Krugman’s blog, 4/12/14

April 13, 2014

There was one post yesterday, “Wall Street, The City, And Austerity:”

Noah Smith, Simon Wren-Lewis, and I have in effect been having an intermittent, long-distance conversation about the role of the finance industry in promoting a view of our economic problems — one that emphasizes the dangers of deficits and monetary expansion — that has had a seriously damaging effect on policy. The question is why so many people in finance gravitate toward that view, and cling to it despite what is at this point overwhelming evidence that it’s wrong.

Wren-Lewis suggests that it was in large part about deflecting blame — that the financial industry was eager to shift attention away from its own role in creating crisis to the alleged role of fiscal profligacy. And I’m sure that was part of it. But I’d like to add a couple of other motives that seem, in my own experience, to have mattered.

One is the issue of stocks versus flows, which sounds obscure, but bear with me for a minute.

If you were listening to the deficit worriers from late 2009 right through until the summer of 2011, they were constantly asking “Who’s going to buy all those bonds we’re issuing?” And they kept arguing that while yes, someone was buying them now, those purchases will dry up any day now. In 2009 it was the argument that US Treasuries were being bought only through an unsustainable “carry trade”; in 2010-2011 it was only QE2 that was supporting bond prices; and so on.

Meanwhile, economists like me or Ben Bernanke were arguing that this was the wrong question: Asset prices mainly reflect the willingness of people to hold the stock of assets out there, not the flow of new assets being created, so that obsessing over who happened to be buying the flow today was wrong and created a false sense of fragility.

Events have largely confirmed the stock view. But why would finance people have leaned toward a flow view? One answer, I think, is that while demands for stocks are the big story, day-by-day movements in asset prices — movements that are usually just a fraction of a percent — do often reflect the order flow. And here’s the thing: while those day-to-day fluctuations aren’t important for economic policy, they’re all-important for traders trying to make money (which is why getting your trades in a millisecond before your rivals is a big business).

So finance guys were taking the kind of thing they worry about in their business, asset price movements driven by flows, and extrapolating it to macroeconomics, where it didn’t belong.

And this brings me to my second point: deficit scoldery, in addition to being in the class and industry interest of the scolds, was a way to assert the value of what they knew over the ideas of pointy-headed economists. Think about it: finance industry types know, or think they know, a fair bit about what goes on in markets — buyers and sellers, confidence, etc.. But here we were in a macroeconomic situation, the liquidity trap, which nobody in the West had seen for three generations.

And there were these guys with beards and cheap suits telling everyone that to understand what was going on you needed to know macroeconomic theory and a lot of musty old economic history. I suppose Wall Street and City guys could have decided to sit down and read textbooks and history books; yeah, right. It was much more natural for them to defend their turf, to declare that book learning was beside the point, that they knew markets and how markets worked and could tell you that those deficits were putting us in grave danger.

I don’t think that any of the reasons I’ve described are mutually exclusive. Ego, political interest, and personal interest all combined to encourage finance types to tell a story about the world that pushed governments toward austerity. And since nobody ever admits being wrong about anything, it just keeps happening.

The Pasty Little Putz, Dowd, Friedman, Kristof and Bruni

April 13, 2014

The Pasty Little Putz has extruded something called “Diversity and Dishonesty” in which he whines that Mozilla and Brandeis may preach pluralism, but it’s a sham.  “Gemli” from Boston had this to say in the comments:  “There may be a reason that certain institutions “…support diversity, but only as the left defines it.” I don’t think I’ve ever heard the right’s definition of diversity, unless it’s their tendency to treat everyone who doesn’t look like them with equal disdain.”  MoDo, in “A Wit for All Seasons,” says with a quicksilver wit and basic decency, Colbert’s the real deal.  This may be the first column in years where she doesn’t take a gratuitous slap at Obama or Clinton.  The Moustache of Wisdom says “Go Ahead, Vladimir, Make My Day.”  He opines that a Russian gas embargo might be just what the world needs. Seriously.  “Victor” in Cold Spring, NY had this to say:  “Whoa! That’s some pretty tough talk there “Dirty Tommy”. I’m sure you got Vlad shaking in his boots at the prospect of the west going solar in retaliation for a brutal annexation of Ukraine through gas pipeline extortion. This is like some junior high-schooler’s mixed metaphor.”  Mr. Kristof, in “A Loyal Soldier Doesn’t Deserve This,” says here’s a veteran who risked his life and sacrificed his mind for his country. He asks what are we doing for him in return?  Mr. Bruni considers “Women’s Unequal Lot” and says the 77-cent figure so loosely tossed around misrepresents the pay gap and its roots.  Here’s The Putz:

Earlier this year, a column by a Harvard undergraduate named Sandra Y. L. Korn briefly achieved escape velocity from the Ivy League bubble, thanks to its daring view of how universities should approach academic freedom.

Korn proposed that such freedom was dated and destructive, and that a doctrine of “academic justice” should prevail instead. No more, she wrote, should Harvard permit its faculty to engage in “research promoting or justifying oppression” or produce work tainted by “racism, sexism, and heterosexism.” Instead, academic culture should conform to left-wing ideas of the good, beautiful and true, and decline as a matter of principle “to put up with research that counters our goals.”

No higher-up at Harvard endorsed her argument, of course. But its honesty of purpose made an instructive contrast to the institutional statements put out in the immediate aftermath of two recent controversies — the resignation of the Mozilla Foundation’s C.E.O., Brendan Eich, and the withdrawal, by Brandeis University, of the honorary degree it had promised to the human rights activist Ayaan Hirsi Ali.

In both cases, Mozilla and Brandeis, there was a striking difference between the clarity of what had actually happened and the evasiveness of the official responses to the events. Eich stepped down rather than recant his past support for the view that one man and one woman makes a marriage; Hirsi Ali’s invitation was withdrawn because of her sweeping criticisms of Islamic culture. But neither the phrase “marriage” nor the word “Islam” appeared in the initial statements Mozilla and Brandeis released.

Instead, the Mozilla statement rambled in the language of inclusion: “Our organizational culture reflects diversity and inclusiveness. … Our culture of openness extends to encouraging staff and community to share their beliefs and opinions. …”

The statement on Hirsi Ali was slightly more direct, saying that “her past statements … are inconsistent with Brandeis University’s core values.” But it never specified what those statements or those values might be — and then it fell back, too, on pieties about diversity: “In the spirit of free expression that has defined Brandeis University throughout its history, Ms. Hirsi Ali is welcome to join us on campus in the future to engage in a dialogue about these important issues.”

What both cases illustrate, with their fuzzy rhetoric masking ideological pressure, is a serious moral defect at the heart of elite culture in America.

The defect, crucially, is not this culture’s bias against social conservatives, or its discomfort with stinging attacks on non-Western religions. Rather, it’s the refusal to admit — to others, and to itself — that these biases fundamentally trump the commitment to “free expression” or “diversity” affirmed in mission statements and news releases.

This refusal, this self-deception, means that we have far too many powerful communities (corporate, academic, journalistic) that are simultaneously dogmatic and dishonest about it — that promise diversity but only as the left defines it, that fill their ranks with ideologues and then claim to stand athwart bias and misinformation, that speak the language of pluralism while presiding over communities that resemble the beau ideal of Sandra Y. L. Korn.

Harvard itself is a perfect example of this pattern: As Patrick Deneen of Notre Dame pointed out when the column was making waves, Korn could only come up with one contemporary example of a Harvardian voice that ought to be silenced — “a single conservative octogenarian,” the political philosophy professor Harvey Mansfield. Her call for censorship, Deneen concluded, “is at this point almost wholly unnecessary, since there are nearly no conservatives to be found at Harvard.”

I am (or try to be) a partisan of pluralism, which requires respecting Mozilla’s right to have a C.E.O. whose politics fit the climate of Silicon Valley, and Brandeis’s right to rescind degrees as it sees fit, and Harvard’s freedom to be essentially a two-worldview community, with a campus shared uneasily by progressives and corporate neoliberals, and a small corner reserved for token reactionary cranks.

But this respect is difficult to maintain when these institutions will not admit that this is what is going on. Instead, we have the pretense of universality — the insistence that the post-Eich Mozilla is open to all ideas, the invocations of the “spirit of free expression” from a school that’s kicking a controversial speaker off the stage.

And with the pretense, increasingly, comes a dismissive attitude toward those institutions — mostly religious — that do acknowledge their own dogmas and commitments, and ask for the freedom to embody them and live them out.

It would be a far, far better thing if Harvard and Brandeis and Mozilla would simply say, explicitly, that they are as ideologically progressive as Notre Dame is Catholic or B. Y.U. is Mormon or Chick-fil-A is evangelical, and that they intend to run their institution according to those lights.

I can live with the progressivism. It’s the lying that gets toxic.

If anyone knows about lying it’s a Republican…  Here’s MoDo:

I don’t remember much about being on Stephen Colbert’s show.

It all passed in a blur of fear.

I remember him coming into the makeup room to remind me that he was going to be in character as a jerk.

I remember that he held up my book about gender and asked if it was “soft-core porn.”

I remember he asked me if I wanted to hold his Peabody and I told him I did, so he jumped up to grab the TV award from the mantel.

The experience reminded me of a 1937 musical called “A Damsel in Distress,” where Fred Astaire guided Joan Fontaine, clearly not a dancer, around a lawn, soaring for both of them.

