only choices among lesser demons. Sometimes conflicts are a swirl of history, ambition, grievance, vengeance and egos. Sometimes actors can only see righteousness in their wrong. Sometimes nobility and savagery coexist.

But if America, as the world’s last remaining superpower, is to faithfully play a role — if we must play that role — as a check against tyranny and terror in the world, its citizenry must be up to the task of discernment.

You don’t necessarily have to be privy to national security reports to be part of the national conversation. Those who know more don’t always know better. It has been my experience that truth has a way of revealing itself to those willing to search for it.

We have a responsibility to stay abreast of the conflicts in the world so that we can support or reject our leaders’ efforts to navigate them.

Abdicating that responsibility inevitably seems to grant more power to the war machine and its warmongers who have never seen a fight they didn’t want to join.

But we continue to be reminded that what’s left in the wake of force can be worse than what existed before it. Sadly, not every population can be freed, nor every life saved, by an exterior force when threatened by the reign of dictators or the rise of terrorists. This is a hard truth to swallow in the land of the free and home of the brave. Our hearts hurt for the oppressed and the slain.

But sometimes we must use softer power. As the president said in May at West Point: “Just because we have the best hammer does not mean that every problem is a nail.”

Sometimes sanctions will be the more appropriate path, sometimes appeals for peace. And regardless of our approach, we have no guarantees of success. There are limits to all expressions of power. Sometimes we can only influence — but not dictate — events.

Sometimes the best we can do is to maintain constant pressure, so that we slowly bend the world toward freedom and justice.

Whatever our politics, we must at least make an effort to know enough about the issues to take a position.

And now here’s Prof. Krugman:

In the latest Times Magazine, Robert Draper profiled youngish libertarians — roughly speaking, people who combine free-market economics with permissive social views — and asked whether we might be heading for a “libertarian moment.” Well, probably not. Polling suggests that young Americans tend, if anything, to be more supportive of the case for a bigger government than their elders. But I’d like to ask a different question: Is libertarian economics at all realistic?

The answer is no. And the reason can be summed up in one word: phosphorus.

As you’ve probably heard, the City of Toledo recently warned its residents not to drink the water. Why? Contamination from toxic algae blooms in Lake Erie, largely caused by the runoff of phosphorus from farms.

When I read about that, it rang a bell. Last week many Republican heavy hitters spoke at a conference sponsored by the blog Red State — and I remembered an antigovernment rant a few years back from Erick Erickson, the blog’s founder. Mr. Erickson suggested that oppressive government regulation had reached the point where citizens might want to “march down to their state legislator’s house, pull him outside, and beat him to a bloody pulp.” And the source of his rage? A ban on phosphates in dishwasher detergent. After all, why would government officials want to do such a thing?

An aside: The states bordering Lake Erie banned or sharply limited phosphates in detergent long ago, temporarily bringing the lake back from the brink. But farming has so far evaded effective controls, so the lake is dying again, and it will take more government intervention to save it.

The point is that before you rage against unwarranted government interference in your life, you might want to ask why the government is interfering. Often — not always, of course, but far more often than the free-market faithful would have you believe — there is, in fact, a good reason for the government to get involved. Pollution controls are the simplest example, but not unique.

Smart libertarians have always realized that there are problems free markets alone can’t solve — but their alternatives to government tend to be implausible. For example, Milton Friedman famously called for the abolition of the Food and Drug Administration. But in that case, how would consumers know whether their food and drugs were safe? His answer was to rely on tort law. Corporations, he claimed, would have the incentive not to poison people because of the threat of lawsuits.

So, do you believe that would be enough? Really? And, of course, people who denounce big government also tend to call for tort reform and attack trial lawyers.

More commonly, self-proclaimed libertarians deal with the problem of market failure both by pretending that it doesn’t happen and by imagining government as much worse than it really is. We’re living in an Ayn Rand novel, they insist. (No, we aren’t.) We have more than a hundred different welfare programs, they tell us, which are wasting vast sums on bureaucracy rather than helping the poor. (No, we don’t, and no, they aren’t.)

I’m often struck, incidentally, by the way antigovernment clichés can trump everyday experience. Talk about the role of government, and you invariably have people saying things along the lines of, “Do you want everything run like the D.M.V.?” Experience varies — but my encounters with New Jersey’s Motor Vehicle Commission have generally been fairly good (better than dealing with insurance or cable companies), and I’m sure many libertarians would, if they were honest, admit that their own D.M.V. dealings weren’t too bad. But they go for the legend, not the fact.

Libertarians also tend to engage in projection. They don’t want to believe that there are problems whose solution requires government action, so they tend to assume that others similarly engage in motivated reasoning to serve their political agenda — that anyone who worries about, say, environmental issues is engaged in scare tactics to further a big-government agenda. Paul Ryan, the chairman of the House Budget Committee, doesn’t just think we’re living out the plot of “Atlas Shrugged”; he asserts that all the fuss over climate change is just “an excuse to grow government.”

As I said at the beginning, you shouldn’t believe talk of a rising libertarian tide; despite America’s growing social liberalism, real power on the right still rests with the traditional alliance between plutocrats and preachers. But libertarian visions of an unregulated economy do play a significant role in political debate, so it’s important to understand that these visions are mirages. Of course some government interventions are unnecessary and unwise. But the idea that we have a vastly bigger and more intrusive government than we need is a foolish fantasy.

Brooks and Krugman

August 8, 2014

Oh FSM help us, Bobo has produced another “think” piece.  As if…  In “Introspective or Narcissistic?” he gurgles that the answer to that question might be found in whether you keep a journal.  In the comments “ailun99″ from Wisconsin has a question:  “I’m wondering what makes Mr. Brooks feel like he has enough expertise on this topic to write this?”  Good question.  Prof. Krugman says “Inequality is a Drag,” and that the gap between the rich and poor in the United States has grown so wide that it is inflicting a lot of economic damage and makes a new case for trickle-up economics.  Here’s Bobo:

Some people like to keep a journal. Some people think it’s a bad idea.

People who keep a journal often see it as part of the process of self-understanding and personal growth. They don’t want insights and events to slip through their minds. They think with their fingers and have to write to process experiences and become aware of their feelings.

People who oppose journal-keeping fear it contributes to self-absorption and narcissism. C.S. Lewis, who kept a journal at times, feared that it just aggravated sadness and reinforced neurosis. Gen. George Marshall did not keep a diary during World War II because he thought it would lead to “self-deception or hesitation in reaching decisions.”

The question is: How do you succeed in being introspective without being self-absorbed?

Psychologists and others have given some thought to this question. The upshot of their work is that there seems to be a paradox at the heart of introspection. The self is something that can be seen more accurately from a distance than from close up. The more you can yank yourself away from your own intimacy with yourself, the more reliable your self-awareness is likely to be.

The problem is that the mind is vastly deep, complex and variable. As Immanuel Kant famously put it, “We can never, even by the strictest examination, get completely behind the secret springs of action.” At the same time, your self-worth and identity are at stake in every judgment you make about yourself.

This combination of unfathomability and “at stakeness” is a perfect breeding ground for self-deception, rationalization and motivated reasoning.

