Krugman’s blog, 2/27/15

February 28, 2015

There were three posts yesterday.  The first was “Anarchy, State, and Dread Pirate Roberts:”

Henry Farrell has a truly brilliant essay on how the evolution of Silk Road, the dark-web trading platform for forbidden transactions, can be viewed as an experiment in political philosophy. I can’t do better than his own blurb:

The Silk Road might have started as a libertarian experiment, but it was doomed to end as a fiefdom run by pirate kings.

It’s an awesome read.

Yesterday’s second post was “The Closed Minds Problem:”

When I was a young economist trying to build a career, I lived — or thought I lived — in a world in which ideas and those who championed them met in relatively open intellectual combat. Of course there were people who clung to their prejudices, of course style sometimes trumped substance. But I believed that by and large better ideas tended to prevail: if your model of trade flows or exchange rate fluctuations tracked the data better than someone else’s, or resolved puzzles that other models couldn’t, you could expect it to be taken up by many if not most researchers in the field.

This is still true in much of economics, I believe. But in the areas that matter most given the state of the world, it’s not true at all. People who declared back in 2009 that Keynesianism was nonsense and that monetary expansion would inevitably cause runaway inflation are still saying exactly the same thing after six years of quiescent inflation and overwhelming evidence that austerity affects economies exactly the way Keynesians said it would.

And we’re not just talking about cranks without credentials; we’re talking about founders of the Shadow Open Market Committee and Nobel laureates.

Obviously this isn’t just a story about economics; it covers everything from climate science and evolution to Bill O’Reilly’s personal history. But that in itself is telling: academic economics, which still has pretenses of being an arena of open intellectual inquiry, appears to be deeply infected with politicization.

So what should those of us who really wanted to be part of what we thought this enterprise was about do? That’s the question Brad DeLong has been asking.

I see three choices:

1. Continue to write and speak as if we were still having a genuine intellectual dialogue, in the hope that politeness and persistence will make the pretense come true. I think that’s one way to understand Olivier Blanchard’s now somewhat infamous 2008 paper on thestate of macro; he was, you could argue, trying to appeal to the better angels of freshwater nature. The trouble with this strategy, however, is that it can end up legitimizing work that doesn’t deserve respect — and there is also a tendency to let your own work get distorted as you try to find common ground where none exists.

2. Point out the wrongness, but quietly and politely. This has the virtue of being honest, and useful to anyone who reads it. But nobody will.

3. Point out the wrongness in ways designed to grab readers’ attention — with ridicule where appropriate, with snark, and with names attached. This will get read; it will get you some devoted followers, and a lot of bitter enemies. One thing it won’t do, however, is change any of those closed minds.

So is there a reason I go for door #3, other than simply telling the truth and having some fun while I’m at it? Yes — because the point is not to convince Rick Santelli or Allan Meltzer that they are wrong, which is never going to happen. It is, instead, to deter other parties from false equivalence. Inflation cultists can’t be moved; but reporters and editors who tend to put out views-differ-on-shape-of-planet stories because they think it’s safe can be, sometimes, deterred if you show that they are lending credence to charlatans. And this in turn can gradually move the terms of discussion, possibly even pushing the nonsense out of the Overton window.

And the inflation-cult story is, I think, a prime example. Yes, you still get coverage treating both sides as equivalent — but not nearly as consistently as in the past. When Paul hyperinflation-in-the-Hamptons Singer complains about the “Krugmanization” of the media, who have the impudence to point out that the inflation he and his friends kept predicting never materialized, that’s a sign that we’re getting somewhere.

It really would be nice not having to do things this way. But that’s the world we live in — and, as I said, there’s some compensation in the fact that one can have a bit of fun doing it.

And the week ended, as usual, with music.  Here’s Friday Night Music: Forever Young:”

So what’s with all the mourning of Leonard Nimoy’s death? I mean, I’m sorry to say this, but I believe that Mr. Spock didn’t love Earth — he wasn’t brought up the way you were brought up. [/end Giuliani]

Seriously, it wasn’t until reading some of the commentary that it sank in just how innovative, how progressive in all senses, the persona Nimoy created really was. Interracial in the extreme sense — interspecies! Hyperrational in style, but obviously deeply passionate and a bit tormented under the surface. Brainy but heroic. He was two generations ahead of his time.

Incidentally, as a teenager I liked Star Trek but I loved the original Mission Impossible, and the Nimoy character — who would always dramatically rip off his face at some point, after impersonating a crime lord or dictator — was my favorite.

Meanwhile, intimations of mortality make the music selection I was already planning to post even more appropriate:

It’s gorgeous. It also resonates a bit because I’m personally hitting an important milestone: the next time I take New Jersey Transit, I’ll get the senior discount!

For you young whippersnappers out there, an encouraging word: physically and psychologically, my 60s feel vastly better than I had ever imagined. It’s not 30, but it’s pretty good. Also, you kids get off my lawn.

Nocera and Collins

February 28, 2015

Mr. Nocera is back to playing Gunga Din for the fossil fuel industry.  In “Bloomberg Sees a Way on Keystone” he tells us that the former mayor of New York suggests that the Obama administration negotiate directly with Canada on a climate pact.  He’ll just never stop, and I STILL want to get a look at his investment portfolio.  In “And Now, Homeland Insecurity” Ms. Collins says getting Congress to fund the Homeland Security Department has us back in the land of fiscal cliffs.  Here’s Gunga Din:

No one can question Michael Bloomberg’s climate change bona fides. As mayor of New York, he declared that cities had to lead the way in reducing the threat of climate change, and he strove to make New York greener. He has donated millions of dollars to the effort to shut down coal-fired power plants. He endorsed President Obama for re-election in 2012 primarily because the president, he said, “has taken major steps to reduce our carbon consumption.” Most recently, he was named the United Nations secretary general’s special envoy for cities and climate change, a position he appears to be taking quite seriously.

Bloomberg is also a supremely pragmatic man, who prides himself on not letting ideology get in the way of finding practical solutions to difficult problems. Thus it was that earlier this week — after Obama vetoed a bill passed by Congress that would have forced him to approve the Keystone XL oil pipeline — Bloomberg wrote an article for Bloomberg View, his media company’s opinion publication, proposing an idea for breaking the logjam over the pipeline, which would transport oil from the tar sands of Alberta, Canada, to refineries in the Gulf of Mexico.

His idea is that the Obama administration should negotiate directly with the Canadian government, and come up with a climate pact that would more than offset the emissions that would be generated — indeed, are already being generated — by mining the oil from the sands. Though it is unlikely to satisfy the partisans on both sides, it is a wonderfully sensible solution.

“Keystone has become irrationally significant,” Bloomberg told me when I spoke to him about his idea. “Environmentalists overstate the danger of the pipeline to the environment,” he continued, “while those who say the economics would be significant are overstating as well.” Bloomberg believes we would all be better off if we stripped the pipeline of its symbolism and dealt with it more realistically.

Many in the environmental movement have taken the position that building Keystone — and thus allowing for increased production of tar sands oil — would be ruinous for the planet. Not only would it further the world’s dependence on fossil fuels, but, if it enabled the full exploitation of the tar sands, it would emit so much carbon that it would be “game over” for the planet, in the memorable words of James Hansen, an anti-Keystone scientist. As I’ve written before, these claims are wildly overstated; indeed, the Canadian government likes to note that, in 2012, eight states, starting with Texas, had higher emissions from their coal-fired power plants than Canada did from its oil sands. And transporting oil by train, as is currently being done, is far more dangerous than sending it through a state-of-the-art pipeline.

