Krugman’s blog, 5/18/13

There were two posts yesterday.  First up was “The Liquidationist Urge:”

I’m stayed out of the fracas over Mike Kinsley’s somewhat bizarre attack on my recent writings; Mark Thoma, Brad DeLong, and Dan Drezner have it covered. And I owe a debt to Kinsley, who hired me to write for Slate way back when, letting me establish a reputation as someone who could write short-form pieces about economics for a broad audience, which led down a path to, well, you know.

For some reason, however, none of the things I’ve read goes back directly to Kinsley’s original screed about inflation, which is in a way where all this started. It’s very worth reading, and not just because he was dead wrong (and learned nothing from the experience). For it is pure Schumpeter/Hayek/Mellon liquidationism:

In short, I can’t help feeling that the gold bugs are right. No, I’m not stashing gold bars under my bed. But that’s only because I lack the courage of my convictions.

My fear is not the result of economic analysis. It’s more from the realm of psychology. I mean mine.

…

But this cure has been one ice-cream sundae after another. It can’t be that easy, can it? The puritan in me says that there has to be some pain. That’s not to say that there hasn’t been plenty of economic pain. But that pain has come from the recession itself, not the cure.

Look, folks, when I write about the urge to see economics as a morality play, I am not just inventing this out of thin air. I read a lot; I also talk to a fair number of these people at things like Group of 30 meetings. Yes, there’s class interest; yes, there’s disaster capitalism at work. But the gut feeling that there must be pain (your pain, of course, not theirs) is very, very real too.

The second post of the day was “Old Fashioned Austerity:”

Matthew Yglesias piles on Michael Kinsley too, and makes a point I’ve also tried to make in the past: if the real problem is that we overspent and lived beyond our means, we should be working harder, not throwing millions of people into unemployment. Yglesias makes his point with the case of Iceland, which has indeed restored relatively full employment while continuing to suffer somewhat reduced real income.

But there’s an even better example from the historical record: Britain after World War II.

In fact, when people used to refer to Austerity Britain, they were referring to the half-dozen years after the war when Britain had very high public debt, much reduced overseas assets, and in general found its economic situation much straitened.

So what was the British economy like? Well, there was rationing, which people hated. There were exchange controls. There was financial repression. All very terrible things, unacceptable by modern standards, right? But there was full employment! Here’s a chart from here, mysteriously missing the year labels, but you can see the war clearly:

And here’s UK public debt as a percentage of GDP over the same period:

So, our grandfathers (or strictly speaking the grandfathers of the Brits — we never had austerity of any kind) — responded to high levels of debt with an economy in which life was pretty hard for investors, luxuries were hard to come by even for the middle class, and everyone worked hard — but, you know, everyone had a job. We’ve responded to much lower levels of debt by ensuring that the economy functions far below potential, millions of people who want to work can’t find jobs, and many people see all their hopes for the future slipping away.

Progress!

 

The Pasty Little Putz, Dowd, Friedman and Bruni

In “When Assimilation Stalls” The Pasty Little Putz has decided to tell us that there’s an unwarranted optimism in the immigration bill.  MoDo has another one of her “special” titles to an op-ed:  “The Silver Fox’s Pink Slip.”  In this offering she says in the Bush family, one brother is sacrificed on the altar of the other’s misdeeds.  Me?  I think the whole kit and kaboodle of them ought to head off down to Paraguay.  The Moustache of Wisdom, in “Judgment Not Included,” says some theories about the motivations behind the Boston attack and the role the Internet played in shaping them are outrageous.  Mr. Bruni, in “The Lesson of Boston,” says in the aftermath of the marathon, there are any number of easy and insufficient answers, but just one inescapable conclusion.  Here’s the Putz:

The immigration legislation percolating in the Senate has been pitched as an all-things-to-all-factions compromise. Illegal immigrants will be regularized, but most of them will have to wait at least a decade to gain citizenship. There will be more visas and new guest-worker programs, but also stiffer enforcement on the border and in workplaces.

But the bill’s real priority is to accelerate existing immigration trends. The enforcement mechanisms phase in gradually, with ambiguous prospects for success, while the legislation’s impact on migration would be immediate: more paths to residency for foreigners, instant legal status for the 11 million here illegally, and the implicit promise to future border-crossers that some kind of amnesty always comes to those who come and wait.

Today, almost 25 percent of working-age Americans are first-generation immigrants or their children. That figure is up sharply since the 1960s, and it’s projected to climb to 37 percent by 2050. A vote for the Senate legislation would be a vote for that number to climb faster still.

The bill has been written this way because America’s leadership class, Republicans as well as Democrats, assumes that continued mass immigration is exactly what our economy needs. As America struggles to adapt to an aging population, the bill’s supporters argue, immigrants offer youth, vitality and tax dollars. As we try to escape economic stagnation, mass immigration promises an extra shot of growth.

Is there any reason to be skeptical of this optimistic consensus? Actually, there are two: the assimilation patterns for descendants of Hispanic (particularly Mexican) immigrants and the socioeconomic disarray among the native-born poor and working class.

Conservatives have long worried that recent immigrants from Latin America would assimilate more slowly than previous new arrivals — because of their sheer numbers and shared language, and because the American economy has changed in ways that make it harder for less-educated workers to assimilate and rise.

As my colleague David Leonhardt wrote recently, those fears seem unfounded if you look at second-generation Hispanics, who make clear progress — economic, educational and linguistic — relative to their immigrant parents.

But there’s a substantial body of literature showing that progress stalling out, especially for Mexican-Americans, between the second generation and the third. A 2002 study, for instance, reported that despite “improvements in human capital and earnings” for second-generation Mexican immigrants, the third generation still “trails the education and earnings of the average American,” and shows little sign of catching up. In their 2009 book “Generations of Exclusion,” the sociologists Edward Telles and Vilma Ortiz found similar stagnation and slippage for descendants of Mexican immigrants during the second half of the 20th century.

As National Review’s Reihan Salam points out, even a recent Pew study painting an optimistic portrait of assimilation also shows third-generation (and higher) Hispanics with lower household incomes than the second generation.

This past need not predict the future. Maybe things will turn out better for the descendants of people arriving now.

But it’s pretty easy to see how the third-generation stall-out could continue, given the trends — unemployment, family breakdown, weakening communal ties — already working against social mobility in America.

These trends mean that we’re asking low-skilled immigrants to assimilate into a working class that’s already in crisis. We’re hoping that our dysfunctional educational system can prevent millions more children from assimilating downward into what sociologists have called a “rainbow underclass.” And we’re betting that the growing incomes of second-generation Hispanics will outweigh their retreat from marriage and rising out-of-wedlock birthrates.

All these bets may pay off. But maybe, just maybe, we should be hedging them a bit. If we want to regularize 11 million illegal immigrants, for instance, does it make sense to layer bigger guest-worker programs on top of amnesty? If we care about workplace enforcement, why not phase it in more completely before offering legal status to the undocumented? If we want to increase immigration over all, shouldn’t we consider tilting the balance much, much more toward higher-skilled immigrants than the current legislation does?

On a blackboard in an economics classroom, the case for mass immigration looks airtight. But many of America’s economic difficulties are rooted in social and cultural problems, and a policy that just ignores those problems is a policy that’s likely to make them worse.