When people examine themselves from too close, they often end up ruminating or oversimplifying. Rumination is like that middle-of-the-night thinking — when the rest of the world is hidden by darkness and the mind descends into a spiral of endless reaction to itself. People have repetitive thoughts, but don’t take action. Depressed ruminators end up making themselves more depressed.

Oversimplifiers don’t really understand themselves, so they just invent an explanation to describe their own desires. People make checklists of what they want in a spouse and then usually marry a person who is nothing like their abstract criteria. Realtors know that the house many people buy often has nothing in common with the house they thought they wanted when they started shopping.

We are better self-perceivers if we can create distance and see the general contours of our emergent system selves — rather than trying to unpack constituent parts. This can be done in several ways.

First, you can distance yourself by time. A program called Critical Incident Stress Debriefing had victims of trauma write down their emotions right after the event. (The idea was they shouldn’t bottle up their feelings.) But people who did so suffered more post-traumatic stress and were more depressed in the ensuing weeks. Their intimate reflections impeded healing and froze the pain. But people who write about trauma later on can place a broader perspective on things. Their lives are improved by the exercise.

Second, we can achieve distance from self through language. We’re better at giving other people good advice than at giving ourselves good advice, so it’s smart, when trying to counsel yourself, to pretend you are somebody else. This can be done a bit even by thinking of yourself in the third person. Work by Ozlem Ayduk and Ethan Kross finds that people who view themselves from a self-distanced perspective are better at adaptive self-reflection than people who view themselves from a self-immersed perspective.

Finally, there is narrative. Timothy Wilson of the University of Virginia suggests in his book “Strangers to Ourselves” that we shouldn’t see ourselves as archaeologists, minutely studying each feeling and trying to dig deep into the unconscious. We should see ourselves as literary critics, putting each incident in the perspective of a longer life story. The narrative form is a more supple way of understanding human processes, even unconscious ones, than rationalistic analysis.

Wilson writes, “The point is that we should not analyze the information [about our feelings] in an overly deliberate, conscious manner, constantly making explicit lists of pluses and minuses. We should let our adaptive unconscious do the job of finding reliable feelings and then trust those feelings, even if we cannot explain them entirely.”

Think of one of those Chuck Close self-portraits. The face takes up the entire image. You can see every pore. Some people try to introspect like that. But others see themselves in broader landscapes, in the context of longer narratives about forgiveness, or redemption or setback and ascent. Maturity is moving from the close-up to the landscape, focusing less on your own supposed strengths and weaknesses and more on the sea of empathy in which you swim, which is the medium necessary for understanding others, one’s self, and survival.

My guess is that poor Bobo is going through a really tough midlife crisis.  I just wish he’d keep it to himself.  Here’s Prof. Krugman:

For more than three decades, almost everyone who matters in American politics has agreed that higher taxes on the rich and increased aid to the poor have hurt economic growth.

Liberals have generally viewed this as a trade-off worth making, arguing that it’s worth accepting some price in the form of lower G.D.P. to help fellow citizens in need. Conservatives, on the other hand, have advocated trickle-down economics, insisting that the best policy is to cut taxes on the rich, slash aid to the poor and count on a rising tide to raise all boats.

But there’s now growing evidence for a new view — namely, that the whole premise of this debate is wrong, that there isn’t actually any trade-off between equity and inefficiency. Why? It’s true that market economies need a certain amount of inequality to function. But American inequality has become so extreme that it’s inflicting a lot of economic damage. And this, in turn, implies that redistribution — that is, taxing the rich and helping the poor — may well raise, not lower, the economy’s growth rate.

You might be tempted to dismiss this notion as wishful thinking, a sort of liberal equivalent of the right-wing fantasy that cutting taxes on the rich actually increases revenue. In fact, however, there is solid evidence, coming from places like the International Monetary Fund, that high inequality is a drag on growth, and that redistribution can be good for the economy.

Earlier this week, the new view about inequality and growth got a boost from Standard & Poor’s, the rating agency, which put out a report supporting the view that high inequality is a drag on growth. The agency was summarizing other people’s work, not doing research of its own, and you don’t need to take its judgment as gospel (remember its ludicrous downgrade of United States debt). What S.& P.’s imprimatur shows, however, is just how mainstream the new view of inequality has become. There is, at this point, no reason to believe that comforting the comfortable and afflicting the afflicted is good for growth, and good reason to believe the opposite.

Specifically, if you look systematically at the international evidence on inequality, redistribution, and growth — which is what researchers at the I.M.F. did — you find that lower levels of inequality are associated with faster, not slower, growth. Furthermore, income redistribution at the levels typical of advanced countries (with the United States doing much less than average) is “robustly associated with higher and more durable growth.” That is, there’s no evidence that making the rich richer enriches the nation as a whole, but there’s strong evidence of benefits from making the poor less poor.

But how is that possible? Doesn’t taxing the rich and helping the poor reduce the incentive to make money? Well, yes, but incentives aren’t the only thing that matters for economic growth. Opportunity is also crucial. And extreme inequality deprives many people of the opportunity to fulfill their potential.

Think about it. Do talented children in low-income American families have the same chance to make use of their talent — to get the right education, to pursue the right career path — as those born higher up the ladder? Of course not. Moreover, this isn’t just unfair, it’s expensive. Extreme inequality means a waste of human resources.

And government programs that reduce inequality can make the nation as a whole richer, by reducing that waste.

Consider, for example, what we know about food stamps, perennially targeted by conservatives who claim that they reduce the incentive to work. The historical evidence does indeed suggest that making food stamps available somewhat reduces work effort, especially by single mothers. But it also suggests that Americans who had access to food stamps when they were children grew up to be healthier and more productive than those who didn’t, which means that they made a bigger economic contribution. The purpose of the food stamp program was to reduce misery, but it’s a good guess that the program was also good for American economic growth.

The same thing, I’d argue, will end up being true of Obamacare. Subsidized insurance will induce some people to reduce the number of hours they work, but it will also mean higher productivity from Americans who are finally getting the health care they need, not to mention making better use of their skills because they can change jobs without the fear of losing coverage. Over all, health reform will probably make us richer as well as more secure.

Will the new view of inequality change our political debate? It should. Being nice to the wealthy and cruel to the poor is not, it turns out, the key to economic growth. On the contrary, making our economy fairer would also make it richer. Goodbye, trickle-down; hello, trickle-up.

Blow and Krugman

August 4, 2014

In “The Do-Even-Less Congress” Mr. Blow says legislating is only a hobby for members of this deliberative body.  Prof. Krugman considers “Obama’s Other Success” and says the Dodd-Frank financial reforms have probably gotten worse press than Obamacare, but they, too, are working.  Here’s Mr. Blow:

Congress is a joke. But the joke isn’t funny — unless, of course, you’re into dark humor.

The entire legislative body has been consumed by kvetching, at the expense of actual legislating. And the numbers that highlight this reality are simply atrocious.

According to a Pew Research Center report issued Thursday:

“As of Wednesday the current Congress had enacted 142 laws, the fewest of any Congress in the past two decades over an equivalent time span. And only 108 of those enactments were substantive pieces of legislation, under our deliberately broad criteria (no post-office renamings, anniversary commemorations or other purely ceremonial laws).”