Colbert was as quicksilver with his wit as Fred was with his feet. And like Astaire’s more talented partner Ginger Rogers, who had to dance backward and in heels, Colbert was doing two things at once that were very hard. He was dazzling as a satirist and improv comedian while mimicking a buffoonish right-wing broadcaster.

Jon Stewart once described the level of difficulty to me this way: “It’s as though you’re doing your show in Portuguese.”

The reason “The Colbert Report” worked, Stewart said, when I interviewed the two comics for Rolling Stone in 2006, was that Colbert could act like an obnoxious egoist, but his “basic decency can’t be hidden.”

Colbert is witty and a good interrogator without being twisted, as Johnny Carson was.

He’s inventive, like the comic genius he will replace, but not tortured like David Letterman.

In person, Colbert is a nice guy, but not as monologue-monomaniacal as Jay Leno. Colbert has lived the life of a suburban soccer dad and Catholic Church-going Sunday school teacher in Montclair, N.J., with a beautiful wife he’s nuts about, Evie McGee, and three kids.

He’s not an ingratiating boy next door, like Jimmy Fallon, or a scorchingly candid curmudgeon, like Letterman.

No one, including the CBS president, Les Moonves, and the host himself, is sure what his new show will be like because we’ve so rarely seen Colbert when he wasn’t playing a character.

And it’s a sad double blow, after all. It’s not only Letterman who’s retiring, but the blowhard doppelgänger of Colbert.

Carson was the Walter Lippmann of comedy, wielding enormous influence over the reputations of politicians he mocked. Stewart and Colbert took it a step further. They became Murrow and Cronkite for a generation of young viewers.

It was a measure of how seriously Washington viewed Colbert that in 2007, Rahm Emanuel, then the Democratic Caucus chairman, told freshman Democrats to stay off Colbert’s show. And Colbert has to be the only person who testified before Congress as a bit.

Rush Limbaugh and some other conservatives bristled at news that Colbert was moving to the more mainstream network platform; they know he can be brilliantly effective about the absurdity and doublespeak of politics.

“CBS has just declared war on the heartland of America,” Limbaugh said.

Colbert said in the Rolling Stone interview that his agenda was humor, not social change, noting: “Peter Cook was once asked if he thought that satire had a political effect. He said, ‘Absolutely, the greatest satire of the 20th century was the Weimar cabaret, and they stopped Hitler in his tracks.’ ”

Except for supporting J.F.K., Colbert’s parents were not very political or liberal. Colbert kept a Nixon poster above his office desk. “Nixon was the last liberal president,” he told me. “He supported women’s rights, the environment, ending the draft, youth involvement, and now he’s the boogeyman?”

After his famous appearance at the White House Correspondents Dinner in 2006, where he sliced W. so surgically that the speech, which fell flat in the room, went viral on liberal websites, Colbert looked shaken.

“I didn’t want to be subversive,” he told me. “I just wanted to be funny.” He said he was not trying to throw a Molotov cocktail, as a critic charged. He agreed with one of his writers, who told him, “You threw a bottle of grape soda that happened to have a lit rag in the neck, and the room was soaked with gasoline.”

He describes himself as “an omnivore,” who loves everything from “A Man for All Seasons” to “Jackass,” from hip-hop to Ovid in the original Latin.

He had 10 older siblings. But after his father and the two brothers closest to him in age died in a plane crash when he was 10 and the older kids went off to college, he said, he was “pretty much left to himself, with a lot of books.”

He said he loved the “strange, sad poetry” of a song called “Holland 1945” by an indie band from Athens, Ga., called Neutral Milk Hotel and sent me the lyrics, which included this heartbreaking bit:

“But now we must pick up every piece

Of the life we used to love

Just to keep ourselves

At least enough to carry on. . . .

And here is the room where your brothers were born

Indentions in the sheets

Where their bodies once moved but don’t move anymore.”

And now we get to The Moustache of Wisdom:

So the latest news is that President Vladimir Putin of Russia has threatened to turn off gas supplies to Ukraine if Kiev doesn’t pay its overdue bill, and, by the way, Ukraine’s pipelines are the transit route for 15 percent of gas consumption for Europe. If I’m actually rooting for Putin to go ahead and shut off the gas, does that make me a bad guy?

Because that is what I’m rooting for, and I’d be happy to subsidize Ukraine through the pain. Because such an oil shock, though disruptive in the short run, could have the same long-term impact as the 1973 Arab oil embargo — only more so. That 1973 embargo led to the first auto mileage standards in America and propelled the solar, wind and energy efficiency industries. A Putin embargo today would be even more valuable because it would happen at a time when the solar, wind, natural gas and energy efficiency industries are all poised to take off and scale. So Vladimir, do us all a favor, get crazy, shut off the oil and gas to Ukraine and, even better, to all of Europe. Embargo! You’ll have a great day, and the rest of the planet will have a great century.

“Clean energy is at an inflection point,” explains Hal Harvey, C.E.O. of Energy Innovation. “The price reductions in the last five years have been nothing less than spectacular: Solar cells, for example, have dropped in cost by more than 80 percent in the last five years. This trend is underway, if a bit less dramatically, for wind, batteries, solid state lighting, new window technologies, vehicle drive trains, grid management, and more. What this means is that clean energy is moving from boutique to mainstream, and that opens up a wealth of opportunities.”

New houses in California now use one-fourth of the energy they used 25 years ago, added Harvey. Chevrolet, Dodge and Ford are in a contest to make the most efficient pickup — because their customers want to spend less on gasoline — so they are deploying new engines and lighter truck bodies. Texas now has enough wind to power more than 3 million homes. New Jersey generates more solar watts per person than California.

And check out Opower, which just went public. Opower works with utilities and consumers to lower electricity usage and bills using behavioral economics, explained Alex Laskey, the company’s co-founder, at their Arlington, Va., office. They do it by giving people personalized communications that display in simple, clear terms how their own energy usage compares with that of their neighbors. Once people understand where they are wasting energy — and how they compare with their neighbors — many start consuming less. And, as their consumption falls, utilities can meet their customers’ demand without having to build new power plants to handle peak loads a few days of the year. Everybody wins. Opower just signed up the Tokyo Electric Power Company and its 20 million homes.

Putting all its customers together since it was founded in 2007, said Laskey, Opower has already saved about “4 terawatt hours of energy” and expects to be soon saving that annually. The Hoover Dam produces about 4 terawatts hours of energy a year. So we just got a new Hoover Dam — for free — in Arlington, Va.

A gas embargo by Putin would also reinforce the message of the United Nations’ latest climate report by the Intergovernmental Panel on Climate Change, which warned with greater confidence than ever that human-created carbon emissions are steadily melting more ice, creating more dangerous sea level rise, stressing ecosystems around the globe and creating more ocean acidification, from oceans absorbing more C02, posing “a fundamental challenge to marine organisms and ecosystems.”

Sunday, at 10 p.m. Eastern time, Showtime will begin airing a compelling nine-part series, called “Years of Living Dangerously,” about how environmental and climate stresses affect real people. The first episode features Harrison Ford confronting Indonesian officials about the runaway deforestation in one of their national parks, Don Cheadle following evangelicals in Texas wrestling with the tension between their faith and what is happening to their environment, and this columnist exploring how the prolonged drought in Syria contributed to the uprising there. The ninth episode is an in-depth interview with President Obama on environment and climate issues.

I asked Harrison Ford, a longtime board member of Conservation International, whether working on the documentary left him feeling it was all too late. “It isn’t too late; it can’t be too late,” he said. “Is it too late to teach our kids the difference between right and wrong? If we are not ready to redress something happening on our watch, how can we expect our kids to do something about it?” Remember, he added, “nature will be just fine without us. Nature doesn’t need people. People need nature. That is why we can’t save ourselves without saving nature.”

Ford is right. We can still do this. We are closer to both irreversible dangers on climate and scale solutions on clean tech than people realize. Just a little leadership now by America — or a little scare by Putin — would make a big difference.

Correction: April 12, 2014

I have no idea what the correction is or was, as the Times neglected to actually put it on the web site.  Here’s Mr. Kristof:

The only reason he is alive, says Mike Yurchison, is his girlfriend, Leigh Anna Landsberger. She sits with him through endless waits at Veterans Affairs, whispering that he’s smarter than she is even if his brain is damaged. She helps him through his seizures, and she nags him to overcome drug addiction.

Leigh Anna gave Mike, 34, something to live for after his brother, an Iraq veteran confronting similar torment, died of a drug overdose, an apparent suicide. She talked him through his grief after the suicide of another Army buddy, Jake, the one who persuaded them to move to Dallas from their native Ohio.

“If it wasn’t for her, I’d be dead right now,” Mike told me. “It was her that got me to start feeling human.”

Yet the shadow of war is difficult to escape, and a United States veteran still kills himself (or, sometimes, herself) almost once each hour. A few weeks ago, Leigh Anna returned the ring Mike had given to her and called off their engagement. She says she still loves Mike, but she is 26 and full of dreams, and he’s a veteran with post-traumatic stress disorder and a brain injury that, for all his intelligence, leaves him speaking slowly and sometimes sounding punch drunk. He muddles his age, forgets his address, struggles to hold a job, and he isn’t getting much help from Veterans Affairs.

“I want a family, and I want a lot of things girls want,” Leigh Anna told me, crying softly. “There are things I’m giving up.”

Leigh Anna has stood by Mike for three and a half years, but how much does a girlfriend sign on for? She isn’t sure what to think now. “I’m taking it a day at a time,” she said.

