Archive for the ‘Krugman’ Category

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.

Blow and Krugman

July 14, 2014

In ” ‘The Buck Stops With Me’ ” Mr. Blow has a question.  He says the president has taken responsibility for the country’s problems many times. Have Republicans?  Jeez, Mr. Blow, the question is enough to make a cat laugh.  Prof. Krugman, in “Obamacare Fails to Fail,” says the Affordable Care Act’s huge success is largely slipping under the radar.  Here’s Mr. Blow:

In trying to lay the blame for the border crisis on the White House’s doorstep, House Speaker John Boehner exploded at a press conference on Thursday, saying of the president:

“He’s been president for five and a half years! When is he going to take responsibility for something?”

The suggestion in the question — that the president doesn’t take responsibility for anything — is so outrageously untrue that it demands strong rebuttal.

President Obama hasn’t taken all the blame Republicans have ascribed to him, nor should he have. But he has often been quick to take responsibility.

In 2009, after the administration came under fire for A.I.G. executives’ receiving bonuses after the bailout, Obama said on the lawn of the White House:

“Ultimately I’m responsible. I’m the president of the United States. We’ve got a big mess that we’re having to clean up. Nobody here drafted those contracts. Nobody here was responsible for supervising A.I.G. and allowing themselves to put the economy at risk by some of the outrageous behavior that they were engaged in. We are responsible, though. The buck stops with me.”

After the failed bombing plot on Christmas Day in 2009 by a young Nigerian man with plastic explosives sewn into his underwear, the president took responsibility for intelligence lapses, saying the next month:

“Moreover, I am less interested in passing out blame than I am in learning from and correcting these mistakes to make us safer. For ultimately, the buck stops with me.”

In a 2011 interview with CNN’s Wolf Blitzer, the president took responsibility for the economy and the rate at which it was being repaired, saying:

“Well, here’s what I remember, is that when I came into office, I knew I was going to have a big mess to clean up and, frankly, the mess has been bigger than I think a lot of people anticipated at the time. We have made steady progress on these fronts, but we’re not making progress fast enough.

“And what I continue to believe is that ultimately the buck stops with me. I’m going to be accountable. I think people understand that a lot of these problems were decades in the making. People understand that this financial crisis was the worst since the Great Depression. But, ultimately, they say, look, he’s the president, we think he has good intentions, but we’re impatient and we want to see things move faster.”

(It should be noted that this president has produced 45 straight months of job growth, and the June jobs report released this month was particularly strong.)

In an interview in the 2012 election cycle, the president reiterated his philosophy about presidential responsibility in response to a question about Mitt Romney’s relationship to Bain Capital:

“Well, here’s what I know, we were just talking about responsibility, and as president of the United States, it’s pretty clear to me that I’m responsible for folks who are working in the federal government and, you know, Harry Truman said the buck stops with you.”

In a 2013 interview with CNN’s Chris Cuomo, the president said he was accountable for Washington gridlock:

“Well, look, ultimately, the buck stops with me. And so any time we are not moving forward on things that should be simple, I get frustrated.”

In an interview with MSNBC’s Chuck Todd after the health care rollout, the president took responsibility for the problems rather than simply pin them on Kathleen Sebelius, then the health and human services secretary, saying: “My priority right now is to get it fixed. … Ultimately, the buck stops with me. I’m the president. This is my team. If it is not working, it is my job to get it fixed.”

(The site is now fixed, the law is working, and according to a Gallup report issued Thursday the uninsured rate has dropped to “the lowest quarterly average recorded since Gallup and Healthways began tracking the percentage of uninsured Americans in 2008.”)

This president is a habitual blame-taker. This is the anti-George W. Bush. The fess-upper in chief. He is the antidote to the eight previous years of obfuscation, fault-dodging and flat-out denial.

This is one of the traits that made Obama an attractive candidate, and it is one of his best traits as a president.

But taking his share of responsibility does not mean he must acquiesce to his opponents and absolve them of guilt, particularly not an intransigent Congress that would rather do nothing than something, particularly not Republican leaders who envision opportunity in opposition. The president has a duty to himself and the country to call them out for the part they play in our problems.

The real question, Mr. Boehner, is not when the president will take personal responsibility for something. He has. Many times. The real question is, When will you?

How about never.  Does never work for you, Mr. Blow?  Because that’s when it will happen.  Here’s Prof. Krugman:

How many Americans know how health reform is going? For that matter, how many people in the news media are following the positive developments?

I suspect that the answer to the first question is “Not many,” while the answer to the second is “Possibly even fewer,” for reasons I’ll get to later. And if I’m right, it’s a remarkable thing — an immense policy success is improving the lives of millions of Americans, but it’s largely slipping under the radar.

How is that possible? Think relentless negativity without accountability. The Affordable Care Act has faced nonstop attacks from partisans and right-wing media, with mainstream news also tending to harp on the act’s troubles. Many of the attacks have involved predictions of disaster, none of which have come true. But absence of disaster doesn’t make a compelling headline, and the people who falsely predicted doom just keep coming back with dire new warnings.

Consider, in particular, the impact of Obamacare on the number of Americans without health insurance. The initial debacle of the federal website produced much glee on the right and many negative reports from the mainstream press as well; at the beginning of 2014, many reports confidently asserted that first-year enrollments would fall far short of White House projections.