President Obama has felt it necessary to veto only two bills since becoming president. That is fewer than any president since James Garfield in 1881, who vetoed none. But Garfield’s term lasted only 200 days before his death, and he was struck more than two months earlier by an assassin’s bullets.

Part of the reason for the dearth of vetoes is the dearth of legislation making it to the president’s desk. And this is in part because of the ever-shrinking periods of time that Congress is in session.

As a New York Times article declared in January, “The ‘do nothing’ Congress is preparing to do even less.”

The House of Representatives is scheduled to be in session even fewer days than last year’s depressingly low 135 days. That’s right: The House is underperforming even last session’s underperformance. Last December, The New York Times’s Jeremy W. Peters crunched the numbers and found:

“Not counting brief, pro forma sessions, the House was in session for 942 hours, an average of about 28 hours each week that it conducted business in Washington.”

Tell that to the average American full-time worker busting his or her hump working more than 1,700 hours a year. And the average American is laboring for only a fraction of the $174,000 most members of Congress bring home.

The Senate didn’t fare much better than the House in Peters’s analysis:

“By a similar measure, the Senate was near its recorded lows for days on the floor. Senators have spent 99 days casting votes this year, close to the recent low point for a nonelection year in 1991, when there were 95 voting days.”

And yet, as much as the president has been criticized for his recent fund-raising efforts, members of Congress are making the time to do the same. As ABC News reported last week:

“Republicans and Democrats in Congress are holding at least 100 fund-raisers in Washington in the days leading up to the August recess, according to fund-raising lists obtained by ABC News, with senators who aren’t even on the ballot in 2014 holding events.”

Part of the problem with Washington is a manifestation of polarization.

A June Pew study found that “Republicans and Democrats are more divided along ideological lines — and partisan antipathy is deeper and more extensive — than at any point in the last two decades.” And that polarized public is represented by an increasingly polarized Congress. According to the political scientists Christopher Hare, Keith T. Poole and Howard Rosenthal, “Congress is now more polarized than at any time since the end of Reconstruction.”

The polarization has bastardized the meaning of compromise. The June Pew poll found that the more liberal people were, the more they preferred politicians who compromise, and the more conservative Americans were, the more they preferred politicians who stick to their positions. And yet, a majority of those who were consistently liberal and those who were consistently conservative thought that an ideal compromise was tantamount to their getting more of what they wanted than the other side.

There is no longer a real middle.

This is not to say that there is some equivalency between left and right when it comes to hostility and intransigence. As I see it, what middle remains has been dragged so far right that it doesn’t feel like a real middle anymore. America in general may be becoming more liberal on a variety of social issues, but there is a strident and forceful push to dial back the clock — or at least prevent it from moving forward — from a new strain of conservative politicians and the people who support them.

There is still time for this Congress to get more things done. As Pew pointed out: “Among the past seven Congresses, between 39 percent and 59 percent of all the substantive laws they passed came in the last five months of their respective two-year terms; the average was 49 percent.”

But I’m not holding my breath. Legislating is only a hobby for members of this Congress. Their full-time job is raising hell, raising money and lowering the bar of acceptable behavior.

And now here’s Prof. Krugman:

Although the enemies of health reform will never admit it, the Affordable Care Act is looking more and more like a big success. Costs are coming in below predictions, while the number of uninsured Americans is dropping fast, especially in states that haven’t tried to sabotage the program. Obamacare is working.

But what about the administration’s other big push, financial reform? The Dodd-Frank reform bill has, if anything, received even worse press than Obamacare, derided by the right as anti-business and by the left as hopelessly inadequate. And like Obamacare, it’s certainly not the reform you would have devised in the absence of political constraints.

But also like Obamacare, financial reform is working a lot better than anyone listening to the news media would imagine. Let’s talk, in particular, about two important pieces of Dodd-Frank: creation of an agency protecting consumers from misleading or fraudulent financial sales pitches, and efforts to end “too big to fail.”

The decision to create a Consumer Financial Protection Bureau shouldn’t have been controversial, given what happened during the housing boom. As Edward M. Gramlich, a Federal Reserve official who warned prophetically of problems in subprime lending, asked, “Why are the most risky loan products sold to the least sophisticated borrowers?” He went on, “The question answers itself — the least sophisticated borrowers are probably duped into taking these products.” The need for more protection was obvious.

Of course, that obvious need didn’t stop the U.S. Chamber of Commerce, financial industry lobbyists and conservative groups from going all out in an effort to prevent the bureau’s creation or at least stop it from doing its job, spending more than $1.3 billion in the process. Republicans in Congress dutifully served the industry’s interests, notably by trying to prevent President Obama from appointing a permanent director. And the question was whether all that opposition would hobble the new bureau and make it ineffective.

At this point, however, all accounts indicate that the bureau is in fact doing its job, and well — well enough to inspire continuing fury among bankers and their political allies. A recent case in point: The bureau is cracking down on billions in excessive overdraft fees.

Better consumer protection means fewer bad loans, and therefore a reduced risk of financial crisis. But what happens if a crisis occurs anyway?

The answer is that, as in 2008, the government will step in to keep the financial system functioning; nobody wants to take the risk of repeating the Great Depression.

But how do you rescue the banking system without rewarding bad behavior? In particular, rescues in times of crisis can give large financial players an unfair advantage: They can borrow cheaply in normal times, because everyone knows that they are “too big to fail” and will be bailed out if things go wrong.

The answer is that the government should seize troubled institutions when it bails them out, so that they can be kept running without rewarding stockholders or bondholders who don’t need rescue. In 2008 and 2009, however, it wasn’t clear that the Treasury Department had the necessary legal authority to do that. So Dodd-Frank filled that gap, giving regulators Ordinary Liquidation Authority, also known as resolution authority, so that in the next crisis we can save “systemically important” banks and other institutions without bailing out the bankers.

Bankers, of course, hate this idea; and Republican leaders like Mitch McConnell tried to help their friends with the Orwellian claim that resolution authority was actually a gift to Wall Street, a form of corporate welfare, because it would grease the skids for future bailouts.

But Wall Street knew better. As Mike Konczal of the Roosevelt Institute points out, if being labeled systemically important were actually corporate welfare, institutions would welcome the designation; in fact, they have fought it tooth and nail. And a new study from the Government Accountability Office shows that while large banks were able to borrow more cheaply than small banks before financial reform passed, that advantage has now essentially disappeared. To some extent this may reflect generally calmer markets, but the study nonetheless suggests that reform has done at least part of what it was supposed to do.

Did reform go far enough? No. In particular, while banks are being forced to hold more capital, a key force for stability, they really should be holding much more. But Wall Street and its allies wouldn’t be screaming so loudly, and spending so much money in an effort to gut the law, if it weren’t an important step in the right direction. For all its limitations, financial reform is a success story.

Brooks and Krugman

August 1, 2014

Bobo is busy playing “Let’s All Blame Teh Poors.”  In “The Character Factory” he has the unmitigated gall to say that antipoverty programs will continue to be ineffective until they integrate a robust understanding of character.  “Gemli” from Boston ends an extended comment with this:  “So the poor should not lament the outrageous income inequality, or fight to raise the pitiful minimum wage, but rather should learn to improve their character, accept their lot, and be the best darn hopeless drudges they can be.”  And tug the forelock when Bobo sweeps past on the way to his limo…  Prof. Krugman has a question in “Knowledge Isn’t Power:”  Why does ignorance rule in policy debates?  Here’s Bobo:

Nearly every parent on earth operates on the assumption that character matters a lot to the life outcomes of their children. Nearly every government antipoverty program operates on the assumption that it doesn’t.