Iraq is but a fading memory for most Americans, and Afghanistan may soon recede as well. But for countless others like Mike and Leigh Anna, the war continues and will for decades to come.

The Department of Veterans Affairs says that it has made progress in reducing its backlog in processing disability compensation claims, but critics say that is because of the way it defines the backlog — and many hundreds of thousands of veterans are still awaiting decisions.

Likewise, the V.A. has improved suicide prevention work, but, by all accounts, it’s not enough, so that veterans are dying unnecessarily.

Mike signed up to join the Army a month after the 9/11 attacks in 2001 as an act of patriotism. “I wanted to go to war and do my part,” he said. I first wrote about him two years ago in a column about the apparent suicide of his younger brother, Ryan Yurchison, who had looked up to Mike and signed up for the Army after he did.

Then a bit more than a month ago, I heard from Cheryl DeBow, the mother of Ryan and Mike.

“I am fearing I may lose my other son as well,” Ms. DeBow tells me, speaking of Mike. “It it’s becoming déjà vu and truly scares me.”

When Mike went to war he was, like Ryan, strong and healthy. So when he returned, Ms. DeBow couldn’t believe the difference. “When he got off the plane from Iraq, his body was shaking and so stiff when I went to hug him,” she said. “It’s as if he wasn’t there.”

He was diagnosed with post-traumatic stress disorder and traumatic brain injury. (Of Iraq and Afghanistan veterans who have been treated by the V.A., 55 percent have been diagnosed with a mental disorder.) He says that military doctors prescribed anxiety medication and painkillers that left him addicted to opiates.

Mike suffers from occasional seizures, in which his mouth foams and he becomes as stiff as a board, stops breathing and turns blue. He never had these before the war, and doctors can’t explain them.

Although his mom and girlfriend worry about suicide risks, Mike told me that the thought has barely crossed his mind. I don’t know whether to believe him. He also said: “This is probably going to sound weird, but with my brother dying, then Jake, I keep feeling death is, like, closing in on me. It’s a horrible feeling. It’s almost like this war had a curse, and if you didn’t die there, you’ll die at home. I don’t know why so many veterans are dying at home.”

Mike is also haunted by a particular incident. On an officer’s order in Iraq, he shot a young girl who the officer feared was wearing a suicide vest. The girl died, blood was everywhere, there was no suicide vest — and Mike was shattered.

So the Iraq war goes on in Mike’s head.

The Department of Veterans Affairs rates him 30 percent disabled and pays him a monthly stipend. Mike is stoical and reluctant to complain, saying he knew the risks when he signed up. He has appealed for a higher fraction of disability payment because he is struggling economically.

That’s common. The unemployment rate for veterans who joined the service after 9/11 is higher than the civilian rate, and the homelessness rate for such veterans is significantly higher than for other adults.

Mike periodically visits V.A. doctors but finds them unhelpful, and he gave up on an addiction program because of a long waiting list. An outside doctor prescribes him medicine to help wean him off opiates (and his family says he is making progress), but he has to pay for the doctor and medicine himself.

As for his mental health, he’s not hopeful. “In a lot of ways, it’s getting worse,” he said.

So the pain lingers in Mike, in Leigh Anna, in Ms. DeBow’s fears for her son — and in so many homes across America. These are the families that sometimes wish the injuries were the obvious ones, the amputations or scars that the public recognizes and honors, rather than mental health concerns that are stigmatizing.

Mike agreed to share his story and be photographed, despite embarrassment and innate reluctance, in hopes that the attention might help other veterans in need of assistance.

There are no simple answers, of course, but we as a country can do so much more for these veterans and their loved ones. If we have the wherewithal to repair armored vehicles, we can at least try to repair the people like Pvt. Mike Yurchison who served in them. “My heart is breaking not just for a second son I could lose,” said Ms. DeBow, “but for all those we will lose as well due to government apathy.”

The goddamn Republicans howl about “supporting the troops” while they cut the budgets that actually might.  To say nothing of sending them off to be cannon fodder because of a pack of lies.  Here’s Mr. Bruni:

I dropped in on my sister last week. As usual, I was amazed.

I work a single job; she works three or four. There’s her paid one at an executive search firm, finding and screening candidates for corner offices in the retail industry. Then there are the others.

She spends many hours daily as a combined chauffeur, drill sergeant, cheerleader and emotional nursemaid for her two children and two stepchildren. During my visit, on Wednesday night, our chat was interrupted repeatedly so that she could tangle with her son about an unfinished school essay or field questions from her daughter about softball.

She’s the vice president of her New Jersey township’s board of education, because she feels an obligation to better the community in which her kids live. And she’s hosting our family’s Easter celebration, when 20 of us will descend on her. I could see the extra stress settling in. Like too many women, she frets that the smoothness with which she pulls off a holiday is a verdict on her character, her femininity.

Her husband’s a champ. He pitches in, lavishly. But the buck really does stop with her.

Although she’s had enormous professional success, being a woman has surely constrained her. She chose employment that allows her to telecommute frequently, a necessary aspect of her juggling act.

It’s also entirely possible that some of the positions she has held would have paid her more if she were a man.

But the disparities that she faces are so much more complicated than her salary. Decades into the discussion about how to ensure women’s equality, we have a culture that still places a different set of expectations and burdens on women and that still nudges or even shames them into certain roles.

There was too little recognition of that last week at the White House, where President Obama practiced the timeless political art of oversimplification, reducing a messy reality into a tidy figure and saying that working women make only 77 cents for every dollar that working men earn. He left the impression that this was principally the consequence of direct discrimination in the form of unequal pay for the same job.

Some of it is, and that’s flatly unacceptable.

But most of it isn’t. And the misuse of the 77-cent statistic could actually hurt the important cause of giving women a fair shake, because it allows people who don’t value that goal a way to discredit those of us who do, and because it gives short shrift to dynamics that must be a part of any meaningful, truthful, constructive discussion.

The 77-cent figure speaks to the earnings of all women and all men classified as full-time workers. But it doesn’t adjust for the longer hours that such men generally work. It doesn’t factor in the paychecks of the many men and women who are employed part time.

When all of that comes into play and hourly income is calculated, women make 84 cents for every dollar that men do, according to the Pew Research Center. Even that 16-cent difference, though, isn’t entirely about women earning less money for the same work. It’s influenced by many factors, including the greater percentage of women who slow down their careers because of child-rearing responsibilities and fall behind.

To wit: Among younger women, many of whom have yet to hit that pause button, the hourly “wage gap” is 93 cents on the dollar, according to Pew’s number crunching. Other analyses reach similar conclusions.

In the White House, women made 88 cents for every dollar that men did last year, according to a review by the conservative American Enterprise Institute, and salaries there are determined by hierarchical rank, not managerial discretion. What created the gap wasn’t unequal pay for equal work; it was a concentration of women in lower positions. Jay Carney, the White House press secretary, explained this as if it were some sort of exoneration, when it merely raises other, bigger questions. At 1600 Pennsylvania Avenue and elsewhere, why are so many women at the bottom?

PATRIARCHIES, like old habits, die hard. In many arenas, we’re simply accustomed to being led by men. It’s our default, our fallback. With Stephen Colbert’s appointment last week to replace David Letterman, we’ve continued a period of intense shuffling of the late-night chairs, and each one that belonged to a man went to another man. Chelsea Handler is ending her own show; the days when Joan Rivers was a guest host for Johnny Carson are long gone; and on the major networks around midnight, it’s a boys’ club. Women get to tuck in the children, but not the national television audience.

By suggesting that the chief culprit for women’s inferior earnings is discriminatory pay, the 77-cent figure lets too many men off the hook, not forcing them to confront their culpability as bosses who care too little for women’s advancement, as husbands who prioritize their own careers and as fathers who don’t participate fully around the house.

Arlie Russell Hochschild, the sociologist who examined the burden of working women in the book “The Second Shift,” told me that since its publication 25 years ago, men have improved — but not enough. Back then, she said, “If you put a woman’s paid and unpaid labor beside her husband’s, and they both worked full time and had kids under 6, she was working an extra month.” Now, she said, it’s an extra two weeks.

That situation, she cautioned, pertains largely to affluent women. For less affluent ones, the issue is often men who are entirely absent. Equal-pay legislation doesn’t begin to address what these women need.

If we’re concerned about them, if we’re concerned about all working women, we have to talk about child care, flexible hours, paid leave. We have to talk about gender stereotypes and whether they steer women into professions with lower compensation. We have to talk about the choices that women make and which of those they feel muscled into.

Obama acknowledged that much only after he dwelt on the 77 cents. “We got to make it possible for more women to enter high-paying fields,” he said, going on to note, “Fewer than 5 percent of Fortune 500 companies have women at the helm.”

Being at the helm would probably push my sister over the edge. I checked in with her on Friday at noon, by which point she had driven her son to school, attended a board of education meeting elsewhere, returned to her son’s school for a conference and then gone to the doctor to deal with a case of conjunctivitis — in both of her eyes — and a sore throat. She had hoped, but failed, to get her broken eyeglasses fixed somewhere along the way.

“How can I place senior executives when I’m facing my son’s headmaster with glasses at a 45-degree angle on my head and pinkeye?” she said, with the kind of laugh that’s a sob in drag. “I look like a total hot mess.” Or a cautionary tale. Or, to me, a superhero.