Then came the remarkable late surge in enrollment. Did the pessimists face tough questions about why they got it so wrong? Of course not. Instead, the same people just came out with a mix of conspiracy theories and new predictions of doom. The administration was “cooking the books,” said Senator John Barrasso of Wyoming; people who signed up wouldn’t actually pay their premiums, declared an array of “experts”; more people were losing insurance than gaining it, declared Senator Ted Cruz of Texas.

But the great majority of those who signed up did indeed pay up, and we now have multiple independent surveys — from Gallup, the Urban Institute and the Commonwealth Fund — all showing a sharp reduction in the number of uninsured Americans since last fall.

I’ve been seeing some claims on the right that the dramatic reduction in the number of uninsured was caused by economic recovery, not health reform (so now conservatives are praising the Obama economy?). But that’s pretty lame, and also demonstrably wrong.

For one thing, the decline is too sharp to be explained by what is at best a modest improvement in the employment picture. For another, that Urban Institute survey shows a striking difference between the experience in states that expanded Medicaid — which are also, in general, states that have done their best to make health care reform work — and those that refused to let the federal government cover their poor. Sure enough, the decline in uninsured residents has been three times as large in Medicaid-expansion states as in Medicaid-expansion rejecters. It’s not the economy; it’s the policy, stupid.

What about the cost? Last year there were many claims about “rate shock” from soaring insurance premiums. But last month the Department of Health and Human Services reported that among those receiving federal subsidies — the great majority of those signing up — the average net premium was only $82 a month.

Yes, there are losers from Obamacare. If you’re young, healthy, and affluent enough that you don’t qualify for a subsidy (and don’t get insurance from your employer), your premium probably did rise. And if you’re rich enough to pay the extra taxes that finance those subsidies, you have taken a financial hit. But it’s telling that even reform’s opponents aren’t trying to highlight these stories. Instead, they keep looking for older, sicker, middle-class victims, and keep failing to find them.

Oh, and according to Commonwealth, the overwhelming majority of the newly insured, including 74 percent of Republicans, are satisfied with their coverage.

You might ask why, if health reform is going so well, it continues to poll badly. It’s crucial, I’d argue, to realize that Obamacare, by design, by and large doesn’t affect Americans who already have good insurance. As a result, many peoples’ views are shaped by the mainly negative coverage in the news media. Still, the latest tracking survey from the Kaiser Family Foundation shows that a rising number of Americans are hearing about reform from family and friends, which means that they’re starting to hear from the program’s beneficiaries.

And as I suggested earlier, people in the media — especially elite pundits — may be the last to hear the good news, simply because they’re in a socioeconomic bracket in which people generally have good coverage.

For the less fortunate, however, the Affordable Care Act has already made a big positive difference. The usual suspects will keep crying failure, but the truth is that health reform is — gasp! — working.

Brooks, Cohen and Krugman

July 11, 2014

Bobo has a question in “Baseball or Soccer?”  He asks if your life more like a baseball game or a soccer match, and says you might be surprised.  “Jack Chicago” from Chicago wasn’t surprised.  In his comment he said “I find myself ill-prepared for another trite ‘life as a sport analogy’. The entire column is simplistic and lacking in any depth.”  In “Fat Britain” Mr. Cohen says once we’ve found our lunch our instinct is to avoid becoming someone else’s.  Prof. Krugman asks “Who Wants a Depression?”  He considers “sadomonetarism,” the interests of the 0.01 percent and the politicization of economics.  Here’s Bobo:

Is life more like baseball, or is it more like soccer?

Baseball is a team sport, but it is basically an accumulation of individual activities. Throwing a strike, hitting a line drive or fielding a grounder is primarily an individual achievement. The team that performs the most individual tasks well will probably win the game.

Soccer is not like that. In soccer, almost no task, except the penalty kick and a few others, is intrinsically individual. Soccer, as Simon Critchley pointed out recently in The New York Review of Books, is a game about occupying and controlling space. If you get the ball and your teammates have run the right formations, and structured the space around you, you’ll have three or four options on where to distribute it. If the defenders have structured their formations to control the space, then you will have no options. Even the act of touching the ball is not primarily defined by the man who is touching it; it is defined by the context created by all the other players.

As Critchley writes, “Soccer is a collective game, a team game, and everyone has to play the part which has been assigned to them, which means they have to understand it spatially, positionally and intelligently and make it effective.” Brazil wasn’t clobbered by Germany this week because the quality of the individual players was so much worse. They got slaughtered because they did a pathetic job of controlling space. A German player would touch the ball, even close to the Brazilian goal, and he had ample room to make the kill.

Most of us spend our days thinking we are playing baseball, but we are really playing soccer. We think we individually choose what career path to take, whom to socialize with, what views to hold. But, in fact, those decisions are shaped by the networks of people around us more than we dare recognize.

This influence happens through at least three avenues. First there is contagion. People absorb memes, ideas and behaviors from each other the way they catch a cold. As Nicholas Christakis and others have shown, if your friends are obese, you’re likely to be obese. If your neighbors play fair, you are likely to play fair. We all live within distinct moral ecologies. The overall environment influences what we think of as normal behavior without being much aware of it.

Then there is the structure of your network. There is by now a vast body of research on how differently people behave depending on the structure of the social networks. People with vast numbers of acquaintances have more job opportunities than people with fewer but deeper friendships. Most organizations have structural holes, gaps between two departments or disciplines. If you happen to be in an undeveloped structural hole where you can link two departments, your career is likely to take off.

Innovation is hugely shaped by the structure of an industry at any moment. Individuals in Silicon Valley are creative now because of the fluid structure of failure and recovery. Broadway was incredibly creative in the 1940s and 1950s because it was a fluid industry in which casual acquaintances ended up collaborating.

