Brooks and Krugman

In “Started at the Bottom” Bobo has decided to tell us about four Hispanic young people who peel back the curtain into a different wiring of aspirations and loyalties than those held by the empirical kids he described in March.  He could have used this column to repudiate the bigoted Heritage Foundation study by Jason Redwine, but he apparently chose not to do so.  Prof. Krugman has a question in “Bernanke, Blower of Bubbles?”  He asks, with all the talk about financial bubbles lately, do current bond and stock prices make sense?  Here’s Bobo:

Not long ago, I devoted a column to the mostly upper-middle-class students at elite universities — the empirical kids. I thought it would be interesting to devote a column to students who at least started at the other end of the social scale. So the Times researcher Anne Snyder and I interviewed a bunch of young people whom we had met earlier through the Congressional Hispanic Caucus Institute.

Edgar Leon’s background was pretty typical. Both of his parents immigrated from Mexico. His mom does janitorial work in Chicago, while his dad commuted to Indiana to fix railroad lines.

These young people have been shaped by their awesome life trajectories, from poor neighborhoods, to college, to internships on Capitol Hill. Cristi Privado is the last of seven children and the only one to graduate from high school. Kimberly Lopez has a brother and a sister who dropped out of school in the 9th and 10th grades. Her sister got pregnant at 16. “I got lucky,” Kimberly explained.

None of them had pressuring parents who organized their children’s lives for success. “College was more of an encouragement in my home, less a given,” Edgar recalled.

Almost all of them experienced a life-altering move when they were teenagers. Reuben Kapp benefited from a school choice program that enabled him to move from an urban Michigan high school to a suburban one. “I’m a big believer in school choice,” he said. “If it wasn’t for choice, I wouldn’t be here.” Cristi’s parents took her from a poorly performing middle school and moved to Greenville, S.C. At her new school there, she fell in with the smart kids. She developed a taste for country music. She ended up as class president.

She was not babied in school. “Until I got to D.C., I never heard the word mentor. When I got here, it seemed that everybody has one,” Cristi joked.

Like several of the others, she was discouraged from applying to a competitive college. Cristi said her guidance counselor mentioned that her own son had been rejected by Clemson so Cristi shouldn’t apply. “That made me definitely want to apply.”

In college and at internships, they found a new world. “My mom and dad always worked the third shift. It dawned on me that some people leave work at 5 p.m.,” Edgar remembered.

Edgar lived at home while going to DePaul, commuting 45 minutes each way. “I was just going to class and going to work,” he noted, uncomplainingly. Cristi’s father died a month before graduation. She had to finish the term through her grief.

Most of the students had some trouble gelling with the whiter, richer student body in college and hung out mostly with fellow Hispanics. “We love our culture,” said Reuben. “That’s what makes our group stronger and bonds us together.” Now they seem to flow fluidly across cultural lines.

We met them as they were finishing a stint as Congressional staffers, often answering the phones and hearing the public rage about everything from the sequester to immigration reform.

All of them have experienced culture shock in coming to Washington. Kimberly observed, “I feel that here people will do whatever it takes to get to the top. It was really overwhelming at the beginning. Are they being sincere? I could never tell.” Edgar echoed that: “Everyone is on a mission. People are all about networking. How can we use each other to get what we want? Maybe there’s a lack of genuineness?”

Still, most wanted to stay in politics. As Kimberly put it: “I really want to go back to Delaware and seek elective office, whether it is local office or national office. To be president would be really cool.”

The economy has been bad during their adult lives, but they’ve been shooting upward. Anne Snyder and I both came away with the impression that they have fewer anxieties than the more affluent students or empirical kids, less of a fear that one false move can lead to disaster.

They seemed both hardy and a bit naïve, made more resilient by reality but not jaded by it. Their conversational styles were enthusiastic, grateful, direct and earnest. They seemed to us unself-conscious about how they present themselves — unironic, matter of fact, sincere and un-meta — not tripping in loops of self-awareness. They also have a less methodical sense of the exact steps you have to take to make it in the world.

Their ambitions were perpetually sandwiched by their affections. “I know people who move across the country for a job. They see their family once or twice a year. I could never do that,” Kimberly remarked.

Without even being asked, almost all of them burst into rhapsodies about their country. “I love the United States,” Reuben explained. “I have a lot of pride in the United States. I’m not a hockey fan, but when the American team is playing I go crazy.”

Now here’s Prof. Krugman:

Bubbles can be bad for your financial health — and bad for the health of the economy, too. The dot-com bubble of the late 1990s left behind many vacant buildings and many more failed dreams. When the housing bubble of the next decade burst, the result was the greatest economic crisis since the 1930s — a crisis from which we have yet to emerge.

So when people talk about bubbles, you should listen carefully and evaluate their claims — not scornfully dismiss them, which was the way many self-proclaimed experts reacted to warnings about housing.

And there’s a lot of bubble talk out there right now. Much of it is about an alleged bond bubble that is supposedly keeping bond prices unrealistically high and interest rates — which move in the opposite direction from bond prices — unrealistically low. But the rising Dow has raised fears of a stock bubble, too.

So do we have a major bond and/or stock bubble? On bonds, I’d say definitely not. On stocks, probably not, although I’m not as certain.

What is a bubble, anyway? Surprisingly, there’s no standard definition. But I’d define it as a situation in which asset prices appear to be based on implausible or inconsistent views about the future. Dot-com prices in 1999 made sense only if you believed that many companies would all turn out to be a Microsoft; housing prices in 2006 only made sense if you believed that home prices could keep rising much faster than buyers’ incomes for years to come.

Is there anything comparable going on in today’s bond market? Well, the interest rate on long-term bonds depends mainly on the expected path of short-term interest rates, which are controlled by the Federal Reserve. You don’t want to buy a 10-year bond at less than 2 percent, the current going rate, if you believe that the Fed will be raising short-term rates to 4 percent or 5 percent in the not-too-distant future.

But why, exactly, should you believe any such thing? The Fed normally cuts rates when unemployment is high and inflation is low — which is the situation today. True, it can’t cut rates any further because they’re already near zero and can’t go lower. (Otherwise investors would just sit on cash.) But it’s hard to see why the Fed should raise rates until unemployment falls a lot and/or inflation surges, and there’s no hint in the data that anything like that is going to happen for years to come.

Why, then, all the talk of a bond bubble? Partly it reflects the correct observation that interest rates are very low by historical standards. What you need to bear in mind, however, is that the economy is also in especially terrible shape by historical standards — once-in-three-generations terrible. The usual rules about what constitutes a reasonable level of interest rates don’t apply.

There’s also, one has to say, an element of wishful thinking here. For whatever reason, many people in the financial industry have developed a deep hatred for Ben Bernanke, the Fed chairman, and everything he does; they want his easy-money policies ended, and they also want to see those policies fail in some spectacular fashion. As it turns out, however, dislike for bearded Princeton professors is not a good basis for investment strategy.

And one should never forget the example of Japan, where bets against government bonds — justified by more or less the same arguments currently made to justify claims of a U.S. bond bubble — ended in grief so often that the whole trade came to be known as the “widow maker.” At this point, Japan’s debt is well over twice its G.D.P., its budget deficit remains large, and the interest rate on 10-year bonds is 0.6 percent. No, that’s not a misprint.

O.K., what about stocks? Major stock indexes are now higher than they were at the end of the 1990s, which can sound ominous. It sounds a lot less ominous, however, when you learn that corporate profits — which are, after all, what stocks are shares in — are more than two-and-a-half times higher than they were when the 1990s bubble burst. Also, with bond yields so low, you would expect investors to move into stocks, driving their prices higher.

All in all, the case for significant bubbles in stocks or, especially, bonds is weak. And that conclusion matters for policy as well as investment.

For one important subtext of all the recent bubble rhetoric is the demand that Mr. Bernanke and his colleagues stop trying to fight mass unemployment, that they must cease and desist their efforts to boost the economy or dire consequences will follow. In fact, however, there isn’t any case for believing that we face any broad bubble problem, let alone that worrying about hypothetical bubbles should take precedence over the task of getting Americans back to work. Mr. Bernanke should brush aside the babbling barons of bubbleism, and get on with doing his job.

Keller and Krugman

Mr. Keller is busily beating his little war drum.  In “Syria Is Not Iraq” he says our errors in Iraq should not keep us from doing the right thing this time.  Really.  In the third graf of this thing he tells us “… at the outset of the Iraq invasion, I found myself a reluctant hawk. That turned out to be a humbling error of judgment, and it left me gun-shy.”  Obviously not quite gun-shy enough…  Prof. Krugman considers “The Chutzpah Caucus,” looking for realism in all the wrong places.  Here’s Mr. Keller, telling us why it’s time to beat the war drums again:

In the search for an American response to the civil war in Syria, the favorite guidebook seems to be our ill-fated adventure in Iraq. We have another brutal Middle East autocrat holding power on behalf of a sectarian minority. We have another dubious cast of opposition factions competing for foreign patronage. We hear some of the same hawks — John McCain, Paul Wolfowitz — exhorting us to intervene, countered by familiar warnings of “quagmire.” We even have murky intelligence claims that the regime has used weapons of mass destruction.

This time, though, we have a president who, having opposed the costly blunder of Iraq and been vindicated, is holding back. The theme song at the National Security Council is “Won’t Get Fooled Again.”

As a rule, I admire President Obama’s cool calculation in foreign policy; it is certainly an improvement over the activist hubris of his predecessor. And frankly I’ve shared his hesitation about Syria, in part because, during an earlier column-writing interlude at the outset of the Iraq invasion, I found myself a reluctant hawk. That turned out to be a humbling error of judgment, and it left me gun-shy.

Of course, there are important lessons to be drawn from our sad experience in Iraq: Be clear about America’s national interest. Be skeptical of the intelligence. Be careful whom you trust. Consider the limits of military power. Never go into a crisis, especially one in the Middle East, expecting a cakewalk.

But in Syria, I fear prudence has become fatalism, and our caution has been the father of missed opportunities, diminished credibility and enlarged tragedy.

The United States has supplied humanitarian aid and diplomatic pressure. But our reluctance to arm the rebels or defend the civilians being slaughtered in their homes has convinced the Assad regime (and the world) that we are not serious. Our fear that arms supplied to the rebels would fall into the hands of jihadis has become a self-fulfilling prophecy, because instead of dealing directly with the rebels we left the arming to fundamentalist monarchies, Saudi Arabia and Qatar, and they are predictably using lethal aid to appease the more radical Islamists.

It might have been easier to intervene a year ago, before the opposition was so fragmented. But back then the president was busy ending foreign engagements and in no mood to start a new one. Besides, everyone was preoccupied by the dramas of Iran’s nuclear program, Egypt’s revolution and Ohio’s electoral votes. Since then, Assad has been sly about escalating his savagery by degrees — artillery, then aerial bombardment, then Scud missiles and now, apparently, chemical weapons — while staying just below whatever threshold of horror might shame us into responding.

What you hear from the Obama team is that we know way too little about the internal dynamics of Syria, so we can’t predict how an intervention will play out, except that there is no happy ending; that while the deaths of 70,000 Syrians are tragic, that’s what happens in a civil war; that no one in the opposition can be trusted; and, most important, that we have no vital national interest there. Obama conceded that the use of poison gas would raise the stakes, because we cannot let the world think we tolerate spraying civilians with nerve gas. But even there, the president says he would feel obliged to respond to “systematic” use of chemical weapons, as if something less — incremental use? sporadic use? — would be O.K. This sounds like a president looking for excuses to stand pat.