Krugman’s blog, 4/11/14

April 12, 2014

There were four posts yesterday.  The first was “The Return of Expansionary Austerity:”

Here we go again. There’s now a full-court press of the usual suspects claiming that the recovery in the UK proves that fiscal austerity isn’t contractionary after all, that the IMF had it all wrong, and so on.

Jonathan Portes has an extended takedown; but the simple version is that the Cameron government did a lot of fiscal contraction in 2010 and 2011, but then slowed the pace of consolidation dramatically. Unfortunately, uncertainty over how big the UK’s output gap really is makes it hard to agree on a measure of fiscal policy, but just about every measure does indeed show austerity tapering off sharply after 2011. Here, for example, is real government non-interest spending:


European Commission

So the UK government did a lot of austerity, then stopped doing more, and the economy began to grow thereafter. Does this vindicate expansionary austerity? To use an analogy I’ve used before, if I keep hitting myself in the head with a baseball bat, and then I stop, I will start to feel better; this doesn’t mean that hitting yourself in the head with a baseball bat is a good thing.

If you read Portes’s piece, you’ll see that Osborne et al are engaging in some sophistry here, claiming that the government has never changed its plan, so it’s still on Plan A. That’s a very dubious claim, but in any case it’s irrelevant to the macroeconomic argument. The fact is that the UK has done much less fiscal consolidation since 2012 than it did in the previous two years — so the fact that the economy has perked up since then is actually a vindication of Keynesian claims, whatever the government’s intentions.

Needless to say, I don’t expect any of this to make dent in austerian views.

The second post today was “Offshore and Underground:”

I had lunch with Gabriel Zucman today, co-author of the startling new paper (pdf) showing that the concentration of wealth at the very top — the 0.1% — is fully back to Gilded Age levels.And he pointed me to another paper that flew under my, and I suspect other peoples’, radar: his demonstration that a lot of wealth at the top is held in offshore tax havens (pdf).

You might have suspected that already, but it’s one thing to rely on anecdotal evidence, another thing to find the clear footprint of underground money in official statistics. What Zucman points out is that we have international data on investment positions, with each country reporting its assets abroad and foreign-owned assets at home. But the numbers don’t add up: globally, liabilities are substantially larger than assets. That’s mathematically impossible, but Zucman shows that it’s what will appear in the statistics if a lot of money is run through offshore havens, so that the ownership doesn’t show up in anyone’s national statistics. And he uses other data and information to show that this is by far the most compelling explanation.

I think this is telling us something important about how the world really works. There was a flurry of interest in the offshore haven issue when Mitt Romney’s Cayman Islands accounts; a bit more interest when Cyprus hit the wall, and the question of what it was doing arose. But the issue keeps receding, I think due to a sense that it’s somehow trivial, a matter of a few Russians and maybe a handful of our own wealthy.

In reality, however, it’s almost surely a much bigger deal than that. At the commanding heights of the US economy, hiding a lot of one’s wealth offshore is probably the norm, not the exception.

The third post yesterday was “Health Reform and Affinity Fraud:”

Over at Talking Points Memo, they seem bemused by the violent reaction on the right to any suggestion that Obamacare is working as well as all the evidence suggests it is. Josh Marshall and Ezra Klein both made a fairly obvious point: Kathleen Sebelius’s resignation was almost surely timed to follow good news, so that her departure wouldn’t be easy to spin as part of a narrative about failed reform. The right, however, went ballistic — not so much expressing skepticism over the good enrollment numbers and the encouraging survey data as expressing total outrage and bewilderment that anyone believes the good news. On the right they know, just know, that it’s a total disaster.

What’s interesting about this is that conservative health wonks, however much they may like to spin facts, know better: even on the right, everyone who knows anything about the subject has been telling people not to expect a collapse, a death spiral, whatever, and even suggesting that Republicans may need to accept that much of Obamacare is irreversible. But not many people in that camp read, say, Avik Roy; they’re getting their information from Fox News and Rush, and they hear nothing but tales of disaster.

But why would they place so much faith in these sources? These are, after all, the same sources that told them that Romney was going to win big, that we were headed for hyperinflation, and much much more. How can such experiences not have instilled at least a bit of doubt?

Well, we basically know the answer. One thing I learned from reporting on the Madoff affair was the term “affinity fraud”: people are easily duped by con men who seem to be like them, to be their kind of people. What Fox, Rush etc. do is build a cultural and emotional bond with their audiences, based mainly on who they dislike and attack. And that bond induces those audiences to believe that what comes from these sources is the obvious truth, never mind what those arrogant elitists with their “facts” and “data” may be saying. (I’m turning into Stephen Colbert as we speak.)

Anyway, it’s quite a sight to behold.

The work week ended, as usual, with music.  His last post yesterday was “Friday Night Music: Carolina Chocolate Drops:”

Saw them last night at Brooklyn Academy of Music. Totally amazing. Every time you thought they couldn’t surprise you any more with their range, they pulled something else out — and not just by singing in Gaelic. When Rhiannon Giddens kicked off her shoes and starting dancing, the whole audience lost it.

 

Blow and Nocera

April 12, 2014

Ms. Collins is off today.  In “The Self-Sort” Mr. Blow says it’s easy to demonize, or simply dismiss, people you don’t know or see.  Mr. Nocera gives us “The Apple Chronicles” and says these days, the tech industry is battling over patents instead of new products.  Here’s Mr. Blow:

This week, four presidents journeyed to Austin, Tex., to address the Civil Rights Summit and remark on President Lyndon B. Johnson’s legacy on the 50th anniversary of the passage of the Civil Rights Act.

That landmark act brought an end to legal racial segregation in public places.

But now we are facing another, worsening kind of segregation, one not codified but cultural: We are self-sorting, not only along racial lines but also along educational and income ones, particularly in our big cities.

Our cities are increasingly becoming vast outposts of homogeneity and advantage, arcing ever upward, interspersed by deserts of despair, all of which produces in them some of the highest levels of income inequality ever seen in this country.

Some call this progress; I call it a perversion, at least of the concept of diversity — of race, culture, identity and class — that dynamic engine that built urban identities and that is now being erased out of them.

As a report by Kendra Bischoff of Cornell and Sean F. Reardon of Stanford pointed out last year: “The proportion of families living in affluent neighborhoods more than doubled from 7 percent in 1970 to 15 percent in 2009. Likewise, the proportion of families in poor neighborhoods doubled from 8 percent to 18 percent over the same period.”

This is consistent with a 2012 Pew Research Center report that found, “Residential segregation by income has increased during the past three decades across the United States and in 27 of the nation’s 30 largest major metropolitan areas, according to a new analysis of census tract and household income data.”

The report added, “The analysis finds that 28 percent of lower-income households in 2010 were located in a majority lower-income census tract, up from 23 percent in 1980, and that 18 percent of upper-income households were located in a majority upper-income census tract, up from 9 percent in 1980.”

As Richard Florida wrote in The Atlantic last month, “The poor face higher levels of segregation in larger, denser metros.” In affluent cities, he said, “The segregation of poverty is more pronounced,” adding, “The poor also face greater levels of segregation in more advanced, knowledge-based metros.”

According to a study published last year in the journal Education and Urban Society, “Students are more racially segregated in schools today than they were in the late 1960s and prior to the enforcement of court-ordered desegregation in school districts across the country.”

In fact, a report last month by researchers at the Civil Rights Project of the University of California, Los Angeles, found, “New York has the most segregated schools in the country.”

Martin Luther King Jr.’s dream about the coming together of children of different races seems, in some ways, to grow more faint.

A Reuters/Ipsos poll last year found, “About 40 percent of white Americans and about 25 percent of nonwhite Americans are surrounded exclusively by friends of their own race.”

This kind of sorting has real world consequences in terms of behaviors, empathy and socialization. As The Independent of London reported last month, a new study found, “People who live in ethnically diverse streets are less racially prejudiced than individuals living in highly segregated areas and their increased tolerance is due directly to the experience of a more integrated society.”

The findings, the newspaper said, “emerged from the analysis of seven previous studies on community relations carried out between 2002 and 2012 in England, Europe, the United States and South Africa, and specifically tried to rule out the idea that the results can be explained by tolerant people being more likely to live in mixed neighborhoods.”

By ruling this out, the study was able to show that “even the attitudes of the most prejudiced people who did not mix at all with ethnic minorities became more tolerant over time as a result of living in areas where others were mixing on a daily basis.”

We need to see people other than ourselves in order to empathize. If we don’t live around others we do ourselves and our society damage because our ability to relate becomes impaired.

It’s easy to demonize, or simply dismiss, people you don’t know or see. It’s in this context that we can keep having inane conversations about the “habits” and “culture” of the poor and “inner city” citizens.

It’s nearly impossible to commiserate with the unseen and unknown.

Now here’s Mr. Nocera:

So they’re at it again, Apple and Samsung, fighting over patents in a courtroom in San Jose, Calif. They had a similar fight in 2012, in the same courtroom, which Apple won. Samsung has also won its share of these legal battles, including in Australia.

This time around, Apple alleges that Samsung has violated five of its patents, including the one that allows iPhone users to slide their finger across the bottom of the screen to unlock it. One of its experts testified the other day that Samsung should be forced to pay more than $2 billion for the harm done. Samsung, meanwhile, has retaliated by accusing Apple of violating several of its patents. The legal bills alone have to be running into the tens of millions of dollars.