Most Democratic antipoverty programs consist of transferring money, providing jobs or otherwise addressing the material deprivation of the poor. Most Republican antipoverty programs likewise consist of adjusting the economic incentives or regulatory barriers faced by the disadvantaged.

As Richard Reeves of the Brookings Institution pointed out recently in National Affairs, both orthodox progressive and conservative approaches treat individuals as if they were abstractions — as if they were part of a species of “hollow man” whose destiny is shaped by economic structures alone, and not by character and behavior.

It’s easy to understand why policy makers would skirt the issue of character. Nobody wants to be seen blaming the victim — spreading the calumny that the poor are that way because they don’t love their children enough, or don’t have good values. Furthermore, most sensible people wonder if government can do anything to alter character anyway.

The problem is that policies that ignore character and behavior have produced disappointing results. Social research over the last decade or so has reinforced the point that would have been self-evident in any other era — that if you can’t help people become more resilient, conscientious or prudent, then all the cash transfers in the world will not produce permanent benefits.

Walter Mischel’s famous marshmallow experiment demonstrated that delayed gratification skills learned by age 4 produce important benefits into adulthood. Carol Dweck’s work has shown that people who have a growth mind-set — who believe their basic qualities can be developed through hard work — do better than people who believe their basic talents are fixed and innate. Angela Duckworth has shown how important grit and perseverance are to lifetime outcomes. College students who report that they finish whatever they begin have higher grades than their peers, even ones with higher SATs. Spelling bee contestants who scored significantly higher on grit scores were 41 percent more likely to advance to later rounds than less resilient competitors.

Summarizing the research in this area, Reeves estimates that measures of drive and self-control influence academic achievement roughly as much as cognitive skills. Recent research has also shown that there are very different levels of self-control up and down the income scale. Poorer children grow up with more stress and more disruption, and these disadvantages produce effects on the brain. Researchers often use dull tests to see who can focus attention and stay on task. Children raised in the top income quintile were two-and-a-half times more likely to score well on these tests than students raised in the bottom quintile.

But these effects are reversible with the proper experiences.

People who have studied character development through the ages have generally found hectoring lectures don’t help. The superficial “character education” programs implanted into some schools of late haven’t done much either. Instead, sages over years have generally found at least four effective avenues to make it easier to climb. Government-supported programs can contribute in all realms.

First, habits. If you can change behavior you eventually change disposition. People who practice small acts of self-control find it easier to perform big acts in times of crisis. Quality preschools, K.I.P.P. schools and parenting coaches have produced lasting effects by encouraging young parents and students to observe basic etiquette and practice small but regular acts of self-restraint.

Second, opportunity. Maybe you can practice self-discipline through iron willpower. But most of us can only deny short-term pleasures because we see a realistic path between self-denial now and something better down the road. Young women who see affordable college prospects ahead are much less likely to become teen moms.

Third, exemplars. Character is not developed individually. It is instilled by communities and transmitted by elders. The centrist Democratic group Third Way suggests the government create a BoomerCorps. Every day 10,000 baby boomers turn 65, some of them could be recruited into an AmeriCorps-type program to help low-income families move up the mobility ladder.

Fourth, standards. People can only practice restraint after they have a certain definition of the sort of person they want to be. Research from Martin West of Harvard and others suggests that students at certain charter schools raise their own expectations for themselves, and judge themselves by more demanding criteria.

Character development is an idiosyncratic, mysterious process. But if families, communities and the government can envelop lives with attachments and institutions, then that might reduce the alienation and distrust that retards mobility and ruins dreams.

And maybe if people didn’t have to work 3 jobs to put food on the table and keep the lights on that might be easier, you poisonous turd.  Now here’s Prof. Krugman:

One of the best insults I’ve ever read came from Ezra Klein, who now is editor in chief of Vox.com. In 2007, he described Dick Armey, the former House majority leader, as “a stupid person’s idea of what a thoughtful person sounds like.”

It’s a funny line, which applies to quite a few public figures. Representative Paul Ryan, the chairman of the House Budget Committee, is a prime current example. But maybe the joke’s on us. After all, such people often dominate policy discourse. And what policy makers don’t know, or worse, what they think they know that isn’t so, can definitely hurt you.

What inspired these gloomy thoughts? Well, I’ve been looking at surveys from the Initiative on Global Markets, based at the University of Chicago. For two years, the initiative has been regularly polling a panel of leading economists, representing a wide spectrum of schools and political leanings, on questions that range from the economics of college athletes to the effectiveness of trade sanctions. It usually turns out that there is much less professional controversy about an issue than the cacophony in the news media might have led you to expect.

This was certainly true of the most recent poll, which asked whether the American Recovery and Reinvestment Act — the Obama “stimulus” — reduced unemployment. All but one of those who responded said that it did, a vote of 36 to 1. A follow-up question on whether the stimulus was worth it produced a slightly weaker but still overwhelming 25 to 2 consensus.

Leave aside for a moment the question of whether the panel is right in this case (although it is). Let me ask, instead, whether you knew that the pro-stimulus consensus among experts was this strong, or whether you even knew that such a consensus existed.

I guess it depends on where you get your economic news and analysis. But you certainly didn’t hear about that consensus on, say, CNBC — where one host was so astonished to hear yours truly arguing for higher spending to boost the economy that he described me as a “unicorn,” someone he could hardly believe existed.

More important, over the past several years policy makers across the Western world have pretty much ignored the professional consensus on government spending and everything else, placing their faith instead in doctrines most economists firmly reject.

As it happens, the odd man out — literally — in that poll on stimulus was Professor Alberto Alesina of Harvard. He has claimed that cuts in government spending are actually expansionary, but relatively few economists agree, pointing to work at the International Monetary Fund and elsewhere that seems to refute his claims. Nonetheless, back when European leaders were making their decisive and disastrous turn toward austerity, they brushed off warnings that slashing spending in depressed economies would deepen their depression. Instead, they listened to economists telling them what they wanted to hear. It was, as Bloomberg Businessweek put it, “Alesina’s hour.”

Am I saying that the professional consensus is always right? No. But when politicians pick and choose which experts — or, in many cases, “experts” — to believe, the odds are that they will choose badly. Moreover, experience shows that there is no accountability in such matters. Bear in mind that the American right is still taking its economic advice mainly from people who have spent many years wrongly predicting runaway inflation and a collapsing dollar.

All of which raises a troubling question: Are we as societies even capable of taking good policy advice?

Economists used to assert confidently that nothing like the Great Depression could happen again. After all, we know far more than our great-grandfathers did about the causes of and cures for slumps, so how could we fail to do better? When crises struck, however, much of what we’ve learned over the past 80 years was simply tossed aside.

