Krugman’s blog, 5/28/15

May 29, 2015

There was one post yesterday, “Latvia: The Thrill Is Gone:”

Back in 2013, when Olivier Blanchard presented a paper on Latviaat the Brookings Panel, many of the participants were bemused: why was the august panel devoting so much time to a country with the population of Brooklyn? But Latvia was, for a time, the great poster child for austerity.

Even then, as many of us pointed out (I was one of Olivier’s discussants) that role rested on shaky foundations; the main really good news about Latvia, rapid productivity growth, arguably had more to do with the catchup of a very poor country by European standards than with macro policy.

And now, as Frances Coppola notes, the era of rapid bounce back has stalled out. Here’s Latvia as compared with another small peripheral economy (even fewer people, although comparable GDP) that followed very different policies:


Eurostat

And no, Latvia’s rapid pre-crisis growth says nothing at all about the success of its post-crisis policies — if anything, it should set the bar for success higher.

Truly, nothing much here to justify all that triumphalism.

Brooks and Krugman

May 29, 2015

Bobo has decided to wax poetic (or, rather, have other people wax poetic) about “The Small, Happy Life.  He burbles that in this first batch of personal takes on how some readers found purpose in life, a surprising theme emerged.  Oh, lawdy, that implies that there will be more…  In the comments “HeyNorris” from Paris had this to say:  “It’s becoming alarmingly apparent that Mr. Brooks sees himself as Professor Pangloss, and us Tonstant Weaders as his Candides. Well, this Candide is ready to fwow up.”  Prof. Krugman, in “The Insecure American,” says a new study on the financial well-being of U.S. households shows just how little room for error there is for many of us.  Here, FSM help us, is Bobo:

A few weeks ago, I asked readers to send in essays describing their purpose in life and how they found it. A few thousand submitted contributions, andmany essays are online. I’ll write more about the lessons they shared in the weeks ahead, but one common theme surprised me.

I expected most contributors would follow the commencement-speech clichés of our high-achieving culture: dream big; set ambitious goals; try to change the world. In fact, a surprising number of people found their purpose by going the other way, by pursuing the small, happy life.

Elizabeth Young once heard the story of a man who was asked by a journalist to show his most precious possession. The man, Young wrote, “was proud and excited to show the journalist the gift he had been bequeathed. A banged up tin pot he kept carefully wrapped in cloth as though it was fragile. The journalist was confused, what made this dingy old pot so valuable? ‘The message,’ the friend replied. The message was ‘we do not all have to shine.’ This story resonated deeply. In that moment I was able to relieve myself of the need to do something important, from which I would reap praise and be rewarded with fulfillment. My vision cleared.”

Young continues, “I have always wanted to be effortlessly kind. I wanted to raise children who were kind.” She notes that among those who survived the Nazi death camps, a predominant quality she noticed was generosity.

“Perhaps,” she concludes, “the mission is not a mission at all. … Everywhere there are tiny, seemingly inconsequential circumstances that, if explored, provide meaning” and chances to be generous and kind. Spiritual and emotional growth happens in microscopic increments.

Kim Spencer writes, “I used to be one of the solid ones — one of the people whose purpose was clearly defined and understood. My purpose was seeing patients and ‘saving lives.’ I have melted into the in-between spaces, though. Now my purpose is simply to be the person … who can pick up the phone and give you 30 minutes in your time of crisis. I can give it to you today and again in a few days. … I can edit your letter. … I can listen to you complain about your co-worker. … I can look you in the eye and give you a few dollars in the parking lot. I am not upset if you cry. I am no longer drowning, so I can help keep you afloat with a little boost. Not all of the time, but every once in a while, until you find other people to help or a different way to swim. It is no skin off my back; it is easy for me.”

Terence J. Tollaksen wrote that his purpose became clearer once he began to recognize the “decision trap”: “This trap is an amazingly consistent phenomena whereby ‘big’ decisions turn out to have much less impact on a life as a whole than the myriad of small seemingly insignificant ones.”

Tollaksen continues, “I have always admired those goal-oriented, stubborn, successful, determined individuals; they make things happen, and the world would be lost without them.” But, he explains, he has always had a “small font purpose.”