At the same time, the Republicans who want to use Obama’s veto as a symbol that he is willing to forego good jobs to please his environmental supporters are equally wrongheaded. Most of the American jobs related to Keystone would involve building the pipeline. Once it was up and running,the number of new jobs it would create would be minimal.

There is a third entity for whom Keystone has become a symbol: the conservative government of Stephen Harper, the Canadian prime minister, which has pushed for approval of the pipeline by the United States with an urgency that has sometimes felt a little desperate. In 2011, Harper said that approval of the pipeline should be a “no brainer” for the U.S. Canadian officials have threatened that if the U.S. doesn’t approve the pipeline, the oil would likely go to China instead. And it has treated Obama’s reluctance to make a decision on the pipeline as a reflection of American-Canadian relations, rather than what it is: an issue of American politics. There are many Canadians who believe that the Harper government has badly mishandled the Keystone issue.

At the same time, Harper’s government has not exactly been leading the climate change charge. His administration pulled Canada out of the Kyoto Protocols, the landmark 1997 agreement that committed countries that signed on to mandatory emissions reductions. “We are known around the world as being climate change obstructionists,” said Peter McKenna, a political scientist at the University of Prince Edward Island. “Harper always equates getting serious about climate change as having a negative effect on the Canadian economy.”

It is this state of affairs that Bloomberg seeks to exploit. Late last year, the Obama administration announced a climate change agreement with China, which commits both parties to lowering their greenhouse gas emissions. Because Harper so badly wants the Keystone pipeline to be approved, the U.S. government has tremendous leverage, says Bloomberg, to cut the same kind of deal with Canada. After which, the president could approve the Keystone XL oil pipeline with a clear conscience, knowing that he had mitigated the worst of its effects on the planet.

Pragmatism, for a change, would upend ideology, and we could finally stop talking about this fractious pipeline.

We’ll stop howling about that death funnel when the idea has been killed, embalmed, cremated and buried.  Now here’s Ms. Collins:

Great news! Congress has voted to fund the Department of Homeland Security for a week.

Does that make you feel better, people? The department was due to run out of money Friday night, and the new congressional Republican majority threw itself at the challenge. And after the seventh day, they rested.

Earlier, Speaker John Boehner had attempted a far more ambitious piece of legislation that would have guaranteed the department’s employees would continue to get their paychecks for 21 more days. Those folks would have been on Easy Street until the middle of March. But the Republican right rebelled at Boehner’s audacious reach and the three-week bill failed miserably.

Then, after a few hours of scurrying around, One Week emerged. This time, Democrats gave Boehner a hand, and the bill passed on a bipartisan vote after a debate that almost literally boiled down to the following:

“This is no way to govern the nation.”

“This has been a day of confusion.”

There was absolutely no agreement on what will happen next. We look back with nostalgia on the era when congressional leaders would get together in secret and make deals to pass big, mushy pieces of legislation that were littered with secret appropriations for unnecessary highways and a stuffed-owl museum in some swing vote’s district. We complained a lot at the time, but that was because we didn’t realize it was the golden age.

Do you think it’s a little worrisome that the powerful right flank of the House is made up of people who believe a good way to show their opposition to Obama’s liberal immigration policy is to cut off the border patrol’s paychecks? That the critical role of speaker of the House is held by a guy who doesn’t seem to be able to control his membership? Or even count votes?

“If ands and buts were candy and nuts, every day would be Christmas,” said Boehner when reporters pressed him about his plans earlier in the week.

That used to be a saying he kept for special occasions, but now it seems to be cropping up a lot. I take that to be a bad sign. As was the little kissy face Boehner made to reporters when he got another question.

If the Democrats don’t bail him out, Boehner can only afford to lose about 27 Republican votes on any issue. And he’s got a new group called the House Freedom Caucus that was organized to mobilize about 30 Republicans who feel the regular conservative caucus is too mainstream. (Once again we will express our displeasure about the way people keep messing with “freedom.” It used to be such a great word, and now when it comes up we are often forced to recall that song about how freedom’s just another word for nothing left to lose.)

The Freedom Caucus hated the homeland security bill the Senate passed, which simply continued to fund the department for the rest of the year without a side assault on the president’s immigration policy. “It’s an effort to punt, like Republicans like to do,” said Representative Raúl Labrador of Idaho, who seems to be the voice for the caucus. If we have to have a brand-new group of people dedicated to making the House of Representatives more intransigent, we can at least take consolation in the fact that its spokesman is going to be a person named Raúl Labrador.

This take-no-prisoners right wing is a large part of the reason the Republicans can’t come up with their own policies on anything. It’s embarrassing. They hate Obama’s immigration initiative, but they’ve never passed an immigration bill of their own. They’ve voted to repeal Obamacare at least 56 times, but they’ve never come up with a replacement. Last term, the guy who chaired the committee that writes tax bills produced a tax reform plan, and it went absolutely nowhere.

On the same day the Republican leadership failed to find enough votes to fund Homeland Security for three weeks, it also failed to find enough votes to pass a bill rewriting No Child Left Behind, the massive 2001 education law that desperately needs updating. The Republicans chose not to compromise with the Democrats, and the right wing was angry because the bill didn’t include enough of its agenda. The House spent hours debating it, but, in the end, the leaders had to pull it off the calendar.

Before Boehner got his new, bigger majority, he did manage to get a No Child Left Behind bill through the House. Then it faced inevitable extinction in the Senate. Maybe the speaker will remember that as his glory days, when his troops were fully capable of passing a big bill that had no chance of making it into law.

Still to come: raising the debt ceiling and passing a budget. And, oh yeah, getting Homeland Security through a second week.

Pass the candy and nuts.

Does anyone know which member of the Lunatic Caucus has the tiny little box containing Boehner’s balls?  I know they’re supposed to show them to him once a month…

Krugman’s blog, 2/26/15

February 27, 2015

There were three posts yesterday.  The first was “Chris Christie, Peacock:”

Gail Collins has a characteristically hilarious piece about Chris Christie, who went around bellowing about his fiscal responsibleness, then, as soon as the question arose about how to pay for something he agreed to, welshed on the deal.

Gail thinks this is the end of Christie’s presidential ambitions; I think this gives his party too much credit for caring about reality. Christie probably is toast, but not because he has shown himself fiscally irresponsible and untrustworthy. Instead, he apparently doesn’t know when to stop bellowing — you do need to make nice to the big money, and he hasn’t.

But in any case, there’s a larger point: the Christie affair is yet another demonstration that there are no true fiscal hawks on the right, only deficit peacocks who strut around and preen themselves on their supposed fiscal virtue, but never show themselves willing to make any sacrifices for the cause.

In fact, all the supposed alarm about deficits ends up being a club such people use to slash benefits for workers and the poor; as soon as it becomes a question of taxes on the rich, they suddenly lose interest.

The fading of Chris Christie will lower the decibel level, but nothing else will change.

And it won’t lower the decibel level much, not with The Donald sniffing around The Clown Car…  Yesterday’s second post was “Despicable Monetary Me:”

I want to weigh in on the issue of “cognitive capture” and the appropriate tactics for the reality-oriented community; more later or tomorrow. But I did want to remind readers of the column that had Allan Meltzer complaining that I say vicious things that the Times shouldn’t print. Here’s the column.

It’s pretty stiff, and no doubt had Meltzer very upset. After all, he has spent his life positioning himself as a wise, stern critic of the Fed, in effect its monetary conscience. The financial crisis should have been his big, culminating moment; instead it has turned into a vast embarrassment, in which he has been wrong again and again.