In contemplating Syria, it is useful to consider the ways it is not Iraq.

First, we have a genuine, imperiled national interest, not just a fabricated one. A failed Syria creates another haven for terrorists, a danger to neighbors who are all American allies, and the threat of metastasizing Sunni-Shiite sectarian war across a volatile and vital region. “We cannot tolerate a Somalia next door to Israel, Lebanon, Jordan, Iraq and Turkey,” said Vali Nasr, who since leaving the Obama foreign-policy team in 2011 has become one of its most incisive critics. Nor, he adds, can we afford to let the Iranians, the North Koreans and the Chinese conclude from our attitude that we are turning inward, becoming, as the title of Nasr’s new book puts it, “The Dispensable Nation.”

Second, in Iraq our invasion unleashed a sectarian war. In Syria, it is already well under way.

Third, we have options that do not include putting American troops on the ground, a step nobody favors. None of the options are risk-free. Arming some subset of the rebels does not necessarily buy us influence. The much-touted no-fly zone would put American pilots in range of Syrian air defenses. Sending missiles to destroy Assad’s air force and Scud emplacements, which would provide some protection for civilians and operating room for the rebels, carries a danger of mission creep. But, as Joseph Holliday, a Syria analyst at the Institute for the Study of War, points out, what gets lost in these calculations is the potentially dire cost of doing nothing. That includes the danger that if we stay away now, we will get drawn in later (and bigger), when, for example, a desperate Assad drops Sarin on a Damascus suburb, or when Jordan collapses under the weight of Syrian refugees.

Fourth, in Iraq we had to cajole and bamboozle the world into joining our cause. This time we have allies waiting for us to step up and lead. Israel, out of its own interest, seems to have given up waiting.

Advocates of doing more (a group that included Hillary Clinton and David Petraeus before they left the administration) do not agree on every detail of what “more” means, but it might look something like this:

For starters, President Obama articulates — as he has not done — how the disintegration of Syria represents a serious danger to America’s interests and ideals. The United States moves to assert control of the arming and training of rebels — funneling weapons through the rebel Supreme Military Council, cultivating insurgents who commit to negotiating an orderly transition to a nonsectarian Syria. We make clear to President Assad that if he does not cease his campaign of terror and enter negotiations on a new order, he will pay a heavy price. When he refuses, we send missiles against his military installations until he, or more likely those around him, calculate that they should sue for peace.

All of this must be carefully choreographed and accompanied by a symphony of diplomacy to keep our allies with us and our adversaries at bay. The aim would be to eventually have a transition government, stabilized for a while by an international peacekeeping force drawn mostly from neighboring states like Turkey.

I don’t mean to make this sound easy. It might well be that the internal grievances are too deep and bitter to forestall a bloody period of reprisals. But that outcome is virtually inevitable if we stay out.

The administration is now preparing contingency plans along those lines in the event that Assad’s use of chemical weapons forces our hand. Why wait for the next atrocity?

“We have to change the calculation of the people around Assad, to have them figure out a deal is better than going down to the end,” said Anne-Marie Slaughter, the Princeton professor and former director of policy planning for Hillary Clinton’s State Department, who was an early advocate of intervention. “And the sooner we change that calculation, the more possibility there is for a political settlement.”

“The challenge to this administration from 2009 has been how to move this country past the Iraq war into a sensible, viable foreign policy,” added Vali Nasr. “That hasn’t happened. We’re paralyzed like a deer in the headlights, and everybody keeps relitigating the Iraq war.”

Whatever we decide, getting Syria right starts with getting over Iraq.

Fck you, Billy boy.  Here’s Prof. Krugman:

At this point the economic case for austerity — for slashing government spending even in the face of a weak economy — has collapsed. Claims that spending cuts would actually boost employment by promoting confidence have fallen apart. Claims that there is some kind of red line of debt that countries dare not cross have turned out to rest on fuzzy and to some extent just plain erroneous math. Predictions of fiscal crisis keep not coming true; predictions of disaster from harsh austerity policies have proved all too accurate.

Yet calls for a reversal of the destructive turn toward austerity are still having a hard time getting through. Partly that reflects vested interests, for austerity policies serve the interests of wealthy creditors; partly it reflects the unwillingness of influential people to admit being wrong. But there is, I believe, a further obstacle to change: widespread, deep-seated cynicism about the ability of democratic governments, once engaged in stimulus, to change course in the future.

So now seems like a good time to point out that this cynicism, which sounds realistic and worldly-wise, is actually sheer fantasy. Ending stimulus has never been a problem — in fact, the historical record shows that it almost always ends too soon. And in America, at least, we have a pretty good record for behaving in a fiscally responsible fashion, with one exception — namely, the fiscal irresponsibility that prevails when, and only when, hard-line conservatives are in power.

Let’s start with the common claim that stimulus programs never go away.

In the United States, government spending programs designed to boost the economy are in fact rare — F.D.R.’s New Deal and President Obama’s much smaller Recovery Act are the only big examples. And neither program became permanent — in fact, both were scaled back much too soon. F.D.R. cut back sharply in 1937, plunging America back into recession; the Recovery Act had its peak effect in 2010, and has since faded away, a fade that has been a major reason for our slow recovery.

What about programs designed to aid those hurt by a depressed economy? Don’t they become permanent fixtures? Again, no. Unemployment benefits have fluctuated up and down with the business cycle, and as a percentage of G.D.P. they are barely half what they were at their recent peak. Food stamp usage is still rising, thanks to a still-terrible labor market, but historical experience suggests that it too will fall sharply if and when the economy really recovers.

Incidentally, foreign experience follows the same pattern. You often hear Japan described as a country that has pursued never-ending fiscal stimulus. In reality, it has engaged in stop-go policies, increasing spending when the economy is weak, then pulling back at the first sign of recovery (and thereby pushing itself back into recession).

So the whole notion of perma-stimulus is fantasy posing as hardheaded realism. Still, even if you don’t believe that stimulus is forever, Keynesian economics says not just that you should run deficits in bad times, but that you should pay down debt in good times. And it’s silly to imagine that this will happen, right?

Wrong. The key measure you want to look at is the ratio of debt to G.D.P., which measures the government’s fiscal position better than a simple dollar number. And if you look at United States history since World War II, you find that of the 10 presidents who preceded Barack Obama, seven left office with a debt ratio lower than when they came in. Who were the three exceptions? Ronald Reagan and the two George Bushes. So debt increases that didn’t arise either from war or from extraordinary financial crisis are entirely associated with hard-line conservative governments.

And there’s a reason for that association: U.S. conservatives have long followed a strategy of “starving the beast,” slashing taxes so as to deprive the government of the revenue it needs to pay for popular programs.

The funny thing is that right now these same hard-line conservatives declare that we must not run deficits in times of economic crisis. Why? Because, they say, politicians won’t do the right thing and pay down the debt in good times. And who are these irresponsible politicians they’re talking about? Why, themselves.

To me, it sounds like a fiscal version of the classic definition of chutzpah — namely, killing your parents, then demanding sympathy because you’re an orphan. Here we have conservatives telling us that we must tighten our belts despite mass unemployment, because otherwise future conservatives will keep running deficits once times improve.

Put this way, of course, it sounds silly. But it isn’t; it’s tragic. The disastrous turn toward austerity has destroyed millions of jobs and ruined many lives. And it’s time for a U-turn.

Brooks and Krugman

Bobo is all agog at the fact that people are different.  In “The Confidence Responses” he gurgles that readers’ responses to the confidence questions inspire awe at the diversity of the human experience.  The poor sod may actually think he’s doing a valid “scientifical” study…  Prof. Krugman, in “Not Enough Inflation,” says the economic hole we’re in just gets deeper and deeper.  Here’s Bobo:

A few columns ago, I asked readers to give me their feedback about questions having to do with self-confidence: Are women still less self-confident than men? Do we have more to fear from overconfidence or underconfidence?

I’ve read through a mountain of responses, and my first reaction is awe at the diversity of the human experience. I went looking for patterns in this survey. Were younger people more likely to say women are self-confident than older people?

But it was really hard to see consistent correlations and trends. The essays were highly idiosyncratic, and I don’t want to impose a false order on them that isn’t there. Let me just string together some of the interesting points people made.

Many men wrote to say that the real crisis these days is male underconfidence. Here’s a law student from Chicago: “I firmly believe one of the unintended consequences of the feminist revolution has been that men in my generation are raised without a strong self-identity, and, in essence, grow up to be little more than boys looking for mothers.”

A few women wrote that family dynamics were the sources of their underconfidence. One 58-year-old mom wrote that mothers “might as well have had, as a friend of mine puts it, ‘our vocal cords cut.’ We want to talk in nice voices and stay calm and sit down and have a heart-to-heart. Our children want the five-minute version — direct, to the point. They come back at anything we say with smart remarks that knock the wind out of our sails.”

More women wrote about conflicts with other women than about conflicts with men. One retired Army officer wrote, “Girls and women are highly critical of any other girl or woman who exhibits confidence. Men, on the whole, do not ‘shut down’ women who are intelligent and confident, but women do.”

One small-business owner put it this way: “I have enjoyed a lot of professional success because I do not present a threat to other women. They trust me and attach to me and stay bonded because I pay so little attention to appearances, dress and style — theirs or mine. My strategy, if at all deliberate, was to become ‘invisible’ and pass gently through the world as wallpaper, leading as a border collie rather than an alpha dog.”

Mallory Shaddix theorized that both men and women may suffer equally from underconfidence, but they present this trait differently. Men are more likely to bluff their way through. Women are more likely to be skeptical or ask advice or be passive. Betsy Frank observed that if you create a confidence scale from “None” to “Hubris,” there seem to be more people at the extremes now than in decades past.

A few experienced coaches noted that when you criticize a team or group, the women are more likely to take the criticism personally, while the guys are more likely to figure somebody else is at fault.

I was struck by the dappled nature of self-confidence, as people transmogrify from high self-confidence to low. One political consultant wrote, “I am 71, am loving the last chapter of a very successful life, and would say I have a great deal of self-confidence. Yet, sometimes it’s as if I have suddenly become invisible — a short gray-haired woman of a certain age can become a blur, especially to powerful older men and to young women who never suspect they will get old.”

A journalist from Utah writes: “I’m an overweight woman, but I feel robust. And I know people like to hug and cuddle me because my body is, as they say, ‘comfortable.’ (I sometimes say ‘plush.’) I know I don’t look good in shorts, but I don’t hate myself for it. I choose to wear dresses that are more flattering, and I walk with confidence instead of despair.”

One of the calmest letters came from Carol Collier, who works at Covenant College. She wrote: “As a believer in Jesus Christ, I see myself as redeemed, forgiven and covered in the righteousness of Jesus Christ. I believe that this is how God sees me, all the time and without exception. I believe that his smile and delight in me is unwavering. This view of myself is quite simple yet with profound implications. It allows me to accept criticism without self-condemnation and to accept affirmations without exalting myself. This is the ideal view of myself that I am always working at. It is a struggle, but a good one.”