“I can say it worked for me. I know it sounds so Midwest, but it’s been wonderful. I have a terrific wife, 5 kids, friends from grade school and high school, college, army, friends locally, and sometimes, best of all, horses, dogs, and cats. Finally, I have a small industrial business that I started and have run for 40 years based on what I now identify as principles of ‘Pope Francis capitalism.’ ”

Hans Pitsch wrote: “At age 85, the question of meaning in my life is urgent. The question of the purpose of my life is another matter. World War II and life in general have taught me that outcomes from our actions or inactions are often totally unpredictable and random.”

He adds, “I am thankful to be alive. I have a responsibility to myself and those around me to give meaning to my life from day to day. I enjoy my family (not all of them) and the shrinking number of old friends. You use the term ‘organizing frame’ in one’s life. I am not sure if I want to be framed by an organizing principle, but if there is one thing that keeps me focused, it’s the garden. Lots of plants died during the harsh winter, but, amazingly, the clematises and the roses are back, and lettuce, spinach and tomatoes are thriving in the new greenhouse. The weeping cherry tree in front of the house succumbed to old age. I still have to plant a new tree this year.”

This scale of purpose is not for everyone, but there is something beautiful and concrete and well-proportioned about tending that size of a garden.

One wonders why any of these people would actually write to Bobo…  Here’s Prof. Krugman:

America remains, despite the damage inflicted by the Great Recession and its aftermath, a very rich country. But many Americans are economically insecure, with little protection from life’s risks. They frequently experience financial hardship; many don’t expect to be able to retire, and if they do retire have little to live on besides Social Security.

Many readers will, I hope, find nothing surprising in what I just said. But all too many affluent Americans — and, in particular, members of our political elite — seem to have no sense of how the other half lives. Which is why a new study on the financial well-being of U.S. households, conducted by the Federal Reserve, should be required reading inside the Beltway.

Before I get to that study, a few words about the callous obliviousness so prevalent in our political life.

I am not, or not only, talking about right-wing contempt for the poor, although the dominance of compassionless conservatism is a sight to behold. According to the Pew Research Center, more than three-quarters of conservatives believe that the poor “have it easy” thanks to government benefits; only 1 in 7 believe that the poor “have hard lives.” And this attitude translates into policy. What we learn from the refusal of Republican-controlled states to expand Medicaid, even though the federal government would foot the bill, is that punishing the poor has become a goal in itself, one worth pursuing even if it hurts rather than helps state budgets.

But leave self-declared conservatives and their contempt for the poor on one side. What’s really striking is the disconnect between centrist conventional wisdom and the reality of life — and death — for much of the nation.

Take, as a prime example, positioning on Social Security. For decades, a declared willingness to cut Social Security benefits, especially by raising the retirement age, has been almost a required position — a badge of seriousness — for politicians and pundits who want to sound wise and responsible. After all, people are living longer, so shouldn’t they work longer, too? And isn’t Social Security an old-fashioned system, out of touch with modern economic realities?

Meanwhile, the reality is that living longer in our ever-more-unequal society is very much a class thing: life expectancy at age 65 has risen a lot among the affluent, but hardly at all in the bottom half of the wage distribution, that is, among those who need Social Security most. And while the retirement system F.D.R. introduced may look old-fashioned to affluent professionals, it is quite literally a lifeline for many of our fellow citizens. A majority of Americans over 65 get more than half their income from Social Security, and more than a quarter are almost completely reliant on those monthly checks.

These realities may finally be penetrating political debate, to some extent. We seem to be hearing less these days about cutting Social Security, and we’re even seeing some attention paid to proposals for benefit increases given the erosion of private pensions. But my sense is that Washington still has no clue about the realities of life for those not yet elderly. Which is where that Federal Reserve study comes in.

This is the study’s second year, and the current edition actually portrays a nation in recovery: in 2014, unlike 2013, a substantial plurality of respondents said that they were better off than they had been five years ago. Yet it’s startling how little room for error there is in many American lives.

We learn, for example, that 3 in 10 nonelderly Americans said they had no retirement savings or pension, and that the same fraction reported going without some kind of medical care in the past year because they couldn’t afford it. Almost a quarter reported that they or a family member had experienced financial hardship in the past year.

And something that even startled me: 47 percent said that they would not have the resources to meet an unexpected expense of $400 — $400! They would have to sell something or borrow to meet that need, if they could meet it at all.

Of course, it could be much worse. Social Security is there, and we should be very glad that it is. Meanwhile, unemployment insurance and food stamps did a lot to cushion unlucky families from the worst during the Great Recession. And Obamacare, imperfect as it is, has immensely reduced insecurity, especially in states whose governments haven’t tried to sabotage the program.