In the end, the promise of American life is more than just a bigger paycheck than foreign economies supply. It’s a promise of social equality, intergenerational advancement and fluid lines of class. The fact that so many people around the world still find that promise appealing is a wonderful thing. But it’s also important to be sure, while we decide how many of them to welcome and how fast, that we can still deliver on it.

Social equality and intergenerational advancement?  Not any more, sparky…  Your crowd put paid to that by gutting the middle class.  Here’s MoDo:

Barbara Bush is a word that rhymes with fright.

She’s right.

Asked on the “Today” show whether she thought her son Jeb should run for president in 2016, as W. has urged, the famously candid and caustic Silver Fox offered the most honest assessment of her oldest son’s legacy.

Aside from the cascading disasters that the country is still struggling to recover from, a key W. legacy is derailing the path of the son Poppy and Barbara Bush dearly wanted to be president: Jeb.

For the first time, the 87-year-old former first lady acknowledged, in essence, that W. had worn out the family’s welcome in the White House. “He’s by far the best qualified man, but no, I really don’t,” she said when asked if her second son should aim to be the third Bush in chief. “I think it’s a great country. There are a lot of great families, and it’s not just four families or whatever. There are other people out there that are very qualified and we’ve had enough Bushes.”

Jenna Bush Hager, a “Today” show correspondent who was a participant in the Thursday interview with her grandmother, mother and sister, blurted “Surpri-i-ise!” and threw up her arms. CNN e-mailed Jeb to find out what he thought of his mother’s “priceless” comment and Jeb e-mailed back: “Priceless indeed!”

But Bar, who was also giving the back of the hand to the Clintons, spit out the truth. It is wearying that America, a country that broke away from aristocratic England in a burst of rugged individualism, has spawned so many of its own royal political families, dynasties that feel entitled to inhabit the White House, generation after generation, letting their family competitions and tensions shape policy and history to an alarming degree.

Why does a George P., Chelsea, Beau Biden, Joe Kennedy III presidential sweepstakes feel so inevitable?

There were plenty of other, less perspicacious assessments of the Bush legacy on the occasion of W.’s presidential library opening in Dallas. Josh Bolten, Bush’s chief of staff in the second term, defended 43’s economic record — two off-the-books, badly managed wars and more of the deregulation that led to toxic derivatives, government bailouts and a near collapse of the whole economy — saying it “really wasn’t so bad.”

Former Bush staffers and some on the right defended 43 in the usual debates: Was he the Decider or the Dupe? Was he smart or simplistic? The latter question is really beside the point in Washington, the capital of smart people doing dumb things.

W.’s presidency will go down in infamy because he ignored Katrina and the Constitution and cherry-picked intelligence with Tony Blair to build up a faux case for invading Iraq. That is why the three Democratic presidents who talked at his library’s dedication had to cherry-pick their topics, focusing mostly on W.’s good work on AIDS in Africa.

Though he presents himself as the Batman of anti-terrorism, W. ignored the warning that Osama was going to strike and didn’t catch him dead or alive. He failed to fix the egregious problems of agencies coordinating watch lists and dropping the ball on information about terrorist suspects, which flared again in the Boston bombings.

W. and other Bush officials continue to say they could not possibly have known that Saddam had no W.M.D. But I’m now told that Saddam sent word through the Saudis to the Bushies over and over that he had no W.M.D. and was only blustering to keep his nemesis in the neighborhood, Iran, at bay.

Dick Cheney and Donald Rumsfeld weren’t looking for the truth, and they weren’t hitting the pause button the way President Obama is with Syria right now, sensitive to the quicksand nature of the region. They simply wanted to blast some Arabs and Saddam was a weak target, just as W. was a weak president, easily led wherever Cheney and his co-conspirator Rummy, along with their bellicose band of neocons, wanted to take him.

Obama and others praised 43 last week as “comfortable in his own skin.” That’s absurd. People who are comfortable in their own skin don’t shape their lives and actions so self-consciously, and often self-destructively, on another. W. veered between aping his father and doing the opposite of his father.

Pressed by Charlie Rose on “CBS This Morning,” W. reiterated the unfathomable fact that he went to war with the same dictator that his father did, without ever seeking his dad’s counsel. “He knows,” W. said of his father, “that each presidential decision requires advice from people who have studied an issue.” That’s quite a rationalization. Who, after all, has studied the issue more closely than another president who decided against invading Baghdad?

Sadly, no one in W.’s inner circle studied the issue. As Colin Powell has noted, there was no proper debate or meeting of the National Security Council before the invasion. W. went to war on body language, manipulated by the war-mongering gargoyles who would also bring us torture, domestic spying and secret prisons.

“I can’t remember a specific incident where I called up and said, ‘What do I do?’ ” W. said about getting advice from his level-headed dad.

And that’s the shame of it.

No, MoDo, sweetie, that’s the criminal fcking stupidity of it.  He should be in the dock at The Hague.  Here’s The Moustache of Wisdom:

As police investigators peel away the layers of the Boston Marathon bombing, there are two aspects of this unfolding story to which I want to react: the mind-set of the alleged bombers and the role of the Internet in shaping it. Important news about both was contained in a single Washington Post article on Tuesday.

“The 19-year-old suspect in the Boston Marathon bombings has told interrogators that the American wars in Iraq and Afghanistan motivated him and his brother to carry out the attack, according to U.S. officials familiar with the interviews,” The Post reported. The officials said, “Dzhokhar and his older brother, Tamerlan Tsarnaev … do not appear to have been directed by a foreign terrorist organization. Rather, the officials said, the evidence so far suggests they were ‘self-radicalized’ through Internet sites and U.S. actions in the Muslim world. Dzhokhar Tsarnaev has specifically cited the U.S. war in Iraq, which ended in December 2011 with the removal of the last American forces, and the war in Afghanistan.”

This is a popular meme among radical Muslim groups, and, to be sure, some Muslim youths were deeply angered by the U.S. interventions in the Middle East. The brothers Tsarnaev may have been among them.

But what in God’s name does that have to do with planting a bomb at the Boston Marathon and blowing up innocent people? It is amazing to me how we’ve come to accept this non sequitur and how easily we’ve allowed radical Muslim groups and their apologists to get away with it.

A simple question: If you were upset with U.S. wars in Iraq and Afghanistan, why didn’t you go out and build a school in Afghanistan to strengthen that community or get an advanced degree to strengthen yourself or become a math teacher in the Muslim world to help its people be less vulnerable to foreign powers? Dzhokhar claims the Tsarnaev brothers were so upset by something America did in a third country that they just had to go to Boylston Street and blow up people who had nothing to do with it (some of whom could have been Muslims), and too often we just nod our heads rather than asking: What kind of sick madness is this?

It’s a double non sequitur when it comes from Muslim youths who lived and studied in America, where, if you’re upset about something, you have many ways to express your opposition and have an impact — from organizing demonstrations to publishing articles to running for office. In fact, an American guy named Barack, whose grandfather was a Muslim, did just that. And he’s now president of the United States, a job he’s used to unwind the wars in Iraq and in Afghanistan.