But should I have tried to spare his feelings? I don’t think so. I think I owe it to readers to give a clear picture of what is going on — and yes, to make it entertaining, because an unread column does nobody any good. I’m snarky for a reason.

The last post yesterday was “Quantitative Easing and Monetary Aggregates:”

I haven’t had time for the broader discussion of cognitive closure, but one more thing about Meltzer and all that: I get especially annoyed when economists who have been wrongly predicting inflation say that it’s not their fault — who could have known that banks would just sit on all those reserves? The answer is, anyone who had paid attention should have known that would happen.

Let me quote myself, from my 1998 — yes, 1998 — paper on the liquidity trap:

The point is important and bears repeating: under liquidity trap conditions, the normal expectation is that an increase in high-powered money will have little effect on broad aggregates, and may even lead to a decline in bank deposits and a larger decline in bank credit.

I presented data from the 1930s that seemed to confirm that point; a few years later Japan gave us another experiment, when it tried quantitative easing. Here’s how it went, with the monetary base and M2 both shown with January 2001=100:

So theory and experience both predicted exactly the sterility of monetary base expansion that we saw in practice. And, you know, that’s the kind of successful prediction that is supposed to change peoples’ minds: if you’re that wrong about how an experiment turned out, and someone else made a prediction you considered foolish but turned out completely right, you’re supposed to concede that just maybe, possibly, they were on to something.

The fact that essentially nobody on that side of the debate has budged in the slightest tells us that whatever it is they’ve been doing, it’s not scientific research.

Well, they can’t do research because, as is well known, facts have an appallingly liberal bias…

Brooks and Krugman

February 27, 2015

In “Converting the Ayatollahs” Bobo gurgles that the nuclear negotiations with Iran are based on misguided premises and could have disastrous outcomes.  In the comments (which generally take him to school) “Stuart” from NY, NY has this to say:  “Just my opinion, but I think this Op-Ed is irresponsible. First of all, it’s full of conjecture. Second, NYTimes readers already know Mr. Brooks’s tactics. He suggests a recklessness on the part of the Obama administration that reasonable people shouldn’t believe.  Mr. Brooks is only one of many wishing to derail diplomacy before seeing its results. It puts him in Dick and Liz Cheney territory. For all his warm and fuzzy think pieces, we’re expected to be swayed by this misguided propaganda. Why he would want to be the Joe Lieberman of columnists is anyone’s guess.”  Well, Stuart, he probably thinks Weeping Joe is a great ‘Murkan…  Prof. Krugman has a question in “What Greece Won:”  Why all the negative analysis about the debt deal that has actually done the rest of Europe a favor?  Here’s Bobo:

Over the past centuries, Western diplomats have continually projected pragmatism onto their ideological opponents. They have often assumed that our enemies are driven by the same sort of national interest calculations that motivate most regimes. They have assumed that economic interests would trump ideology and religion — that prudent calculation and statecraft would trump megalomania.

They assumed that the world leaders before 1914 would not be stupid enough to allow nationalist passion to plunge them into a World War; that Hitler would not be crazy enough to start a second one; that Islamic radicals could not really want to send their region back into the 12th century; that Sunnis and Shiites would never let their sectarian feud turn into a cataclysmic confrontation in places like Iraq.

The Obama administration is making a similar projection today. It is betting that Iran can turn into a fundamentally normal regime, which can be counted upon to put G.D.P. over ideology and religion and do the pragmatic thing.

The Iran nuclear negotiations are not just about centrifuges; they are about the future of the Middle East. Through a series of statements over the last few years, President Obama has made it reasonably clear how he envisions that future.

He seeks to wean Iran away from the radicalism of the revolution and bind it into the international economic and diplomatic system. By reaching an agreement on nukes and lifting the sanctions, Iran would re-emerge as America’s natural partner in the region. It has an educated middle class that is interested in prosperity and is not terribly anti-American. Global integration would strengthen Iranian moderates and reinforce democratic tendencies.

Once enmeshed in the global system, Iran would work to tame Hezbollah and Hamas and would cooperate to find solutions in Gaza, Iraq and Syria. There would be a more stable balance of power between the major powers. In exchange for good global citizenship, Iran would be richer and more influential.

To pursue this détente, Obama has to have a nuclear agreement. He has made a series of stunning sacrifices in order to get it. In 2012, the president vowed that he would not permit Iran to maintain a nuclear program. Six United Nations Security Council resolutions buttressed that principle. But, if reports of the proposed deal are correct, Obama has abandoned this policy.

Under the reported framework, Iran would have thousands of centrifuges. All restrictions on its nuclear program would be temporary and would be phased out over a decade or so. According to some reports, there will be no limits on Iran’s ballistic missiles, no resolution of Iran’s weaponizing activities. Monitoring and enforcement would rely on an inspection regime that has been good, but leaky.

Meanwhile, the United States has offended its erstwhile allies, like Israel, Saudi Arabia and Egypt, without being sure that Iran is really willing to supplement them. There is a chance that Iran’s regional rivals would feel the need to have their own nuclear programs and we would descend into a spiral of proliferation.

All of this might be defensible if Iran is really willing to switch teams, if religion and ideology played no role in the regime’s thinking. But it could be that Iran has been willing to be an international pariah for the past generation for a reason. It could be that Iran finances terrorist groups and destabilizes regimes like Yemen’s and Morocco’s for a reason. It could be that Iran’s leaders really believe what they say. It could be that Iranian leaders are as apocalyptically motivated, paranoid and dogmatically anti-American as their pronouncements suggest they are. It could be that Iran will be as destabilizing and hegemonically inclined as all its recent actions suggest. Iran may be especially radical if the whole region gets further inflamed by Sunni-Shia rivalry or descends into greater and greater Islamic State-style fanaticism.

Do we really want a nuclear-capable Iran in the midst of all that?

If the Iranian leaders believe what they say, then United States policy should be exactly the opposite of the one now being pursued. Instead of embracing and enriching Iran, sanctions should be toughened to further isolate and weaken it. Instead of accepting a nuclear capacity, eliminating that capacity should be restored as the centerpiece of American policy. Instead of a condominium with Iran that offends traditional allies like Saudi Arabia, Egypt and Israel, the U.S. should build a regional strategy around strengthening relations with those historic pillars.

It’s hard to know what’s going on in the souls of Iran’s leadership class, but a giant bet is being placed on one interpretation. March could be a ruinous month for the Middle East. Prime Minister Benjamin Netanyahu of Israel could weaken U.S.-Israeli relations, especially on the Democratic left. The world might accept an Iranian nuclear capacity. Efforts designed to palliate a rogue regime may end up enriching and emboldening it.

Now here’s Prof. Krugman:

Last week, after much drama, the new Greek government reached a deal with its creditors. Earlier this week, the Greeks filled in some details on how they intend to meet the terms. So how did it go?

Well, if you were to believe many of the news reports and opinion pieces of the past few days, you’d think that it was a disaster — that it was a “surrender” on the part of Syriza, the new ruling coalition in Athens. Some factions within Syriza apparently think so, too. But it wasn’t. On the contrary, Greece came out of the negotiations pretty well, although the big fights are still to come. And by doing O.K., Greece has done the rest of Europe a favor.

To make sense of what happened, you need to understand that the main issue of contention involves just one number: the size of the Greek primary surplus, the difference between government revenues and government expenditures not counting interest on the debt. The primary surplus measures the resources that Greece is actually transferring to its creditors. Everything else, including the notional size of the debt — which is a more or less arbitrary number at this point, with little bearing on the amount anyone expects Greece to pay — matters only to the extent that it affects the primary surplus Greece is forced to run.