But while things could be worse, they could also be better. There is no such thing as perfect security, but American families could easily have much more security than they have. All it would take is for politicians and pundits to stop talking blithely about the need to cut “entitlements” and start looking at the way their less-fortunate fellow citizens actually live.

Krugman’s blog 5/26 and 5/27

May 28, 2015

There were two posts on 5/26 and one yesterday.  The first post on 5/26 was “The IMF’s New Cloves:”

A brief further note on the European situation: to me, at least, there are some echoes of 1998. Back then the IMF, in its attempt to deal with the Asian financial crisis, focused — as it does now in Europe — on the supposed need to couple financial deals with structural reform. In the case of Asian debtors, this meant taking on crony capitalism — and God knows crony capitalism was very real.

Yet even then, and even more in retrospect, the attempt to fix everything raised questions about what, exactly, the Fund thought it was doing. (Joke about Camdessus among US Treasury people at the time: “Even Napoleon never got as far as Korea”.) Wasn’t the Fund going too far afield? The case that exemplified the problem, at least as I was told the story, was the assault on the Suharto family’sclove monopoly — certainly a bad thing, deserving to be killed, but not all that relevant to financial stability. And by making things like ending the clove monopoly a condition of stabilization loans, the IMF arguably helped delay a resolution and feed a self-fulfilling panic.

The parallel with Greece today is far from perfect, but there’s enough commonality that everyone should think hard about whether old mistakes are being repeated. Reform overreach, the attempt to link crisis resolution to some kind of universal fix, is a good way to turn a manageable crisis into an irreversible rupture.

The second post on 5/26 was “Things I Wish I’d Been Wrong About:”

Brad DeLong remembers a blog post of mine from 2009 about the non-threat of an interest rate spike; I have to say that it looks pretty darn good analytically after all these years. Unfortunately, it was also right about this:

I just don’t think the inner circle gets how much danger we’re in from another vicious circle, one that’s real, not hypothetical. The longer high unemployment drags on, the greater the odds that crazy people will win big in the midterm elections — dooming us to economic policy failure on a truly grand scale.

Yesterday’s post was “Preliminary Notes on Inequality and Urbanism:”

Edited slightly from first version

Tim Wu has an interesting piece about the phenomenon of vacant storefronts in booming New York neighborhoods, which by coincidence dovetails with a number of conversations I’ve been having here at the Said Business School in Oxford, where several people are interested in the changing economic geography of London and its links to globalization.

The empty-store phenomenon is interesting, and cries out for a bit of modeling, which I won’t do right now. But it’s part of a broader story of big money moving in to desirable neighborhoods, and in the process destroying what makes them desirable. And this in turn has me thinking, blurrily — this is just a start — about the relationship between inequality and urbanism. Not as a diatribe — I think it’s a fairly complex issue — but just as an interesting thing, especially if you’re in the process of moving into a big city.

Some thoughts:

First, when it comes to things that make urban life better or worse, there is absolutely no reason to have faith in the invisible hand of the market. External economies are everywhere in an urban environment. After all, external economies — the perceived payoff to being near other people engaged in activities that generate positive spillovers — is the reason cities exist in the first place. And this in turn means that market values can very easily produce destructive incentives. When, say, a bank branch takes over the space formerly occupied by a beloved neighborhood shop, everyone may be maximizing returns, yet the disappearance of that shop may lead to a decline in foot traffic, contribute to the exodus of a few families and their replacement by young bankers who are never home, and so on in a way that reduces the whole neighborhood’s attractiveness.

On the other hand, however, an influx of well-paid yuppies can help support the essential infrastructure of hipster coffee shops (you can never have too many hipster coffee shops), ethnic restaurants, and dry cleaners, and help make the neighborhood better for everyone.

What does history tell us? Politically, I’d like to say that inequality is bad for urbanism. That’s far from obvious, however. Jane Jacobs wrote The Death and Life of Great American Cities right in the middle of the great postwar expansion, an era of widely shared economic growth, relatively equal income distribution, empowered labor — and collapsing urban life, as white families fled the cities and a combination of highway building and urban renewal destroyed many neighborhoods.

And when a partial urban revival began, it was arguably associated with forces driven by or associated with rising inequality. Affluent types in search of a bit of cool — probably 5 percenters rather than 1 percenters, and more or less David Brooks’s Bobos (bourgeois bohemians) drove gentrification and revival in urban cores; in New York, at least, large number of poorly paid but striving immigrants drove the revival of outer borough neighborhoods like Jackson Heights or Brighton Beach.