Moreover, some 70,000 people, most of them Muslims, have been killed by other Muslims in the Syrian civil war, which the U.S. had nothing to do with — although many Muslims are now begging us to intervene to stop it. And every week innocent Muslims are blown up by Muslim suicide bombers in Pakistan and Iraq — every week. Thousands of them have been maimed and killed in attacks so nihilistic that the bombers don’t even bother to give their names or make demands. Yet this does not appear to have moved the brothers Tsarnaev one iota.

Why is that? We surely must not tar all of Islam in this. Having lived in the Muslim world, I know how unfair that would be. But we must ask a question only Muslims can answer: What is going on in your community that a critical number of your youth believes that every American military action in the Middle East is intolerable and justifies a violent response, and everything Muslim extremists do to other Muslims is ignorable and calls for mostly silence?

As for the role that Web sites apparently played in the “self-radicalization” of the two Chechen brothers, it is yet another reminder that the Internet is a digital river that carries incredible sources of wisdom and hate along the same current. It’s all there together. And our kids and citizens usually interact with this flow nakedly, with no supervision.

So more people are more directly exposed to more raw information and opinion every day from everywhere. As such, it is more important than ever that we build the internal software, the internal filters, into every citizen to sift out fact from fiction in this electronic torrent, which offers so much information that has never been touched by an editor, a censor or a libel lawyer. That’s why, when the Internet first emerged and you had to connect via a modem, I used to urge that modems sold in America come with a warning label from the surgeon general, like cigarettes. It would read: “Attention: Judgment not included.”

And that’s why the faster, more accessible and ultramodern the Internet becomes, the more all the old-fashioned stuff matters: good judgment, respect for others who are different and basic values of right and wrong. Those you can’t download. They have to be uploaded, the old-fashioned way, by parents around the dinner table, by caring but demanding teachers at school and by responsible spiritual leaders in a church, synagogue, temple or mosque. Somewhere, somehow, that did not happen, or stopped happening, with the brothers Tsarnaev.

And last but not least here’s Mr. Bruni:

If only it were as simple as the drones coming home to roost. That would be comforting somehow. In giving us a tidy cause, it would give us a clear remedy: rain less death in distant lands, and worry less about death in our own.

If only it could all be chalked up to immigration leniency or an F.B.I. blunder. We could get tougher on both fronts, turning a warier eye toward anyone aspiring to come here, cracking the whip over at Quantico. And maybe then we could vanquish the worry that blooms darkly inside many of us when we visit a thronged landmark or attend the kind of richly symbolic event, like the Boston Marathon, whose violent disruption carries all the extra horror its disrupters intend.

Last week was one of theories, of hobbyhorses, of political complaints and agendas being hitched like so many train cars to what happened on that brutal afternoon in Boston.

The assailants’ radicalization proved that we must scale back our military campaigns and take a humbler posture in the world. The assailants’ firepower (overstated, it turns out) made a case for gun control.

We had to be more expansive in our embrace of Muslims, who become agents of destruction because they’re targets of suspicion. We had to slough off political correctness and patrol mosques.

Oh, the pitfalls of the amnesty our country grants and the big heart it opens to determined pilgrims from the third world! Oh, the peril of all our aimless, alienated young men! (Are there many other kinds?)

But these broad-brush diagnoses, many of them conveniently tethered to a proposed solution, weren’t entirely or even ultimately about policy, sociology or anything so concrete. They were about something much more nebulous and much less easily mastered.

They were about fear. And they were about the ardent, persistent, poignant hunger to believe that in a society of free information and free movement and clashing ideologies and gaudy dreams that don’t come true — in other words, in this splendid but difficult experiment known as the United States of America — we can somehow prevent disaster, somehow inoculate ourselves. With a sufficiently probing analysis of a suspect’s Twitter feed, with the designation of a broken 19-year-old as an enemy combatant, we could unravel the riddle, then adjust to and obey the truths at its core.

On NBC’s “Meet the Press” last weekend, Doris Kearns Goodwin described a celebration that erupted in the bar where she happened to have been when it was reported that the younger of the brothers Tsarnaev was captured: “Everybody was just screaming, ‘Thank God we got him alive,’ because they want the answer to the question, why?”

And over the days that followed they got — we got — many answers. We learned that Dzhokhar Tsarnaev was easily swayed by Tamerlan Tsarnaev, 26, a sibling dynamic of an utterly routine stripe.

We learned that the Internet and social media sped one or both of them to wicked influences and let them steep in anger and twisted thoughts, the way the Internet and social media let anyone concentrate on a specific obsession, a single cluster of emotions.

We learned that they’d plucked bomb-making instructions from the Web, in much the way someone else might retrieve a guacamole recipe.

All in all we learned at least as much to amplify our anxieties as to quiet them, because the Tsarnaevs were seemingly inconspicuous, haphazard terrorists, and because the picture that emerged didn’t really yield a set of instructions for staving off the manner of mayhem they allegedly engineered from occurring again. It suggested how easily this can happen in a land of liberty, governed by a compact of trust.

THE brothers had ample reason to love America. More reason, it would seem, than to hate it. When their family, of Chechen heritage, asked for refuge, America said yes. It extended them opportunities, gave them hope. Dzhokhar went to the same high school that Ben Affleck and Matt Damon had attended, and when he graduated, the city of Cambridge, Mass., awarded him a $2,500 scholarship for his future studies.

But college didn’t go well for him, just as Tamerlan’s boxing career — he’d once aspired to represent this country in the Olympics — didn’t pan out. And the big promises of our country no doubt make its disappointments all the more crushing. But the big promises also make us who we are.

The brothers apparently objected to our interventions in Iraq and Afghanistan. But do we know that they wouldn’t have had some other plaint, some other prompt, if those interventions had never occurred? They postdated 9/11, whose authors had a brimming portfolio of alternate grievances.

Where there’s a capacity for fury, justifications aren’t hard to come by. Timothy McVeigh, the Oklahoma City bomber, cited the government’s raid on the Branch Davidians in Waco, Tex., as one of his prods. He was neither Muslim nor immigrant, just unhinged, a characterization that also fits Anders Behring Breivik, who blamed Europe’s acquiescence to multiculturalism for his killing of 77 people in Norway in 2011. Terrorism isn’t a scourge we Americans alone endure, and it’s seldom about any one thing, or any two things.

Our insistence on patterns and commonalities and some kind of understanding assumes coherence to the massacres, rationality. But the difference between the aimless, alienated young men who do not plant bombs or open fire on unsuspecting crowds — which is the vast majority of them — and those who do is less likely to be some discrete radicalization process that we can diagram and eradicate than a dose, sometimes a heavy one, of pure madness. And there’s no easy antidote to that. No amulet against it.

There’s also a danger built into the American experiment, the very nature of which leaves us exposed. Our rightly cherished diversity can make the challenge of belonging that much steeper. Our good fortune and leadership mean that we’ll be not just envied in the world, but also reviled.

The F.B.I. averted its gaze from the older Tsarnaev brother after it couldn’t find any conclusive alarms because that’s what the government is supposed to do, absent better information. We don’t want it to go too far in spying on us. That means it will fail to notice things.