Since then, studies show, theater social networks have rigidified, and, even if you collaborate with an ideal partner, you are not as likely to be as creative as you would have been when the global environment was more fertile.

Finally, there is the power of the extended mind. There is also a developed body of research on how much our very consciousness is shaped by the people around us. Let me simplify it with a classic observation: Each close friend you have brings out a version of yourself that you could not bring out on your own. When your close friend dies, you are not only losing the friend, you are losing the version of your personality that he or she elicited.

Once we acknowledge that, in life, we are playing soccer, not baseball, a few things become clear. First, awareness of the landscape of reality is the highest form of wisdom. It’s not raw computational power that matters most; it’s having a sensitive attunement to the widest environment, feeling where the flow of events is going. Genius is in practice perceiving more than the conscious reasoning.

Second, predictive models will be less useful. Baseball is wonderful for sabermetricians. In each at bat there is a limited range of possible outcomes. Activities like soccer are not as easily renderable statistically, because the relevant spatial structures are harder to quantify. Even the estimable statistician Nate Silver of FiveThirtyEight gave Brazil a 65 percent chance of beating Germany.

Finally, Critchley notes that soccer is like a 90-minute anxiety dream — one of those frustrating dreams when you’re trying to get somewhere but something is always in the way. This is yet another way soccer is like life.

Now here’s Mr. Cohen:

Britain is fat, unacceptably fat — fatter than ever before. There is no escaping this development. Turn on the radio and chances are some new report on obesity will be the subject of debate, with handwringing over the “Americanization” of Britain, and hectoring BBC-style questioning as to what can be done.

A recent report in the Lancet medical journal found that 67 percent of men and 57 percent of women in the United Kingdom are either overweight or obese. This put Britain at the top of the supersized league table among big European countries (the likes of Malta and Iceland outdid it). More than a quarter of children are overweight or obese.

The causes are scarcely different from elsewhere in a fattening world: cheap availability of calorie-dense food (burgers, fries, chips, sodas); “food deserts” in poor areas where healthy fare is hard to find and expensive; sedentary lives spent seated in front of the computer or sprawled on the couch with “Game of Thrones” blaring; too much sugar, fat and fructose; broken or weakened families where children forage in the fridge for prepared meals and snack all day rather than gathering for a family meal; speeded-up societies that breed bored, stressed, impulsive and compulsive behavior, including binge eating and constant eating.

As Tony Goldstone, a consultant endocrinologist at London’s Hammersmith Hospital put it to me: “In the developed world we don’t eat because we are hungry.” We eat because everywhere we look there’s a superabundance of food and we’re hardwired through evolution to keep our body weight up.

The effects, as elsewhere, include a sharp increase in diabetes. Since 1996 the number of people diagnosed with diabetes in Britain has more than doubled to about three million. It is estimated that by 2025 there will be some five million diabetics. Direct and indirect health costs related to spreading obesity range into the billions of dollars.

The new social divide sees the skinny affluent at their Knightsbridge gym raving about their personal trainer and favorite farmers’ market, and the pot-bellied poor guzzling kebabs and fries. The counterintuitive association of poverty and obesity is an indicator of how much the world has changed. Survival is still an instinct but it is no longer an issue. More people today are overweight than malnourished.

Goldstone said he comes away from obesity conferences feeling gloomy. Telling fat people to get thin through dieting is, he suggests, like “telling an asthmatic to breathe more.” Cognitive control cedes to the force of instinct. “Who says that the will can overcome biology when biology trained us to get food when scarce?” Goldstone said. “We evolved to prefer foods high in fat and sugar because they contain the calories we need to reproduce.”

Our urges are out of sync with our environment. The environment has changed. Urges have not. Our instinct is to eat and rest. We have no instinct to stop eating and be active. We eat to survive and then want to rest because we may need energy to flee some wild beast. Once we’ve found our lunch, our instinct is to avoid being someone else’s.

It may not seem like lying on a couch is part of our survival gene but it is. David Haslam, the chairman of Britain’s National Obesity Forum, told me: “It is in our interest to eat and be lazy. Put people in an environment like the current one that promotes eating and laziness and they will oblige.” It’s their genetic inclination.

So I’m gloomy too. I eat more in the hours before I have to write a column. My instinct is then to rest. I cannot because I have to write. My impulse is then to eat again as a way, for a moment, not to write. This only augments the desire to rest. If deadlines did not exist I’d be enormous. Everyone these days plays such mental games, their instincts and environment at war with each other.

This does not mean there is nothing to be done about fat Britain or fat America. Exercise can be encouraged in big and small ways (promoting use of bikes, making sure hotels no longer hide the stairs). Make restaurant chains post calorie information. Improve labeling (Goldstone, a diabetic, told me he often can’t work out from current labels how many carbohydrates a product contains). Oblige supermarkets to move sweets from the checkouts, as Tesco has agreed to do. Get healthy food into schools and poor areas. Haslam told me about an experiment at a Morrisons supermarket where cardboard avatars of a diabetes consultant, a midwife or a doctor pointed to healthy foods. The results were positive. And, for those who can afford it, there’s bariatric surgery.

Nonetheless, the world will get fatter for the foreseeable future because humans in their ingenuity have created a near-perfect environment for the propagation of fatness.