I’ll try to harvest more social trends later. But, in the meantime, I’m struck by how hard it is to have the right stable mix of self-confidence and self-criticism without some external moral framework or publicly defined life calling. If it’s just self-appraisal — one piece of your unstable self judging another unstable piece — it’s subjectivity all the way down.

Please, Bobo, DON’T try to harvest more social trends.  (Why anyone would actually respond to one of his requests for column fodder remains a mystery to me…)  Here’s Prof. Krugman:

Ever since the financial crisis struck, and the Federal Reserve began “printing money” in an attempt to contain the damage, there have been dire warnings about inflation — and not just from the Ron Paul/Glenn Beck types.

Thus, in 2009, the influential conservative monetary economist Allan Meltzer warned that we would soon become “inflation nation.” In 2010, the Paris-based Organization for Economic Cooperation and Development urged the Fed to raise interest rates to head off inflation risks (even though its own models showed no such risk). In 2011, Representative Paul Ryan, then the newly installed chairman of the House Budget Committee, raked Ben Bernanke, the Fed chairman, over the coals, warning of looming inflation and intoning solemnly that it was a terrible thing to “debase” the dollar.

And now, sure enough, the Fed really is worried about inflation. You see, it’s getting too low.

Before I get to the trouble with low inflation, however, let’s talk about what we should have learned so far.

It’s not hard to see where inflation fears were coming from. In its efforts to prop up the economy, the Fed has bought more than $2 trillion of stuff — private debts, housing agency debts, government bonds. It has paid for these purchases by crediting funds to the reserves of private banks, which isn’t exactly printing money, but is close enough for government work. Here comes hyperinflation!

Or, actually, not. From the beginning, it was or at least should have been obvious that the financial crisis had plunged us into a “liquidity trap,” a situation in which many people figure that they might just as well sit on cash. America spent most of the 1930s in a liquidity trap; Japan has been in one since the mid-1990s. And we’re in one now.

Economists who had studied such traps — a group that included Ben Bernanke and, well, me — knew that some of the usual rules of economics are in abeyance as long as the trap lasts. Budget deficits, for example, don’t drive up interest rates; printing money isn’t inflationary; slashing government spending has really destructive effects on incomes and employment.

The usual suspects dismissed all this analysis; it was “liquidity claptrap,” declared Alan Reynolds of the Cato Institute. But that was four years ago, and the liquidity trappers seem to have been right, after all.

And it’s worth mentioning another issue on which the inflation non-worriers have been vindicated: how to measure inflation trends. The Fed relies on a measure that excludes food and energy prices, which fluctuate widely from month to month. Many commentators ridiculed this focus on “core” inflation, especially in early 2011, when rising food and energy prices briefly sent “headline” inflation above 4 percent even as the core stayed low. But, sure enough, inflation came back down.

So all those inflation fears were wrong, and those who fanned those fears proved, in case you were wondering, that their economic doctrine is completely wrong — not that any of them will ever admit such a thing.

And, at this point, inflation — at barely above 1 percent by the Fed’s favored measure — is dangerously low.

Why is low inflation a problem? One answer is that it discourages borrowing and spending and encourages sitting on cash. Since our biggest economic problem is an overall lack of demand, falling inflation makes that problem worse.

Low inflation also makes it harder to pay down debt, worsening the private-sector debt troubles that are a main reason overall demand is too low.

So why is inflation falling? The answer is the economy’s persistent weakness, which keeps workers from bargaining for higher wages and forces many businesses to cut prices. And if you think about it for a minute, you realize that this is a vicious circle, in which a weak economy leads to too-low inflation, which perpetuates the economy’s weakness.

And this brings us to a broader point: the utter folly of not acting to boost the economy, now.

Whenever anyone talks about the need for more stimulus, monetary and fiscal, to reduce unemployment, the response from people who imagine themselves wise is always that we should focus on the long run, not on short-run fixes. The truth, however, is that by failing to deal with our short-run mess, we’re turning it into a long-run, chronic economic malaise.

I wrote recently about how, by allowing long-term unemployment to persist, we’re creating a permanent class of unemployed Americans. The problem of too-low inflation is very different in detail, but similar in its implications: here, too, by letting short-run economic problems fester we’re setting ourselves up for a long-run, perhaps permanent, pattern of economic failure.

The point is that we are failing miserably in responding to our economic challenge — and we will be paying for that failure for many years to come.

Keller and Krugman

In “Erasing History” Mr. Keller has a question:  In the age of the almighty search engine, do we have a right to be forgotten?  Prof. Krugman continues to be a voice crying in the wilderness.  In “The Story of Our Time” he offers a refresher on our economic woes, and why this is a very bad time for cuts.  Here’s Keller:

One of my favorite coffee-table books is an odd volume called “The Commissar Vanishes,” a portfolio of doctored photographs from Stalin’s Russia. When Stalin purged one of his fellow Bolsheviks, the comrade who fell from favor was duly cropped or airbrushed out of official photographs. “The Commissar Vanishes” juxtaposes the before and after. Here is the party stalwart grinning alongside Lenin in Red Square; and now — poof! — he’s gone. Person, un-person. History, un-history.

For a contemporary take on the subject of un-history, I take you now to a lawsuit scheduled for argument next month in a Connecticut courtroom. The case tests the proposition that in America in the Internet age, there are benign, even humane reasons that sometimes history should be erased.

Connecticut has a law that allows people accused of crimes to expunge the official record if a case is dismissed. Most states have some version of expungement laws, or erasure laws as they are sometimes called. They are intended to let those whose cases have been dropped or overturned get on with their lives, unencumbered by the taint of arrest. Thus under the Connecticut law any person whose record is erased “shall be deemed to have never been arrested” and “may swear so under oath.”

Lorraine Martin, a nurse in Greenwich, was arrested in 2010 with her two grown sons when police raided her home and found a small stash of marijuana, scales and plastic bags. The case against her was tossed out when she agreed to take some drug classes, and the official record was automatically purged. It was, the law seemed to assure her, as if it had never happened.

But Martin found that when she applied for jobs that should have been well within her reach, she got the cold shoulder. She Googled herself and discovered what any vigilant employer would have seen: stories still sitting in online news archives with headlines like “Mother and sons charged with drug offenses.”

“It’s essentially a scarlet letter,” her lawyer, Mark Sherman, told me. “She’s become unemployable in spite of the fact that she has no criminal arrest record.”

So Martin filed a class action against local news outlets, claiming that they had defamed her and everyone in a similar situation. Defamation is the publication of information that is both damaging and false. The arrest story was obviously true when it was first published. But Connecticut’s erasure law has already established that truth can be fungible. Martin, her suit says, was “deemed never to have been arrested.” And therefore the news story had metamorphosed into a falsehood.

There are passages in the court briefs that make you think the lawyers were possessed by the ghost of Lewis Carroll. They debate the difference between “historical fact” and “legal fact.” They dispute whether something that was true when it happened can become not just private but actually untrue, so untrue you can swear an oath that it never happened and, in the eyes of the law, you’ll be telling the truth. Several pages and copious footnotes are devoted to considering what the meaning of “publish” is. Martin’s lawyers insist that every time a search engine delivers the old story to a new reader, it amounts to republishing, and constitutes a new libel. The defending news companies say that is ridiculous.

The plaintiff’s brief concedes that the suit is “novel,” and most lawyers I talked to predicted the case would probably be dismissed. It seems to collide head on with the First Amendment. The closest thing I could find to a similar case, in New Jersey’s Supreme Court, was thrown out with a ruling that suggested the plaintiff’s logic was “Orwellian.”

But the dilemma underlying this case is real, and not so simple. The Connecticut case is just one manifestation of an anxious backlash against the invasive power of the Internet, a world of Big Data and ever more powerful search engines, in which it seems almost everything is permanently recorded and accessible to almost anyone — potential employers, landlords, dates, predators. In Europe, where press freedoms are less sacred and the right to privacy is more ensconced, the idea has taken hold that individuals have a “right to be forgotten,” and those who want their online particulars expunged tend to have the government on their side. In Germany or Spain, Lorraine Martin might have a winning case.

I sense that the idea is gaining traction here. Erasure laws seem to be proliferating. States feel greater pressure to put public records offline. (After a New York newspaper published names and addresses of local handgun permit-holders, the Legislature in Albany sharply limited access to that information.) Google’s latest transparency report shows a sharp rise in requests from governments and courts to take down potentially damaging material. Editors tell me they are increasingly beset by readers who once cooperated with a reporter on a sensitive subject — nudism, anorexia, bullying — and years later find that old story a recurring source of distress. (It’s called “source remorse.”)

Greg Brock, who handles reader complaints for The Times, says he now gets about four pleas a week from readers who want something purged. Most involve items from the police blotter, though he also gets requests to delete announcements of weddings that have since ended in ugly divorce. The most heartbreaking appeal he has heard involved the story of a toddler who apparently mistook her newborn twin siblings for dolls, pulled them from their cribs to play with them and inadvertently killed them. Nearly 30 years later, the toddler is now a teacher. When her students plugged her name into Google, the first thing that popped up was a headline tying her to the death of the twins.

As if that were not enough, there is a growing flock of buzzards to feed on your distress. Mugshots.com, for example, collects and posts arrest records from all over, complete with lurid mug shots, and then offers to redact your information — for $399.

However understandable the yearning to escape painful memories, The Times’s policy is not to censor history, because it’s history. The paper will update an arrest story if presented with evidence of an acquittal or dismissal, completing the story but not deleting the story.

Some papers have compromised by agreeing in certain instances to insert a bit of code in online articles that prevents them from being fetched by the major search engines. The stories can still be found in the paper’s digital archive, just as they can be found in bound volumes at the local library, but they do not show up on Google. The Hearst Corporation, a defendant in that Connecticut libel suit, is experimenting with such a program. The Times considered a similar policy a few years ago, and we decided it was a slippery slope. But perhaps it’s time to reopen that discussion.

A number of privacy protection firms use another technique. They prepare packets of non-damaging information about their clients — academic records, philanthropic work — and “optimize” them so they pop up in search-engine rankings before the more embarrassing stuff.

Last month Owen Tripp, a co-founder of Reputation.com, which has made a business out of helping clients manage their digital profile, advocated a “right to be forgotten” in a YouTube video. Tripp said everyone is entitled to a bit of space to grow up, to experiment, to make mistakes.

“How do we give people a chance to go back and to edit, to trim around the edges, or at least drop the veil across those things that are most private?” he asked.

“This is not just a privacy problem,” said Viktor Mayer-Schönberger, a professor at the Oxford Internet Institute, and author of “Delete: The Virtue of Forgetting in the Digital Age.” “If we are continually reminded about people’s mistakes, we are not able to judge them for who they are in the present. We need some way to put a speed-brake on the omnipresence of the past.”

What that brake might be, he says, is not entirely clear. He is wary of legislation, but would like to see search engine companies — the parties that benefit the most financially from amassing our information — offer the kind of reputation-protecting tools that are now available only to those who can afford paid services like those of Reputation.com. Google, he points out, already takes down five million items a week because of claims that they violate copyrights. Why shouldn’t we expect Google to give users an option — and a simple process — to have news stories about them down-ranked or omitted from future search results? Good question. What’s so sacred about a search algorithm, anyway? After all, nobody ever called Google the first draft of history.