While we can and will figure out small ways to be safer, we have to come to terms with the reality that we’ll never be safe, not with unrestricted travel through cyberspace. Not with the Second Amendment. Not with the privacy we expect. Not with the liberty we demand.

That’s the bargain we’ve made. It’s imperfect, but it’s the right one.

Brooks and Bruni

Mr. Nocera is off today.  In “What You’ll Do Next” Bobo says Big Data and numbers know a lot. But they can’t explain all the whys.  Mr. Bruni, in “The Locker and the Closet,” says the predicted coming-out of a gay player in one of the major sports isn’t served by invocations of Jackie Robinson.  Here’s Bobo:

Over the past few centuries, there have been many efforts to come up with methods to help predict human behavior — what Leon Wieseltier of The New Republic calls mathematizing the subjective. The current one is the effort to understand the world by using big data.

Other efforts to predict behavior were based on models of human nature. The people using big data don’t presume to peer deeply into people’s souls. They don’t try to explain why people are doing things. They just want to observe what they are doing.

The theory of big data is to have no theory, at least about human nature. You just gather huge amounts of information, observe the patterns and estimate probabilities about how people will act in the future.

As Viktor Mayer-Schönberger and Kenneth Cukier write in their book, “Big Data,” this movement asks us to move from causation to correlation. People using big data are not like novelists, ministers, psychologists, memoirists or gossips, coming up with intuitive narratives to explain the causal chains of why things are happening. “Contrary to conventional wisdom, such human intuiting of causality does not deepen our understanding of the world,” they write.

Instead, they aim to stand back nonjudgmentally and observe linkages: “Correlations are powerful not only because they offer insights, but also because the insights they offer are relatively clear. These insights often get obscured when we bring causality back into the picture.”

This method has yielded some impressive observations. Analysts can look at Google search terms and pick up where flu outbreaks are occurring. In doctor’s offices, statistical predictions often make better diagnoses than clinical predictions. Wal-Mart executives looked at the data and noticed that, as hurricanes approach, people buy large quantities of Strawberry Pop-Tarts. They began to put Pop-Tarts at the front of the stores with storm supplies.

In my columns, I’m trying to appreciate the big data revolution, but also probe its limits. One limit is that correlations are actually not all that clear. A zillion things can correlate with each other, depending on how you structure the data and what you compare. To discern meaningful correlations from meaningless ones, you often have to rely on some causal hypothesis about what is leading to what. You wind up back in the land of human theorizing.

Another obvious problem is that unlike physical objects and even animals, people are discontinuous. We have multiple selves. We are ambiguous and ambivalent. We get bored, and we self-deceive. We learn and mislearn from experience. Thus, the passing of time can produce gigantic and unpredictable changes in taste and behavior, changes that are poorly anticipated by looking at patterns of data on what just happened.

Another limit is that the world is error-prone and dynamic. I recently interviewed George Soros about his financial decision-making. While big data looks for patterns of preferences, Soros often looks for patterns of error. People will misinterpret reality, and those misinterpretations will sometimes create a self-reinforcing feedback loop. Housing prices skyrocket to unsustainable levels.

If you are relying just on data, you will have a tendency to trust preferences and anticipate a continuation of what is happening right now. Soros makes money by exploiting other people’s misinterpretations and anticipating when they will become unsustainable.

Then there is the distinction between commodity decisions and flourishing decisions. Some decisions are straightforward commodities: what route to work is likely to be fastest. Big data can help. Flourishing decisions are things like who to marry, who to befriend, what career calling to pursue and what college to choose. These decisions involve trying to find people, places and things that harmonize with your subjective self. It’s a mistake to take subjective intuition out of this decision because subjectivity is the whole point.

One of my take-aways is that big data is really good at telling you what to pay attention to. It can tell you what sort of student is likely to fall behind. But then to actually intervene to help that student, you have to get back in the world of causality, back into the world of responsibility, back in the world of advising someone to do x because it will cause y.

Big data is like the offensive coordinator up in the booth at a football game who, with altitude, can see patterns others miss. But the head coach and players still need to be on the field of subjectivity.

Most of the advocates understand data is a tool, not a worldview. My worries mostly concentrate on the cultural impact of the big data vogue. If you adopt a mind-set that replaces the narrative with the empirical, you have problems thinking about personal responsibility and morality, which are based on causation. You wind up with a demoralized society. But that’s a subject for another day.

Oh, heaven spare us a Bobo column on personal responsibility and morality.  It’ll be the end of poor Moral Hazard…  Here’s Mr. Bruni:

I’ve been hearing the name Jackie Robinson a lot lately, and not just because a movie about him, “42,” hit multiplexes on Friday and had a bigger opening-weekend gross than any baseball movie ever.

I’ve been hearing it in the context of an intensifying drumbeat: that the “gay Jackie Robinson” is just weeks or months away.

We should retire the phrase now. It’s a flawed comparison.

As a few other observers have noted, it doesn’t do justice to Robinson’s experience and to the many differences between the challenges he confronted and those facing the first man or men to acknowledge being gay while still active in one of America’s four major professional sports (baseball, football, basketball and hockey).

It doesn’t do any favors to the gay trailblazer. Robinson’s cleats — his place in history, his meaning then and now to a nation almost cleaved in two by racism — are pretty much impossible to fill. There’s only one number in major league baseball no longer put on players’ jerseys, in tribute to the titan who wore it. That’s 42. His number.

I’m shocked that he never got a splashy Hollywood movie before. I wish the current one were better. It paints with too broadly sentimental a brush, giving us a Robinson who’s more icon than individual.

But it’s still an important, stirring reminder of our country in 1947, when he broke baseball’s color barrier. He couldn’t stay in hotels open to white teammates. Other teams’ pitchers threw at his head. The manager of the Philadelphia Phillies loudly taunted him with racial epithets as he stepped up to bat.

In laying out this galling ugliness, “42” elicits all the disgust and outrage it should.

The movie also makes clear that Robinson got his precedent-setting assignment not just because of his talent but because of his character. Branch Rickey, the team president who hired him, wanted and picked someone who might not buckle, as most men surely would, under such pressure and such a mantle.

The first openly gay player in a major sport could instead be an accidental and unwilling hero, hauled into history by a random photo, a talkative boyfriend, some other unintended exposure or the fear of it. That sort of messy scenario was suggested by Cyd Zeigler and Howard Bragman in a post on the sports Web site SB Nation. Its headline: “Hoping Our ‘Gay Jackie Robinson’ Isn’t the ‘George Michael of Sports.’ ”

Robinson was openly black, if you will, before he played in the big leagues, and what he ended in baseball was apartheid.

The trailblazer still to come will most likely have his place in the big leagues before he’s openly gay, and the frontier he’ll inhabit is not one of access — there have been and are gay players in the four major sports — but of candor. What he’ll end, or erode, is a culture of duplicity and denial. And if he hasn’t in fact been forced out of the closet, there will a particular kind of decision and volition in his emergence.

It will in turn be met with a particular kind of scrutiny. Why didn’t he act sooner? What’s his motivation now? Is he creating an unnecessary distraction for his team?

That last issue was raised last month by a player for the Seattle Seahawks, who responded to forecasts of an imminent disclosure in the National Football League with disapproving tweets.