For Greece to run any surplus at all — given the depression-level slump that it’s in and the effect of that depression on revenues — is a remarkable achievement, the result of incredible sacrifices. Nonetheless, Syriza has always been clear that it intends to keep running a modest primary surplus. If you are angry that the negotiations didn’t make room for a full reversal of austerity, a turn toward Keynesian fiscal stimulus, you weren’t paying attention.

The question instead was whether Greece would be forced to impose still more austerity. The previous Greek government had agreed to a program under which the primary surplus would triple over the next few years, at immense cost to the nation’s economy and people.

Why would any government agree to such a thing? Fear. Essentially, successive leaders in Greece and other debtor nations haven’t dared to challenge extreme creditor demands, for fear that they would be punished — that the creditors would cut off their cash flow or, worse yet, implode their banking system if they balked at ever-harsher budget cuts.

So did the current Greek government back down and agree to aim for those economy-busting surpluses? No, it didn’t. In fact, Greece won new flexibility for this year, and the language about future surpluses was obscure. It could mean anything or nothing.

And the creditors did not pull the plug. Instead, they made financing available to carry Greece through the next few months. That is, if you like, putting Greece on a short leash, and it means that the big fight over the future is yet to come. But the Greek government didn’t succumb to the bum’s rush, and that in itself is a kind of victory.

Why, then, all the negative reporting? To be fair, fiscal policy isn’t the only issue. There were and are also arguments about things like privatization of public assets, where Syriza has agreed not to reverse deals already made, and labor market regulation, where some of the “structural reform” of the austerity era will apparently stand. Syriza also agreed to crack down on tax evasion, although why collecting taxes is supposed to be a defeat for a leftist government is a mystery to me.

Still, nothing that just happened justifies the pervasive rhetoric of failure. Actually, my sense is that we’re seeing an unholy alliance here between left-leaning writers with unrealistic expectations and the business press, which likes the story of Greek debacle because that’s what is supposed to happen to uppity debtors. But there was no debacle. Provisionally, at least, Greece seems to have ended the cycle of ever-more-savage austerity.

And, as I said, in so doing, Greece has done the rest of Europe a favor. Remember, in the background of the Greek drama is a European economy that, despite some positive numbers lately, still seems to be sliding into a deflationary trap. Europe as a whole desperately needs to end austerity madness, and this week there have been some slightly positive signs. Notably, the European Commission has decided not to fine France and Italy for exceeding their deficit targets.

Levying these fines would have been insane given market realities; France can borrow for five years at an interest rate of 0.002 percent. That’s right, 0.002 percent. But we’ve seen a lot of similar insanity in recent years. And you have to wonder whether the Greek story played a role in this outbreak of reasonableness.

Meanwhile, the first real debtor revolt against austerity is off to a decent start, even if nobody believes it. What’s the Greek for “Keep calm and carry on”?

Krugman’s Blog, 2/25/15

February 26, 2015

There were two posts yesterday.  The first was “Explaining Recovery Performance in Europe:”

I was very interested by the new paper by Claeys and Walsh on “plucking” as an explanation of differential performance in Europe; basically, they’re saying that fast growth has come in countries that previously had deep slumps. But how does that result interact with the result many of us have found, which is that differences in austerity seem to explain a lot? Here’s an example of what I find:

I tried to see where their result fits in; but I used a slightly different sample. I included Greece; I’m not sure why they excluded it (they say that they’re dropping countries that didn’t have any recovery, but why?) I also used the same dates for everyone, 2007-9 for the slump and 2009-14 for the recovery. And since I wanted to use structural deficits to measure austerity, I could only include Latvia among the Baltics.

What I got was this:

Latvia stands out, but in this sample it’s alone; the estimated coefficient on the size of the slump is large but hugely uncertain.

What happens if you throw both variables in? With standard errors in parentheses, I get Growth in GDP 2009-14 = 7.91 – .26(.28)*Change in GDP 2007-9 – 1.41(.27)*Change in structural balance as % of potential GDP. Plucking might be important, but it’s hard to tell given the lack of data. Austerity, on the other hand, comes in very clear.

Maybe the point is that there aren’t any deep mysteries that need explaining. You can point to individual countries and say that they did better than you might have expected, but any kind of non-cherry-picked analysis of the data really, really wants to tell you not just that austerity hurts growth but that it’s the major factor causing some European countries to do worse than others.

Yesterday’s second post was “Monetarism in Winter:”

Brad DeLong is writing about “cognitive closure” on the right, and focuses on the case of Allan Meltzer, the long-time monetarist standard-bearer and co-founder of the Shadow Open Market Committee. Meltzer has been predicting inflation, just around the corner, for six years; the experience apparently has had no impact on his conviction that he understands the economy better than the Fed. And he considers it rude and unprofessional when some of us point out how wrong he has been for how long.

But there’s one thing that struck me in particular about the last entry in Brad’s bill of particulars, where Meltzer says this:

The Fed’s third major error is its baffling inattention to the growth of monetary and credit aggregates. Central banks supply the raw material on which financial markets build the credit and money magnitudes. The reason given for neglecting these aggregates is usually a claim they are unstable. That is true only, if at all, of quarterly values. It is not true of medium- and longer-term values, as many researchers have shown.

I’m not sure what Meltzer is saying here, exactly. Surely the claim is not so much that the aggregates are unstable as that the relationship between those aggregates and variables of interest — like inflation — is unstable. Now, where might the Fed have gotten that idea? Maybe from this:

The velocity of M2 — the ratio of nominal GDP to a broadly defined version of the money supply — has turned out to be hugely variable. Once upon a time Milton Friedman called for slow, steady growth in M2 as the key to a stable economy; surely you can’t think that makes sense given developments since the mid-1980s.

But here we have Meltzer insisting that the Fed is making a terrible mistake by not worrying about monetary aggregates, and complaining bitterly about those who question whether, given his track record, he has any authority to lecture the Fed. It’s really very sad.

Kristof and Collins

February 26, 2015

I’m sorry about nothing yesterday — Firefox in its infinite wisdom decided not to let me access WordPress at all.  Suffice it to say I’m no longer using Firefox for this.  Mr. Kristof, in “The Human Stain,” says Israel squanders political capital and antagonizes even its friends with its naked land grab in the West Bank.  In “Adieu, Chris Christie, Adieu” Ms. Collins says with no reform to show off, the reform governor has blown any real chance at winning the Republican presidential nomination.  Gail, never underestimate the lunacy of the current batch of Mole People…  Here’s Mr. Kristof, writing from Sinjil, West Bank:

The Israeli elections scheduled for March 17 should constitute a triumph, a celebration of democracy and a proud reminder that the nation in which Arab citizens have the most meaningful vote is, yes, Israel.

Yet Israeli settlements here on the West Bank mar the elections, and the future of the country itself. The 350,000 Israeli settlers in the West Bank— not even counting those in Arab East Jerusalem — impede any Middle East peace and stain Israel’s image.

But let’s be clear: The reason to oppose settlements is not just that they are bad for Israel and America, but also that this nibbling of Arab land is just plain wrong. It’s a land grab. The result is a “brutal occupation force,” in the words of the late Avraham Shalom, a former chief of the Israeli internal security force, Shin Bet.

Most Israeli settlers are not violent. But plenty are — even stoning American consular officials early this year — and they mostly get away with it because settlements are an arm of an expansive Israeli policy. The larger problem is not violent settlers, but the occupation.