Perhaps it is just coincidence that this latest trial coincides with the publication of a new book by Yukari Iwatani Kane, titled “Haunted Empire: Apple After Steve Jobs.” The coincidence is nonetheless telling. (Disclosure: Kane devotes several pages to a phone call I got from Steve Jobs in 2008 when I was working on a column about Apple’s unwillingness to disclose details of his health problems.)

The Apple Kane chronicles in “Haunted Empire” is not the same company she used to cover as a reporter for The Wall Street Journal, when Jobs was alive. That Apple was fearless in its willingness to take risks and bring innovative products to market. This Apple, the post-Jobs Apple, has become risk-averse, its innovative capacity reduced to making small tweaks on products it has already brought to market. Though its leadership still talks a good game, it has so far been unable to deliver on the kind of knock-your-socks-off products for which Apple was once famous.

Part of this was inevitable. Jobs was a once-in-a-generation leader, with product instincts that just aren’t replicable. It is a sobering tale of what happens when a corporation becomes so reliant on one man.

But there are other reasons, too. Kane tracks down Clayton Christensen, the Harvard Business School professor and author of the famous business book “The Innovator’s Dilemma.” The book documents how companies stop innovating as they reach a certain critical mass and become more concerned with protecting what they have rather than chasing the new. This makes them vulnerable to newer competitors. “By the time those companies paid attention to the cheap, new innovations they had initially ignored, it was usually too late,” writes Kane, paraphrasing Christensen. Apple, Christensen believed, had long been the exception to his rule. Now, he feared, it was facing the innovator’s dilemma, just as other big companies did.

Meanwhile, the stock market was souring on Apple, and even Carl Icahn was poking around, urging Tim Cook, Jobs’s successor as chief executive, to hand some of its enormous cash hoard to shareholders.

The only real way to stave off further decline is to come out with a product that establishes a whole new category — the way the iPad did in 2010. But that seems unlikely. “Outside the echo chamber of Apple’s headquarters, the notion of the company’s exceptionalism has been shattered,” Kane writes.

Which brings me back to the litigation with Samsung — the company that is coming to market with products that are every bit as good as Apple’s, and at a lower price to boot. This never-ending litigation is yet another sign that Apple is becoming a spent force. Suing each other “is not what innovative companies do,” said Robin Feldman, a patent law expert at the University of California, Hastings College of the Law.

Nor has the lawsuit been going smoothly for Apple. One document revealed during the trial was an internal Apple presentation, a slide of which read, “Consumers want what we don’t have” — meaning inexpensive phones with large screens, which Apple doesn’t sell. In the earlier trial, although Apple won a verdict against Samsung, the judge refused to force Samsung to remove certain products from the market, as Apple has demanded. Instead, the case had the perverse effect of validating “the Korean company as a worthy rival and supplied it with free advertising,” writes Kane.

These patent war cases can be — and should be — easily settled, as everyone in the business knows. Every smartphone company is now armed to the teeth with patents, and the most sensible way to deal with the issue is to cross-license the patents. Then the companies can get back to the business of innovating. Apple’s utter refusal to do so suggests that it has become less interested — or less capable — of innovating and more interested in protecting what it has already brought to market.

Or, as Apple’s former general counsel, Nancy Heinen, tells Kane, “When patent lawyers become rock stars, it is a bad sign for where an industry is headed.”

Krugman’s blog, 4/10/14

April 11, 2014

There was one post yesterday, “Greenish Shootlets in Southern Europe (Implicitly Wonkish):”

 

There are hints of recovery in some of Europe’s austerity-stricken economies. Even Greece is finally showing some signs of an uptick. And you know one thing is going to happen: some people will say, “See — growth despite austerity! Krugman and the Keynesians were wrong!”

What’s interesting is that at the very same time other people (or in some cases, I think, the same people) are pointing to the lack of recovery in the United States and declaring “This has gone on so long that it can’t be cyclical. Krugman and the Keynesians are wrong!”

So whatever happens, I’m proved wrong. So it goes.

But what we should really be doing, of course, is asking what the models (not the person) predicts. And I want to enlarge on some points I made last fall.

Back then I pointed out that textbook macroeconomics says that economies will eventually self-correct from adverse demand shocks, including those created by fiscal austerity. And I do mean textbook: from the World’s Best Principles Book,

The idea is that high unemployment produces gradually falling wages and prices, and that the economy slides down the aggregate demand curve until full employment is restored in the long run. The problem is that this is the long run in which we are all dead — that is, the cost in output lose and lives ruined may be immense by the time you finally get there.

Beyond that, I noted that in a liquidity trap it’s hard to see why aggregate demand should slope down. The usual channel through which lower prices increase demand, via an increased real money supply and lower interest rates, doesn’t work; meanwhile a worsened burden of debt means that a falling price level probably reduces demand. So the aggregate demand curve slopes the “wrong” way, and the auto-correct mechanism doesn’t work:

The paradox of flexibility
The paradox of flexibility

But wait: this is an analysis for a closed economy, or more realistically, for an economy with a floating exchange rate. What if you’re Greece, with a fixed exchange rate (because you have no currency of your own) vis-a-vis a much larger currency area? IN that case falling wages and prices make you more competitive, so that the aggregate demand curve probably slopes down after all, for different reasons.

So we would expect deflation in Greece eventually to produce recovery, even in a totally Keynesian framework. The point, however, is that the cost of austerity and currency rigidity has been immense, and will continue to be immense for years even if GDP is finally growing again.

Brooks and Krugman

April 11, 2014

In “The Moral Power of Curiosity” Bobo gurgles that “Flash Boys” by Michael Lewis is mostly a book about finance and high-frequency traders. But it’s also a morality tale.  In “Health Care Nightmares” Prof. Krugman says Obamacare is doing just fine, but America is not, thanks to the ugliness brought out into the open by the debate on health reform.  Here’s Bobo:

Most of us have at one time or another felt ourselves in the grip of the explanatory drive. You’re confronted by some puzzle, confusion or mystery. Your inability to come up with an answer gnaws at you. You’re up at night, turning the problem over in your mind. Then, suddenly: clarity. The pieces click into place. There’s a jolt of pure satisfaction.

We’re all familiar with this drive, but I wasn’t really conscious of the moral force of this longing until I read Michael Lewis’s book, “Flash Boys.”

As you’re probably aware, this book is about how a small number of Wall Street-types figured out that the stock markets were rigged by high-frequency traders who used complex technologies to give themselves a head start on everybody else. It’s nominally a book about finance, but it’s really a morality tale. The core question Lewis forces us to ask is: Why did some people do the right thing while most of their peers did not?

The answer, I think, is that most people on Wall Street are primarily motivated to make money, but a few people are primarily motivated by an intense desire to figure stuff out.

If you are primarily motivated to make money, you just need to get as much information as you need to do your job. You don’t have time for deep dives into abstract matters. You certainly don’t want to let people know how confused you are by something, or how shallow your knowledge is in certain areas. You want to project an image of mastery and omniscience.

On Wall Street, as in some other areas of the modern economy that I could mention, this attitude leads to a culture of knowingness. People learn to bluff their way through, day to day. Executives don’t really understand the complex things going on in their own companies. Traders don’t understand how their technological tools really work. Programmers may know their little piece of code, but they don’t have a broader knowledge of what their work is being used for.

These people are content to possess information, but they don’t seek knowledge. Information is what you need to make money short term. Knowledge is the deeper understanding of how things work. It’s obtained only by long and inefficient study. It’s gained by those who set aside the profit motive and instead possess an intrinsic desire just to know.

The heroes of Lewis’s book have this intrinsic desire. The central figure, Brad Katsuyama, observes that the markets are not working the way they are supposed to. Like thousands of others, he observes that funny things are happening on his screen when he places a trading order. But, unlike those others, this puzzling discrepancy between how things are and how things are supposed to be gnaws at him. He just has to understand what’s going on.

He conducts a long, arduous research project to go beneath the technology and figure things out. At one point he and his superiors at the Royal Bank of Canada conduct a series of trades not to make money but just to test theories.

Another character, Ronan Ryan, taught himself how electronic signals move through the telecommunications system. A third, John Schwall, is an obsessive who buried himself in the library so he could understand the history of a particular form of stock-rigging called front-running.

These people eventually figure out what was happening in the market. They acquire knowledge both of how the markets are actually working and of how they are supposed to work. They become indignant about the discrepancy.

They could have used their knowledge to participate in the very market-rigging they were observing. But remember, the pleasure they derived from satisfying their curiosity surpassed the pleasure they derived from making money. So some of them ended up creating a separate stock exchange that could not be rigged in this way.

One lesson of this tale is that capitalism doesn’t really work when it relies on the profit motive alone. If everybody is just chasing material self-interest, the invisible hand won’t lead to well-functioning markets. It will just lead to arrangements in which market insiders take advantage of everybody else. Capitalism requires the full range of motivation, including the intrinsic drive for knowledge and fairness.

Second, you can’t tame the desire for money with sermons. You can only counteract greed with some superior love, like the love of knowledge.

Third, if market-rigging is defeated, it won’t be by government regulators. It will be through a market innovation in which a good exchange replaces bad exchanges, designed by those who fundamentally understood the old system.

And here’s a phenomenon often true in innovation stories: The people who go to work pursuing knowledge, or because they intrinsically love writing code, sometimes end up making more money than the people who go to work pursuing money as their main purpose.