“Who on God’s earth is this person saying he’s coming out?” asked the player, Chris Clemons, in one tweet. In another he said: “It’s a selfish act. They just trying to make themselves bigger than the team.”

At the league’s scouting combine in late February, concerned recruiters reportedly quizzed prospects about their sexual orientations. A month earlier, before he played in the Super Bowl, the San Francisco 49er Chris Culliver said, “We don’t got no gay people on the team, they gotta get up out of here if they do.”

The first openly gay player in football, baseball, basketball or hockey will be tested, no question. With an extra measure of fame will come naysaying and nastiness.

And he’ll potentially have a huge impact, toppling certain stubborn stereotypes by “smashing through the closet door in the most masculine of our pastimes,” as Brian Ellner, a prominent gay rights advocate, said to me.

That burden and promise are noteworthy enough that whoever takes them on needn’t be framed in terms of anybody else.

But there’s one Robinson analogy I’ll indulge.

In a few emotional scenes, “42” emphasizes his special meaning to black children, who see in him a future they weren’t sure they had. The first linebacker or center fielder to say “I’m gay” will be a similar agent of hope, assuring more than a few scared boys that glory and honesty are both possible, even in our country’s sacred cathedrals of sport.

Krugman’s Blog, 3/29/13

There were 5 posts yesterday.  The first was “Debasing Lincoln:”

Greg Sargent catches John Boehner invoking none other than Abraham Lincoln to inveigh against the deficit. This is pretty funny — in multiple ways.

One is the whole notion of relying on Lincoln as an authority on economic policy. Why should we believe that a lawyer speaking in 1843, in a largely agricultural nation — no matter how smart, and no matter how great a president he became — knew what we should be doing about an economic slump in a service-centered economy 170 years later?

Then there’s Greg’s catch: Boehner truncated the quote, leaving out the part where Lincoln called for balancing the budget by raising taxes. And also the point that Lincoln was actually a big government interventionist for his time, a strong advocate of what we would now call industrial policy.

But wait: there’s more. Lincoln’s most dramatic departure from standard economic policy was … drumroll .. debasing the currency (pdf). Here’s the dollar price of gold:

True, he did it to pay for a war; but do you think a 19th-century version of Paul Ryan would have stroked his immense beard and said “Well, under the circumstances, letting the dollar fall to a third of its gold parity is OK?”

Actually, the greenback experience is interesting, mainly for two reasons: nothing terrible happened despite 15 years off the gold standard, and despite this fact all the Very Serious People continued to believe that going off the gold standard was a terrible, terrible thing. It doesn’t much raise your hopes that they’ll learn from recent failures.

Still, with firmness in the right, let us press on with the work we are in.

Next up was “Europe’s Second Depression:”

Correction: It turns out that I messed up slightly on the historical data — in a way that weakened my point! The truth is worse: Europe’s recovery is already behind where it was in 1935.

Reading Brad DeLong’s essay on how we’re on our way to matching the Great Depression has spurred me to do something I’ve been meaning to do for a while: an updated comparison of Europe’s woes now with those of the 1930s.

In Britain, the NIESR regularly publishes estimates showing that Britain has done worse this time around than in the 30s. Arguably, though, Britain is a somewhat special case: it had a lousy 20s, thanks to the misguided return to gold, and a relatively good 30s, thanks to the early exit from gold. What about Europe more broadly?

Well, a quick take: I use GDP estimates from the Maddison Project for the 30s, GDP growth from the IMF plus an assumed 0.1 percent growth in 2013 for the modern era. What you get is this:

The timing is, I think, a bit off — Europe’s earlier slump began in 1929, but the later didn’t really begin until early 2008. Still, the basics won’t change. In the 30s there was a very severe initial slump, but a strong recovery after 1933 as one country after another went off gold and adopted reflationary policies. This time around, the initial slump wasn’t so bad, but recovery was hobbled by austerity policies, especially in countries on the euro, and has now stalled out completely. So Europe in 2013 is doing barely better than Europe in 1935 — and all indications are that by next year recovery will be lagging behind what was achieved in the Great Depression.

Great work, guys.

(There’s a later post on the correction.)  The third post of the day was “The Rewards of Being Very Serious:”

A while back, before moving to Slate, Matthew Yglesias had what I considered a brilliant insight into the incentives facing small-country political leaders:

Normally you would think that a national prime minister’s best option is to try to do the stuff that’s likely to get him re-elected. No matter how bleak the outlook, this is your dominant strategy. But in the era of globalization and EU-ification, I think the leaders of small countries are actually in a somewhat different situation. If you leave office held in high esteem by the Davos set, there are any number of European Commission or IMF or whatnot gigs that you might be eligible for even if you’re absolutely despised by your fellow countrymen. Indeed, in some ways being absolutely despised would be a plus. The ultimate demonstration of solidarity to the “international community” would be to do what the international community wants even in the face of massive resistance from your domestic political constituency.

How small does the country in question have to be? Maybe not very: Nicolas Sarkozy’s road from the Elysée to private equity. As it turns out, Sarkozy’s money-making plans may be on hold due to a strange combination of legal troubles and the possibility of a political comeback thanks to Hollande’s timidity. But it remains true that Keynes’s dictum — “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally” – is probably even more true for politicians than it is for bankers. And this probably helps explain the persistence of the austerity cult despite years of failure.

The fourth post of the day was the weekly music post, “Friday Night Music:  Arcade Fire, Modern Man:”

My late-in-life odyssey through current music began when Arcade Fire’s The Suburbs won the Grammy for best album, and I decided for some reason to give them a listen — and was shocked to discover that good music didn’t end in the 1970s. Since then I’ve found many bands I love, but I do keep coming back to AF — and I keep finding new depths in that album. Here’s a quiet one:

Arcade Fire — Modern Man / Later… With Jools Holland.

There was the final correction post as the last post of the day, “Europe’s Second Depression, A Correction:”

Aha — in my post on Europe’s policy failure, I somehow failed to notice that the new Maddison dataset provides per capita real GDP, which means that I should use per capita GDP in looking at the current crisis. And my point about dismal performance gets even stronger:

Europe in 2013 has recovered worse from its slump than Europe in 1935. Again, great work, guys.

 

Krugman’s Blog, 3/28/13

There were two posts yesterday.  The first was “Twins No More:”

Back in the Reagan years two unprecedented things began happening to the US economy. For the first time ever, we began running large peacetime budget deficits; and for the first time ever we began running large trade deficits. In a famous analysis, Martin Feldstein pronounced them “twin deficits”, linking the external deficit to the budget deficit, a proposition that made sense at the time: the budget deficit was helping to drive up interest rates, and high rates led to an overvalued dollar.

It’s occurred to me recently that much discussion of deficits these days implicitly assumes that something similar applies in today’s world — that by running budget deficits we’re indebting ourselves, as a nation, to foreigners (especially China). So it’s worth pointing out that this isn’t remotely true.

It’s important to note, by the way, that the fraction of US government debt the Chinese own is basically irrelevant here; if the Chinese decide, say, to sell a bunch of stocks and buy government bonds instead, this raises the fraction of government debt they hold but doesn’t hurt the international investment position at all. What we should be looking at is simply the amount of external finance we’re relying on.