Now here’s Prof. Krugman:

One unhappy lesson we’ve learned in recent years is that economics is a far more political subject than we liked to imagine. Well, duh, you may say. But, before the financial crisis, many economists — even, to some extent, yours truly — believed that there was a fairly broad professional consensus on some important issues.

This was especially true of monetary policy. It’s not that many years since the administration of George W. Bush declared that one lesson from the 2001 recession and the recovery that followed was that “aggressive monetary policy can make a recession shorter and milder.” Surely, then, we’d have a bipartisan consensus in favor of even more aggressive monetary policy to fight the far worse slump of 2007 to 2009. Right?

Well, no. I’ve written a number of times about the phenomenon of “sadomonetarism,” the constant demand that the Federal Reserve and other central banks stop trying to boost employment and raise interest rates instead, regardless of circumstances. I’ve suggested that the persistence of this phenomenon has a lot to do with ideology, which, in turn, has a lot to do with class interests. And I still think that’s true.

But I now think that class interests also operate through a cruder, more direct channel. Quite simply, easy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent.

The story so far: For more than five years, the Fed has faced harsh criticism from a coalition of economists, pundits, politicians and financial-industry moguls warning that it is “debasing the dollar” and setting the stage for runaway inflation. You might have thought that the continuing failure of the predicted inflation to materialize would cause at least a few second thoughts, but you’d be wrong. Some of the critics have come up with new rationales for unchanging policy demands — it’s about inflation! no, it’s about financial stability! — but most have simply continued to repeat the same warnings.

Who are these always-wrong, never-in-doubt critics? With no exceptions I can think of, they come from the right side of the political spectrum. But why should right-wing sentiments go hand in hand with inflation paranoia? One answer is that using monetary policy to fight slumps is a form of government activism. And conservatives don’t want to legitimize the notion that government action can ever have positive effects, because once you start down that path you might end up endorsing things like government-guaranteed health insurance.

But there’s also a much more direct reason for those defending the interests of the wealthy to complain about easy money: The wealthy derive an important part of their income from interest on bonds, and low-rate policies have greatly reduced this income.

Complaints about low interest rates are usually framed in terms of the harm being done to retired Americans living on the interest from their CDs. But the interest receipts of older Americans go mainly to a small and relatively affluent minority. In 2012, the average older American with interest income received more than $3,000, but half the group received $255 or less. The really big losers from low interest rates are the truly wealthy — not even the 1 percent, but the 0.1 percent or even the 0.01 percent. Back in 2007, before the slump, the average member of the 0.01 percent received $3 million (in 2012 dollars) in interest. By 2011, that had fallen to $1.3 million — a loss equivalent to almost 9 percent of the group’s 2007 income.

That’s a lot, and it surely explains a lot of the hysteria over Fed policy. The rich are even more likely than most people to believe that what’s good for them is good for America — and their wealth and the influence it buys ensure that there are always plenty of supposed experts eager to find justifications for this attitude. Hence sadomonetarism.

Which brings me back to the politicization of economics.

Before the financial crisis, many central bankers and economists were, it’s now clear, living in a fantasy world, imagining themselves to be technocrats insulated from the political fray. After all, their job was to steer the economy between the shoals of inflation and depression, and who could object to that?

It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority. And, as a result, monetary policy is as bound up in class and ideological conflict as tax policy.

The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.

Blow and Krugman

July 7, 2014

In “Ramparts Against Republicans” Mr. Blow says with the plutocrats betting on the G.O.P., Democrats will need to marshal their forces.  In “Beliefs, Facts and Money” Prof. Krugman outlines how Republicans ignore the evidence and cling to that old-time economic religion.  Here’s Mr. Blow:

Republicans believe that they have a chance of taking control of the Senate in November. And they do.

Who will win control is at the moment basically a tossup, but Republicans get the nod by narrow statistical margins.

Republicans need to pick up just six seats to gain control of the chamber. Thirty-six seats are open, and nearly two-thirds are currently held by Democrats. That means Democrats are playing defense in a political climate poisoned by Republican intransigence that has made much of the public sour on Washington in general. And it doesn’t help that the president’s approval rating remains underwater.

As The Los Angeles Times pointed out Friday: “Of the dozen or so most competitive races, virtually all are for seats held by Democrats. Of those, seven are in states that President Obama lost in 2012: Alaska, Arkansas, Louisiana, Montana, North Carolina, South Dakota and West Virginia.”

According to the Cook Report, “Republicans are on track to pick up between four and six seats; it is more likely than not that the number will be at the higher end of — and may exceed — that range.”

The New York Times’s current Senate forecast from The Upshot puts it this way: “According to our statistical election-forecasting machine, it’s a tossup. The Republicans have about a 54 percent chance of gaining a majority.”

Last month, Nate Silver at FiveThirtyEight.com said: “It’s almost certain that Republicans are going to gain seats. The question is whether they’ll net the six pickups necessary to win control of the Senate.” But he continued: “If asked to place a bet at even odds, we’d take a Republican Senate.”

And big-money conservatives are flooding the zone with cash to ensure victory.

Lauren Windsor reported last month in The Nation that Charles and David Koch held their annual summer seminar for “a gang of the world’s richest people,” and, according to a source who attended the conference, “the explicit goal was to raise $500 million to take the Senate in the 2014 midterms and another $500 million ‘to make sure Hillary Clinton is never president.’”

This continues a disturbing trend in which the wealthy tilt right in the fight against the rest. According to a report last month from the Center for Responsive Politics, “So far this cycle, the top 20 deep-pocketed contributors to the joint committees are all giving to conservatives. In contrast, during the 2012 cycle four of the top five donors to [joint fund-raising committees] were giving to Democrats.”