Now here’s Prof. Krugman:

Those of us who have spent years arguing against premature fiscal austerity have just had a good two weeks. Academic studies that supposedly justified austerity have lost credibility; hard-liners in the European Commission and elsewhere have softened their rhetoric. The tone of the conversation has definitely changed.

My sense, however, is that many people still don’t understand what this is all about. So this seems like a good time to offer a sort of refresher on the nature of our economic woes, and why this remains a very bad time for spending cuts.

Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.

Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.

And that’s what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.

Why did spending plunge? Mainly because of a burst housing bubble and an overhang of private-sector debt — but if you ask me, people talk too much about what went wrong during the boom years and not enough about what we should be doing now. For no matter how lurid the excesses of the past, there’s no good reason that we should pay for them with year after year of mass unemployment.

So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again. The crucial point is that under current conditions, the government is not, repeat not, in competition with the private sector. Government spending doesn’t divert resources away from private uses; it puts unemployed resources to work. Government borrowing doesn’t crowd out private investment; it mobilizes funds that would otherwise go unused.

Now, just to be clear, this is not a case for more government spending and larger budget deficits under all circumstances — and the claim that people like me always want bigger deficits is just false. For the economy isn’t always like this — in fact, situations like the one we’re in are fairly rare. By all means let’s try to reduce deficits and bring down government indebtedness once normal conditions return and the economy is no longer depressed. But right now we’re still dealing with the aftermath of a once-in-three-generations financial crisis. This is no time for austerity.

O.K., I’ve just given you a story, but why should you believe it? There are, after all, people who insist that the real problem is on the economy’s supply side: that workers lack the skills they need, or that unemployment insurance has destroyed the incentive to work, or that the looming menace of universal health care is preventing hiring, or whatever. How do we know that they’re wrong?

Well, I could go on at length on this topic, but just look at the predictions the two sides in this debate have made. People like me predicted right from the start that large budget deficits would have little effect on interest rates, that large-scale “money printing” by the Fed (not a good description of actual Fed policy, but never mind) wouldn’t be inflationary, that austerity policies would lead to terrible economic downturns. The other side jeered, insisting that interest rates would skyrocket and that austerity would actually lead to economic expansion. Ask bond traders, or the suffering populations of Spain, Portugal and so on, how it actually turned out.

Is the story really that simple, and would it really be that easy to end the scourge of unemployment? Yes — but powerful people don’t want to believe it. Some of them have a visceral sense that suffering is good, that we must pay a price for past sins (even if the sinners then and the sufferers now are very different groups of people). Some of them see the crisis as an opportunity to dismantle the social safety net. And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain.

What has happened now, however, is that the drive for austerity has lost its intellectual fig leaf, and stands exposed as the expression of prejudice, opportunism and class interest it always was. And maybe, just maybe, that sudden exposure will give us a chance to start doing something about the depression we’re in.

Brooks and Krugman

Bobo says that there is “Health Chaos Ahead,” and that the implementation of Obamacare is off to a rough start. Even the law’s fervent supporters admit that things are going worse than expected.  Prof. Krugman has a question in “The 1 Percent’s Solution:”  While the austerity doctrine seems to have imploded, austerity has strengthened its grip on elite opinion. Why?  Here’s Bobo:

It was always going to be difficult to implement Obamacare, but even fervent supporters of the law admit that things are going worse than expected.

Implementation got off to a bad start because the Obama administration didn’t want to release unpopular rules before the election. Regulators have been working hard but are clearly overwhelmed, trying to write rules that influence the entire health care sector — an economic unit roughly the size of France. Republicans in Congress have made things much more difficult by refusing to provide enough money for implementation.

By now, everybody involved seems to be in a state of anxiety. Insurance companies are trying to put out new products, but they don’t know what federal parameters they have to meet. Small businesses are angry because the provisions that benefited them have been put on the back burner. Health care systems are highly frustrated. They can’t plan without a road map. Senator Max Baucus, one of the authors of the law, says he sees a “huge train wreck” coming.

I’ve been talking with a bipartisan bunch of health care experts, trying to get a sense of exactly how bad things are. In my conversations with this extremely well-informed group of providers, academics and former government officials, I’d say there is a minority, including some supporters of the law, who think the whole situation is a complete disaster. They predict Obamacare will collapse and do serious damage to the underlying health system.

But the clear majority, including some of the law’s opponents, believe that we’re probably in for a few years of shambolic messiness, during which time everybody will scramble and adjust, and eventually we will settle down to a new normal.

What nobody can predict is how health care chaos will interact with the political system. There’s a good chance that Republicans will be able to use unhappiness with what is already an unpopular law to win back the Senate in 2014. Controlling both houses of Congress, they will be in a good position to alter, though not repeal, the program.

The law’s biggest defenders will then become insurance companies and health care corporations. Having spent billions of dollars adapting to the new system, they are not going to want to see it repealed or replaced.

The experts talk about the problems that lie ahead in cascades. First, there is what you might call the structural cascade. Everything is turning out to be more complicated than originally envisioned. The Supreme Court decision made the Medicaid piece more complicated. The decision by many states not to set up exchanges made the exchange piece more complicated. The lines of accountability between, for example, state and federally run exchanges have grown byzantine and unclear.

A law that was very confusing has become mind-boggling. That could lead people to freeze up. Insurance companies will hesitate before venturing into state exchanges, thereby limiting competition and choice. Americans are just going to be overwhelmed and befuddled. Many are just going to stay away, even if they are eligible for benefits.

Then there is the technical cascade. At some point, people are going to sit at computers and enroll. If the data process looks like some 1990s glitchmonster, if information doesn’t flow freely, then the public opinion hit will be catastrophic.

Then there is the cost cascade. Nearly everybody not in the employ of the administration agrees this law does not solve the cost problem, and many of the recent regulatory decisions will send costs higher. A study in California found that premiums could increase by an average of 20 percent for people not covered by federal subsidies. A study by the Society of Actuaries found that by 2017 costs could rise by 32 percent for insurers covering people in the individual exchanges, and as high as 80 percent in states like Ohio.

Then there is the adverse selection cascade. Under the law, young healthy people subsidize poorer, sicker and older people. But the young may decide en masse that it is completely irrational for them to get health insurance that subsidizes others while they are healthy. They’ll be better off paying the fines, if those are even enforced, and opting out. Without premiums from the young, everybody else’s costs go up even higher.

Then there is the provider concentration cascade. The law further incentivizes a trend under way: the consolidation of hospitals, doctors’ practices and other providers. That also boosts prices.

Over all, it seems likely that in some form or another Obamacare is here to stay. But the turmoil around it could dominate politics for another election cycle, and the changes after that — to finally control costs, to fix the mind-boggling complexities and the unintended consequences — will never end.

Regulatory regimes can be simple and dumb or complex and sprawling. When you build complex, it takes a while to work through the consequences.

Seeing that most of Obamacare doesn’t even phase in until 2014 it may be just a tad early to get hysterical about what a failure it is…  Here’s Prof. Krugman:

Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close — at least in the world of ideas. At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.

Yet two big questions remain. First, how did austerity doctrine become so influential in the first place? Second, will policy change at all now that crucial austerian claims have become fodder for late-night comics?

On the first question: the dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity — Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. — faced withering criticism almost as soon as they came out.

And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings, while many economists raised fundamental questions about Reinhart-Rogoff long before we knew about the famous Excel error. Meanwhile, real-world events — stagnation in Ireland, the original poster child for austerity, falling interest rates in the United States, which was supposed to be facing an imminent fiscal crisis — quickly made nonsense of austerian predictions.

Yet austerity maintained and even strengthened its grip on elite opinion. Why?

Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price. Economists can explain ad nauseam that this is wrong, that the reason we have mass unemployment isn’t that we spent too much in the past but that we’re spending too little now, and that this problem can and should be solved. No matter; many people have a visceral sense that we sinned and must seek redemption through suffering — and neither economic argument nor the observation that the people now suffering aren’t at all the same people who sinned during the bubble years makes much of a dent.

But it’s not just a matter of emotion versus logic. You can’t understand the influence of austerity doctrine without talking about class and inequality.

What, after all, do people want from economic policy? The answer, it turns out, is that it depends on which people you ask — a point documented in a recent research paper by the political scientists Benjamin Page, Larry Bartels and Jason Seawright. The paper compares the policy preferences of ordinary Americans with those of the very wealthy, and the results are eye-opening.

Thus, the average American is somewhat worried about budget deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face. And how should the budget deficit be brought down? The wealthy favor cutting federal spending on health care and Social Security — that is, “entitlements” — while the public at large actually wants to see spending on those programs rise.

You get the idea: The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.

Does a continuing depression actually serve the interests of the wealthy? That’s doubtful, since a booming economy is generally good for almost everyone. What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.

And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make. To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?

I hope not; I’d like to believe that ideas and evidence matter, at least a bit. Otherwise, what am I doing with my life? But I guess we’ll see just how much cynicism is justified.

Keller and Krugman

In “A Blogger on Trial” Mr. Keller has decided to tell us why the prosecution of Aleksei Navalny matters.  Prof. Krugman looks at “The Jobless Trap” and explains that we are creating a permanent class of unemployed Americans.  Here’s Keller:

If you set out to design a political nemesis who would give Vladimir Putin the shivers, you might well come up with Aleksei Navalny. That is why the trial of the popular Russian activist on Wednesday is the most important political trial in Russia in decades.

Navalny, a lawyer, anticorruption crusader and blogger, has been likened to every political insurgent from Julian Assange to Nelson Mandela. As a potential political leader he long ago surpassed Assange and hasn’t quite caught up to Mandela, but he keeps getting better. He is young (36), thoughtful, politically astute, crowd-pleasing and apparently unafraid. He has command of the Internet and the skills of an investigative reporter. (He buys stock in state-owned oil companies and banks and uses his status as a minority shareholder to air their dirty laundry on his LiveJournal blog.)

He is an ethnic Russian who has incorporated a mild dose of nationalist sloganeering into his patter. This has dismayed some of his liberal friends, but it is shrewd. It inoculates him somewhat against Putin’s favorite line of attack, that critics are Western stooges, and, more important, helps broaden his appeal beyond the young, social-media-savvy cubicle workers who are his base.

His platform combines free-market libertarianism, which appeals to Russia’s growing bourgeoisie, and a relentless campaign against corruption, which resonates widely in a nation where it seems every transaction entails a bribe. (Russia ranks a humiliating 133rd on the Transparency International index of countries where businesses can invest with confidence.) The Moscow Times in 2011 called Navalny “the only electable” opposition figure. That might be true, although the best rabble-rousers don’t always make the best presidents — a lesson Russia should have learned from Boris Yeltsin.

This is hardly the first time the Putin regime has used law enforcement and the criminal courts (acquittal rate: 0.4 percent) to cull antagonists. The hounding of the outspoken tycoon Mikhail Khodorkovsky was an appalling and largely successful effort to warn Russia’s wealthiest not to kid themselves that money entitled them to free speech. The sham trial of Sergei Magnitsky, the Russian lawyer who dared take on tax fraud in high places and died in jail from mistreatment, sent a message not to meddle with the thievery of Putin’s cronies. And the trial of the sacrilegious punk trio Pussy Riot served notice that the president does not see the joke, not when it’s on him. None of these victims of Kremlin justice, though, could mobilize a serious political following. Navalny might, especially if he ever gets off a TV black list.