And now here’s Prof. Krugman:

When it comes to health reform, Republicans suffer from delusions of disaster. They know, just know, that the Affordable Care Act is doomed to utter failure, so failure is what they see, never mind the facts on the ground.

Thus, on Tuesday, Mitch McConnell, the Senate minority leader, dismissed the push for pay equity as an attempt to “change the subject from the nightmare of Obamacare”; on the same day, the nonpartisan RAND Corporation released a study estimating “a net gain of 9.3 million in the number of American adults with health insurance coverage from September 2013 to mid-March 2014.” Some nightmare. And the overall gain, including children and those who signed up during the late-March enrollment surge, must be considerably larger.

But while Obamacare is looking like anything but a nightmare, there are indeed some nightmarish things happening on the health care front. For it turns out that there’s a startling ugliness of spirit abroad in modern America — and health reform has brought that ugliness out into the open.

Let’s start with the good news about reform, which keeps coming in. First, there was the amazing come-from-behind surge in enrollments. Then there were a series of surveys — from Gallup, the Urban Institute, and RAND — all suggesting large gains in coverage. Taken individually, any one of these indicators might be dismissed as an outlier, but taken together they paint an unmistakable picture of major progress.

But wait: What about all the people who lost their policies thanks to Obamacare? The answer is that this looks more than ever like a relatively small issue hyped by right-wing propaganda. RAND finds that fewer than a million people who previously had individual insurance became uninsured — and many of those transitions, one guesses, had nothing to do with Obamacare. It’s worth noting that, so far, not one of the supposed horror stories touted in Koch-backed anti-reform advertisements has stood up to scrutiny, suggesting that real horror stories are rare.

It will be months before we have a full picture, but it’s clear that the number of uninsured Americans has already dropped significantly — not least in Mr. McConnell’s home state. It appears that around 40 percent of Kentucky’s uninsured population has already gained coverage, and we can expect a lot more people to sign up next year.

Republicans clearly have no idea how to respond to these developments. They can’t offer any real alternative to Obamacare, because you can’t achieve the good stuff in the Affordable Care Act, like coverage for people with pre-existing medical conditions, without also including the stuff they hate, the requirement that everyone buy insurance and the subsidies that make that requirement possible. Their political strategy has been to talk vaguely about replacing reform while waiting for its inevitable collapse. And what if reform doesn’t collapse? They have no idea what to do.

At the state level, however, Republican governors and legislators are still in a position to block the act’s expansion of Medicaid, denying health care to millions of vulnerable Americans. And they have seized that opportunity with gusto: Most Republican-controlled states, totaling half the nation, have rejected Medicaid expansion. And it shows. The number of uninsured Americans is dropping much faster in states accepting Medicaid expansion than in states rejecting it.

What’s amazing about this wave of rejection is that it appears to be motivated by pure spite. The federal government is prepared to pay for Medicaid expansion, so it would cost the states nothing, and would, in fact, provide an inflow of dollars. The health economist Jonathan Gruber, one of the principal architects of health reform — and normally a very mild-mannered guy — recently summed it up: The Medicaid-rejection states “are willing to sacrifice billions of dollars of injections into their economy in order to punish poor people. It really is just almost awesome in its evilness.” Indeed.

And while supposed Obamacare horror stories keep on turning out to be false, it’s already quite easy to find examples of people who died because their states refused to expand Medicaid. According to one recent study, the death toll from Medicaid rejection is likely to run between 7,000 and 17,000 Americans each year.

But nobody expects to see a lot of prominent Republicans declaring that rejecting Medicaid expansion is wrong, that caring for Americans in need is more important than scoring political points against the Obama administration. As I said, there’s an extraordinary ugliness of spirit abroad in today’s America, which health reform has brought out into the open.

And that revelation, not reform itself — which is going pretty well — is the real Obamacare nightmare.

Krugman’s blog, 4/9/14

April 10, 2014

There were three posts yesterday.  The first was “Stagnation Without End, Amen (Wonkish):”

In 1938 Alvin Hansen, who did more than anyone else to bring Keynesian economics to America, gave a landmark speech to the American Economic Association. (The speech is behind a paywall, but Tim Taylor has a good summary here.) In it, he made the case for “secular stagnation” — a persistently depressed economy. His arguments were pretty good, too: slow population growth and slow technological progress, he argued meant low investment demand — and even very low interest rates wouldn’t be enough to make up for the shortfall.

Incidentally, for those who believe that the new interest in secular stagnation vindicates arguments like those of Greider, notice that technological progress in the secular stagnation story has the opposite sign; instead of worrying that rapid technological progress will destroy jobs, secstaggers (we are going to need a word!) worry that slow technological progress will mean not enough investment demand.

Of course, it didn’t happen at the time; but many people took the wrong conclusion from Hansen’s failed prediction. They took it to mean that secular stagnation could not happen in real life, that the magic of the marketplace would always find a way to restore full employment. But given what actually happened — a baby boom and a wave of productivity growth that Hansen failed to anticipate — his theory never got a real test.

Moreover, you could very much argue that Japan since the 1990s fits Hansen’s story quite well. Stagnating population? Check. Slowing technological progress? Well, not so clear cut, but certainly Japan didn’t progress after 1990 the way it did before. Persistently depressed economy? Oh yes.

And now we’re talking about the same thing for advanced western economies. And this time the theory is getting more explicit: Eggertsson and Mehrotra (pdf and very wonkish) have an excellent paper showing how this can happen.

There are two things I really like about the EM paper. First, it shows that I was wrong. Second, it shows that I was right.

On the wrongness side of the ledger: In my original Japan piece (pdf), I offered a little model of a liquidity trap in which, for simplicity, I assumed infinitely-lived agents. This was a gadget, not a fundamental assertion — that is, it was a way to push aside complexities I din’t think were central to the logic. The rest of the literature has followed the same path of least mathematical resistance.

As Eggertsson and Mehrotra point out, however, this approach effectively rules out anything like secular stagnation: the real interest rate eventually must equal the discount rate of whichever players matter on the margin. So a liquidity trap has to be a temporary phenomenon driven by a temporary shock. Since this fitted in with what policymakers wanted to hear, and with the general presumption that Hansen-type stories can’t be right, it went largely unquestioned.

But EM show that once you have overlapping generations, you can indeed have secular stagnation. So this is kind of an object lesson in how strategic simplifications in modeling — which are necessary! — can lead you to overlook important possibilities.

On the other hand, EM confirm my hypothesis of a timidity trap: while an inflation target, if believed, can bootstrap you out of secular stagnation, it has to be a sufficiently bold target. Announce your commitment to 2 percent inflation when the economy needs 4, and nothing happens.

I need to work a lot more on the mechanics of this paper; I’m wondering in particular whether there is a possibility of sustaining the economy with permanent fiscal expansion.

But important stuff.

Yesterday’s second post was “Low Inflation and Structural Illusions (Wonkish):”

The suggestion that only the short-term unemployed matter for wage determination, that the long-term unemployed have been written off, is rapidly congealing into orthodoxy. And it might be true. But I’m with Mike Konczal here: it’s far from being a well-established fact. Mike argues that to the extent it was true at all, it was a temporary phenomenon, and that more recent data don’t support the claim. I’d make a different (although not necessarily conflicting) argument: a lot of the supposed evidence comes from applying Phillips curves estimated over periods of moderate to high inflation, and there are good reasons to believe that such estimates misbehave at low inflation.

If you look at the figures Mike extracts from Krueger et al (pdf), they show “accelerationist” Phillips curves: unemployment determines not the rate of change of prices or wages, but the change in the rate of change. The idea is that recent inflation gets built into expectations and hence establishes a new baseline for each year’s short-run tradeoff.

But we know that there is strong evidence for downward nominal wage rigidity, which is binding for many workers at low inflation; we are constantly told that these days inflation expectations are “anchored”; and we know from historical experience with prolonged large output gaps (PLOGs) that countries very rarely go into actual deflation. All of this suggests that using a wage or price equation estimated over the 70s and early 80s could be very misleading if applied to today’s environment.

In fact, I’ve pointed out in the past that if you restrict yourself to Great Moderation-era data, what you seem to find is an old-fashioned, non-accelerationist Phillips curve. Furthermore, recent experience is consistent with that curve. Here’s the rate of growth of nonsupervisory wages:

I’d like to see someone do some more formal testing here, estimating Phillips curves on some rolling basis. My strong bet is that the coefficient on lagged inflation, which is forced to be 1 in the Krueger et al work, “wants” to be a lot less than 1 in recent decades.

My point is that we may well be mistaking the normal behavior of a low-inflation, depressed economy for a structural rise in the natural rate of unemployment.

PS: The Beveridge curve, widely taken as a sign of structural unemployment, seems to be normalizing.

The last post yesterday was “Capital in the Twenty-First Century:”

My NYRB review of Piketty is up.

Blow and Kristof

April 10, 2014

Ms. Collins is off today.  Mr. Blow asks a question in “We Should Be in a Rage:”  When will we demand the country we deserve? He says if we don’t like the path we’re on, we can alter it.  Mr. Kristof has decided to tell us “Where the G.O.P. Gets it Right.”  He says Republicans actually get some big things right about poverty, but it’s too bad their solutions are mostly wrong.  “Socrates” from Verona, NJ had this to say:  “Every broken clock gets it right twice a day.  There’s nothing more broken in America – intellectually, emotionally, morally, politically – than the Republican Party.”  Here’s Mr. Blow:

Voter apathy is a civic abdication. There is no other way to describe it.