Still, we’re now arguably looking at something new, as the really wealthy — domestic malefactors of great wealth, but also oligarchs, princelings, and sheiks — buy up prime real estate and leave it vacant, creating luxury-shopping wastelands at best (I know, snobbish Upper West Side bias), expensive ghost districts at worst.

Anyway, interesting to think about, and for me a welcome diversion from dark thoughts about Greece.

Blow, Cohen, Kristof and Collins

May 28, 2015

In “The Rise of Social Liberalism and G.O.P. Resistance” Mr. Blow says as the nation’s views evolve, Republican presidential candidates remain stuck trying to out-conservative one another for the sake of primary voters.  Mr. Cohen, in “Sepp Blatter’s FIFA Reign of Shame,” says that to conclude Blatter should quit feels so obvious it’s not worth saying. But he’s so thick-skinned it’s worth saying twice.  Mr. Kristof considers “Polluted Political Games” and says here’s what can be done to bring the dark money of politics into the sunlight in time for the 2016 elections.  Ms. Collins says “Let’s Do Some Railing” and that one person’s waste is another person’s ride home.  Here’s Mr. Blow:

There is a fascinating phenomenon taking shape in America: As the country becomes less religious, it is also becoming more socially liberal.

It makes sense that these two variables should closely track each other, but the sheer scale and speed of the change is astonishing.

After a Pew Research Center report earlier this month found that “the Christian share of the U.S. population is declining, while the number of U.S. adults who do not identify with any organized religion is growing,” this week Gallup released a report that found that “more Americans now rate themselves as socially liberal than at any point in Gallup’s 16-year trend, and for the first time, as many say they are liberal on social issues as say they are conservative.”

Gallup has tested the moral acceptability of 19 variables since the early 2000s.

And, as Gallup found this week:

“The upward progression in the percentage of Americans seeing these issues as morally acceptable has varied from year to year, but the overall trend clearly points toward a higher level of acceptance of a number of behaviors. In fact, the moral acceptability ratings for 10 of the issues measured since the early 2000s are at record highs.”

Acceptance of gay or lesbian relations is up 23 percentage points over that time. Having a baby outside of marriage is up 16 points. Premarital sex is up 15 points. Divorce and research using stem cells obtained from human embryos are both up 12 points.

At the same time, the death penalty is down three points (within the four-point margin of error) and medical testing on animals is down nine points.

We as a country may still be engaged in a vigorous debate about the proper size and function of government, and about which parties and candidates could best steer America in the right direction, but one thing is less and less debatable: We are rapidly becoming a more socially liberal country.

This change poses a particular challenge for the Republican Party and its national aspirations, not so much at the congressional seats, many of which are safe, but for presidential candidates.

Part of the issue, as the likely candidate Jeb Bush put it last year, is that for a Republican to become president, he or she would have to be willing to “lose the primary to win the general” election.

It was a catchy phrase and everyone understood what he was saying: Don’t allow the Republican debates and primaries to drag you so far right that you will never be able to recover in the general election. But the problem is that there is no way to compete in the general without first winning the primaries securing the nomination.

And so, Republicans are now involved in another election season that feels like the movie “Groundhog Day”: trying to out-conservative one another to be in the good graces of Republican primary voters, who in many states can be disproportionately religious and socially conservative.

Take Iowa, for instance, whose February caucuses will be the first contests of the 2016 presidential cycle. As the Public Religion Research Institute pointed out earlier this month:

“Iowa Republicans are notably more socially conservative than Republicans nationally. Compared to Republicans overall, Iowa Republicans are more likely to oppose legalizing same-sex marriage (64 percent vs. 58 percent, respectively), and are more likely to say abortion should be illegal in all or most cases (68 percent vs. 58 percent, respectively). The social conservatism evident among Iowa Republicans is based in part on the large presence of white evangelical Protestants. More than four in ten (42 percent) Iowa Republicans are white evangelical Protestant.”

How do you win Iowa, or at least survive it? Some candidates may not focus their attentions there at all. They may skip it, as John McCain did in 2000, and instead focus on the slightly more moderate Republican primary voters in New Hampshire to deliver their first strong showing shortly after the Iowa caucuses.

For example, a March poll conducted by the Suffolk University Political Research Center in Boston found that more likely New Hampshire Republican primary voters are pro-choice than pro-life on abortion and more favor same-sex marriage than oppose it.