The main charge against Navalny is that, as an adviser to the regional government in Kirov, he embezzled money from a state-run timber company. A review of the case by a Chicago law firm for a client sympathetic to Navalny’s plight concluded that the charges were laughably bogus, and the state has offered nothing to rebut that. In fact, local authorities conducted what seems to have been a thorough investigation and concluded no crime was committed. But the federal Investigative Committee, a powerful agency that serves Putin, stepped in and — without adding any new evidence — charged Navalny with stealing timber worth more than $500,000.

It’s probably no coincidence that one of the targets of Navalny’s recent muckraking was the head of the very same Investigative Committee, Aleksandr Bastrykin. Navalny posted documents showing that Bastrykin secretly possessed a residence permit and real estate in the Czech Republic, raising questions about his faith in Russia’s future and, since the Czech Republic is a member of the NATO alliance, his vulnerability to blackmail.

The state’s obvious hope is that by convicting Navalny on charges of greed, it will diminish his credibility as a corruption-fighter and, not incidentally, head off his political ambitions. (Conviction of a serious crime is a disqualification for public office.)

I suspect the Russian public knows exactly what is going on. That, in fact, is the point. The trial is a show, and the moral of this drama is, if you stick your head up too high, you could lose it. In an interview in Izvestia that reads like a relic of Soviet-era cynicism, Vladimir Markin, the oleaginous spokesman for the Investigative Committee, left no doubt about Navalny’s real crime. Why, the paper asked, was the case propelled to the front of the court docket? The spokesman replied: “If a person tries with all his might to draw attention to himself, even, you might say, tries to taunt the authorities — says, ‘Look at me, you’re all covered in dirt and I’m so clean’ — well, then the interest in his past grows, and the process of exposing him naturally speeds up.”

Markin suggested that Navalny, who spent a semester at a Yale program for budding foreign leaders, is a kind of Ivy-League Manchurian candidate, set in motion by American mentors to provoke a conflict with the Kremlin that would end in his arrest and demonstrate that Russia persecutes truth-tellers.

The interviewer asked why, rather than threaten Navalny with jail, the state did not enlist his anticorruption expertise to help clean up the country. “No one is hindering his public activities,” Markin smirked. “Even in prison many convicts write letters and statements, struggle against the shortcomings of the system.”

Friends of Navalny — and, you would think, common sense — say this case is a loser for Putin. He will further discredit a politicized justice system. He risks making Navalny a martyr. He jeopardizes Russia’s respectful treatment at all those meetings of the G-8, the G-20 and the P5-plus-1, not to mention the Winter Olympics in Sochi next year. And at a time when Russia badly needs foreign capital, using economic laws for political repression spooks investors. “Putin doesn’t want Russia to become a pariah,” a close friend of Navalny told me, hopefully. “He doesn’t want to be treated like the president of Belarus.”

Let’s hope this is all true, but Putin — especially in the last few years of his seemingly endless rule — has not been a cleareyed calculator of Russian’s best interest, or a man in close touch with what the world thinks of him. He has become ever more weirdly narcissistic, a stuntman posing shirtless on horseback, hugging a tranquilized polar bear, piloting a motorized glider to lead a flock of migrating Siberian cranes. And he has become more petty and vindictive, signing a law ending the adoption of Russian orphans by Americans and obliging nonprofits to register as “foreign agents.” In the campaign to make an example of Navalny, the activist’s friends and supporters have been followed, searched, harassed and threatened. Authorities have filed charges against Navalny’s brother and leaked private e-mails that suggested tensions in Navalny’s marriage.

Navalny knows, as Putin does, that sometimes fear works. The blogger’s middle-class followers, unlike the threadbare Soviet throngs who backed Yeltsin against the Communists or the miserable armies of the Arab Spring, actually have something to lose.

“The majority of the elite or business elite,” Navalny told The Times’s Ellen Barry recently, “they are people with liberal views, but they are cowardly, they are simply afraid of everything, they are trembling all the time, so they will be quiet.”

“Man is weak,” he said. “I am not blaming anyone, but man is weak.”

For the United States, Navalny’s case calls for calibrated diplomacy. President Obama and Putin have a bilateral summit scheduled in September, and the administration is busily trying to salvage a relationship on the rocks. It would be wrong to let the case impede cooperation in combating terrorism (as the Boston-Chechnya connection reminds us) or the downsizing of nuclear arsenals or possible Russian cooperation in resolving the crises of Syria and Iran, not that much cooperation has been forthcoming so far. But it would be wrong, too, to pretend Navalny’s case didn’t matter.

I hope Obama pays attention to the Navalny show trial. He will learn something about the man across the table, and about the man who, you never know, might someday take his place.

Now here’s Prof. Krugman:

F.D.R. told us that the only thing we had to fear was fear itself. But when future historians look back at our monstrously failed response to economic depression, they probably won’t blame fear, per se. Instead, they’ll castigate our leaders for fearing the wrong things.

For the overriding fear driving economic policy has been debt hysteria, fear that unless we slash spending we’ll turn into Greece any day now. After all, haven’t economists proved that economic growth collapses once public debt exceeds 90 percent of G.D.P.?

Well, the famous red line on debt, it turns out, was an artifact of dubious statistics, reinforced by bad arithmetic. And America isn’t and can’t be Greece, because countries that borrow in their own currencies operate under very different rules from those that rely on someone else’s money. After years of repeated warnings that fiscal crisis is just around the corner, the U.S. government can still borrow at incredibly low interest rates.

But while debt fears were and are misguided, there’s a real danger we’ve ignored: the corrosive effect, social and economic, of persistent high unemployment. And even as the case for debt hysteria is collapsing, our worst fears about the damage from long-term unemployment are being confirmed.

Now, some unemployment is inevitable in an ever-changing economy. Modern America tends to have an unemployment rate of 5 percent or more even in good times. In these good times, however, spells of unemployment are typically brief. Back in 2007 there were about seven million unemployed Americans — but only a small fraction of this total, around 1.2 million, had been out of work more than six months.

Then financial crisis struck, leading to a terrifying economic plunge followed by a weak recovery. Five years after the crisis, unemployment remains elevated, with almost 12 million Americans out of work. But what’s really striking is the huge number of long-term unemployed, with 4.6 million unemployed more than six months and more than three million who have been jobless for a year or more. Oh, and these numbers don’t count those who have given up looking for work because there are no jobs to be found.

It goes without saying that the explosion of long-term unemployment is a tragedy for the unemployed themselves. But it may also be a broader economic disaster.

The key question is whether workers who have been unemployed for a long time eventually come to be seen as unemployable, tainted goods that nobody will buy. This could happen because their work skills atrophy, but a more likely reason is that potential employers assume that something must be wrong with people who can’t find a job, even if the real reason is simply the terrible economy. And there is, unfortunately, growing evidence that the tainting of the long-term unemployed is happening as we speak.

One piece of evidence comes from the relationship between job openings and unemployment. Normally these two numbers move inversely: the more job openings, the fewer Americans out of work. And this traditional relationship remains true if we look at short-term unemployment. But as William Dickens and Rand Ghayad of Northeastern University recently showed, the relationship has broken down for the long-term unemployed: a rising number of job openings doesn’t seem to do much to reduce their numbers. It’s as if employers don’t even bother looking at anyone who has been out of work for a long time.

To test this hypothesis, Mr. Ghayad then did an experiment, sending out résumés describing the qualifications and employment history of 4,800 fictitious workers. Who got called back? The answer was that workers who reported having been unemployed for six months or more got very few callbacks, even when all their other qualifications were better than those of workers who did attract employer interest.

So we are indeed creating a permanent class of jobless Americans.

And let’s be clear: this is a policy decision. The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy.

It’s hard to overstate how self-destructive this policy is. Indeed, the shadow of long-term unemployment means that austerity policies are counterproductive even in purely fiscal terms. Workers, after all, are taxpayers too; if our debt obsession exiles millions of Americans from productive employment, it will cut into future revenues and raise future deficits.

Our exaggerated fear of debt is, in short, creating a slow-motion catastrophe. It’s ruining many lives, and at the same time making us poorer and weaker in every way. And the longer we persist in this folly, the greater the damage will be.

Brooks and Krugman

In “The Second Wave” Bobo informs us that the meltdown of the gun control bill won’t have an overt political effect on the Republican Party. He’s convinced that immigration, rather, is where it’s at.  Prof. Krugman has a question in “The Excel Depression:”  Did a coding error basically destroy the economies of the Western world? You be the judge.  Here’s Bobo:

Liberals are furious, but the gun issue will not significantly damage the Republican Party. Sure, it looks bad to oppose background checks, which have overwhelming popular support. Sure, the Republican position will further taint the party’s image in places like the suburbs of Philadelphia and Northern Virginia. Sure, the party looks extreme when it can’t accept a bill sponsored by the conservative Senator Joe Manchin and the very conservative Senator Pat Toomey.

But, let’s face it, the gun issue has its own unique dynamic, which is that the people who oppose gun limits vote on this issue while the people who support them do not.

Moreover, Democrats never made a compelling case that the bill would have been effective, that it would have directly prevented future Sandy Hooks or lowered the murder rate nationwide. Even many of the bill’s supporters were lukewarm about its contents.

The main reason the gun issue won’t significantly harm Republicans is that it doesn’t play into the core debate that will shape the future of the party. The issue that does that is immigration. The near-term future of American politics will be determined by who wins the immigration debate.

In the months since the election, a rift has opened between the Republicans you might call first-wave revolutionaries and those you might call second-wave revolutionaries. The first-wave revolutionaries (the party’s Congressional leaders) think of themselves as very conservative. They ejected the remaining moderates from their ranks. They sympathize with the Tea Party. They are loyal to Fox News and support a radical restructuring of the government.

These first-wave revolutionaries haven’t softened their conservatism, but they are trying to adjust it to win majority support. They are trying to find policies to boost social mobility, so Republicans look less like the party of the rich. They are swinging behind immigration reform, believing that Hispanics won’t even listen to Republicans until they put that issue in the rearview mirror.

The second-wave revolutionaries — like Rand Paul (on some issues), Jim DeMint, Ted Cruz and some of the cutting-edge talk radio jocks — see the first-wave revolutionaries as a bunch of incompetent establishmentarians. They speak of the Bush-Cheney administration as if it were some sort of liberal Republican regime run by Nelson Rockefeller and Jacob Javits. They argue that Republicans have lost elections recently because the party has been led by big-spending, mushy moderates like John McCain and Mitt Romney and managed by out-of-touch elitists like Karl Rove and Reince Priebus.

The second wavers are much more tactically aggressive, favoring filibusters and such when possible. What the party needs now, they argue, is an ultra-Goldwaterite insurgency that topples the “establishment,” ditches immigration reform and wins Hispanic votes by appealing to the evangelicals among them and offering them economic liberty.

The first and second wavers are just beginning their immigration clash. A few weeks ago, I would have thought the pro-immigration forces had gigantic advantages, but now it is hard to be sure.