If more Americans — particularly young people and less-wealthy people — went to the polls, we would have a better functioning government that actually reflected the will of the citizenry.

But, that’s not the way it works. Voting in general skews older and wealthier, and in midterm elections that skew is even more severe.

As David Wasserman wrote on the Cook Report last year:

“Voters under the age of 30 were 19 percent of all voters in 2012, but just 12 percent of all voters in 2010. Likewise, voters 65 and up were 17 percent of all voters in 2012, but 21 percent of all voters in 2010. Herein lies the biggest danger for Democratic candidates in 2014.”

Now we hear murmuring that Republicans hold a slight advantage going into 2014, not strictly because that’s the will of the American people, but because that may well be the will of the people willing to show up at the polls.

There is an astounding paradox in it: too many of those with the least economic and cultural power don’t fully avail themselves of their political power. A vote is the great equalizer, but only when it is cast.

The strategy here is simple: Break the spirit. Muddy the waters. Make voting feel onerous and outcomes ambiguous. And make it feel like a natural outgrowth of tedium and bickering, and not a well-funded, well-designed effort. Make us subsist on personality politics rather than principled ones.

The greatest trick up the sleeves of the moneyed and powerful is their diabolical ability to render themselves invisible and undetectable, to recede and operate behind a front, one relatable and common. Our politics are overrun with characters acting at the behest of shadows.

These are the politicians to whom we have become accustomed — too much polish, and too much beam — which is precisely the reason they should warrant our suspicion and not our trust, the way one cannot trust a cook with pots too pretty and not burned black on the bottoms.

And yet too many people shrug or sleep when they should seethe.

We should be in a rage over the Roberts court’s seemingly implacable drive to vest corporations with the rights of people and unleash the full fury of billionaires to bend our politics to their will.

We should be in a rage over the widespread attempts to disenfranchise voters, from the gutting of the Voting Rights Act to the rise of the Voter ID movement — a near-naked attempt by conservatives to diminish the number of Democratic voters.

We should be in a rage over Republican efforts, particularly on the state level, to drag the range of women’s reproductive options back to the 1960s.

We should be in a rage over the extraordinary pressures facing ordinary families. According to The New York Times’ Economix blog, college costs have risen over 500 percent since 1985, medical and gas costs more than 300 percent. And, the Pew Research Center reported Tuesday that “in inflation-adjusted dollars, average weekly child care expenses for families with working mothers who paid for child care” rose 70 percent from 1985 to 2011.

And yet, a report last week from the Center on Budget and Policy Priorities found that “some 69 percent of the cuts in House Budget Committee Chairman Paul Ryan’s new budget would come from programs that serve people of limited means.”

We should be in a rage over the fact that people in this country can work a full-time job and not earn a living wage.

We should be in a rage that this country’s infrastructure is literally crumbling beneath us. The “2013 Report Card for America’s Infrastructure,” produced by the American Society of Civil Engineers, gave our infrastructure an overall grade of D+ and estimated that $3.6 trillion would be needed by 2020 to fix it.

We should be in a rage that we are spiraling toward cataclysmic, irreversible climate change with little interest or effort in averting it, with little coverage and less than accurate coverage.

But where rage should be, there is too often a whimper.

When will we demand the country we deserve: reflective of its people, protective of its people, simply of its people? When will the young and the poor and the aggrieved and the forsaken walk abreast to the polls and then to the public squares?

If we don’t like the government we have, we can change it. If we don’t like the path we’re on, we can alter it.

Democracy is durable, but not incorruptible. The very purity of the concept invites those determined to alter it, to tilt it toward oligarchy, to slowly, imperceptibly if possible, bring it to a calamitous end.

The drift of the boat seems inconsequential until it encounters the falls.

And now here’s Mr. Kristof:

Republicans may seem like ultimate Scrooges. Many want to slash food stamps, unemployment benefits and just about any program that helps the needy.

So they know nothing about poverty, right?

Wrong. Actually, conservatives have been proved right about three big ideas of social policy. Liberals may grimace, but hear me out on these points:

STRONG FAMILIES Conservatives highlight the primacy of family and argue that family breakdown exacerbates poverty, and they’re right. Children raised by single parents are three times as likely to live in poverty as kids in two-parent homes.

One historic mistake by liberals in social policy was the condemnation of Daniel Patrick Moynihan’s warning in 1965 of the breakdown of the African-American family. He wasn’t racist; he was prescient, for the same breakdown has since occurred in white-working-class families as well.

Yet if Republicans were shown to be right in their diagnosis of family breakdown as a central problem, they have mostly been proved wrong in their prescriptions. Particularly under President George W. Bush, millions of dollars were spent on marriage promotion initiatives, and follow-up studies show that overwhelmingly they failed to have an impact. Abstinence-only sex education is another demonstrated failure.

What does work to strengthen families and reduce out-of-wedlock births?

There are no magic wands, but family-planning programs have reduced unplanned births — and 70 percent of pregnancies among unmarried women under 30 are unplanned. The Guttmacher Institute calculates that without family-planning services, the rate of unintended teen pregnancies would be 73 percent higher.

So it’s hard to think of a more anti-family policy than the closure of family-planning clinics in states like Texas, or the two-thirds cut (after inflation) in the main federal family-planning program since 1980. That’s a national shame.

One landmark initiative to help in this area is the Affordable Care Act, which requires insurers to offer free long-acting contraceptives to all women. Research suggests strongly that this will reduce abortions and out-of-wedlock births, while strengthening marriage, yet Republicans are fighting this mandate.

JOB CREATION President Reagan was right when he said that the best social program is a job. Good jobs also strengthen families. Evidence has grown that jobs are important not only to our economic well-being but also to self-esteem. Indeed, long-term unemployment seems to lead to shortened life expectancy.

Two decades ago, President Clinton pushed to “end welfare as we know it.” Liberals protested that the poor would be devastated, while conservatives hailed this as an avenue out of poverty. In retrospect, neither prediction was right. Welfare reform pushed the poor into jobs, but mostly marginal jobs that rarely offered an escalator to the middle class.

So how do we get good jobs? Expansion of the earned-income tax credit. Job training for people coming out of prison. Reduced incarceration, since a prison record makes people less employable. Subsidies to hire the long-term unemployed. Vocational programs like Career Academies.

Yet these are the kinds of social policies that Democrats tend to embrace and Republicans are leery of.

SCHOOL REFORM Republicans were right to blow the whistle on broken school systems, for education in inner-city schools is the civil rights issue of the 21st century. Democrats, in cahoots with teachers’ unions and protective of a dysfunctional system, were long part of the problem.

Bravo to Republicans for protesting that teachers’ unions were sometimes protecting disastrous teachers (including, in New York City, one who passed out drunk in her classroom, with even the principal unable to rouse her). Likewise, some of the most successful schools in the inner cities have been charters in the Knowledge Is Power Program, showing what is possible even in troubled cities.

Yet Democrats, led by President Obama and Education Secretary Arne Duncan, are coming around, and teachers’ unions have moderated. Republicans sometimes suggest that our biggest educational problem is teachers’ unions themselves. That’s absurd. States with strong teachers’ unions in the North like Massachusetts have better schools than states in the South with weak unions.

Meanwhile, one of the most important evidence-backed school reforms is public preschool and home visitation for disadvantaged kids, yet Republicans are blocking any national move to universal prekindergarten (even though Republican-led states like Oklahoma are leaders in pre-K).

So, come on, Republicans! You’ve highlighted enduring truths about the importance of family, jobs and school reform. But, while your diagnoses deserve respectful consideration, your prescriptions have mostly been proved wrong.

One more thing: These aren’t just abstract policies. These are ethical issues, touching on our obligations to fellow humans.

If we offer the needy nothing but slogans and reprimands — “Strengthen your family! Get a job! Get an education!” — then our antipoverty programs are a cruel joke as bankrupt as Marie Antoinette’s “Let them eat cake.”

Krugman’s blog, 4/8/14

April 9, 2014

There were two posts yesterday.  The first was “Three Legs Good, One Leg Bad:”

The good news for Obamacare just keeps coming in. Via Charles Gaba, the Rand Survey — which was the subject of a report in the LA Times, but which wasn’t publicly available — is now in. And it says that as of mid-March — that is, before the final enrollment surge — the Affordable Care Act had already produced a net gain of 9.3 million insured adults. Again, that’s a net gain; so much for claims that more people are losing insurance than gaining it.

At least some Republicans are realizing that (a) the ACA is not going to collapse and (b) they can’t simply take away insurance from millions of Americans. So they have to come up with an alternative.

And as Sahil Kapur reports, at least a few of them are coming to a terrible realization: there is no alternative. You can’t just support the popular pieces of reform, in particular coverage for preexisting conditions, and scrap the rest. As Jonathan Gruber taught me, and I and others have said many times, reform is a three-legged stool that requires community rating, the individual mandate, and subsidies; take away any leg and it collapses. And Kapur finds a GOP aide who admits to the awful truth: any workable GOP plan would look pretty much the same as Obamacare.

I don’t know how many GOP leaders, as opposed to aides, understand this. And even those who do won’t dare to admit it. The party line, literally, has been that Obamacare is an unworkable monstrosity, and the base will destroy anyone who points out, this late in the game, that it’s both workable and pretty much the only doable alternative to single-payer.

And if that’s not a case of politics making people stupid, I don’t know what is..