The only piece of our system that seemed to have learned anything from history was the Federal Reserve, and the Fed’s actions under Ben Bernanke, continuing under Janet Yellen, are arguably the only reason we haven’t had a full replay of the Depression. (More recently, the European Central Bank under Mario Draghi, another place where expertise still retains a toehold, has pulled Europe back from the brink to which austerity brought it.) Sure enough, there are moves afoot in Congress to take away the Fed’s freedom of action. Not a single member of the Chicago experts panel thinks this would be a good idea, but we’ve seen how much that matters.

And macroeconomics, of course, isn’t the only challenge we face. In fact, it should be easy compared with many other issues that need to be addressed with specialized knowledge, above all climate change. So you really have to wonder whether and how we’ll avoid disaster.

Blow and Krugman

July 28, 2014

In “The Fight Over ‘Impeachment Lite’ ” Mr. Blow says as politics, House Republicans’ threat to sue the president may work best for Democrats.  Prof. Krugman, in “Corporate Artful Dodgers,” takes a look at a loophole so big whole companies can slip through.  Here’s Mr. Blow:

Rather than getting on with the country’s business and focusing solely on can’t-wait issues before they jet out of town this weekend — like the unfinished bill to fix veterans’ health care and the stalled bill to deal with the humanitarian crisis of Central American children arriving at the border — House Republicans are gearing up for a grand maneuver: an apparently unprecedented move by the House to sue the president over his use of executive orders.

Talk about misplaced priorities.

But this isn’t about the public’s priorities, not even close. This is about base-voter activation; this is about midterm turnout. The president’s most ardent opposition wants more punishing actions taken. There is an insatiable vengeance-lust for the haughty president who refuses to bend under pressure or fold under duress.

He must be brought to heel. He must be chastened. He must be broken. So, House Republicans are throwing the red meat into the cage.

Even Paul Ryan, fresh off his “Opportunity Grant” move to address poverty in this country — a plan that the Center on Budget and Policy Priorities said “would likely increase poverty and hardship” rather than decrease it — said Friday that he would vote for the measure to sue the president.

I’m not sure Ryan is aware that people making less than $30,000 a year voted for President Obama nearly two to one over his opponents in 2008 and 2012. Low-income people are President Obama’s people. You can’t make a show of supposedly extending them a hand one day and use that hand to take a slap at their political hero the next. Or maybe you can, if your sense of cognitive dissonance is strong enough.

The White House is returning in kind, picking up the language of the most extreme among the far right to invoke the word “impeachment.”

Dan Pfeiffer, the Obama administration senior adviser, said Friday, “I think Speaker Boehner, by going down the path of this lawsuit, has opened the door to impeachment sometime in the future.”

It should be noted that most senior Republican leaders are not clamoring for impeachment — and John Boehner has flatly ruled it out, for now — but the idea that a lawsuit is akin to “impeachment lite” is one Democrats would love to take hold for the same reason that the lawsuit exists in the first place: politics.

But the concept isn’t completely without underpinning. In a recent Los Angeles Times article titled “Why Experts See Little Hope for G.O.P. Plan to Sue Obama Over Law’s Delay,” David G. Savage pointed out: “While the Constitution does not authorize the legislative branch to sue the president, it says the House of Representatives may vote on articles of impeachment if it believes the president has committed ‘high crimes and misdemeanors.’ If Republicans believe Obama has broken the law, impeachment is the appropriate vehicle, analysts say.”

Adding an unprecedented legal maneuver to a long list of what Democrats view as extraordinary slights against this particular president is likely to excite a liberal base in dire need of excitement.

As a report by the Pew Research Center for the People and the Press pointed out: “Barack Obama is as powerful a motivating factor for Republican voters as he was in 2010: about half (51 percent) of those who say they will vote Republican this fall consider their vote as a vote ‘against’ Obama, little changed from June 2010 (52 percent). And Obama has become a less positive factor for Democrats — 36 percent of those who plan to vote for the Democrat in their district view their vote as being ‘for’ Obama, down from 44 percent four years ago.”

But the anti-Obama Republican lawsuit could change all that.

A CNN/ORC poll released Friday found that while 45 percent of respondents said they believed the president had gone too far in expanding the power of the presidency and the executive branch, 52 percent believed that he “has been about right” or “has not gone far enough.”

For comparison, in 2006, the sixth year of the George W. Bush administration, 48 percent believed that he had gone too far, while just as many thought he was about right or hadn’t gone far enough.

Furthermore, only 41 percent of Americans believe House Republicans should sue the president, as opposed to 57 percent who believe they shouldn’t.

And if you believe that the lawsuit is simply, as some have called it, “impeachment lite,” the public truly has no appetite for that. Respondents in the CNN/ORC poll opposed impeachment by nearly two to one.

This may all be political theater, but in this act Democrats appear to have the most compelling lines.

Now here’s Prof. Krugman:

In recent decisions, the conservative majority on the Supreme Court has made clear its view that corporations are people, with all the attendant rights. They are entitled to free speech, which in their case means spending lots of money to bend the political process to their ends. They are entitled to religious beliefs, including those that mean denying benefits to their workers. Up next, the right to bear arms?

There is, however, one big difference between corporate persons and the likes of you and me: On current trends, we’re heading toward a world in which only the human people pay taxes.

We’re not quite there yet: The federal government still gets a tenth of its revenue from corporate profits taxation. But it used to get a lot more — a third of revenue came from profits taxes in the early 1950s, a quarter or more well into the 1960s. Part of the decline since then reflects a fall in the tax rate, but mainly it reflects ever-more-aggressive corporate tax avoidance — avoidance that politicians have done little to prevent.

Which brings us to the tax-avoidance strategy du jour: “inversion.” This refers to a legal maneuver in which a company declares that its U.S. operations are owned by its foreign subsidiary, not the other way around, and uses this role reversal to shift reported profits out of American jurisdiction to someplace with a lower tax rate.

The most important thing to understand about inversion is that it does not in any meaningful sense involve American business “moving overseas.” Consider the case of Walgreen, the giant drugstore chain that, according to multiple reports, is on the verge of making itself legally Swiss. If the plan goes through, nothing about the business will change; your local pharmacy won’t close and reopen in Zurich. It will be a purely paper transaction — but it will deprive the U.S. government of several billion dollars in revenue that you, the taxpayer, will have to make up one way or another.

Does this mean President Obama is wrong to describe companies engaging in inversion as “corporate deserters”? Not really — they’re shirking their civic duty, and it doesn’t matter whether they literally move abroad or not. But apologists for inversion, who tend to claim that high taxes are driving businesses out of America, are indeed talking nonsense. These businesses aren’t moving production or jobs overseas — and they’re still earning their profits right here in the U.S.A. All they’re doing is dodging taxes on those profits.

And Congress could crack down on this tax dodge — it’s already illegal for a company to claim that its legal domicile is someplace where it has little real business, and tightening the criteria for declaring a company non-American could block many of the inversions now taking place. So is there any reason not to stop this gratuitous loss of revenue? No.

Opponents of a crackdown on inversion typically argue that instead of closing loopholes we should reform the whole system by which we tax profits, and maybe stop taxing profits altogether. They also tend to argue that taxing corporate profits hurts investment and job creation. But these are very bad arguments against ending the practice of inversion.