The immigration fight will be pitting a cohesive insurgent opposition force against a fragile coalition of bipartisan proponents who have to ambivalently defend a sprawling piece of compromise legislation. We’ve seen this kind of fight before. Things usually don’t end up well for the proponents.

Whether it’s guns or immigration, it is easy to imagine that the underlying political landscape, which prevented progress in the past, has changed. But when you actually try to pass something, you often discover the underlying landscape has not changed. The immigration fight of 2013 might bear an eerie similarity to the fight of 2007.

The arguments that might persuade Republicans to support immigration reform are all on the table. They came on election night 2012. The arguments against are only just now unfolding.

It is just a fact that the big short-term beneficiaries of this law are not generally Republicans: the 11 million who are living in the shadows; the high-tech entrepreneurs who will get more skilled labor. The short-term losers, meanwhile, are often Republicans: the white working-class people who will face a new group of labor-market competition when they try to get jobs in retail; the taxpayers who, at least in the short term, will have to pay some additional costs.

In the past, Republican politicians have had trouble saying no to the latest and most radical insurgency. Even if they know immigration reform is eventually good for their party, lawmakers may figure that opposing it is immediately necessary for themselves.

It would be great if Republicans can hash out their differences over a concrete policy matter, especially immigration, which touches conservatism’s competing values. But if the insurgent right defeats immigration reform, that will be a sign that the party’s self-marginalization will continue. The revolution devours its own.

Here’s Prof. Krugman:

In this age of information, math errors can lead to disaster. NASA’s Mars Orbiter crashed because engineers forgot to convert to metric measurements; JPMorgan Chase’s “London Whale” venture went bad in part because modelers divided by a sum instead of an average. So, did an Excel coding error destroy the economies of the Western world?

The story so far: At the beginning of 2010, two Harvard economists, Carmen Reinhart and Kenneth Rogoff, circulated a paper, “Growth in a Time of Debt,” that purported to identify a critical “threshold,” a tipping point, for government indebtedness. Once debt exceeds 90 percent of gross domestic product, they claimed, economic growth drops off sharply.

Ms. Reinhart and Mr. Rogoff had credibility thanks to a widely admired earlier book on the history of financial crises, and their timing was impeccable. The paper came out just after Greece went into crisis and played right into the desire of many officials to “pivot” from stimulus to austerity. As a result, the paper instantly became famous; it was, and is, surely the most influential economic analysis of recent years.

In fact, Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact. For example, a Washington Post editorial earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.

For the truth is that Reinhart-Rogoff faced substantial criticism from the start, and the controversy grew over time. As soon as the paper was released, many economists pointed out that a negative correlation between debt and economic performance need not mean that high debt causes low growth. It could just as easily be the other way around, with poor economic performance leading to high debt. Indeed, that’s obviously the case for Japan, which went deep into debt only after its growth collapsed in the early 1990s.

Over time, another problem emerged: Other researchers, using seemingly comparable data on debt and growth, couldn’t replicate the Reinhart-Rogoff results. They typically found some correlation between high debt and slow growth — but nothing that looked like a tipping point at 90 percent or, indeed, any particular level of debt.

Finally, Ms. Reinhart and Mr. Rogoff allowed researchers at the University of Massachusetts to look at their original spreadsheet — and the mystery of the irreproducible results was solved. First, they omitted some data; second, they used unusual and highly questionable statistical procedures; and finally, yes, they made an Excel coding error. Correct these oddities and errors, and you get what other researchers have found: some correlation between high debt and slow growth, with no indication of which is causing which, but no sign at all of that 90 percent “threshold.”

In response, Ms. Reinhart and Mr. Rogoff have acknowledged the coding error, defended their other decisions and claimed that they never asserted that debt necessarily causes slow growth. That’s a bit disingenuous because they repeatedly insinuated that proposition even if they avoided saying it outright. But, in any case, what really matters isn’t what they meant to say, it’s how their work was read: Austerity enthusiasts trumpeted that supposed 90 percent tipping point as a proven fact and a reason to slash government spending even in the face of mass unemployment.

So the Reinhart-Rogoff fiasco needs to be seen in the broader context of austerity mania: the obviously intense desire of policy makers, politicians and pundits across the Western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs.

What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses. For three years, the turn to austerity has been presented not as a choice but as a necessity. Economic research, austerity advocates insisted, showed that terrible things happen once debt exceeds 90 percent of G.D.P. But “economic research” showed no such thing; a couple of economists made that assertion, while many others disagreed. Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to.

So will toppling Reinhart-Rogoff from its pedestal change anything? I’d like to think so. But I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and on.

Keller and Krugman

Mr. Keller has read a book about the CIA written by one of his colleagues.  In “Cowboys and Eggheads” he natters on about taking out bad guys and missing the big picture.  Prof. Krugman, in “The Antisocial Network,” addresses the fruitless search for dehumanized money.  Here’s Keller:

My Times colleague Mark Mazzetti has a new book out that is getting a lot of attention, including some cinematic excerpts published in The Times, here and here. “The Way of the Knife” recounts the recent transformation of the Central Intelligence Agency from a traditional spying shop into more of a man-hunting paramilitary — custodian of lethal drones, sponsor of dark ops, employer of secret armies and shady contractors.

As an assassination bureau, the C.I.A. has had some spectacular successes. (The Navy Seal raid that killed Osama bin Laden was led by the C.I.A.) It has also come in for some fierce criticism from those who are uncomfortable with assassination in general, with the eerily impersonal methods of remote killing, with the civilian casualties, or with the timid oversight of an agency licensed to kill. And of course the demand for operational intelligence to aid these manhunts drove the C.I.A. into the practice of torture and rendition.

But Mazzetti’s important thought is not that war is a dirty business; it is that by turning our premier intelligence agency into a killing machine, we may have paid a price in national vigilance.

Alone among the many U.S. intelligence outfits (the number has grown to 16 or 17 depending on how you count) the C.I.A. has the job of supplying the president with the deep strategic intelligence that anticipates dangers and shapes American policy. The agency has always housed both covert operations and the more traditional gathering and analysis of information — “cowboys and eggheads,” as one agency-watcher put it. The worry is that the eggheads have become so caught up in serving the cowboys tactical intelligence about high-profile assassination targets that they have less bandwidth to devote to longer-term threats.

“The C.I.A.’s raison d’être is preventing big strategic surprises,” said Amy Zegart, an intelligence specialist at the Hoover Institution. “They do not exist to kill third-rate terrorists running around failed states.”

Gregory Treverton, a RAND Corporation expert who is a former vice chairman of the National Intelligence Council, said that as hundreds of analysts flood into the subject of the moment, they are assigned to narrower and narrower slices of the problem. There is less standing back and figuring out how it adds up, what might happen next. “All the creativity is going to, can we identify, locate and take out the bad guys,” Treverton said. But unless somebody is asking where the bad guys came from and what drives them, we are fighting the symptom rather than the disease.

We have learned, to our peril, how much it matters when intelligence lets us down. The C.I.A., having been hollowed out in the ’90s after the end of the cold war, failed to see the signs of what would be 9/11. Then the C.I.A. got the ostensible Iraqi weapons threat terribly wrong, drowning out more skeptical voices in the intelligence units of the State Department and Energy Department, and paving the way to a colossal blunder of a war.

At least twice before in recent memory the C.I.A. has been consumed by secret warfare that had unhappy endings. In the 1980s the agency joined forces with mujahedeen fighters in Afghanistan against Soviet occupiers; the Soviets were routed, the Americans moved on, and the mujahedeen turned their jihad on us. At the same time, the agency was secretly, illegally backing the Nicaraguan contra rebels; that venture ended in defeat, indictments and embarrassment.

Jeffrey Smith, who has worked on intelligence issues as a Senate staffer, a State Department lawyer and the general counsel of the C.I.A., points out that it’s not just the spy agencies that have their attention monopolized by these ventures, but their clients in the Pentagon, the State Department and the White House. “The problem with these big covert action programs,” a senior official once told Smith, “is that they become the policy of the United States.”

“When you start these programs, everybody is enthusiastic about them,” Smith said. “But to run them right takes a huge focus of senior leadership.” And other things get neglected.

By most accounts, including the assessment of intelligence insiders, academics and journalists who cover the subject, the conglomerate of intelligence agencies is in much better shape than it was before 9/11. That’s a low bar, but credit where credit is due. The agencies are better staffed and better at sharing information. It’s hard for an outsider to tell until something goes wrong, but high-priority topics like Iran’s nuclear program and China’s development of cyberweapons seem to be getting the emphasis they deserve.

Gary Samore, who worked in the Clinton Administration and then returned to oversee nuclear weapons-related intelligence for President Obama until January, said he felt well served by the agency’s collection and analysis.

“Of course the C.I.A. missed all the revolutions in the Arab world,” he said. “But we always miss the revolutions. We missed the collapse of the Soviet Union, we missed the revolution in Iran, we missed the overthrow in the Philippines. … It’s a normal human condition. We all expect continuity — until there’s change.”

He’s right, but when change does happen you hope the agency will be quick to catch up with unfolding events and provide the president with cleareyed reporting that will help position the U.S. to its best advantage. That requires the difficult, patient cultivation of sources on the ground, including the opposition. In the Muslim world, Mazzetti and some experts suspect, the C.I.A. had not acquired a wealth of sources in the opposition, and that may be partly because in places like Egypt and Libya the agency was focused on cozying up to the official spy agencies, hoping to tap into their information about Qaeda operatives.

The concern that essential intelligence has suffered from the paramilitary preoccupation is shared by some of the president’s own advisers. According to a Washington Post report last month, the President’s Intelligence Advisory Board warned in a secret report last year that spy agencies were paying insufficient attention to China and the Middle East and other potential trouble spots and should shift emphasis back toward traditional intelligence work. The panel included Chuck Hagel, who has since become secretary of defense.

“Who knows what you’re missing?” said Lee Hamilton, former chairman of the House Intelligence Committee and another member of the advisory board (he emphasized he was speaking only for himself). Hamilton supports the president’s power to authorize targeted killing, but he worries that “the tail is wagging the dog.” He points out that traditional intelligence analysis has become more urgent because in our digitized world the profusion of data is overwhelming.

In Senate hearings before his confirmation as the new C.I.A. director, John Brennan conceded that the agency’s military focus is “a bit of an aberration from its traditional role” and promised “to take a look at that allocation of mission.” There is talk of transferring much of the killer drone program to the Pentagon, where it would be more accountable and better integrated with other military activities. But President Obama will almost certainly choose to keep some drone operations at the C.I.A., for those occasions when the mission requires secrecy or venturing into a sovereign country. (The C.I.A. ran the bin Laden mission because the military, on its own, would not be allowed to violate the air space of Pakistan without its permission.)

Rebuilding traditional intelligence collecting and analysis is not a simple matter of reassigning case officers. The expertise is not always transferable; the skills are not fungible. “You’ve had a whole generation of intelligence people who have come into the C.I.A. now that have only worked on military operations,” Hamilton said. Treverton says people in the clandestine service tell him of case officers who arrive at Langley after a few tours in Iraq:  “Their idea of meeting a source is with a Humvee and a military escort. They’ve never done real espionage tradecraft.”