“We planted 5,000 trees last year,” Mahmood Ahmed, a Palestinian farmer near Sinjil told me. “Settlers cut them all down with shears or uprooted them.”

Israel has enormous security challenges, but it’s hard to see the threat posed by 69-year-old Abed al-Majeed, who has sent all 12 of his children to university. He told me he used to have 300 sheep grazing on family land in Qusra but that nearby settlers often attack him when he is on his own land; he rolled up his pant leg to show a scar where he said a settler shot him in 2013. Now he is down to 100 sheep.

“I can’t graze my sheep on my own land,” he said. “If I go there, settlers will beat me.”

Sarit Michaeli of B’Tselem, an Israeli human rights group, accompanied me here and said that the allegations are fully credible. Sometimes Palestinians exaggerate numbers, she said, but the larger pattern is undeniable: “the expulsion of Palestinians from wide areas of their agricultural land in the West Bank.”

Elsewhere, I saw graffiti that said “Death to Arabs” in Hebrew, heard Palestinians say that their olive trees had been poisoned or their tires slashed, and talked to an Arab family whose house was firebombed in the middle of the night, leaving the children traumatized.

The violence, of course, cuts both ways, and some Israeli settlers have been murdered by Palestinians. I just as easily could have talked to settler children traumatized by Palestinian violence. But that’s the point: As long as Israel maintains these settlements, illegal in the eyes of most of the world, both sides will suffer.

To its credit, Israel sometimes lets democratic institutions work for Palestinians. In the southern West Bank, I met farmers who, with the help of a watchdog group, Rabbis for Human Rights, used Israeli courts to regain some land after being blocked by settlers. But they pointed wistfully at an olive grove that they are not allowed to enter because it is next to an outpost of a Jewish settlement.

They haven’t been able to set foot in the orchard for years, but I, as an outsider, was able to walk right into it. A settler confronted me, declined to be interviewed, and disappeared again — but the Palestinians who planted the trees cannot harvest their own olives.

A unit of Israeli soldiers soon showed up to make sure that there was no trouble. They were respectful, but, if they were really there to administer the law, they would dismantle the settlement outpost, which is illegal under Israeli as well as international law.

Kerem Navot, an Israeli civil society organization, has documented “the wholesale takeover of agricultural lands” by Israeli settlers. It notes that this takeover is backed by the Israeli government “despite the blatant illegality of much of the activity, even in terms of Israeli law.”

There are, of course, far worse human rights abuses in the Middle East; indeed, Israeli journalists, lawyers, historians and aid groups are often exquisitely fair to Palestinians. Yet the occupation is particularly offensive to me because it is conducted by the United States’ ally, underwritten with our tax dollars, supported by tax-deductible contributions to settlement groups, and carried out by American bulldozers and weaponry, and presided over by a prime minister who is scheduled to speak to Congress next week.

At a time when Saudi Arabia is flogging dissidents, Egypt is sentencing them to death, and Syria is bombing them, Israel should stand as a model. Unfortunately, it squanders political capital and antagonizes even its friends with its naked land grab in the West Bank. That’s something that Prime Minister Benjamin Netanyahu might discuss in his address to Congress.

Now here’s Ms. Collins:

Chris Christie is political toast.

Cause of his charred presidential prospects: an unreformed state pension system. I know that’s disappointing. Not nearly as exciting as the political near-death experiences that went before. We were hoping the next disaster would be something like Governor Yells at Elmo. Or a reprise of the day he chased a guy down the boardwalk while waving an ice cream cone, this time maybe featuring Tom Hanks or Ruth Bader Ginsburg.

Fixing New Jersey’s pension system was supposed to be Christie’s signature achievement. He explained it in his keynote speech at the Republican convention in 2012, right after he told us about his mom, his dad, his wife, his children and his love of Bruce Springsteen. “They said it was impossible to touch the third rail of politics,” he bragged.

By this point some of his listeners were wondering when he’d get to Mitt Romney. But Christie went on about how he had saved New Jersey workers’ pensions and staved off fiscal disaster. Thanks to shared sacrifice and “politicians who led instead of politicians who pandered.”

The politicians in question would be Chris Christie, who appeared to be referring to himself with the royal “we.” No matter. It was still a very big deal because there are crisis-ridden pension plans all over the country in need of rescue.

This is the kind of problem that can be fixed only if both sides agree to sacrifices they’d much rather avoid. That’s particularly problematic in American politics because pandering candidates often promise that they can make the pain go away. (When he first ran for governor, Christie sent out an “Open Letter to the Teachers of NJ” denouncing rumors that he might “attempt to diminish or take away teachers’ pensions and benefits.Let me be clear — nothing could be further from the truth.”)

As soon as he was elected, Christie began negotiating on a law that would, um, diminish the benefits. It also required the state to raise its own pension contributions until the whole system was healthy. Bipartisan agreement!

“He was looked at nationally as a hero,” recalled Stephen Sweeney, the Democratic State Senate president, who had been working on the problem for years. “It was my pension plan he was touting, but anyway …”

Pop Quiz: After the Legislature passed the agreement, the workers started seeing smaller paychecks. What did Chris Christie do to keep his side of the bargain?

A) Found the money to make the higher payments no matter what the political cost, because he’s that kind of guy.

B) Found the money for the first two years when the price tag was low, then punted.

C) Chased the state workers down the boardwalk while waving an ice cream cone.

Yes! He punted in Year 3. Which was, to be fair, after the Republican National Convention.

In order to ease the transition, the law allowed New Jersey to ease into its new big pension payments. Christie came up with the first relatively small bill. And then the second year’s. But, by Year 3, there just wasn’t enough money. The State Legislature passed a budget that paid for the pension contribution with tax increases, including one on incomes over $1 million.

Christie vetoed the taxes, and he reduced the new pension contribution to less than half of the target. Nobody’s going to give you the Republican presidential nomination if you raise taxes on rich people. The unions went to court. This week, on the eve of Christie’s budget address, a judge told him to pay up.

“We don’t need a judge to tell us we have a problem,” the governor said, somewhat inaccurately.

This was during the budget address, which Christie devoted almost exclusively to pensions, in a tone that suggested he was the real victim. (“I have stood behind this podium for five years talking about this problem.”)

Well, it certainly is a mess, and the workers probably aren’t done sacrificing. But it’s hard to imagine this governor luring them to the table. “You can always go back to people when you’re living up to your obligations. But you can’t go back to people when you basically break your word,” said Sweeney.

For the rest of us, the news is that Christie is now about as serious a presidential prospect as Donald Trump. The Republicans certainly aren’t going to nominate him because of his in-depth experience in foreign affairs. And if they just want to pick a governor, they’ll probably lean toward one whose administration has enjoyed fewer than eight credit downgrades.

Sure, there’s Christie’s tough-talking, truth-teller thing. But the idea was that his in-your-face style pushed New Jersey to reform. If there’s no reform, you’d have to presume that the American people are just hungry for a president who will yell at members of the audience during the State of the Union address. Or wave an ice cream cone at Vladimir Putin.