And what you actually see is this:

The budget balance here is for “general government” — federal, state, and local; the current account is the broad definition of trade, including investment income. What you see is that the surge in budget deficits after 2008 was accompanied by a significant decline in net foreign borrowing compared with the height of the housing bubble.

There’s no mystery here, of course: what happened in the slump was a collapse in private spending, which actually brought the trade deficit down even as it led to a sharp fall in revenue and rise in spending on safety-net programs. But it’s still very much at odds with the popular perception that our deficits are putting the nation deep into debt to foreigners.

And this in turn means that the notion that deficits are impoverishing the nation is all wrong. To the extent that our future wealth is being impaired, it’s overwhelmingly because we’re investing too little, not because we’re borrowing too much.

The second post of the day was “What’s the Greek for Corralito?”:

It’s now three years since I suggested a possible route to Greek exit from the euro: a banking crisis, followed by sharp limits on bank withdrawals similar to Argentina’s 2001 corralito, and then — with the panic argument against exit removed — reintroduction of a domestic currency.

Obviously, that hasn’t happened. Despite intense suffering, the Greek political elite’s commitment to the euro has proved incredibly strong. My analysis of the economics wasn’t wrong, but my political guesstimates were off.

Still, Cyprus is now following the first part of the script. And let me ask again: what, exactly, is the point of remaining on the euro? The convenience and efficiency of a single currency is gone; meanwhile, the future for Cyprus on the euro is one of years of grinding deflation and catastrophic austerity. Is the hope of someday, somehow restoring the status quo ante enough to justify all of this?

 

And Now for Something Completely Different…

Gail Collins is off today, and none of the other columnists have produced anything, so as a place-holder I’ll give you “The Republican Autopsy Report” by Tom Edsell who writes on politics inside and outside of Washington.  Here he is:

On Monday a Republican task force released a remarkably hard-headed diagnosis of the party’s many liabilities: its ideological rigidity, its preference for the rich over workers, its alienation of minorities, its reactionary social policies and its institutionalized repression of dissent and innovation.

The 97-page Growth and Opportunity Project report was commissioned in the wake of the 2012 election debacle by Reince Priebus, the chairman of the Republican National Committee. The G.O.P. report is an extraordinary public acknowledgment of internal discord and vulnerability, which has intensified the battle between the deeply committed conservative wing and the more pragmatic, pro-business wing for control of the Republican Party. With just a few exceptions, it does not mince words.

At the federal level, it says, the party is “marginalizing itself,” and, in the absence of major change, “it will be increasingly difficult for Republicans to win a presidential election in the near future.” Young voters are “rolling their eyes at what the party represents.” Voters’ belief that “the G.O.P. does not care about them is doing great harm.” Formerly loyal voters gathered in focus groups describe Republicans as “ ‘scary,’ ‘narrow-minded’ and ‘out of touch’ and that we were a party of ‘stuffy old men.’ ”

In a rare intervention in policy making for a political committee, the R.N.C. report calls for abandonment of the party’s anti-immigration stance, flatly declaring that “we must embrace and champion comprehensive immigration reform.” In an equally radical challenge to Republican orthodoxy, the Priebus report states:

We have to blow the whistle at corporate malfeasance and attack corporate welfare. We should speak out when a company liquidates itself and its executives receive bonuses but rank-and-file workers are left unemployed. We should speak out when C.E.O.s receive tens of millions of dollars in retirement packages but middle-class workers have not had a meaningful raise in years.

The report also warns that Republicans need to mute, if not silence, anti-gay rhetoric if they are to have any chance of regaining support among voters under the age of 30.

For the G.O.P. to appeal to younger voters, we do not have to agree on every issue, but we do need to make sure young people do not see the Party as totally intolerant of alternative points of view. Already, there is a generational difference within the conservative movement about issues involving the treatment and the rights of gays — and for many younger voters, these issues are a gateway into whether the Party is a place they want to be. If our Party is not welcoming and inclusive, young people and increasingly other voters will continue to tune us out. The Party should be proud of its conservative principles, but just because someone disagrees with us on 20 percent of the issues, that does not mean we cannot come together on the rest of the issues where we do agree.

This suggests that the issue of same-sex marriage is on course to become a source of significant division within the Republican Party, as social conservatives view the commitment to marriage as a sacrament between a man and woman. Ralph Reed, founder of the Faith and Freedom Coalition and former executive director of the Christian Coalition, contended in a phone interview that the Republican Party risked alienating a large block of loyal voters if it moved to the left on same-sex marriage. Reed argues that opposing same-sex marriage is not a liability and contends that voters are evenly split on the issue, according to exit polls. In fact, in the 2012 exit polls, and in Washington Post polling, a plurality of voters, 49-46, responded affirmatively to the question “Should same-sex marriages be legal in your state?” The issue has shown steady growth in public support.

Priebus and the five authors of the report – Henry Barbour (nephew of former R.N.C. chairman Haley Barbour) of Mississippi, Zori Fonalledas of Puerto Rico, and Glenn McCall of South Carolina, all members of the R.N.C., along with Sally Bradshaw, an adviser to Jeb Bush, and Ari Fleischer, former press secretary to George W. Bush – were far more blunt in their analysis than many expected.

There is at least one crucial problem that the authors, all members of the establishment wing of the party, address only peripherally and with kid gloves: the extreme conservatism of the party’s primary and caucus voters — the people who actually pick nominees. For over three decades, these voters have episodically shown an inclination to go off the deep end and nominate general election losers in House and Senate races — or, in the case of very conservative states and districts, general election winners who push the party in the House and Senate to become an instrument of obstruction.

The highly visible presence of the candidates these voters prefer – recall the party’s Senate nominees in Missouri and Indiana, Todd Akin and Richard Mourdock, and their bizarre views on rape and abortion — suggests that the Republican Party has a severe, if not toxic, problem: a septic electorate that, in the words of the Mayo Clinic, “can trigger a cascade of changes that can damage multiple organ systems, causing them to fail.”

If that is the case, then the task of the Priebus commission should not have been to diagnose the party’s problems, but to conduct an autopsy.

Leaving that question aside for a moment, let’s turn to a part of the report that is tough in its implications, but less forcefully put than other sections of the document: the difficulties created by “super PACs” and other independent expenditure “third party” groups that have become a major presence in House and Senate elections. Without naming any super PACs, the five authors take a hard line against the role of these independent expenditure groups active in Republican primaries: “No one has a monopoly on knowing who is the best candidate; the electorate ultimately makes the decision.”

The authors agree with the substance of Karl Rove’s goal in the new Conservative Victory Project — that goal being to weed out marginal candidates in primaries who appeal to the base but alienate swing voters. The authors disagree, however, with the way in which the C.V.P. is going about this task, running negative ads against those likely to carry the party banner down to defeat in November. The Growth and Opportunity report is critical of all independent expenditure groups, including the anti-tax Club for Growth, that try to play kingmaker in the candidate selection process:

Outside groups now play an expanded role affecting federal races and, in some ways, overshadow state parties in primary and general elections. As a result, this environment has caused a splintered Congress with little party cohesion so that gridlock and polarization grow as the political parties lose their ability to rally their elected officeholders around a set of coherent governing policies.