The plutocrats are flexing their muscle and placing their bets: Republicans for the win!

For one thing, it would signal a reward for obstruction, so a government that already has nearly ground to a halt could become even more resistant to action. This could mean another lost year for us as a nation, as Congress whiles away the time in anticipation of a changing of the guard in 2016.

Or, a Congress completely controlled by Republicans could feel a need to put some points on the board, so to speak, redoubling investigative queries into conservative crusades like the Benghazi attacks and scheduling votes on, and possibly even passing, a raft of bills that stoke conservative passions, like limits on abortion.

According to The Daily Independent, a newspaper in Ashland, Ky., Senator Mitch McConnell, while speaking at a national Right to Life Convention in Louisville last month, told the crowd that if Republicans gained control of the Senate, they would schedule a vote on legislation to outlaw abortions after 20 weeks.

To that point, The New York Times’s Jackie Calmes reported last week: “With their Senate majority at stake in November, Democrats and allied groups are now stepping up an aggressive push to woo single women — young and old, highly educated and working class, never married, and divorced or widowed.”

On the heels of the Supreme Court’s ruling in the Hobby Lobby case, and the court’s temporary order in the Wheaton College case, this might be smart politics. Both decisions limited women’s rights relating to contraceptive coverage, and both were attacked in strongly worded dissents by female justices, Justice Ruth Bader Ginsburg (Notorious R.B.G., as the Internet has crowned her) writing on the former and Justice Sonia Sotomayor on the latter.

But Democrats can’t lean on a single demographic. The corporatists, oligarchs and plutocrats are working in concert. Liberals must marshal all their constituent groups to do the same. Everyone must vote.

Here’s Prof. Krugman:

On Sunday The Times published an article by the political scientist Brendan Nyhan about a troubling aspect of the current American scene — the stark partisan divide over issues that should be simply factual, like whether the planet is warming or evolution happened. It’s common to attribute such divisions to ignorance, but as Mr. Nyhan points out, the divide is actually worse among those who are seemingly better informed about the issues.

The problem, in other words, isn’t ignorance; it’s wishful thinking. Confronted with a conflict between evidence and what they want to believe for political and/or religious reasons, many people reject the evidence. And knowing more about the issues widens the divide, because the well informed have a clearer view of which evidence they need to reject to sustain their belief system.

As you might guess, after reading Mr. Nyhan I found myself thinking about the similar state of affairs when it comes to economics, monetary economics in particular.

Some background: On the eve of the Great Recession, many conservative pundits and commentators — and quite a few economists — had a worldview that combined faith in free markets with disdain for government. Such people were briefly rocked back on their heels by the revelation that the “bubbleheads” who warned about housing were right, and the further revelation that unregulated financial markets are dangerously unstable. But they quickly rallied, declaring that the financial crisis was somehow the fault of liberals — and that the great danger now facing the economy came not from the crisis but from the efforts of policy makers to limit the damage.

Above all, there were many dire warnings about the evils of “printing money.” For example, in May 2009 an editorial in The Wall Street Journal warned that both interest rates and inflation were set to surge “now that Congress and the Federal Reserve have flooded the world with dollars.” In 2010 a virtual Who’s Who of conservative economists and pundits sent an open letter to Ben Bernanke warning that his policies risked “currency debasement and inflation.” Prominent politicians like Representative Paul Ryan joined the chorus.

Reality, however, declined to cooperate. Although the Fed continued on its expansionary course — its balance sheet has grown to more than $4 trillion, up fivefold since the start of the crisis — inflation stayed low. For the most part, the funds the Fed injected into the economy simply piled up either in bank reserves or in cash holdings by individuals — which was exactly what economists on the other side of the divide had predicted would happen.

Needless to say, it’s not the first time a politically appealing economic doctrine has been proved wrong by events. So those who got it wrong went back to the drawing board, right? Hahahahaha.

In fact, hardly any of the people who predicted runaway inflation have acknowledged that they were wrong, and that the error suggests something amiss with their approach. Some have offered lame excuses; some, following in the footsteps of climate-change deniers, have gone down the conspiracy-theory rabbit hole, claiming that we really do have soaring inflation, but the government is lying about the numbers (and by the way, we’re not talking about random bloggers or something; we’re talking about famous Harvard professors). Mainly, though, the currency-debasement crowd just keeps repeating the same lines, ignoring its utter failure in prognostication.

You might wonder why monetary theory gets treated like evolution or climate change. Isn’t the question of how to manage the money supply a technical issue, not a matter of theological doctrine?

Well, it turns out that money is indeed a kind of theological issue. Many on the right are hostile to any kind of government activism, seeing it as the thin edge of the wedge — if you concede that the Fed can sometimes help the economy by creating “fiat money,” the next thing you know liberals will confiscate your wealth and give it to the 47 percent. Also, let’s not forget that quite a few influential conservatives, including Mr. Ryan, draw their inspiration from Ayn Rand novels in which the gold standard takes on essentially sacred status.

And if you look at the internal dynamics of the Republican Party, it’s obvious that the currency-debasement, return-to-gold faction has been gaining strength even as its predictions keep failing.

Can anything reverse this descent into dogma? A few conservative intellectuals have been trying to persuade their movement to embrace monetary activism, but they’re ever more marginalized. And that’s just what Mr. Nyhan’s article would lead us to expect. When faith — including faith-based economics — meets evidence, evidence doesn’t stand a chance.