Brooks and Nocera

February 24, 2015

Oh, Lord…  Bobo’s been to the theater.  In “The Hamilton Experience” he fizzes that Alexander Hamilton, brought strikingly to life in a new musical, embodies a complex but profound American tradition that is inspiring in its audacity.  In the comments “gemli” from Boston has this to say:  “I wonder what Hamilton would make of today’s unfettered finance and capitalism that subjugates the poor and middle class. When Hamilton though about social mobility I suspect that he wasn’t imagining that the mobility would be almost exclusively downward. … As I read Mr. Brooks’ tribute to Hamilton, I wondered how he could wax rhapsodic (or rap-sodic, considering the musical format) about a man who would be vilified by today’s conservatives. Hamilton seemed to have a prodigious intellect, and valued learning. He was concerned about government becoming an oligarchy that would disadvantage the poor. He sought the esteem of thoughtful people. In short, he stood for everything that today’s conservatives despise. I wonder what he would make of pundits who shill for these people?”  Mr. Nocera considers “Scientology’s Chilling Effect” and says it’s impossible to tell the story of Scientology without getting into the issue of intimidation and why the church will never turn the other cheek.  Joe, sweetie, it’s a cult, not a religion.  Here’s Bobo:

Every once in a while a piece of art brilliantly captures the glory, costs and ordeals of public life. Steven Spielberg’s “Lincoln” did that. And so does Lin-Manuel Miranda’s “Hamilton,” now playing at The Public Theater in New York.

The Public Theater seems hellbent on putting drama back in the center of the national conversation, and Miranda’s “Hamilton” is one of the most exhilarating experiences I’ve had in a theater. Each element in the show is a jewel, and the whole is bold, rousing, sexy, tear-jerking and historically respectful — the sort of production that strips things down and asks you to think afresh about your country and your life.

It is a hip-hop musical about a founding father. If that seems incongruous, it shouldn’t. Like the quintessential contemporary rappers, Alexander Hamilton was a poor immigrant kid from a broken home, feverish to rise and broadcast his voice. He was verbally blessed, combative, hungry for fame and touchy about his reputation. Like Tupac Shakur and the Notorious B.I.G., he died in a clash of male bravado. The spirits of Tupac and Biggie waft through this musical; their genre the modern articulation of Hamilton’s clever and cocky assertiveness.

The musical starts with the core fact about Hamilton and the strain of Americanism he represents: The relentless ambition of the outsider. He was effectively an orphan on the island of Nevis in the Caribbean. His mother died in the bed next to him. He was adopted by a cousin who committed suicide. Relentlessly efficient with his use of time and brilliant in the use of his pen, he made his name.

The musical reveals the dappled nature of that ambition. Hamilton is captivating and energetic — a history-making man who thinks he can remake himself and his country. But he is also haunted by a desperate sense that he is racing against time. He has a reckless, out-of-control quality. In the biography, “Alexander Hamilton,” upon which the musical was based, Ron Chernow writes that Hamilton “always had to fight the residual sadness of the driven man.” That haunting loneliness is in this show, too.

But Hamilton is not portrayed as ambition personified. The musical is structured around the rivalry between Hamilton and Aaron Burr, who is the crafty one, the utilitarian manipulator whose only ambition is to get inside the room where power is wielded. In real life and in the musical, Hamilton’s ambition was redeemed by his romanticism. He was more Lord Byron than Horatio Alger.

Hamilton was romantic about virtue and glory. As a boy he read Plutarch and had an archaic belief that death could be cheated by the person who wins eternal fame. He sought to establish himself as a man of honor, who would live on in the mouths of those whose esteem was worth having.

He was also romantic about his country. Miranda plays up Hamilton’s connection to New York, but Hamilton actually dedicated his life to the cause of America. He sought redemption in a national mission, personal meaning in a glory that would be realized by generations to come.

He was also romantic about women, strong in his capacity for love. Hamilton communes with Angelica Schuyler, who is his intellectual equal. He marries her sister, Eliza Schuyler, who is not, but whose submerged strength comes out in adversity.

But the boldest stroke in Miranda’s musical is that he takes on the whole life — every significant episode. He shows how the active life is inevitably an accumulation of battles, setbacks, bruises, scars, victories and humiliating defeats.

Hamilton’s greatest foe, Thomas Jefferson, is portrayed brilliantly by the actor Daveed Diggs as a supremely gifted aristocrat who knows exactly how gifted he is. Hamilton assaulted Jefferson because he did not believe a country dominated by oligarchs could be a country in which poor boys and girls like him would have space to rise and grow.

By the time he set off for his fatal duel, Hamilton was a damaged man. But he left behind a vision, albeit one that sits uncomfortably across today’s political divide. Unlike progressives, he believed in relatively unfettered finance and capitalism to arouse energy and increase social mobility. Unlike conservatives, he believed that government should actively subsidize mobility. Unlike populists of left and right, he believed in an aristocracy, though one based on virtue and work, not birth.

He also left behind a spirit — the spirit of grand aspiration and national greatness. The cast at the Public Theater is mostly black and Latino, but it exudes the same strong ambition as this dead white man from centuries ago. America changes color and shape, but the spirit Hamilton helped bring to the country still lives. I suspect many people will leave the theater wondering if their own dreams and lives are bold enough, if their own lives could someday be so astounding.

And now here’s Mr. Nocera:

When I was at Fortune magazine in the 1990s, one of my colleagues was a reporter named Richard Behar. He had a special lock on his door, and he wouldn’t even let the janitor in to empty his wastebasket. He used a secret phone, which he kept hidden in a desk drawer, so that calls made to sources couldn’t be traced back to him.

At first, I just thought he was paranoid. But I soon learned that he had come by his paranoia honestly. In May 1991, as a correspondent for Time magazine, Behar had written an exposé of Scientology, calling it a “hugely profitable global racket that survives by intimidating members and critics in a Mafia-like manner.”

Before the article was published, Behar says, he was followed by private detectives, who also contacted acquaintances, asking whether he had financial problems. After its publication, that sort of harassment continued, he says — along with a major libel suit. Although the suit was eventually dismissed, it took years, and cost millions of dollars to defend. Behar’s deposition alone lasted 28 days.

What brings this to mind is Alex Gibney’s fine new HBO documentary about Scientology, “Going Clear: Scientology and the Prison of Belief,” which is based on the book “Going Clear” by Lawrence Wright. (Disclosure: I played a small role in Gibney’s 2005 documentary on Enron.) “Going Clear,” which was shown at Sundance in late January, is scheduled to air on HBO on March 29.

It is virtually impossible to tell the story of Scientology without getting into the issue of intimidation. As the film notes, going on the offensive against its critics is part of Scientology’s doctrine, handed down by its founder, L. Ron Hubbard. “It is the antithesis of turn the other cheek,” says Marty Rathbun, a former high-ranking official who left the church in 2004 and has since been subjected to Scientology harassment, as the film documents. It also retells the story, first reported in The New York Times, of how, in 1993, Scientology won a 25-year fight against the Internal Revenue Service, which had refused to grant it nonprofit status. Scientologists filed several thousand lawsuits, against not just the I.R.S. but individual I.R.S. officials, and hired private detectives to look for dirt and conduct surveillance operations.

But the film doesn’t really tackle the intimidation of journalists. One of the first journalists to take on Scientology, in the early 1970s, was a young freelance writer named Paulette Cooper. Scientology’s retaliation was astounding. It framed her for supposedly sending bomb threats to the church. The documents it forged were so convincing that she was indicted in 1973 and was fully exonerated only when the F.B.I., acting on a tip, raided Scientology offices and discovered the plot against her in 1977.

Over the course of the next three decades-plus, there were a handful — though only a handful — of tough-minded articles like Behar’s. “Everybody who wrote about Scientology knew they were taking a risk,” Wright told me. You’ve heard of the “chilling effect?” Scientology offered a prime example of how it works.

Then, in 2009, The Tampa Bay Times (then The St. Petersburg Times) published an important series about Scientology, based on interviews with high-ranking defectors, including Rathbun and Mike Rinder, who had been Scientology’s top spokesman. The series was the first to suggest that Scientology had a longstanding culture of abuse. Amazingly, the church did not sue.