Campaign finance laws and court rulings restrict mega-contributions to the parties while permitting $1 million-plus donations to independent groups, including the two other Rove political committees, American Crossroads and Crossroads GPS, which, the report argues, corrupt the political environment:

The current campaign finance environment has led to a handful of friends and allied groups dominating our side’s efforts. This is not healthy. A lot of centralized authority in the hands of a few people at these outside organizations is dangerous for our Party.

In fairness to Rove – a phrase that does not come easily – his agenda does address the issue of a problematic Republican electorate: he aims to prevent ideologically driven voters from committing political suicide, dooming the party’s chances of winning a Senate majority.

I called Jonathan Collegio, spokesman for the three Rove groups (American Crossroads, Crossroads GPS and the Conservative Victory Project) to see how Rove and his allies picture this dynamic playing out. Collegio explained their thinking:

We looked at the last two election cycles and came to the conclusion that we lost from four to seven U.S. Senate seats not because of the party message, in those cases, but because of the party’s messenger.

A Tea Party supporter, William Temple, at the 40th Annual Conservative Political Action Conference in Maryland.

While claiming that Rove’s new group does not have an anti-Tea Party agenda, Collegio said that in the four to seven Senate races that Republicans lost in 2010 and 2012, primaries produced “candidates who were suboptimal, not necessarily Tea Party candidates, but undisciplined, lacking fund-raising ability and substandard generally.”

Along the same lines as the Priebus report, Collegio cited the 2002 McCain-Feingold law, which prohibits political parties from accepting large “soft money” donations, arguing that it undermines the role of the R.N.C. and other official groups in mediating the political process. The vacuum created by McCain-Feingold served to empower renegade third party groups, one of the many unintended consequences of campaign finance reform. “The campaign finance reforms of the last decade,” Collegio told me

dramatically weakened political parties and artificially constrained the parties’ ability to raise large contributions. That structural change has the effect of empowering outside groups. We are in an era where power is not centralized in the parties because of campaign reforms of 10 years ago. The weakening of the parties, in turn, makes it harder for party leaders to cut deals on big pieces of legislation because they don’t control the electoral pocketbook the way they used to.

A rump group of conservatives disputes the Rove-Collegio analysis of Republican Senate losses, contending that centrist candidates backed by Rove’s American Crossroads fared far worse than those backed by the hard right. Nineteen conservatives, including David Bossie, president of Citizens United; Tony Perkins, president of the Family Research Council; and Richard Viguerie, chairman of Conservative HQ, wrote in a letter to American Crossroads donors (who are publicly listed in campaign finance reports to the Federal Election Commission):

In 2012, the only Senate Republican winners were Jeff Flake (Ariz.), Deb Fischer (Neb.), and Ted Cruz (Tex.) — all of whom enjoyed significant Tea Party and conservative support. Meanwhile, more moderate candidates like Tommy Thompson (Wisc.), Heather Wilson (N. Mex.), Rick Berg (N. Dak.), and Denny Rehberg (Mont.) went down to defeat despite significant support from Crossroads. It was firmly expected that Republicans would capture the Senate in 2012. It is inexcusable that they failed and, in fact, lost two seats. The facts speak for themselves. It was not conservatives. Not one moderate Republican challenger won. According to the Sunlight Foundation, not one Senate challenger supported by Crossroads won. There was another, equally important reason Republicans fared so poorly: Groups like Crossroads squandered hundreds of millions of dollars in what were arguably the most inept campaign advertising efforts ever.

A Republican operative who is a close associate of Rove was more ironic in his criticism of the C.V.P.: “If I was in a Republican primary and Karl Rove came out against me, it would be the single best thing that could happen to my campaign.”

Further fueling suspicions on the right of an anti-conservative vendetta led by Rove and the R.N.C., Rove and party leaders are working together to develop a high-tech digital platform designed to facilitate voter and donor contact and to replicate the major advances in digital campaigning achieved by the Obama campaign.

More broadly, the alliance between Rove and the R.N.C. does substantiate the view that establishment forces are driving the reform movement within the Republican Party, an establishment that includes much of corporate America, including the Chamber of Commerce, the Bush family and its allies, and the more moderate, traditionalist donor community.

Conservative analysts like Timothy P. Carney of the Washington Times and Ramesh Ponnuru of the National Review quickly spotted the establishment tilt in the Priebus report. Carney wrote:

Republican elites tend to favor mass immigration and be ambivalent or supportive of legal abortion and gay marriage. So, shouldn’t we take it with a grain of salt when the Republican leadership puts out a document saying that the G.O.P. should change only its rhetoric on economic issues, but change its substance on social issues?

Similarly, Ponnuru wrote that the recommendations “come naturally to Republican elites” who “are more likely to favor same-sex marriage and comprehensive immigration reform on principle.” The report reflects “elite conventional wisdom perfectly, just perfectly.”

In January, I pointed out that “If the conservative movement continues on its downward trajectory, the American business community, which has the most to lose from Republican failure, will be the key force arguing for moderation.”

That moment has come. The Priebus report and Rove’s Conservative Victory Project together mark a significant escalation in the battle between the center and the right over the soul of the Republican Party. What has yet to be determined is whether they are fighting over a patient who can be quickly resuscitated or a patient with a chronic but not fatal illness — or a corpse.

The very bluntness of the Growth and Opportunity report reflects the seriousness of the moment the Republican Party faces: increasing difficulty holding on to its House majority; weakening prospects of regaining control of the Senate; and the threat of unending Democratic control of the White House.

They can issue all the reports they want to, but until they clean out the nest of vipers at the heart of their party nothing will change.

Krugman blog, 3/13/13

Just one post yesterday, “Night of the Living Alesina:”

Ah, remember the good old days of expansionary austerity? On both sides of the Atlantic, austerians seized on academic work by Alberto Alesina and Silvia Ardagna claiming that fiscal consolidation, if focused on spending cuts, would if anything lead to economic expansion. It wasn’t because the paper was especially compelling — even a quick look suggested that the methodology for identifying austerity was seriously flawed. But A-A told people what they wanted to hear, and they went with it.

Since then we’ve had what has to be one of the most decisive combinations of scholarly critique and real-world tests of an economic doctrine ever — and expansionary austerity has failed with flying colors. The IMF went about identifying austerity through an examination of actual policy, and A-A’s results were reversed. Critics showed that all of the alleged examples of expansion through austerity involved factors like currency depreciation or sharp falls in interest rates that don’t apply now. Osbornian policies in the UK led to stagnation; and in the euro area, well …

By the way, if you take out Greece, the result is pretty much the same, although the R-squared goes down.

So you might have expected austerians to change their minds, or at least to come up with other justifications. But no. Both David Cameron and Paul Ryan are still preaching that old expansionary austerity religion, confidence fairy and all.

This is, by the way, a fairly big deal for the Ryan budget, which actually produces a lot of front-loaded austerity, in part because it keeps the tax hikes that finance Obamacare while cancelling the Medicaid expansion and exchange subsidies. The result would be a lot of fiscal drag in 2014 and 2015 — years when the U.S. is very likely still to be in a liquidity trap, so multipliers will be large. This particular “Path to Prosperity” is, in the short to medium term, very much a path to continued depression.