But New Hampshire is somewhat anomalous. It is the most conservative state in a very liberal northeast. Nationally, only 27 percent of Republicans are pro-choice, while 67 percent are pro-life, and nationally only 37 percent of Republicans support same-sex marriage, according to polls by Gallup in 2014 and 2015. At the same time, New Hampshire is the second most nonreligious state in the country — nonreligious being defined by Gallup as people “saying religion is not an important part of their daily lives and that they seldom or never attend religious services” — second only to Vermont. The nonreligious population of New Hampshire is 51 percent; for Vermont, it’s 56 percent.

But Iowa and New Hampshire would be only the first two of a 50-state slog through a Republican electorate that is not necessarily where the rest of the country is — or is going — on religiosity and social liberalism.

There is only so much skipping one can do. At some point, the candidates must face the most conservative voters and one voice must emerge.

This process has not been kind or general-election-friendly for the Republican candidates in the last couple of cycles. But there is no indication that most Republicans — either candidates or voters — have drawn the necessary lessons from those defeats.

Next up we have Mr. Cohen:

I was living in Paris in 1998 and had tickets for the World Cup Final but instead had to rush off to cover upheaval in Nigeria and ended up in a Lagos hotel watching France beat Brazil 3-0. The commentators were Nigerian, of course. After a couple of first-half French goals against a listless Brazilian side, they pretty much gave up describing the match. Instead they focused on how much money they thought had changed hands to secure France’s triumph. I laughed as the numbers spiraled upward.

The speculation — unfounded in this instance — seemed to me more a reflection of the Nigeria of Sani Abacha, the ruthless and massively corrupt leader who had just died, than of the state of global soccer. In Nigeria back then, nothing moved without payment of a bribe. Now, however, I am not so sure. Those commentators were onto something larger than the match itself. Sepp Blatter, once described by The Guardian as “the most successful non-homicidal dictator of the past century,” had been elected the month before as president of FIFA, soccer’s governing body, in a ballot marked by allegations of cash handouts of $50,000 to African delegates in a Paris hotel. It was the start of Blatter’s 17-year (and counting) reign of shame over the world’s most popular game. He is a man without conscience.

Another unrelated soccer memory stirred at the news of the arrest in Zurich of several top FIFA officials on bribery, fraud and money laundering charges brought by the United States Justice Department. It was of standing 30 years ago at the Heysel Stadium in Brussels with my friends Patrick Wintour of The Guardian and Ed Vulliamy of The Observer. We watched as Liverpool fans charged Juventus fans gathered in the Z-block of the ground. There was a sickening inevitability about what happened as the Juventus supporters were crushed against terrace barriers that collapsed and then a concrete wall.

Later Wintour and Vulliamy filed a report: “We heard a muted but ghastly thud, like quarry dynamited at a distance. It was the sound of tons of concrete and scores of bodies plunging over the edge of the terracing.” You knew. People were dying. There were, in the end, 39 dead, most of them Juventus fans. The match went ahead, a ghastly farce.

It is not true that everything has gotten worse in global soccer under Blatter. Safety has improved and, yes, the World Cup has been held in Africa. But just about everything has. To conclude that Blatter should quit rather than embark on a fifth term as FIFA president (assuming his seemingly inevitable election to a fifth term on Friday) feels so blindingly obvious that it’s not worth saying. But then the FIFA president is so thick-skinned it’s actually worth saying twice: Mr. Blatter, your time is up.

Why? Because the corruption charges against current and former FIFA vice presidents and others reflect an organization rotten to its core, operating in the absence of any meaningful oversight, without term limits for a president whose salary is of course unknown (but estimated by Bloomberg to be “in the low double-digit” millions), overseeing $5.72 billion in partially unaccounted revenue for the four years to December 2014, governing a sport in which matches and World Cup venues and in fact just about everything appears to have been up for sale, burying a report it commissioned by a former United States attorney into the bidding process for the next two World Cups, and generally operating in a culture of cavalier disdain personified by Blatter, whose big cash awards to soccer federations in poorer countries have turned the delegates from many of FIFA’s 209 member associations into his fawning acolytes.

Among those charged is Jeffrey Webb, the successor to Jack Warner as the head of the North and Central American and Caribbean regional confederation within FIFA. Warner was also charged. When Warner’s corruption became so outlandish that he was forced to step down a few years ago, Blatter’s FIFA maintained a presumption of innocence. Enough said.