The second post yesterday was “ECO 348, The Great Recession: Quantitative Easing:”

Slides here (pdf).

Dowd and Friedman

April 9, 2014

MoDo and The Moustache of Wisdom both have questions to ask today.  MoDo continues the Times’ apparently unending series of apple-polishing pieces on the Bush family.  In “Jeb in the Vortex” she asks this:  In today’s fire-breathing Republican Party, is Jeb Bush’s race over before it begins?  We can but pray…  In “Playing Hockey With Putin” The Moustache of Wisdom asks his question too:  Is the West serious or not about facing off against Russia?  Here’s MoDo, calling W a “raffish Roman candle:”

The epic sibling drama of the Republican Party is finally coming to a climax.

For many years, George and Barbara Bush assumed that their second son, Jeb, would be a winner in politics, while W., their eldest, would be a loser.

Jeb was the prince of the dynasty, destined to be king. (Poppy Bush would only call their dynasty “the d word,” wrinkling his nose in a vain attempt to seem like a Greenwich populist.)

The raffish, Roman candle, W., on the other hand, was discouraged by his mother from running for governor of Texas when his father was in the White House. Bar also did not want W. to run for that office in 1993 at the same time that Jeb was running for governor of Florida, for fear that W. would divert too much money from the Bush Rolodex of donors and turn the contest into “a People magazine story,” as Jeb resignedly called it back when he told me he couldn’t “control” his older brother.

Democrats began mocking them during their twin races as “Tweedledee and Tweedledum,” especially after W. began stealing Jeb’s best campaign lines. Yet when I covered the fraternal gubernatorial bids in the South, it was quickly apparent that W. had a crackle that Jeb did not have, not to mention a crack consultant: Karl Rove. W. was driven by a zeal to prove his parents wrong, one of the most powerful impulses on earth.

Jeb, the Good Son, seemed more phlegmatic, bogged down in wonky discourse about “visioning,” “prioritizing,” “empowering” and “sharing a good exchange of ideas.”

Jeb lost his race and W. won his, starting the reversal that would lead to W. becoming the black-sheep king, once Jeb had helped secure Florida for him. Now Jeb has to figure out if W. has fouled the waters forever, or if Americans, lulled by the ex-president’s winsome paintings, have grown less disgusted by his disastrous wars, misadventures in torture and economic belly flop. Jeb’s father desperately wants him to run and his mother now says it would be O.K., despite her reservations about two families trading Air Force One back and forth.

As Hillary Clinton prepares to restore her dynasty, Jeb Bush is dropping a handkerchief about restoring his.

He has campaigned for Republicans around the country and influential donors in the G.O.P. have started a draft-Jeb movement. He was the speaker at a V.I.P. dinner in Las Vegas with Sheldon Adelson. He has reached out to Southern evangelical leaders. And he had a star turn at the 25th anniversary celebration of his father’s presidency over the weekend at the George H.W. Bush library in College Station, Tex.

But is Jeb’s race over before it begins? He would be running, after all, to lead a party he seems to disdain, a party that has become so fragmented and pulled to the right that it would rather lose the election than be led by someone as moderate as Jeb Bush. Even W. is considered a liberal in today’s fire-breathing G.O.P.

“I do think we’ve lost our way,” Jeb said in an interview on stage with a Fox News reporter, urging Republicans to move out of Crazy Town: “We need to elect candidates that have a vision that is bigger and broader, and candidates that are organized around winning the election, not making a point.”

Sounding nostalgic for a world before Dick Cheney, Sarah Palin and Ted Cruz, the 61-year-old said he would only run if he could bring a “hopeful” message and campaign “joyfully,” avoiding “the vortex of the mud fight.”

Then he stumbled into the vortex by repeating his support for Common Core education standards and by trying to inject some compassion into the immigration issue, which sends older, white Tea Partiers into frenzies of fanaticism.

“Yes, they broke the law, but it’s not a felony,” he said of illegal immigrants sneaking into the country to provide for their families. “It’s an act of love.” (Jeb has been married to the Mexican-born Columba for 40 years.)

Karl Rove and Bill Kristol mused that Jeb’s “Bulworth” moment, as Politico dubbed it, may show he’s been out of the mix for too long. Conservative columnist Byron York suggested that the “mud-fight-averse” Jeb “just doesn’t seem like a politician in top fighting shape.” Michelle Malkin tweeted: “He’s pro-amnesty, pro-Common Core, pro-Big Business & he wants to be president. #CancelJebBush.” Marco Rubio said he would not step aside for his mentor in a presidential race. And Stephen Colbert eulogized, “He will be missed.”

Some of those close to Jeb say he’s serious about running and bringing back a civil tone to Republican politics. Others say he needs to act as though he’s running to keep his speaking fees high and options open. Rush Limbaugh thinks Jeb’s “act of love” comment was a gambit to tick off the Tea Party and “get the conservative backlash to him out of the way.”

Jeb thinks Republicans have lost their way. He may soon learn that a lot of conservatives think they have found their way — and it’s not the joyful, loving, government-can-be-a-force-for-good way. It’s the mean, cruel, gut-the-government way.

When this crowd thinks of a Thousand Points of Light, they’re thinking of torches as they march toward the Capitol.

Now we have The Moustache of Wisdom:

Shortly before the Sochi Olympics, Russian President Vladimir Putin played in an exhibition hockey game there. In retrospect, he was clearly warming up for his takeover of Crimea. Putin doesn’t strike me as a chess player, in geopolitical terms. He prefers hockey, without a referee, so elbowing, tripping and cross-checking are all permitted. Never go to a hockey game with Putin and expect to play by the rules of touch football. The struggle over Ukraine is a hockey game, with no referee. If we’re going to play — we, the Europeans and the pro-Western Ukrainians need to be serious. If we’re not, we need to tell the Ukrainians now: Cut the best deal with Putin that you can.

Are we serious? It depends on the meaning of the word “serious.” It starts with recognizing what a huge lift it will be to help those Ukrainians who want to break free of Russia’s orbit. Are we and our allies ready — through the International Monetary Fund — to finance Ukraine’s massive rebuilding and fuel needs, roughly $14 billion for starters, knowing that this money is going to a Ukrainian government that, before the overthrow of the previous president, ranked 144 out of 177 on the Transparency International list of most corrupt countries in the world, equal with Nigeria?

Moreover, we can’t help Ukraine unless we and the European Union have a serious renewable energy and economic sanctions strategy — which requires us to sacrifice — to undermine Putin and Putinism, because Ukraine will never have self-determination as long as Putin and Putinism thrive. Putin’s foreign policy and domestic policy are inextricably linked: His domestic policy of looting Russia and keeping himself permanently in power with oil and gas revenue, despite a weakening economy, seems to require adventures like Ukraine that gin up nationalism and anti-Westernism to distract the Russian public. And are we ready to play dirty, too? Putin is busy using pro-Russian Ukrainian proxies to take over government buildings in Eastern Ukraine — to lay the predicate either for a Russian invasion there or de facto control there by Russia’s allies.

Finally, being serious about Russia means being serious about learning from our big mistake after the Berlin Wall fell. And that was thinking that we could expand NATO — when Russia was at its weakest and most democratic — and Russians wouldn’t care. It was thinking we could treat a democratic Russia like an enemy, as if the Cold War were still on, and expect Russia to cooperate with us as if the Cold War were over — and not produce an anti-Western backlash like Putinism.

As the historian Walter Russell Mead put it in a blog post: “The Big Blini that the West has never faced up to [is]: What is our Russia policy? Where does the West see Russia fitting into the international system? Ever since the decisions to expand NATO and the E.U. were taken in the Clinton administration, Western policy towards Russia … had two grand projects for the post-Soviet space: NATO and the E.U. would expand into the Warsaw Pact areas and into the former Soviet Union, but Russia itself was barred from both. … As many people pointed out in the 1990s, this strategy was asking for trouble.”

One of those pointing that out was George Kennan, the architect of containment and opponent of NATO expansion. I interviewed him about it in this column on May 2, 1998, right after the Senate ratified NATO expansion. Kennan was 94. He had been a U.S. ambassador in Moscow. He knew we were not being serious.

“I think it is the beginning of a new Cold War,” Kennan said to me of NATO expansion. “I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. This expansion would make the founding fathers of this country turn over in their graves. We have signed up to protect a whole series of countries, even though we have neither the resources nor the intention to do so in any serious way. [NATO expansion] was simply a lighthearted action by a Senate that has no real interest in foreign affairs.”

“What bothers me is how superficial and ill informed the whole Senate debate was,” added Kennan. “I was particularly bothered by the references to Russia as a country dying to attack Western Europe. Don’t people understand? Our differences in the Cold War were with the Soviet Communist regime. And now we are turning our backs on the very people who mounted the greatest bloodless revolution in history to remove that Soviet regime. And Russia’s democracy is as far advanced, if not farther, as any of these countries we’ve just signed up to defend from Russia. It shows so little understanding of Russian history and Soviet history. Of course, there is going to be a bad reaction from Russia, and then [the NATO expanders] will say that we always told you that is how the Russians are — but this is just wrong.”

We need a strategy to help Ukraine and to undermine Putinism today — and to reintegrate Russia tomorrow. It’s a big, big lift. So let’s be honest with ourselves and with the Ukrainians. If Putin’s playing hockey and we’re not, Ukrainians need to know that now.

Just itching for more war, aren’t you Tommy…  How many Friedman Units do you think this one will take?


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