Brooks, Cohen and Krugman

July 4, 2014

Bobo’s given us “Social Science Palooza IV” in which he says most social science confirms the blindingly obvious. He offers eight examples where it doesn’t.  Apparently he’s found a site that serves up social science factoids every day…  Mr. Cohen considers a “Lawless Holy Land” and says absent a two-state peace agreement, revenge killings will win out over law. This is the future for Israel and Palestine.  Prof. Krugman, in “Build We Won’t,” explains why America gave up on the future and caved on investing in building and maintaining our highways.  Here’s Bobo:

A day without social science is like a day without sunshine. Fortunately, every morning Kevin Lewis of National Affairs magazine gathers recent social science findings and emails them out to the masses. You can go to the National Affairs website to see and sign up for his work, but, in the meantime, here are some recent interesting findings:

Working moms sometimes raise smarter students. Caitlin McPherran Lombardi and Rebekah Levine Coley studied the children of mothers who work and those of mothers who don’t. They found the children of working mothers were just as ready for school as other children. Furthermore, among families where the father’s income was lower, the children of working mothers demonstrated higher cognitive skills and fewer conduct problems than the children of nonworking mothers. As with all this work, no one study is dispositive, but here is some more support for the idea that mothers who work are not hurting their kids.

The office is often a more relaxing place than the home. Sarah Damaske, Joshua Smyth and Matthew Zawadzki found that people are more likely to have lower values of the stress hormone cortisol when they are at work than when at home. Maybe that’s because parenting small kids is so demanding. But, on the contrary: Having children around was correlated with less relative stress at home.

Hearts and minds may be a myth. Armies fighting counterinsurgency campaigns spend a lot of effort trying to win over the hearts and minds of the local populations. But Raphael Cohen looked at polling data from Vietnam, Iraq and Afghanistan and found that public opinion is a poor predictor of strategic victory. Public opinion is not that malleable, and its swings are more an effect than a cause. That is, counterinsurgency armies get more popular as they win victories; they don’t get popular and then use that popularity to win.

Attractive children attract less empathy than unattractive children. Robert Fisher and Yu Ma studied how much help children received from unrelated adults when they were experiencing difficulties. People perceive that attractive children are more socially competent and, therefore, are less likely to help them, as long as the need is not severe. So, if you are creating an ad to get people to donate to your hospital or charity, you might avoid child models who are winners in the looks department.

Too much talent can be as bad as too little talent. Most people assume there is a linear relationship between talent and team performance. But Roderick Swaab and others studied team performance in basketball and found that more talent is better up to a point — after which more talent just means worse teamwork and ultimately worse performance. In baseball, more talent did lead to better team performance straight up the line, but in activities like basketball, which require more intra-team coordination, too much talent can tear apart teamwork.

Title IX has produced some unintended consequences. Phoebe Clarke and Ian Ayres studied the effect of sports on social outcomes. They found that a 10 percentage point increase in state level female sports participation generated a 5 or 6 percentage point rise in the rate of female secularism, a 5 point rise in the proportion of women who are mothers and a 6 point rise in the percentage who are single mothers. It could be that sports participation is correlated with greater independence from traditional institutions, with good and bad effects.

Moral stories don’t necessarily make more moral children. Kang Lee, Victoria Talwar and others studied the effectiveness of classic moral stories in promoting honesty among 3- to 7-year-olds. They found stories like “Pinocchio” and “The Boy Who Cried Wolf” failed to reduce lying in children. However, the story of “George Washington and the Cherry Tree” significantly increased truth-telling. Stories that emphasized the bad effects of lying had no effect, but stories that emphasized the good effects of telling the truth did have an effect.

Good fences make good neighbors. When ethnic groups clash, we usually try to encourage peace by integrating them. Let them get to know one another or perform a joint activity. This may be the wrong approach. Alex Rutherford, Dion Harmon and others studied ethnically diverse areas and came to a different conclusion. Peace is not the result of integrated coexistence. It is the result of well-defined geographic and political boundaries. For example, Switzerland is an ethnically diverse place, but mountains and lakes clearly define each group’s spot. Even in the former Yugoslavia, amid widespread ethnic violence, peace prevailed where there were clear boundaries.

Most social science research confirms the blindingly obvious. But sometimes it reveals things nobody had thought of, or suggests that the things we thought were true are actually false.

That’s a message for you, federal appropriators.

I guess we’ve all noticed that as the Republicans get crazier and crazier and crazier Bobo writes less and less and less about politics…  Here’s Mr. Cohen:

“Israel is a state of law and everyone is obligated to act in accordance with the law,” the Israeli prime minister, Benjamin Netanyahu, said after the abduction and murder of a Palestinian teenager shot in an apparent revenge attack for the killing last month of three Israeli teenagers in the West Bank.

He called the killing of Muhammad Abu Khdeir in East Jerusalem “abominable.” President Mahmoud Abbas of the Palestinian Authority has denounced the murder of the three Israelis, one of them also an American citizen, in the strongest terms.

What to make of this latest flare-up in the blood feud of Arab and Jew in the Holy Land, beyond revulsion at the senseless loss of four teenagers’ lives? What to make of the hand-wringing of the very leaders who have just chosen to toss nine months of American attempts at diplomatic mediation into the garbage and now reap the fruits of their fecklessness?

Sometimes words, any words, appear unseemly because the perpetuators of the conflict relish the attention they receive — all the verbal contortions of would-be peacemakers who insist, in their quaint doggedness, that reason can win out over revenge and biblical revelation.