Of course, reorienting the C.I.A. depends on the demands of its clients in the White House and its overseers in Congress. Much as policy makers insist they want smart, “over the horizon” intelligence, it’s today’s news that grabs their attention, and covert operations that excite them. I don’t suppose many of the boys in Congress grew up playing egghead.

Now here’s Prof. Krugman:

Bitcoin’s wild ride may not have been the biggest business story of the past few weeks, but it was surely the most entertaining. Over the course of less than two weeks the price of the “digital currency” more than tripled. Then it fell more than 50 percent in a few hours. Suddenly, it felt as if we were back in the dot-com era.

The economic significance of this roller coaster was basically nil. But the furor over bitcoin was a useful lesson in the ways people misunderstand money — and in particular how they are misled by the desire to divorce the value of money from the society it serves.

What is bitcoin? It’s sometimes described as a way to make transactions online — but that in itself would be nothing new in a world of online credit-card and PayPal transactions. In fact, the Commerce Department estimates that by 2010 about 16 percent of total sales in America already took the form of e-commerce.

So how is bitcoin different? Unlike credit card transactions, which leave a digital trail, bitcoin transactions are designed to be anonymous and untraceable. When you transfer bitcoins to someone else, it’s as if you handed over a paper bag filled with $100 bills in a dark alley. And sure enough, as best as anyone can tell the main use of bitcoin so far, other than as a target for speculation, has been for online versions of those dark-alley exchanges, with bitcoins traded for narcotics and other illegal items.

But bitcoin evangelists insist that it’s about much more than greasing the path for illicit transactions. The biggest declared investors in bitcoins are the Winklevoss brothers, wealthy twins who successfully sued for a share of Facebook and were made famous by the movie “The Social Network” — and they make claims for the digital product similar to those made by goldbugs for their favorite metal. “We have elected,” declared Tyler Winklevoss recently, “to put our money and faith in a mathematical framework that is free of politics and human error.”

The similarity to goldbug rhetoric isn’t a coincidence, since goldbugs and bitcoin enthusiasts — bitbugs? — tend to share both libertarian politics and the belief that governments are vastly abusing their power to print money. At the same time, it’s very peculiar, since bitcoins are in a sense the ultimate fiat currency, with a value conjured out of thin air. Gold’s value comes in part because it has nonmonetary uses, such as filling teeth and making jewelry; paper currencies have value because they’re backed by the power of the state, which defines them as legal tender and accepts them as payment for taxes. Bitcoins, however, derive their value, if any, purely from self-fulfilling prophecy, the belief that other people will accept them as payment.

However, let’s leave that strangeness on one side, along with the peculiar “mining” process — actually a process of complex calculation — used to add to the bitcoin stock. Instead, let’s focus on the two huge misconceptions — one practical, one philosophical — that underlie both goldbugism and bitbugism.

The practical misconception here — and it’s a big one — is the notion that we live in an era of wildly irresponsible money printing, with runaway inflation just around the corner. It’s true that the Federal Reserve and other central banks have greatly expanded their balance sheets — but they’ve done that explicitly as a temporary measure in response to economic crisis. I know, government officials are not to be trusted and all that, but the truth is that Ben Bernanke’s promises that his actions wouldn’t be inflationary have been vindicated year after year, while goldbugs’ dire warnings of inflation keep not coming true.

The philosophical misconception, however, seems to me to be even bigger. Goldbugs and bitbugs alike seem to long for a pristine monetary standard, untouched by human frailty. But that’s an impossible dream. Money is, as Paul Samuelson once declared, a “social contrivance,” not something that stands outside society. Even when people relied on gold and silver coins, what made those coins useful wasn’t the precious metals they contained, it was the expectation that other people would accept them as payment.

Actually, you’d expect the Winklevosses, of all people, to get this, because in a way money is like a social network, which is useful only to the extent that other people use it. But I guess some people are just bothered by the notion that money is a human thing, and want the benefits of the monetary network without the social part. Sorry, it can’t be done.

So do we need a new form of money? I guess you could make that case if the money we actually have were misbehaving. But it isn’t. We have huge economic problems, but green pieces of paper are doing fine — and we should let them alone.

Brooks and Krugman

In “Bold on Both Ends” Bobo says President Obama’s budget is admirable for its ideological compromises but cuts out the resources needed to address some pressing social problems.  Want to know what one of those “pressing social problems” is?  Me.  I started working 50 years ago, and retired last year.  My mother had a pension, but those have dried up.  So I’m a leach on the economy, sucking that Social Security right out of the pockets of Bobo and his ilk.  He should be put out on an ice floe, assuming we can still find one…  Prof. Krugman, in “Lust For Gold,” says in modern America, everything is political. And that goes for investments as well as voting.  Here’s Bobo:

It’s time to entertain the possibility that President Obama is a right-wing extremist. After all, look at where he’s taking the country over his second term.

We’re living in a country where 53 percent of children born to women under 30 are born out of wedlock, according to government data. Millions of people, especially men, are dropping out of the labor force. Nearly half the students who begin college are unable to graduate within six years. The social fabric for people without college degrees is in shambles.

Yet President Obama is not offering proposals commensurate with those problems. Under his budget, domestic discretionary spending would be lower as a share of G.D.P. than it was under Reagan, both Bushes and Nixon. When it comes to this category, Obama’s budget would take us back to Eisenhower levels.

The president is increasing total revenues to a historically high 20 percent of G.D.P. by 2023. Federal spending would remain at a way-above-average 22 percent of G.D.P. But Washington still can’t seem to devote enough money to address the challenges faced by the less-educated and ease the segmentation of America. That’s true even after you account for the domestic programs that are outside the discretionary budget category and have their own funding stream, like the new early childhood initiative.

I generally come to celebrate, not criticize, this budget. Obama has the guts to take on special interests in his own party. He works hard to reduce inequality. He understands that entitlement programs represent a fundamental threat to the sustainability of the welfare state. He understands that politics can only work if the president transcends his base and builds a majority coalition. His budget should put to rest those crazy claims that he is some sort of Norwegian socialist.

But being moderate means throwing away ideological blinders and facing reality. Right now, America faces two giant problems: social unraveling today and cataclysmic debt tomorrow. This budget takes small steps to address both problems when big strides are needed.

So where do we go from here? That’s easy. First, we have the same kabuki debate we’ve been having for the past few decades. This debate is organized around the following trade-off: more revenue in exchange for more spending cuts.

This debate will probably go nowhere. Republicans feel as if they’ve already given away the store on new revenue, so they are not going to be compromising. President Obama needs to show Democrats that this budget is the endpoint, not a starting point, for a further rightward drift. He doesn’t have much room to compromise either.

The kabuki debate will probably end, as it usually does, with gridlock and name-calling. But then we can move on to Debate B. This debate would be organized around a different trade-off — not a balance between taxing and spending, but a balance between greater discretionary spending in exchange for structural entitlement reform.

In this framework, Democrats would get a lot of the good ideas that are in the Obama budget, but they’d be bigger and more aggressive. We’d take the pre-k initiative, the spending on scientific research and the infrastructure spending. But then we’d throw on top other programs. Make more men marriageable (by helping them earn a reliable wage). Rebind the social fabric in atomized communities (social entrepreneurship funds). Maybe expand a national service program to give more young adults discipline, orientation and connections.

Republicans would get structural entitlement reform. Here, too, we could build on the ideas in the Obama budget, like chained Consumer Price Index for Social Security and the expansion of means-testing for Medicare. Then we could throw on other modest structural reforms: Combine Medicare Parts A and B and further limiting Medigap plans in order to induce seniors to make more cost-conscious decisions. Repair federal pensions and the disability system. Means test Social Security and raise the Medicare eligibility age for affluent workers.

This deal wouldn’t represent the moderation of the mushy middle. It would represent muscular moderation that is bold on both ends. Persuade majorities that discretionary spending is not just foreign aid and earmarks. It’s the government’s best shot at boosting social mobility. Remind Americans that their country can’t be a rising nation if we have an entitlements system fit for an aging and declining one.

Right now, we are the North Korea of fiscal policy. We’re living under the insane sequester that cuts those programs we should be increasing and spares exactly those old-age programs we should be reforming. Both parties should have incentive to get to a new fiscal regime.

Party leaders could postpone the debate about tax revenues. They could accept higher deficits short term. Most important, they could embrace a deal-making framework that would direct attention toward urgent needs: discretionary programs for now, structural entitlement reforms that accumulate over time.

Here’s Prof. Krugman:

News flash: Recent declines in the price of gold, which is off about 17 percent from its peak, show that this price can go down as well as up. You may consider this an obvious point, but, as an article in The Times on Thursday reports, it has come as a rude shock to many small gold investors, who imagined that they were buying the safest of all assets.

And thereby hangs a tale. One of the central facts about modern America is that everything is political; on the right, in particular, people choose their views about everything, from environmental science to gun safety, to suit their political prejudices. And the remarkable recent rise of “goldbuggism,” in the teeth of all the evidence, shows that this politicization can influence investments as well as voting.

What do I mean by goldbuggism? Not the notion that buying gold sometimes makes sense. Gold has been a very good investment since the early 2000s, and it’s probably not all bubble. One way to think about this is that gold is like a very long-term bond that’s protected from inflation; and actual long-term inflation-protected bonds have also seen big price increases, reflecting a general perception that there aren’t enough alternative good investments.

No, being a goldbug means asserting that gold offers unique security in troubled times; it also means asserting that all would be well if we abolished the Federal Reserve and returned to the good old gold standard, in which the value of the dollar was fixed in terms of gold and that was that. And both forms of goldbuggism soared after 2008.

In the wake of the financial crisis — and to a considerable extent even now — to watch business news on TV, especially on Fox, was to see a lot of talking heads touting gold, not to mention many, many ads from the likes of Goldline. Many Americans were convinced: A third of those polled by Gallup in 2011 declared that gold was the best long-term investment.

At the same time, calls for a return to the gold standard proliferated, and not just among marginal figures. Indeed, the 2012 Republican platform effectively demanded a return to gold, calling for a commission to “investigate possible ways to set a fixed value for the dollar” (which it took as self-evidently desirable), and making it clear that the preferred route involved a “metallic basis” for the currency.

So the financial crisis of 2008 brought a surge in gold fever (although that surge has abated a bit since 2011). But why?

After all, historically, gold has been anything but a safe investment. Sometimes it yields big gains, as it did in the late 1970s and again between 2001 and 2011. But that 1970s run-up was followed by an epic plunge, with the real value of gold falling by more than two-thirds.

Meanwhile, the modern world’s closest equivalent to the classical gold standard is the euro, which puts European countries back under more or less the same constraints they faced when gold ruled. It’s true that the European Central Bank can print money if it chooses to, but individual countries, like nations on the gold standard, can’t. And who would hold up these countries’ recent experience as an example of something we’d like to emulate?

So how can we rationalize the modern goldbug position? Basically, it depends on the claim that runaway inflation is just around the corner.

Why have so many people found this claim persuasive? John Maynard Keynes famously dismissed the gold standard as a “barbarous relic,” noting the absurdity of yoking the fortunes of a modern industrial society to the supply of a decorative metal. But he also acknowledged that “gold has become part of the apparatus of conservatism and is one of the matters which we cannot expect to see handled without prejudice.”