First of all, there are some good reasons to tax profits. In general, U.S. taxes favor unearned income from capital over earned income from wages; the corporate tax helps redress this imbalance. We could, in principle, maintain taxes on unearned income if we offset cuts in corporate taxes with substantially higher tax rates on income from capital gains and dividends — but this would be an imperfect fix, and in any case, given the state of our politics, this just isn’t going to happen.

Furthermore, ending profits taxation would greatly increase the power of corporate executives. Is this really something we want to do?

As for reforming the system: Yes, that would be a good idea. But the case for eventual reform basically has nothing to do with the case for closing the inversion loophole right now. After all, there are big debates about the shape of reform, debates that would take years to resolve even if we didn’t have a Republican Party that reliably opposes anything the president proposes, even if it was something Republicans were for just a few years ago. Why let corporations avoid paying their fair share for years, while we wait for the logjam to break?

Finally, none of this has anything to do with investment and job creation. If and when Walgreen changes its “citizenship,” it will get to keep more of its profits — but it will have no incentive to invest those extra profits in its U.S. operations.

So this should be easy. By all means let’s have a debate about how and how much to tax profits. Meanwhile, however, let’s close this outrageous loophole.

And because of earlier effups, FYWP.

Cohen and Krugman

July 25, 2014

In “Hope in the Abattoir” Mr. Cohen points out that the peoples of the Holy Land are condemned to each other. Realizing that is their only way forward.  Prof. Krugman, in “Left Coast Rising,” says there are lessons for the rest of us in the good news from California.  Here’s Mr. Cohen:

Freight cars full of bodies shot out of the sky make their way across Europe. After more than two weeks of fighting in Gaza, at least 150 Palestinian children are dead, according to the United Nations. Thousands of Hamas rockets have hit Israel, and 32 young Israeli soldiers have been killed fighting to end this terror. As the poet Seamus Heaney observed, “It is difficult at times to repress the thought that history is about as instructive as an abattoir.”

When children die in these numbers, when the legitimate claim of the Jewish people to a sliver of earth is again contested, when the shrieking cacophony of each side declaiming its “truths” overwhelms, human progress seems a fickle fantasy. Truth, even before social media, was always the first victim of war.

Yet, against all evidence, people hope. They seek justice. It is in their nature.

Hamas establishes a stranglehold over 1.8 million Palestinians squeezed into what David Cameron, the British prime minister, once called the “open-air prison” of Gaza. It is a Jew-hating organization. It is ready, when need be, to use the lives of its own people as pawns. It pours concrete into a maze of tunnels rather than schools. Isolated before the latest violence, it revives by demonstrating a measure of military command and control, by hurting Israel, by appearing resolute as Mahmoud Abbas, the president of the Palestinian Authority in the West Bank, wavers.

The demands of this reconstituted Hamas become the demands of the Palestinian people. Abbas is marginalized. This is not a strategic victory for Israel.

Benjamin Netanyahu, the Israeli prime minister, pursues a status-quo strategy that keeps Palestinians divided and Israel dominant. The price of the strategy is periodic violence. This is the third Gaza mini-war in six years. An oppressed people will rise up. That is in the nature of things.

Some decades ago, Netanyahu denounced the efforts of Prime Minister Yitzhak Rabin to reach peace with the Palestinians through the Oslo Accords. Rabin, who had once vowed to “break the bones” of Palestinians, sought peace not because he had changed his view of the enemy but because he saw no alternative. Like the men responsible for Israel’s security interviewed in the movie “The Gatekeepers,” he had concluded that endless dominion over another people was unsustainable and incompatible with the preservation of a Jewish and democratic state. Netanyahu compared Rabin to Neville Chamberlain. Rabin’s widow never forgave him.

This month, Netanyahu said that rockets from Gaza demonstrated how critical it was that “we don’t get another Gaza in Judea and Samaria” — the West Bank. He declared: “I think the Israeli people understand now what I always say: that there cannot be a situation, under any agreement, in which we relinquish security control of the territory west of the river Jordan.”

As David Horovitz observed in The Times of Israel, “That sentence, quite simply, spells the end to the notion of Netanyahu consenting to the establishment of a Palestinian state.”

After the suspension of some flights into Tel Aviv’s Ben Gurion airport due to Hamas rockets, Netanyahu’s stance is immeasurably reinforced.

Inherent in Israeli policy are the eruptions of violence that in turn justify the policy that in turn spurs further violence. Vile Hamas revives itself. Palestinian statehood recedes.

Yet, people, in their majority, hope.

Netanyahu wants a majority Jewish state in the Holy Land. Abbas wants an end to the occupation, freedom and statehood for the Palestinians. Those two objectives are not mutually exclusive. In significant ways they are complementary. But they involve sacrifice of cherished national ambitions.

Two impossible things happened in my lifetime. My parents’ South Africa ended apartheid without the bloodbath I’d heard was coming throughout my youth. Europe’s division at the Berlin Wall dissolved, allowing freedom to spread eastward (if not quite far enough yet to spare those corpses in freight cars).

Sydney Kentridge, a classmate of my father’s in Johannesburg and a lawyer for Nelson Mandela, once told me that he concluded at the 1956 treason trial that one day “both sides would realize that neither could win.”

He was right. Hope is not always irrational.

On a recent visit to Israel, I passed through the Damascus Gate into Jerusalem’s Old City. Palestinians emerging from Al Aqsa Mosque moved toward me in a vast throng. They ran straight into a group of ultra-Orthodox Jews headed toward the Western Wall, and at that moment, out of the Via Dolorosa, a crowd of Philippine Christians emerged, carrying a heavy wooden crucifix. It was an impossible scene, funny even: the three great monotheistic religions jostling in the alley, no way around each other.

Nobody is going away. The peoples of the Holy Land are condemned to each other. Without that realization, any truce, even any demilitarization of Gaza, will only be a way station to the next round of slaughter.

That’s the likely but not inevitable scenario. Impossible things do happen.

Now here’s Prof. Krugman:

The states, Justice Brandeis famously pointed out, are the laboratories of democracy. And it’s still true. For example, one reason we knew or should have known that Obamacare was workable was the post-2006 success of Romneycare in Massachusetts. More recently, Kansas went all-in on supply-side economics, slashing taxes on the affluent in the belief that this would spark a huge boom; the boom didn’t happen, but the budget deficit exploded, offering an object lesson to those willing to learn from experience.

And there’s an even bigger if less drastic experiment under way in the opposite direction. California has long suffered from political paralysis, with budget rules that allowed an increasingly extreme Republican minority to hamstring a Democratic majority; when the state’s housing bubble burst, it plunged into fiscal crisis. In 2012, however, Democratic dominance finally became strong enough to overcome the paralysis, and Gov. Jerry Brown was able to push through a modestly liberal agenda of higher taxes, spending increases and a rise in the minimum wage. California also moved enthusiastically to implement Obamacare.

I guess we’re not in Kansas anymore. (Sorry, I couldn’t help myself.)

Needless to say, conservatives predicted doom. A representative reaction: Daniel J. Mitchell of the Cato Institute declared that by voting for Proposition 30, which authorized those tax increases, “the looters and moochers of the Golden State” (yes, they really do think they’re living in an Ayn Rand novel) were committing “economic suicide.” Meanwhile, Avik Roy of the Manhattan Institute and Forbes claimed that California residents were about to face a “rate shock” that would more than double health insurance premiums.