Bribery occurred “over and over, year after year, tournament after tournament,” said Attorney General Loretta E. Lynch, who has supervised the investigation from the days when she was the United States attorney for the Eastern District of New York. That sounds about right. The Office of the attorney general of Switzerland has opened a separate criminal investigation into the selection of Russia to host the 2018 World Cup and Qatar the 2022 World Cup.

Just because Russia and Qatar are gas-rich (and back in 1998 a Qatari businessman provided Blatter with a private jet for his first FIFA election campaign) does not mean the process was corrupt. Of course it does not. But that Swiss criminal investigation is thoroughly warranted — and the first requisite for making it thorough, transparent and credible is Blatter’s immediate departure.

Now we get to Mr. Kristof:

I’ve admired the Clintons’ foundation for years for its fine work on AIDS and global poverty, and I’ve moderated many panels at the annual Clinton Global Initiative. Yet with each revelation of failed disclosures or the appearance of a conflict of interest from speaking fees of $500,000 for the former president, I have wondered: What were they thinking?

But the problem is not precisely the Clintons. It’s our entire disgraceful money-based political system. Look around:

• Gov. Chris Christie of New Jersey accepted flights and playoff tickets from the Dallas Cowboys owner, Jerry Jones, who has business interests Christie can affect.

• Senator Marco Rubio of Florida has received financial assistance from a billionaire, Norman Braman, and has channeled public money to Braman’s causes.

• Jeb Bush likely has delayed his formal candidacy because then he would have to stop coordinating with his “super PAC” and raising money for it. He is breaching at least the spirit of the law.

When problems are this widespread, the problem is not crooked individuals but perverse incentives from a rotten structure.

“There is a systemic corruption here,” says Sheila Krumholz of the Center for Responsive Politics, which tracks campaign money. “It’s kind of baked in.”

Most politicians are good people. Then they discover that money is the only fuel that makes the system work and sometimes step into the bog themselves.

Money isn’t a new problem, of course. John F. Kennedy was accused of using his father’s wealth to buy elections. In response, he joked that he had received the following telegram from his dad: “Don’t buy another vote. I won’t pay for a landslide!”

Yet Robert Reich, Bill Clinton’s labor secretary and now chairman of the national governing board of Common Cause, a nonpartisan watchdog group,notes that inequality has hugely exacerbated the problem. Billionaires adopt presidential candidates as if they were prize racehorses. Yet for them, it’s only a hobby expense.

For example, Sheldon and Miriam Adelson donated $92 million to super PACs in the 2012 election cycle; as a share of their net worth, that was equivalent to $300 from the median American family. So a multibillionaire can influence a national election for the same sacrifice an average family bears in, say, a weekend driving getaway.

Money doesn’t always succeed, of course, and billionaires often end up wasting money on campaigns. According to The San Jose Mercury News, Meg Whitman spent $43 per vote in her failed campaign for governor of California in 2010, mostly from her own pocket. But Michael Bloomberg won his 2009 re-election campaign for mayor of New York City after,according to the New York Daily News, spending $185 of his own money per vote.

The real bargain is lobbying — and that’s why corporations spend 13 times as much lobbying as they do contributing to campaigns, by the calculations of Lee Drutman, author of a recent book on lobbying.

The health care industry hires about five times as many lobbyists as there are members of Congress. That’s a shrewd investment. Drug company lobbyists have prevented Medicare from getting bulk discounts, amounting to perhaps $50 billion a year in extra profits for the sector.

Likewise, lobbying has carved out the egregious carried interest tax loophole, allowing many financiers to pay vastly reduced tax rates. In that respect, money in politics both reflects inequality and amplifies it.

Lobbyists exert influence because they bring a potent combination of expertise and money to the game. They gain access, offer a well-informed take on obscure issues — and, for a member of Congress, you think twice before biting the hand that feeds you.

The Supreme Court is partly to blame for the present money game, for its misguided rulings that struck down limits in campaign spending by corporations and unions and the overall political donation cap for individuals.

Still, President Obama could take one step that would help: an executive order requiring federal contractors to disclose all political contributions.

“President Obama could bring the dark money into the sunlight in time for the 2016 election,” notes Michael Waldman of the Brennan Center for Justice at the New York University School of Law. “It’s the single most tangible thing anyone could do to expose the dark money that is now polluting politics.”

I’ve covered corrupt regimes all over the world, and I find it ineffably sad to come home and behold institutionalized sleaze in the United States.