Luckily it isn’t going to happen. And a quick read of reactions suggests that the new Ryan plan is being greeted with derision rather than adulation. Is our pundits learning? A bit, maybe.

 

Krugman’s Blog, 2/25/13

Two posts yesterday.  First up was “A Tale of Two Adjustments:”

A commenter on my last euro post asks a good question: didn’t Germany once have a problem of excessive unit labor costs, which it cured with a protracted squeeze? And in that case, why is it so terrible if Spain is asked to do the same thing?

The answer is basically quantitative. I’d make three points:

1. Thanks to the giant housing bubble, Spanish costs got much further out of line than Germany’s ever did, so the required adjustment is much bigger.

2. Germany got to do its adjustment in the face of a relatively strong European economy; Spain is being asked to adjust in the face of a depressed Europe sliding back into recession.

3. In part because of this difference in overall macro conditions, but also because Germany doesn’t have a housing boom and is actually engaging in a bit of austerity on its own, the burden of adjustment this time around is falling much more on deflation by the overvalued country.

Here’s a figure that illustrates that point. According to Eurostat data, German unit labor costs peaked in 2003, Spanish costs in 2009. So here’s what the adjustments looked like in each episode, with blue lines representing the earlier case and red lines the later:

You can see just how much harsher Spain’s adjustment is, and how much less help it’s getting from rising wages in the rest of the eurozone. Basically, Germany is refusing to do for Spain what Spain did for Germany in the past.

And the result of all that is incredibly high unemployment.

The second was “WWS 543, International Trade Policy:  Class 6:”

Import-substituting industrialization (pdf).

 

Krugman’s Blog, 2/21/13

There were 2 posts yesterday.  The first was “Alan Simpson and Bernie Madoff:”

As I’ve written on previous occasions, the Bernie Madoff phenomenon helped me understand a lot about the persistence of bad economics. Madoff flourished through “affinity fraud”; his investors thought he was their kind of guy, so they didn’t look hard at how he was allegedly making money. And I realized that a similar phenomenon explains the enduring popularity of goldbugs and fiscal doomsayers — including, say, the Wall Street Journal editorial page — despite years of being wrong about everything; their devotees, who consist in large part of cranky old white men, see kindred spirits and can’t see past that to the consistently terrible analysis.

But it’s not just the goldbugs who benefit from affinity fraud, a point driven home by Ezra Klein’s piece on Alan Simpson. Simpson is, demonstrably, grossly ignorant on precisely the subjects on which he is treated as a guru, not understanding the finances of Social Security, the truth about life expectancy, and much more. He is also a reliably terrible forecaster, having predicted an imminent fiscal crisis — within two years — um, two years ago. Yet he remains not only respectable among the Beltway crowd; as Ezra says, he’s lionized in a way that looks from the outside like a clear violation of journalistic norms:

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

So what is it that makes Simpson the figure he is? Clearly, it’s an affinity thing: never mind his obvious lack of knowledge, his ludicrous track record, reporters trust and idolize Simpson because he’s their kind of guy.

And think about what it says about them that their kind of guy is this cantankerous, potty-mouthed individual, who evidently feels not a bit of empathy for those less fortunate.

The second post was “Swiss Myths:”

Oh, my. Aaron Carroll is rightly very, very annoyed at Douglas Holtz-Eakin and Arik Roy for saying that Obamacare should be replaced with a free-market system, like Switzerland’s. As he points out, the Swiss system is nothing like their description. In particular, they denounce community rating — but Switzerland has community rating!

Actually, though, it’s even worse than Carroll lets on, for two reasons.

One is that Obamacare in fact looks a lot like, you guessed it, the Swiss system — so much so that back in 2009 I described it as a plan to Swissfy America. After all the screaming about the awfulness of Obamacare, it’s pretty rich to hold up as a role model a very similar system.

But wait, there’s more: the Swiss system is more privatized than other European systems — and guess what, it has higher costs, indeed second only to America’s:

Maybe Holtz-Eakin doesn’t know anything about this — but wasn’t Roy supposed to be a conservative expert in this field? Are they really unaware of the basics here? Or do they just expect their readers to be easily fooled?

 

Krugman’s Blog

There were 2 posts yesterday.  First up we have “An Insurance Company With an Army:”

Jonathan Chait and Greg Sargent both weigh in on the absurd Republican claim that they’ll produce a plan to balance the budget in 10 years, without a penny in additional revenue. Chait points out that the Ryan plan, even if you accepted all its magic asterisks, still didn’t produce a balanced budget until 2040. Sargent, armed with numbers from the Center on Budget and Policy Priorities, points out that if the GOP were to honor its promises not to cut military spending or benefits for those over 55, you’d have to impose savage cuts on everything else.

What all this comes down to is a collision between GOP deficit scare tactics and the reality of what the federal government does. The government really is an insurance company with an army; if you demand rapid deficit reduction without raising taxes or cutting military spending, you have to cut deeply into programs that the public values.

Republicans have, for the most part, managed until recently to skate over this reality, simultaneously calling for lower spending in the abstract while posing as the defenders of seniors against Obama’s Medicare cuts.They’ve been aided in this by pundits and reporters unwilling to seem “unbalanced” by pointing out the realities. But they’ve now run out of room, and are facing a crisis of arithmetic.

But aren’t they the people who have “the math” and say they create their own reality?  Next up he tells us:  “Tim Geithner is Wrong:”

But he’s right, too.

He has a very interesting interview with Liaquat Ahamed; I was struck by what he says about the fiscal outlook:

TG: There’s something strange about the debate today. The magnitude of additional deficit reduction – revenue increases or spending cuts – that you need to lock in in order to achieve fiscal sustainability is pretty modest. By most accounting, because of what we’ve already done on the spending side and tax side, we have to find another ¾ of 1 percent of GDP of policy measures. And if we did that, that would achieve the economist test of sustainability, meaning it would get the deficit down to a modest primary surplus so the debt would start falling as a share of GDP.

That’s basically consistent with the CBPP analysis: 3/4 of a percent over the next decade is around $1.5 trillion. It’s important to note that this same analysis suggests that it’s not a disaster if we don’t take any more deficit-reduction steps: instead of stabilizing the debt at around 73 percent of GDP, it rises to around 80 percent, which isn’t great but isn’t cause for panic.

Where Geithner goes wrong is in suggesting that since what should be done over the next decade is fairly modest, we ought to be able to get bipartisan agreement. I don’t know if he really believes this or just feels that it’s what he has to say, but nobody who has actually been paying attention can take this seriously.

To say what should be obvious: Republicans don’t care about the deficit. They care about exploiting the deficit to pursue their goal of dismantling the social insurance system. They want a fiscal crisis; they need it; they’re enjoying it. I mean, how is “starve the beast” supposed to work? Precisely by creating a fiscal crisis, giving you an excuse to slash Social Security and Medicare.

The idea that they’re going to cheerfully accept a deal that will take the current deficit off the table as a scare story without doing major damage to the key social insurance programs, and then have a philosophical discussion about how we might change those programs over the longer term, is pure fantasy. That would amount to an admission of defeat on their part.

Now, maybe we will get that admission of defeat. But that’s what it will be — not a Grand Bargain between the parties, acting together in the nation’s interest.