Still, it must be said that Israel, a state of laws within the pre-1967 lines, is not a state of law beyond them in the occupied West Bank, where Israeli dominion over millions of Palestinians, now almost a half-century old, involves routine coercion, humiliation and abuse to which most Israelis have grown increasingly oblivious.

What goes on beyond a long-forgotten Green Line tends only to impinge on Israeli consciousness when violence flares. Otherwise it is over the wall or barrier (choose the word that suits your politics) in places best not dwelled upon.

But those places come back to haunt Israelis, as the vile killings of Eyal Yifrach, Naftali Fraenkel and Gilad Shaar demonstrate. Netanyahu, without producing evidence, has blamed Hamas for the murders. The sweeping Israeli response in the West Bank has already seen at least six Palestinians killed, about 400 Palestinians arrested, and much of the territory placed in lockdown. Reprisals have extended to Gaza. Palestinian militants there have fired rockets and mortar rounds into southern Israel in response.

This is not what happens in a state of laws. Beyond the Green Line lies a lawless Israeli enterprise profoundly corrosive, over time, to the noble Zionist dream of a democracy governed by laws.

All four killings took place in territory occupied or annexed by Israel since 1967. Here the law has taken second place to the Messianic claims of religious nationalists who believe Jews have a God-given right to all the land between the Mediterranean and the Jordan River. Their view has held sway, even if it is not the view of a majority of Israelis.

No democracy can be immune to running an undemocratic system of oppression in territory under its control. To have citizens on one side of an invisible line and subjects without rights on the other side of that line does not work. A democracy needs borders; Israel’s slither into military rule for Palestinians in occupied areas where there is no consent of the governed.

As for the Palestinian Authority, so-called, it is weak, and the Palestinian national movement still riven with division beneath a “unity government” that cannot even pay salaries in Gaza.

This situation may be sustainable because power lies overwhelmingly with Israel. But it is sustainable only at the cost of the violence now flaring. This is the future. Absent a two-state peace agreement, revenge will win out over law. Violence is not an aberration. It is the logical consequence of an aberrational order susceptible to lynch mobs, whether Arabs or Jews.

Most Israelis and Palestinians want peace. They do not want their children dying this way. But their leaders are small figures seeking only short-term tactical gain.

A French friend forwarded to me the recent newsletter of a French violinist, Mathilde Vittu, who has been teaching music in the West Bank. She writes of watching Palestinian children emerging from her lessons, violins on their backs, being surrounded by Israeli soldiers trying to provoke them. She goes to Gaza and observes the “double imprisonment” constituted by Israel and “the rules of Hamas.”

In a makeshift conservatory, partially destroyed, hit by power cuts in the midst of Bach piano solos, she speaks of her “indescribable emotion” at a magical final concert where she is thanked “for liberating us for an evening through music.”

One very talented violinist, aged 14, tells her he plans to stop playing after his exam to become a “martyr” after the death of his best friend in the West Bank. She is deeply troubled; then locals tell her lots of kids in Gaza have that ambition at 14, only to think better of it.

Yifrach, Khdeir, Fraenkel, Shaar: Will their deaths serve any purpose? I doubt it.

And now here’s Prof. Krugman:

You often find people talking about our economic difficulties as if they were complicated and mysterious, with no obvious solution. As the economist Dean Baker recently pointed out, nothing could be further from the truth. The basic story of what went wrong is, in fact, almost absurdly simple: We had an immense housing bubble, and, when the bubble burst, it left a huge hole in spending. Everything else is footnotes.

And the appropriate policy response was simple, too: Fill that hole in demand. In particular, the aftermath of the bursting bubble was (and still is) a very good time to invest in infrastructure. In prosperous times, public spending on roads, bridges and so on competes with the private sector for resources. Since 2008, however, our economy has been awash in unemployed workers (especially construction workers) and capital with no place to go (which is why government borrowing costs are at historic lows). Putting those idle resources to work building useful stuff should have been a no-brainer.

But what actually happened was exactly the opposite: an unprecedented plunge in infrastructure spending. Adjusted for inflation and population growth, public expenditures on construction have fallen more than 20 percent since early 2008. In policy terms, this represents an almost surreally awful wrong turn; we’ve managed to weaken the economy in the short run even as we undermine its prospects for the long run. Well played!

And it’s about to get even worse. The federal highway trust fund, which pays for a large part of American road construction and maintenance, is almost exhausted. Unless Congress agrees to top up the fund somehow, road work all across the country will have to be scaled back just a few weeks from now. If this were to happen, it would quickly cost us hundreds of thousands of jobs, which might derail the employment recovery that finally seems to be gaining steam. And it would also reduce long-run economic potential.

How did things go so wrong? As with so many of our problems, the answer is the combined effect of rigid ideology and scorched-earth political tactics. The highway fund crisis is just one example of a much broader problem.

So, about the highway fund: Road spending is traditionally paid for via dedicated taxes on fuel. The federal trust fund, in particular, gets its money from the federal gasoline tax. In recent years, however, revenue from the gas tax has consistently fallen short of needs. That’s mainly because the tax rate, at 18.4 cents per gallon, hasn’t changed since 1993, even as the overall level of prices has risen more than 60 percent.