Reich told me that for meaningful change to arrive, “voters need to reach a point of revulsion.” Hey, folks, that time has come.

And last but not least we have Ms. Collins:

Just before Congress slunk away for the three-day weekend — which it was, of course, planning to stretch into a week — senators from the Northeast held a press conference to denounce Republicans for underfunding Amtrak passenger rail service.

“Amtrak has some infrastructure that is so old it was built and put into service when Jesse James and Butch Cassidy were still alive and robbing trains,” said Senator Charles Schumer of New York.

“In Connecticut we have a bridge that was built when Grover Cleveland was president,” said Senator Richard Blumenthal of Connecticut.

Now you have to admit, this is pretty compelling. Especially if you merge them together and envision Butch Cassidy and Grover Cleveland robbing commuters on the Acela Express.

The Northeast corridor from Boston to Washington is the centerpiece of the nation’s commuter rail system. It carries more people than the airlines, makes a profit, and takes an ungodly number of cars off extremely crowded highways. However, it needs $21 billion of work on its bridges, tunnels, tracks and equipment.

We’ve all been thinking about it since the terrible derailment in Philadelphia earlier this month. In a moment of stupendously bad timing, House Republicans chose the day after the accident to cut more than $1 billion from the $2.45 billion the Obama administration had requested for Amtrak.

Speaker John Boehner said any attempt to link the two things was “stupid.” As only he can.

Let’s take a middle road, people, and assume that while the Philadelphia crash might not be directly related to any funding cut, it’s a good reminder that running packed trains through 19th century tunnels and bridges is asking for trouble.

Amtrak is a managerial mishmash, trapped under the thumb of Congress, and also responsible for long-distance service across the country, touching cities from Chicago to New Orleans to Grand Rapids to Salt Lake City on a series of routes that are never going to make money. Conservative groups that call for the privatization of Amtrak are basically envisioning a system where the Northeast Corridor is left to fend for itself while the money-losing routes fade into history.

“Ideally, we would like to see all transportation spending and taxing devolve to the states,” said Michael Sargent of The Heritage Foundation.

None of the Northeastern senators at the press conference complained about the cross-country money-losers. Perhaps that was out of deference to their colleague, Dick Durbin of Chicago. Perhaps they instinctively understood that no matter what the drain, Amtrak has a better chance of political survival running through 46 states. It’s a theory that works great for the Defense Department.

Maybe the senators just had a national vision of what national rail service is supposed to be.

“It’s worth reminding our colleagues the Northeast Corridor is the only part that makes money,” said Senator Chris Murphy of Connecticut in a phone interview. “But that doesn’t mean I want to get rid of the rest of the system. If we only kept the portions of government that made money, there wouldn’t be any point to the State of Connecticut running a Department of Children and Families anymore.”

What’s your off-the-cuff verdict, people?

A) Save the railroad!

B) Prioritize! Every train for itself!

C) They can do anything they want if they’ll just get together and fix the pothole on my corner.

Wow, I believe I see a majority for the pothole. Remind me to tell you about how members of Congress just passed the 33rd super-short-term highway bill because they haven’t been able to come up with any normal road repair funding since 2008.

Transportation unites the country, but the crowded parts and the empty parts have different needs. Cities require mass transit, which is something that tends to irritate many rural conservatives. (It’s that vision of a whole bunch of strangers stuck together, stripped of even the illusion of control.) Remote towns and cities need connections to survive, even though the price tag seems way out of proportion to those of us who don’t live on, say, an Alaskan island.

Amtrak’s operating budget is about the same as the Essential Air Service program, which subsidizes commercial air service to remote communities. Most of the flights are at least two-thirds empty. CBS News, in a report earlier this year, found one flight between Kansas City, Mo., and Great Bend, Kan., that generally carried only a single passenger.

Everybody knows that the government can waste money. (If you have any doubts, I will refer you to a recent report by Pro Publica about a glorious new $25 million, 64,000-square-foot headquarters the military constructed for American troops in Afghanistan even though said troops were going home.) But making money-losing links between different parts of the theoretically United States doesn’t seem to be in that category.

Fix Amtrak. Connect the country.

Won’t happen as long as the mole people rule.

Krugman’s blog, 5/25/15

May 26, 2015

There were two posts on 5/25.  The first was “The Corporate Archipelago:”

At HowTheLightGetsIn, the other Hay festival, where I just participated in a panel on the future of capitalism. I know, why such a small topic? But what I found myself thinking and talking about is actually the present of capitalism — and in particular about the peculiar delusion that we live in a world of individual competition in freewheeling markets.