And so it remains to this day. Conservative-minded people tend to support a gold standard — and to buy gold — because they’re very easily persuaded that “fiat money,” money created on a discretionary basis in an attempt to stabilize the economy, is really just part of the larger plot to take away their hard-earned wealth and give it to you-know-who.

But the runaway inflation that was supposed to follow reckless money-printing — inflation that the usual suspects have been declaring imminent for four years and more — keeps not happening. For a while, rising gold prices helped create some credibility for the goldbugs even as their predictions about everything else proved wrong, but now gold as an investment has turned sour, too. So will we be seeing prominent goldbugs change their views, or at least lose a lot of their followers?

I wouldn’t bet on it. In modern America, as I suggested at the beginning, everything is political; and goldbuggism, which fits so perfectly with common political prejudices, will probably continue to flourish no matter how wrong it proves.

And let’s not forget that lunatic Glenn Beck who encourages his knuckle-walking fans to buy gold…

Keller and Krugman

Oh, gawd…  Bill Keller’s back.  In “About the Children” he’s decided to tell us all about what it means for kids when gay parents can marry.  I’ve got to admit, my hackles rise whenever I hear people wringing their hands about “the children” when we as a nation seem hell-bent on shredding the safety net that provides for those children.  According to the National Center for Children in Poverty 22% of American children live in poverty.  When do you think Mr. Keller will start writing about them?   Prof. Krugman has a question in “Insurance and Liberty:”  Is health coverage the death of liberty?  Here’s Keller:

The defenders of traditional marriage tell us the argument is, first and foremost, about the children. You might not know that from the buzz surrounding the Supreme Court deliberations. The children of gay and lesbian parents got a few splashes of attention, including a powerful endorsement of marriage equality from the 60,000-member American Academy of Pediatrics and one sympathetic-sounding aside from Justice Anthony Kennedy during the hearings. But for the most part, the debate has focused on the rights of grown-ups and the powers of states, not so much on the well-being of children. And when that subject does come up, the discussion is often shallow or misleading.

So let’s talk about the children.

The stakes for children in this debate fall roughly into two categories. One is legal: A great scaffolding of laws and benefits created to keep children secure and loved is denied to children who grow up with parents of the same gender. Can that be solved without letting same-sex couples marry? The other is social: Researchers have attempted to ascertain whether kids who grow up with two moms or two dads fare differently from kids growing up with one of each. Is there any reason to think same-sex households are bad for children, and if so should policy makers tread carefully?

Take the legal question first.

Nobody knows how the Supreme Court will rule, but the best guess of court-watchers is this: The justices will throw out the federal Defense of Marriage Act, assuring that married same-sex couples will be entitled to approximately the same treatment under federal law as other couples. But they seem likely to leave it up to the states to decide whether gays can get married in the first place.

That means, first of all, that states can continue to deny children of homosexuals many safeguards that protect children of straight couples. The history of this issue is filled with stories of hardship and heartbreak befalling children whose parents are not recognized as — well, as parents. There are the cases of mothers and fathers turned away from a child’s hospital bed because they are not “family.” There are the cases of beloved adults denied visitation rights after a breakup. Many states restrict the ability of a gay parent to adopt or to respond to a child’s medical emergency. Divorce laws were created in large part to assure that children get financial and emotional support when marriages end: no marriage, no divorce, no support.

It is true that a well-crafted civil union law — one that assures gay and lesbian partners the same spousal parenting rights as marriage — can help remedy these cruelties. But many states do not offer civil unions at all. Among those that do, not all civil union laws are so rigorous; some are mere approximations of equality that do not confer full parental rights. Justice Ruth Bader Ginsburg might refer to them as “skim-milk civil unions.”

And civil unions do not address the stigma attached to being treated as if your family is not a “real” family — a stigma that amounts to an official imprimatur for bullying and humiliation. “Kids understand and internalize the sense that something is wrong with their families and that they should be ashamed,” said Camilla Taylor of Lambda Legal, who has followed many of these cases through the courts.

Which brings us to the social question. Defenders of the status quo (including Justice Antonin Scalia) would have you believe that the research on children growing up with gay parents is deeply ambiguous. If you spend time in the recent archives of such periodicals as Pediatrics, Applied Developmental Science, Social Science Research and the Journal of Marriage and Family, you will learn otherwise.

Taken one by one, the studies are far from perfect. The samples are usually small and not random. Few are “longitudinal” — that is, following subjects over years or decades. Social science rarely delivers conclusive results under the best circumstances, and with same-sex marriage researchers face particular handicaps. The number of children who have been raised entirely by stable, same-sex couples is relatively small. (According to the demographer Gary Gates of U.C.L.A., a majority of children being raised by gay or lesbian parents were born to opposite-sex couples who later broke up.) Homosexuality still encounters bigotry that makes potential study subjects wary. And it is hard to untangle all the variables in the raising of children.

But it is fair to say that the research shows no significant disadvantage associated with being raised by lesbian mothers or gay fathers — not in academic performance, not in psychological health, not in social or sexual development, not in violent behavior or substance abuse. And the research leaves little doubt that stable, two-parent households (of whatever flavor) are likely to be better off financially, more attentive to the upbringing of children and more secure than single-parent households.

(You can find excellent roundups of this work in the March issue of Pediatrics, and in the amicus brief of the American Sociological Association.)

Of course, the burden of proof lies with opponents of marriage equality. In legal parlance, they are the ones who seek to establish a “governmental interest” that justifies discriminating against gay couples. So where’s their evidence?

They lean heavily on one study published last year by Mark Regnerus, an associate professor of sociology at the University of Texas. He compared two groups of young adults. The first group told interviewers that at some point in their upbringing a parent experienced a same-sex “romantic relationship.” In most cases, the parents subsequently broke up. In other words, this group wasn’t the offspring of committed gay couples but of failed unions, some of them probably sham marriages. It’s not even clear whether the parents who strayed were gay or lesbian, or simply experimenting. The second group consisted of kids who spent their childhoods in lasting, married, mom-and-dad families.

Guess which group had problems?

The study was pretty well demolished by peers. It may have confirmed the emotional toll of broken homes, but it said nothing much about growing up with gay parents. Regnerus, when I talked to him, conceded that his study compared apples and oranges, because “I didn’t have oranges.” He was unable to articulate what bearing his study had on gay marriage except that it “paints the reality of people’s lives as fairly complicated.”

Activists against same-sex marriage, however, are not all that particular about the quality of their evidence. They are happy to enlist and exaggerate dubious research to create the illusion that there is a scientific stalemate, and they often get away with it. When David Gregory of “Meet the Press” brought up the fact that the American Academy of Pediatrics endorses marriage equality, Ralph Reed of Focus on Family retorted, “And the American College of Pediatricians came out the other way.” Nobody pointed out that this “college” is a tiny, conservative rump that broke away from the main pediatric group in 2002 over gay adoption. To quote its Web site, “The College bases its policies and positions upon scientific truth within a framework of ethical absolutes.” Among its inviolable beliefs are “the sanctity of human life from conception to natural death and the importance of the fundamental mother-father family (female-male) unit in the rearing of children.” Naturally, the college loves the Regnerus study.

Even if the research showed that children of same-sex couples were less well adjusted, which it does not, would we really want government to intervene? After all, there is research showing that children whose parents are of different races struggle more, on average, than children with parents of the same race. But no serious person suggests we turn back the clock on interracial marriage.

“It really doesn’t matter very much what Regnerus or anybody else shows,” concludes James Wright, the editor of the journal that published the Regnerus study and its critics. “It’s a question of fundamental civil rights.”

Next up is Prof. Krugman:

President Obama will soon release a new budget, and the commentary is already flowing fast and furious. Progressives are angry (with good reason) over proposed cuts to Social Security; conservatives are denouncing the call for more revenues. But it’s all Kabuki. Since House Republicans will block anything Mr. Obama proposes, his budget is best seen not as policy but as positioning, an attempt to gain praise from “centrist” pundits.

No, the real policy action at this point is in the states, where the question is, How many Americans will be denied essential health care in the name of freedom?

I’m referring, of course, to the question of how many Republican governors will reject the Medicaid expansion that is a key part of Obamacare. What does that have to do with freedom? In reality, nothing. But when it comes to politics, it’s a different story.

It goes without saying that Republicans oppose any expansion of programs that help the less fortunate — along with tax cuts for the wealthy, such opposition is pretty much what defines modern conservatism. But they seem to be having more trouble than in the past defending their opposition without simply coming across as big meanies.

Specifically, the time-honored practice of attacking beneficiaries of government programs as undeserving malingerers doesn’t play the way it used to. When Ronald Reagan spoke about welfare queens driving Cadillacs, it resonated with many voters. When Mitt Romney was caught on tape sneering at the 47 percent, not so much.

There is, however, an alternative. From the enthusiastic reception American conservatives gave Friedrich Hayek’s “Road to Serfdom,” to Reagan, to the governors now standing in the way of Medicaid expansion, the U.S. right has sought to portray its position not as a matter of comforting the comfortable while afflicting the afflicted, but as a courageous defense of freedom.

Conservatives love, for example, to quote from a stirring speech Reagan gave in 1961, in which he warned of a grim future unless patriots took a stand. (Liz Cheney used it in a Wall Street Journal op-ed article just a few days ago.) “If you and I don’t do this,” Reagan declared, “then you and I may well spend our sunset years telling our children and our children’s children what it once was like in America when men were free.” What you might not guess from the lofty language is that “this” — the heroic act Reagan was calling on his listeners to perform — was a concerted effort to block the enactment of Medicare.

These days, conservatives make very similar arguments against Obamacare. For example, Senator Ron Johnson of Wisconsin has called it the “greatest assault on freedom in our lifetime.” And this kind of rhetoric matters, because when it comes to the main obstacle now remaining to more or less universal health coverage — the reluctance of Republican governors to allow the Medicaid expansion that is a key part of reform — it’s pretty much all the right has.

As I’ve already suggested, the old trick of blaming the needy for their need doesn’t seem to play the way it used to, and especially not on health care: perhaps because the experience of losing insurance is so common, Medicaid enjoys remarkably strong public support. And now that health reform is the law of the land, the economic and fiscal case for individual states to accept Medicaid expansion is overwhelming. That’s why business interests strongly support expansion just about everywhere — even in Texas. But such practical concerns can be set aside if you can successfully argue that insurance is slavery.

Of course, it isn’t. In fact, it’s hard to think of a proposition that has been more thoroughly refuted by history than the notion that social insurance undermines a free society. Almost 70 years have passed since Friedrich Hayek predicted (or at any rate was understood by his admirers to predict) that Britain’s welfare state would put the nation on the slippery slope to Stalinism; 46 years have passed since Medicare went into effect; as far as most of us can tell, freedom hasn’t died on either side of the Atlantic.

In fact, the real, lived experience of Obamacare is likely to be one of significantly increased individual freedom. For all our talk of being the land of liberty, those holding one of the dwindling number of jobs that carry decent health benefits often feel anything but free, knowing that if they leave or lose their job, for whatever reason, they may not be able to regain the coverage they need. Over time, as people come to realize that affordable coverage is now guaranteed, it will have a powerful liberating effect.

But what we still don’t know is how many Americans will be denied that kind of liberation — a denial all the crueler because it will be imposed in the name of freedom.