Vanity Fair published a big piece about Scientology. (This was after the breakup of Tom Cruise and Katie Holmes; Cruise, of course, is the most famous Scientologist of them all.) No lawsuit. Anderson Cooper did a series on CNN. The BBC weighed in. Ditto and ditto.

Sure enough, when I spoke to Wright and Gibney, they said that the pushback they had gotten was nothing they couldn’t handle. A Scientology website has posted a video attacking the two men, and the church has also taken out full-page newspaper ads denouncing “Going Clear.” “I didn’t expect quite this much venom,” Gibney told me, but, he added, “I regard it as good publicity.”

(In a lengthy statement, a Scientology spokesperson said that Gibney had “lied to us repeatedly,” that Marty Rathbun had “destroyed evidence and lied under oath,” that a judge had described Behar as “biased,” and that in defending itself against Gibney’s “propaganda and bigotry,” it was speaking “for those who are subjected to religious persecution and hatred.”)

Gibney also noted that the people who are really harassed these days aren’t journalists but those who have left the church, like Rathbun, who told me that, with more people leaving and talking about the church, it no longer has the resources to sic private eyes on all its critics. He also thinks the Internet has hurt the church, because it is far easier to find out information about it — and many of its supposed secrets are posted online for all to see.

“Part of the message here is that you don’t need to fear Scientology anymore,” says Wright. It’s long overdue.

Krugman’s blog, 2/22/15

February 23, 2015

There were three posts yesterday.  The first was “Greece Did OK:”

Now that the dust has settled a bit, we can look calmly at the deal — if it really is a deal that survives through tomorrow, which some people doubt. And it’s increasingly clear that Greece came out in significantly better shape, at least for now.

The main action, always, involves the Greek primary surplus — how much more will they need to raise in revenue than they can spend on things other than interest? The question these past few days would be whether the Greeks would be forced into agreeing to aim for very high primary surpluses under the threat of being pushed into immediate crisis. And they weren’t.

One way to see this is through careful parsing of the language, as done here. That’s quite useful. But I’d argue that in an important sense we’re past that kind of word-chopping. Instead, we need to think about what happens substantively from here out.

Right now, Greece has avoided a credit cutoff, and worse yet an ECB move to pull the plug on its banks, and it has done so while getting the 2015 primary surplus target effectively waived.

The next step will come four months from now, when Greece makes its serious pitch for lower surpluses in future years. We don’t know how that will go. But nothing that just happened weakens the Greek position in that future round. Suppose that the Germans claim that some ambiguously worded clause should be interpreted to mean that Greece must achieve a 4.5 percent of GDP surplus, after all. Greece will say no, it doesn’t — and then what? A couple of years ago, when all the VSPs of Europe believed utterly in austerity, Greece might have faced retaliation thanks to wording issues; not now.

So Greece has won relaxed conditions for this year, and breathing room in the run-up to the bigger fight ahead. Could be worse.

Yesterday’s second post was “Rip Van Skillsgap:”

There’s been quite a lot of commentary about the Hamilton Project conference on robots and all that. Let me just add my two cents about the “framing paper“.

What strikes me about this paper — and in general what one still hears from many people inside the Beltway — is the continuing urge to make this mainly a story about the skills gap, of not enough workers having higher education or maybe the right kind of education. The paper acknowledges, sort of, that the trends people thought they saw in the 1990s aren’t visible in later data, but then jumps right back into discussing education as the solution as if nothing had happened.

But if my math is right, the 90s ended 15 years ago — and since then wages of the highly educated have stagnated. Why on earth are we still hearing the same rhetoric about education as the solution to inequality and unemployment?

The answer, I’m sorry to say, is surely that it sounds serious. But, you know, it isn’t.

The last post yesterday was “Austerity and the Costs of Internal Devaluation:”

Were the costs of Greek adjustment unavoidable, regardless of the currency? Could they have been much less, even given the euro? This paper says no; Simon Wren-Lewis is aghast, and rightly so. How can alleged experts have learned so little from so much terrible experience?

I’d like to focus in on one point in particular, which I’m not sure is completely clear in Simon’s argument. We’re all agreed that Greece needed to reduce its wages and other costs relative to those of the euro area core. This could have happened quickly, with no need for high unemployment, if Greece had had an independent currency to devalue — as happened in Iceland. Given membership in the euro area, however, Greece had to go through a period of relatively high unemployment depressing wage growth.

There was, however, a question of how fast this had to happen. Think of this schematic picture:

We can think of Greece needing to move wages toward a sustainable path that is itself rising over time thanks to inflation in the rest of the euro area (and of course it’s crucial that this inflation be fast enough). Even given this need, however, there’s the question of how fast; here Plan A is a cold turkey, very high unemployment and deflation route, while Plan B is one in which unemployment need only be high enough to keep wages from rising.

Clearly Plan A involves front-loading the pain. But is the total pain — as measured, say, in point-years of excess unemployment — the same in the two cases?

If the Phillips curve were linear, so that an additional point of unemployment always reduces wage inflation by the same amount, the answer would be yes. But we have overwhelming evidence at this point that the Phillips curve is NOT linear, that it gets very flat at low inflation because of downward nominal wage rigidity.

What this means is that Plan A doesn’t just front-load the pain; it produces a lot more total pain, even though it takes place over a shorter period, because you’re trying to break through strong inhibitions against actual wage cuts as opposed to mere wage restraint.

So Greece could have avoided the bulk of its nightmare if it had had its own currency; but it could have had a much less terrible nightmare even given the euro if austerity had been less extreme and adjustment slower.

Blow and Krugman

February 23, 2015

In “Who Loves America?” Mr. Blow says our allegiance needn’t — mustn’t — be blind to be true. We must acknowledge our warts if we are to proclaim our beauty.  Prof. Krugman, in “Knowledge Isn’t Power,” explains why education isn’t the answer to inequality.  Here’s Mr. Blow:

We have arrived at the point where the utter tedium and desperation of personal attacks against the president about his life story and his loyalty are no longer news. The histrionics have shed their ability to shock. Most right-minded Americans — ethically speaking, not ideologically speaking — have moved on.

But occasionally the insults prove to be accidentally instructive.

Take for instance what Rudy Giuliani (“America’s mayor”) said about the president last week at a dinner for Gov. Scott Walker of Wisconsin (a contender for America’s president). At the dinner — attended, according to Politico, by “about 60 right-leaning business executives and conservative media types” — Giuliani said, “I do not believe, and I know this is a horrible thing to say, but I do not believe that the president loves America.” He continued, “He doesn’t love you. And he doesn’t love me. He wasn’t brought up the way you were brought up and I was brought up through love of this country.”

Yes, Mr. Mayor, it was a horrible thing to say, which is why you backpedaled. On Fox, Giuliani gave a meandering, mealy-mouthed defense of the this vile statement, claiming, preposterously, that “I’m not questioning his patriotism,” explaining that he hears Obama “criticize America much more often than other American presidents” and questioning the president’s faith in American exceptionalism.

Ah, American exceptionalism again.

This is in part about a fundamental difference in views. It is a definitional difference, not about the meaning of love but about the meaning of America and its place in the world. Does exceptionalism — if one accepts the premise — bestow exemption from critique? Is uniqueness perfection? Does our difference require some sort of arresting of development?

As the Pew Research Center pointed out in July, “the view that the U.S. is exceptional — standing above all other countries in the world — has declined 10 points since 2011.” At that time last year, 58 percent of Americans believed America is “one of the greatest countries in the world, along with others,” while only 28 percent believed America “stands above all other countries in the world.” (Whether this is truly a measure of exceptionalism or diminished standing isn’t completely clear to me.)