It’s hard to think of any good reason why taxes on gasoline should be so low, and it’s easy to think of reasons, ranging from climate concerns to reducing dependence on the Middle East, why gas should cost more. So there’s a very strong case for raising the gas tax, even aside from the need to pay for road work. But even if we aren’t ready to do that right now — if, say, we want to avoid raising taxes until the economy is stronger — we don’t have to stop building and repairing roads. Congress can and has topped up the highway trust fund from general revenue. In fact, it has thrown $54 billion into the hat since 2008. Why not do it again?

But no. We can’t simply write a check to the highway fund, we’re told, because that would increase the deficit. And deficits are evil, at least when there’s a Democrat in the White House, even if the government can borrow at incredibly low interest rates. And we can’t raise gas taxes because that would be a tax increase, and tax increases are even more evil than deficits. So our roads must be allowed to fall into disrepair.

If this sounds crazy, that’s because it is. But similar logic lies behind the overall plunge in public investment. Most such investment is carried out by state and local governments, which generally must run balanced budgets and saw revenue decline after the housing bust. But the federal government could have supported public investment through deficit-financed grants, and states themselves could have raised more revenue (which some but not all did). The collapse of public investment was, therefore, a political choice.

What’s useful about the looming highway crisis is that it illustrates just how self-destructive that political choice has become. It’s one thing to block green investment, or high-speed rail, or even school construction. I’m for such things, but many on the right aren’t. But everyone from progressive think tanks to the United States Chamber of Commerce thinks we need good roads. Yet the combination of anti-tax ideology and deficit hysteria (itself mostly whipped up in an attempt to bully President Obama into spending cuts) means that we’re letting our highways, and our future, erode away.

Krugman, solo

June 30, 2014

Mr. Blow is off today.  In “Charlatans, Cranks and Kansas” Prof. Krugman says the state’s economy is in terrible shape after huge income-tax cuts — another case of big money selling bad ideas.  Here he is:

Two years ago Kansas embarked on a remarkable fiscal experiment: It sharply slashed income taxes without any clear idea of what would replace the lost revenue. Sam Brownback, the governor, proposed the legislation — in percentage terms, the largest tax cut in one year any state has ever enacted — in close consultation with the economist Arthur Laffer. And Mr. Brownback predicted that the cuts would jump-start an economic boom — “Look out, Texas,” he proclaimed.

But Kansas isn’t booming — in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state’s budget has plunged deep into deficit, provoking a Moody’s downgrade of its debt.

There’s an important lesson here — but it’s not what you think. Yes, the Kansas debacle shows that tax cuts don’t have magical powers, but we already knew that. The real lesson from Kansas is the enduring power of bad ideas, as long as those ideas serve the interests of the right people.

Why, after all, should anyone believe at this late date in supply-side economics, which claims that tax cuts boost the economy so much that they largely if not entirely pay for themselves? The doctrine crashed and burned two decades ago, when just about everyone on the right — after claiming, speciously, that the economy’s performance under Ronald Reagan validated their doctrine — went on to predict that Bill Clinton’s tax hike on the wealthy would cause a recession if not an outright depression. What actually happened was a spectacular economic expansion.

Nor is it just liberals who have long considered supply-side economics and those promoting it to have been discredited by experience. In 1998, in the first edition of his best-selling economics textbook, Harvard’s N. Gregory Mankiw — very much a Republican, and later chairman of George W. Bush’s Council of Economic Advisers — famously wrote about the damage done by “charlatans and cranks.” In particular, he highlighted the role of “a small group of economists” who “advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue.” Chief among that “small group” was none other than Art Laffer.

And it’s not as if supply-siders later redeemed themselves. On the contrary, they’ve been as ludicrously wrong in recent years as they were in the 1990s. For example, five years have passed since Mr. Laffer warned Americans that “we can expect rapidly rising prices and much, much higher interest rates over the next four or five years.” Just about everyone in his camp agreed. But what we got instead was low inflation and record-low interest rates.

So how did the charlatans and cranks end up dictating policy in Kansas, and to a more limited extent in other states? Follow the money.

For the Brownback tax cuts didn’t emerge out of thin air. They closely followed a blueprint laid out by the American Legislative Exchange Council, or ALEC, which has also supported a series of economic studies purporting to show that tax cuts for corporations and the wealthy will promote rapid economic growth. The studies are embarrassingly bad, and the council’s Board of Scholars — which includes both Mr. Laffer and Stephen Moore of the Heritage Foundation — doesn’t exactly shout credibility. But it’s good enough for antigovernment work.

And what is ALEC? It’s a secretive group, financed by major corporations, that drafts model legislation for conservative state-level politicians. Ed Pilkington of The Guardian, who acquired a number of leaked ALEC documents, describes it as “almost a dating service between politicians at the state level, local elected politicians, and many of America’s biggest companies.” And most of ALEC’s efforts are directed, not surprisingly, at privatization, deregulation, and tax cuts for corporations and the wealthy.

And I do mean for the wealthy. While ALEC supports big income-tax cuts, it calls for increases in the sales tax — which fall most heavily on lower-income households — and reductions in tax-based support for working households. So its agenda involves cutting taxes at the top while actually increasing taxes at the bottom, as well as cutting social services.

But how can you justify enriching the already wealthy while making life harder for those struggling to get by? The answer is, you need an economic theory claiming that such a policy is the key to prosperity for all. So supply-side economics fills a need backed by lots of money, and the fact that it keeps failing doesn’t matter.

And the Kansas debacle won’t matter either. Oh, it will briefly give states considering similar policies pause. But the effect won’t last long, because faith in tax-cut magic isn’t about evidence; it’s about finding reasons to give powerful interests what they want.


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