What has actually happened? There is, I’m sorry to say, no sign of the promised catastrophe.

If tax increases are causing a major flight of jobs from California, you can’t see it in the job numbers. Employment is up 3.6 percent in the past 18 months, compared with a national average of 2.8 percent; at this point, California’s share of national employment, which was hit hard by the bursting of the state’s enormous housing bubble, is back to pre-recession levels.

On health care, some people — basically healthy young men who were getting inexpensive insurance on the individual market and were too affluent to receive subsidies — did face premium increases, which we always knew would happen. Over all, however, the costs of health reform came in below expectations, while enrollment came in well above — more than triple initial predictions in the San Francisco area. A recent survey by the Commonwealth Fund suggests that California has already cut the percentage of its residents without health insurance in half. What’s more, all indications are that further progress is in the pipeline, with more insurance companies entering the marketplace for next year.

And, yes, the budget is back in surplus.

Has there been any soul-searching among the prophets of California doom, asking why they were so wrong? Not that I’m aware of. Instead, I’ve been seeing many attempts to devalue the good news from California by pointing out that the state’s job growth still lags that of Texas, which is true, and claiming that this difference is driven by differential tax rates, which isn’t.

For the big difference between the two states, aside from the size of the oil and gas sector, isn’t tax rates. it’s housing prices. Despite the bursting of the bubble, home values in California are still double the national average, while in Texas they’re 30 percent below that average. So a lot more people are moving to Texas even though wages and productivity are lower than they are in California.

And while some of this difference in housing prices reflects geography and population density — Houston is still spreading out, while Los Angeles, hemmed in by mountains, has reached its natural limits — it also reflects California’s highly restrictive land-use policies, mostly imposed by local governments rather than the state. As Harvard’s Edward Glaeser has pointed out, there is some truth to the claim that states like Texas are growing fast thanks to their anti-regulation attitude, “but the usual argument focuses on the wrong regulations.” And taxes aren’t important at all.

So what do we learn from the California comeback? Mainly, that you should take anti-government propaganda with large helpings of salt. Tax increases aren’t economic suicide; sometimes they’re a useful way to pay for things we need. Government programs, like Obamacare, can work if the people running them want them to work, and if they aren’t sabotaged from the right. In other words, California’s success is a demonstration that the extremist ideology still dominating much of American politics is nonsense.

Krugman, solo

July 21, 2014

Mr. Blow is off today, so Prof. Krugman has the floor solo.  In “The Fiscal Fizzle” he says the deficit scolds are still going at it, even though the whole panic turned out to be a false alarm.  Here he is:

For much of the past five years readers of the political and economic news were left in little doubt that budget deficits and rising debt were the most important issue facing America. Serious people constantly issued dire warnings that the United States risked turning into another Greece any day now. President Obama appointed a special, bipartisan commission to propose solutions to the alleged fiscal crisis, and spent much of his first term trying to negotiate a Grand Bargain on the budget with Republicans.

That bargain never happened, because Republicans refused to consider any deal that raised taxes. Nonetheless, debt and deficits have faded from the news. And there’s a good reason for that disappearing act: The whole thing turns out to have been a false alarm.

I’m not sure whether most readers realize just how thoroughly the great fiscal panic has fizzled — and the deficit scolds are, of course, still scolding. They’re even trying to spin the latest long-term projections from the Congressional Budget Office — which are distinctly non-alarming — as somehow a confirmation of their earlier scare tactics. So this seems like a good time to offer an update on the debt disaster that wasn’t.

About those projections: The budget office predicts that this year’s federal deficit will be just 2.8 percent of G.D.P., down from 9.8 percent in 2009. It’s true that the fact that we’re still running a deficit means federal debt in dollar terms continues to grow — but the economy is growing too, so the budget office expects the crucial ratio of debt to G.D.P. to remain more or less flat for the next decade.

Things are expected to deteriorate after that, mainly because of the impact of an aging population on Medicare and Social Security. But there has been a dramatic slowdown in the growth of health care costs, which used to play a big role in frightening budget scenarios. As a result, despite aging, debt in 2039 — a quarter-century from now! — is projected to be no higher, as a percentage of G.D.P., than the debt America had at the end of World War II, or that Britain had for much of the 20th century. Oh, and the budget office now expects interest rates to remain fairly low, not much higher than the economy’s rate of growth. This in turn weakens, indeed almost eliminates, the risk of a debt spiral, in which the cost of servicing debt drives debt even higher.

Still, rising debt isn’t good. So what would it take to avoid any rise in the debt ratio? Surprisingly little. The budget office estimates that stabilizing the ratio of debt to G.D.P. at its current level would require spending cuts and/or tax hikes of 1.2 percent of G.D.P. if we started now, or 1.5 percent of G.D.P. if we waited until 2020. Politically, that would be hard given total Republican opposition to anything a Democratic president might propose, but in economic terms it would be no big deal, and wouldn’t require any fundamental change in our major social programs.

In short, the debt apocalypse has been called off.

Wait — what about the risk of a crisis of confidence? There have been many warnings that such a crisis was imminent, some of them coupled with surprisingly frank admissions of disappointment that it hadn’t happened yet. For example, Alan Greenspan warned of the “Greece analogy,” and declared that it was “regrettable” that U.S. interest rates and inflation hadn’t yet soared.

But that was more than four years ago, and both inflation and interest rates remain low. Maybe the United States, which among other things borrows in its own currency and therefore can’t run out of cash, isn’t much like Greece after all.

In fact, even within Europe the severity of the debt crisis diminished rapidly once the European Central Bank began doing its job, making it clear that it would do “whatever it takes” to avoid cash crises in nations that have given up their own currencies and adopted the euro. Did you know that Italy, which remains deep in debt and suffers much more from the burden of an aging population than we do, can now borrow long term at an interest rate of only 2.78 percent? Did you know that France, which is the subject of constant negative reporting, pays only 1.57 percent?

So we don’t have a debt crisis, and never did. Why did everyone important seem to think otherwise?

To be fair, there has been some real good news about the long-run fiscal prospect, mainly from health care. But it’s hard to escape the sense that debt panic was promoted because it served a political purpose — that many people were pushing the notion of a debt crisis as a way to attack Social Security and Medicare. And they did immense damage along the way, diverting the nation’s attention from its real problems — crippling unemployment, deteriorating infrastructure and more — for years on end.

Cohen and Krugman

July 18, 2014

Mr. Cohen says “Germany Is Weltmeister” and that Germany is different. It does not believe in quick fixes. Its World Cup team and its society reflect that.  In “Addicted to Inflation” Prof. Krugman says the right is obsessed with the claim that runaway inflation is either happening or about to happen.  Here’s Mr. Cohen:

A new nation won the World Cup. It was the first victory for a unified Germany, or a reunified Germany if you prefer. That country was more than a generation in the making. Germans do not believe in quick fixes.

Formal reunification occurred on Oct. 3, 1990, a few months after the previous 1-0 German victory over Argentina in a World Cup final, an ugly affair in Rome. But it has taken a quarter-century, and untold billions, to knit the post-Cold War nation together. When I lived in Berlin between 1998 and 2001, it was not just the countless cranes hovering over the city that told of a work in progress. It was the different mind-sets of Ossi and Wessi, Easterners and Westerners eyeing each other with resentment.