And what does it mean to love the country? We’re not talking about touristic love of the place — not the mountains and the valleys, the cities and the suburbs, the mighty rivers and the shores that kiss the oceans — but a love of the idea of America.

In a way, this is an ideological battle. Conservatism is rooted in preservation; progressivism advances alteration. These are different love languages. These languages turn on your view of change itself: When you think of America, do you see a country struggling to be maintained or one striving to be made better?

The president not only ran for office on the idea of change, but his presence — in both visage and values — is the manifestation of change. He not only represents a very real affront to the status quo and traditional power but is also not shy about pointing out where America can improve.

Our allegiance needn’t — mustn’t — be blind to be true. We must acknowledge our warts if we are to proclaim our beauty. Our aggrandizement must be grounded. We must be willing to laud America where it has soared and rebuke it where it has faltered.

America is a great country in many ways. But it is far from perfect.

America is a living idea. It isn’t only the tenets of its founding, but also the terms of its future. Every day, we make America.

Seeking to preserve and enshrine one vision of this country from one period of its past robs it of what makes it magical: its infinite possibility for adjustment.

“All men are created equal” is an exquisite idea, but one that wasn’t fully embraced when the words were written. We, the American people, have pushed this country to consider that clause in the broadest possible interpretation for hundreds of years.

We are engaged in a constant struggle to force America to “be true to what you said on paper,” as the Rev. Dr. Martin Luther King Jr. put it.

The concept of forming “a more perfect union” has embedded in it the idea of ambition but not perfection itself. There is room for betterment. America is not static. America is striving.

And sometimes, America requires critique. Jingoism is an avoidance of realism.

You can simultaneously love and be disappointed in the object of your love, wanting it to be better than it is. In fact, that is a measure of love. Honest critique is a pillar of patriotism.

As James Baldwin put it, “I love America more than any other country in the world, and, exactly for this reason, I insist on the right to criticize her perpetually.”

Amen.  Here’s Prof. Krugman:

Regular readers know that I sometimes mock “very serious people” — politicians and pundits who solemnly repeat conventional wisdom that sounds tough-minded and realistic. The trouble is that sounding serious and being serious are by no means the same thing, and some of those seemingly tough-minded positions are actually ways to dodge the truly hard issues.

The prime example of recent years was, of course, Bowles-Simpsonism — the diversion of elite discourse away from the ongoing tragedy of high unemployment and into the supposedly crucial issue of how, exactly, we will pay for social insurance programs a couple of decades from now. That particular obsession, I’m happy to say, seems to be on the wane. But my sense is that there’s a new form of issue-dodging packaged as seriousness on the rise. This time, the evasion involves trying to divert our national discourse about inequality into a discussion of alleged problems with education.

And the reason this is an evasion is that whatever serious people may want to believe, soaring inequality isn’t about education; it’s about power.

Just to be clear: I’m in favor of better education. Education is a friend of mine. And it should be available and affordable for all. But what I keep seeing is people insisting that educational failings are at the root of still-weak job creation, stagnating wages and rising inequality. This sounds serious and thoughtful. But it’s actually a view very much at odds with the evidence, not to mention a way to hide from the real, unavoidably partisan debate.

The education-centric story of our problems runs like this: We live in a period of unprecedented technological change, and too many American workers lack the skills to cope with that change. This “skills gap” is holding back growth, because businesses can’t find the workers they need. It also feeds inequality, as wages soar for workers with the right skills but stagnate or decline for the less educated. So what we need is more and better education.

My guess is that this sounds familiar — it’s what you hear from the talking heads on Sunday morning TV, in opinion articles from business leaders like Jamie Dimon of JPMorgan Chase, in “framing papers” from the Brookings Institution’s centrist Hamilton Project. It’s repeated so widely that many people probably assume it’s unquestionably true. But it isn’t.

For one thing, is the pace of technological change really that fast? “We wanted flying cars, instead we got 140 characters,” the venture capitalist Peter Thiel has snarked. Productivity growth, which surged briefly after 1995, seems to have slowed sharply.

Furthermore, there’s no evidence that a skills gap is holding back employment. After all, if businesses were desperate for workers with certain skills, they would presumably be offering premium wages to attract such workers. So where are these fortunate professions? You can find some examples here and there. Interestingly, some of the biggest recent wage gains are for skilled manual labor — sewing machine operators, boilermakers — as some manufacturing production moves back to America. But the notion that highly skilled workers are generally in demand is just false.

Finally, while the education/inequality story may once have seemed plausible, it hasn’t tracked reality for a long time. “The wages of the highest-skilled and highest-paid individuals have continued to increase steadily,” the Hamilton Project says. Actually, the inflation-adjusted earnings of highly educated Americans have gone nowhere since the late 1990s.

So what is really going on? Corporate profits have soared as a share of national income, but there is no sign of a rise in the rate of return on investment. How is that possible? Well, it’s what you would expect if rising profits reflect monopoly power rather than returns to capital.

As for wages and salaries, never mind college degrees — all the big gains are going to a tiny group of individuals holding strategic positions in corporate suites or astride the crossroads of finance. Rising inequality isn’t about who has the knowledge; it’s about who has the power.

Now, there’s a lot we could do to redress this inequality of power. We could levy higher taxes on corporations and the wealthy, and invest the proceeds in programs that help working families. We could raise the minimum wage and make it easier for workers to organize. It’s not hard to imagine a truly serious effort to make America less unequal.

But given the determination of one major party to move policy in exactly the opposite direction, advocating such an effort makes you sound partisan. Hence the desire to see the whole thing as an education problem instead. But we should recognize that popular evasion for what it is: a deeply unserious fantasy.

Krugman’s blog, 2/21/15

February 22, 2015

There was one post yesterday, “People Aren’t Androids:”

My soon-to-be-colleague Branko Milanovic writes forcefully against the term “human capital”; Elizabeth Bruenig notes an especially unpleasant use of the term by reformicons trying to sell child tax credits to their conservative allies.

I’m in agreement with both. It’s actually shocking how readily we have fallen into rhetoric that treats human beings as assets; it’s closely related to the remarkable, equally shocking way that we now talk about medical patients as health care “consumers”.

But I think there’s a bit more to add.

Branko says that the essential difference between skills and physical capital is that the former aren’t worth anything unless you work, and that is certainly an essential difference. I would, however, also emphasize the flip side: if you think of capital as something that rentiers can own, which is surely one of the important things we connote when we use the c-word, then labor force skills are not capital in that sense. Children of the wealthy can inherit or buy factories and buildings; absent indentured servitude or the coming of androids, they can’t buy worker skills.

Meanwhile, Bruenig is unhappy with James Pethokoukis for trying to sell humanitarian policies, more or less, as a cynical pro-capitalist ploy (which is, to give credit where it’s due, the opposite of the usual thing on the right). What I immediately noted was that Pethokoukis is wrong about what actually works in the direction he wants. He argues that big welfare states discourage having children, and dismisses pro-natalist policies as ineffectual. Here are fertility rates in advanced countries:

The two most extensive, generous welfare states in the world — France and Sweden — also have higher fertility than we do, significantly so in the case of France. And there’s a reason: strong pro-natalist policies, which greatly reduce the burden, financial and otherwise, of raising children. As I’ve written in the past, if you want to see policy informed by genuine family values — as opposed to “pro-family” values that are actually about patriarchy — France is a much better example than America.


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