No matter, Germany had decided. It would pay the price to achieve reunification. It would work on the problem. It would move in the appointed direction, come what may.

This fine World Cup winning team was also the fruit of long-term planning. Over the past dozen years, the Deutscher Fussball-Bund (DFB), or German Football Association, has invested a fortune in new facilities, identifying youthful talent, nurturing that talent and ushering it to the national level. Two young players who emerged from that system, André Schürrle of Chelsea and Mario Götze of Bayern Munich, combined to conjure the beautiful goal that clinched victory.

It had been preceded by the 7-1 demolition of the hosts, Brazil, in the semi-final. Seldom has a soccer match so resembled an execution. It was not only Germans who felt the need to look away. Domination is not the modern German way. Brazilian agony was too explicit not to cringe.

BBC commentators could not resist the clichés. Germany was “clinical.” It was “efficient.” People tweeted, “Don’t mention the score.” With Germany there is always something unmentionable that rhymes with war. It is not easy to be German. But in that difficulty, as this team suggested, there lie strengths. Everything about this team, from its talent to its ethics, was admirable. The right team does not always win. In this case it did.

Germany, I said, does not believe in quick fixes. It is worth repeating because it is an idea that sets the country apart in an age where a quick killing, tomorrow’s share price, instant gratification and short-termism are the norm. Germans on the whole think what the rest of the world builds is flimsy. Anyone who has felt the weight of a German window, or the satisfying hermetic clunk of one closing, knows they have a point. The German time frame is longer.

Why Germany differs in this may be debated. Having plumbed the depths of destruction and evil, having understood the depravity into which a “civilized” country may descend, Germany had to rebuild from the “Stunde Null,” or “Zero Hour,” of 1945. It had to hoist itself up step by step; and it had to build into its reconstituted self the guarantees that ensured no relapse was possible. This took planning. It took persistence. It involved prudence. Even before all this the first German unity of 1871 came only after centuries of strife at the European crossroads. Geborgenheit is an untranslatable German word but no less important for that. It means roughly warmth, home, trust and security, everything that is so precious in part because it may go up in smoke.

Perhaps German success is the result of the immensity of past German failure. I think that has something to do with it, even a lot. Whatever its roots, German success is important and instructive.

If you talk to business leaders of the German Mittelstand, the small and medium-sized companies at the heart of the country’s economy, you are transported to another world. You sit in stark boardrooms, so devoid of indulgence they resemble classrooms, with unassuming people leading billion-dollar companies, and they speak of loyalty, 10-year plans, prudence and quality. If one word induces a look of horror, it is debt. The notion of making money with money, of financial engineering rather than engineering itself, is alien.

Joachim Löw, the German coach, spoke before the final of the careful building of his youthful side: “We can play on top of the world for a good few years yet, with some young players coming in to reinforce the team.” Inevitably, the idea of Germany “on top of the world” for a long time conjured up images the phrase would not evoke for another country. Even a victory dance by members of the German team turned into a national debate because it was seen by some as unseemly mocking of the gaucho Argentine. The president of the DFB apologized.

Germany is now soccer’s “Weltmeister,” a composite word composed of “world” and “master.” It deserves the honor. Its society has much to teach others. But restraint will be its watchword.

Now here’s Prof. Krugman:

The first step toward recovery is admitting that you have a problem. That goes for political movements as well as individuals. So I have some advice for so-called reform conservatives trying to rebuild the intellectual vitality of the right: You need to start by facing up to the fact that your movement is in the grip of some uncontrollable urges. In particular, it’s addicted to inflation — not the thing itself, but the claim that runaway inflation is either happening or about to happen.

To see what I’m talking about, consider a scene that played out the other day on CNBC.

Rick Santelli, one of the network’s stars, is best known for a rant against debt relief that arguably gave birth to the Tea Party. On this occasion, however, he was ranting about another of his favorite subjects, the allegedly inflationary policies of the Federal Reserve. And his colleague Steve Liesman had had enough. “It’s impossible for you to have been more wrong,” Mr. Liesman declared, and he went on to detail the wrong predictions: “The higher interest rates never came, the inability of the U.S. to sell bonds never happened, the dollar never crashed, Rick. There isn’t a single one that’s worked for you.”

You could say the same thing about many people. I’ve had conversations with investors bemused by the failure of the dollar to crash and inflation to soar, because “all the experts” said that was going to happen. And that is indeed what you might have imagined if your notion of expertise was what you saw on CNBC, on The Wall Street Journal’s editorial page, or in Forbes.

And this has been going on for a long time — at least since early 2009. Yet despite being consistently wrong for more than five years, these “experts” never consider the possibility that there might be something amiss with their economic framework, let alone that Ben Bernanke, Janet Yellen or, for that matter, yours truly might have been right to dismiss their warnings.

At best, the inflation-is-coming crowd admits that it hasn’t happened yet, but attributes the delay to unforeseeable circumstances. Thus, in recent Congressional testimony, Lawrence Kudlow, also of CNBC, warned about “excess money and a devalued dollar.” However, “Miraculously, both actual and expected inflation indicators have stayed low.” It’s not something wrong with my model. It’s a miracle!

At worst, inflationistas resort to conspiracy theories: Inflation is already high, but the government is covering it up. The sources purporting to document this cover-up were thoroughly debunked years ago; among other things, private indicators of inflation like the Billion Prices Index (derived from Internet prices) basically confirm the official numbers. Furthermore, inflation conspiracy theorists have faced well-deserved ridicule even from fellow conservatives. Yet the conspiracy theory keeps resurfacing. It has, predictably, been rolled out to defend Mr. Santelli.

All of this is very frustrating to those reform conservatives. If you ask what new ideas they have to offer, they often mention “market monetarism,” which translates under current circumstances to the notion that the Fed should be doing more, not less.

One member of the group, Josh Barro — who is now at The Times — has gone so far as to call market monetarism “the shining success of the conservative reform movement.” But this idea has achieved no traction at all with the rest of American conservatism, which is still obsessed with the phantom menace of runaway inflation.

And the roots of inflation addiction run deep. Reformers like to minimize the influence of libertarian fantasies — fantasies that invariably involve the notion that inflationary disaster looms unless we return to gold — on today’s conservative leaders. But to do that, you have to dismiss what these leaders have actually said. If, for example, people accuse Representative Paul Ryan, chairman of the House Budget Committee, of believing that he’s living in an Ayn Rand novel, that’s because in 2009 he said that we are “living in an Ayn Rand novel.

More generally, modern American conservatism is deeply opposed to any form of government activism, and while monetary policy is sometimes treated as a technocratic affair, the truth is that printing dollars to fight a slump, or even to stabilize some broader definition of the money supply, is indeed an activist policy.

The point, then, is that inflation addiction is telling us something about the intellectual state of one side of our great national divide. The right’s obsessive focus on a problem we don’t have, its refusal to reconsider its premises despite overwhelming practical failure, tells you that we aren’t actually having any kind of rational debate. And that, in turn, bodes ill not just for would-be reformers, but for the nation.


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