I mean, some of us do — by and large, men gathered at street corners in the early morning, waiting to be picked up by vans that carry them off to various forms of day labor. But most people work in organizations. Even in the private sector, two-thirds of workers are employed by firms with more than a hundred workers, half by firms with more than 500, a quarter by firms with more than 10,000 employees. We may live in a market sea, but most of us live on pretty big command-and-control islands, some of them very big indeed. Some of us may spend our workdays like yeoman farmers or self-employed artisans, but most of us are living in the world of Dilbert.

And there are reasons for this situation: in many areas bureaucracy works better than laissez-faire. That’s not a political judgment, it’s the implicit conclusion of the profit-maximizing private sector. And people who try to carry their Ayn Rand fantasies into the real world soon get a rude awakening.

Yesterday’s second post was “Grexit and the Morning After:”

We just had another electoral earthquake in the euro area: Podemos-backed candidates have won local elections in Madrid and Barcelona. And I hope that the IFKAT — the institutions formerly known as the troika — are paying attention.

The essence of the Greek situation is that the actual parameters of a short-run deal are clear and unavoidable: Greece can’t run a primary budget deficit, because nobody will lend it new money, and it won’t (and basically can’t) run a large primary surplus, because you can’t squeeze even more blood from that stone. So you would think that an agreement for Greece to run a modest primary surplus over the next few years would be easy to reach — that is what will happen, so why not make it official?

But now the IMF is playing bad cop, declaring that it cannot release funds until Syriza toes the line on pensions and labor market reform. The latter is dubious economics — the IMF’s own research doesn’t support enthusiasm about structural reforms, especially in the labor market. The former probably recognizes a real problem — Greece probably can’t deliver what it has promised pensioners — but why should this be an issue over and above the general question of the primary surplus.

What I would urge everyone to do is ask what happens if Greece is in fact pushed out of the euro. (Yes, Grexit — ugly word, but we’re stuck with it.)

It would surely be ugly in Greece, at least at first. Right now the core euro countries believe that the rest of the euro area can handle it, which might be true. Bear in mind, however, that the supposed firewall of ECB support has never actually been tested. If markets lose faith and the time for ECB purchases of Spanish or Italian bonds arises, will it really happen?

But the bigger question is what happens a year or two after Grexit, where the real risk to the euro is not that Greece will fail but that it will succeed. Suppose that a greatly devalued new drachma brings a flood of British beer-drinkers to the Ionian Sea, and Greece starts to recover. This would greatly encourage challengers to austerity and internal devaluation elsewhere.

Think about it. Just the other day the Very Serious Europeans were hailing Spain as a great success story, a vindication of the whole program. Evidently the Spanish people don’t agree. And if the anti-establishment forces have a recovering Greece to point to, the discrediting of the establishment will accelerate.

One conclusion, I guess, is that Germany should try to sabotage Greece post-exit. But I hope that will be considered unacceptable.

So think about it, IFKATs: are you really sure you want to start going down this road?

Brooks and Nocera

May 26, 2015

In “Talent Loves English” Bobo babbles that as the world grows more prosperous, immigration is changing, and our ideas need to change with it.  In the comments “craig geary” from Redlands, FL had this to say:  “Finally David Brooks tells the truth.  “The republican party is insane…”  Not only on immigration, but taxes, man made climate change, perpetual war in the Middle East, the need for and sanity of universal healthcare, a woman’s right to choose, equal pay for equal work, marriage equality and our crumbling 20th century infrastructure.”  In “Smoking, Vaping and Nicotine” Mr. Nocera says the different ways of delivering nicotine come with different risks and need to be addressed.  Here’s Bobo:

Eight hundred years ago next month, English noblemen forced King John to sign the Magna Carta. It’s still having amazing effects on the world today. The Magna Carta helped usher in government with a separation of powers. It helped create conditions in which centralized authority could not totally control fiscal, political, religious or intellectual life. It helped usher in the modern Anglo-Saxon state model, with its relative emphasis on the open movement of people, ideas and things.

The Anglo-Saxon model has its plusses and minuses, but it is very attractive to people around the world. Today, as always, immigrants flock to nations with British political heritage. Forty-six million people in the United States are foreign born, almost 1 in 6. That’s by far the highest number of immigrants in any country in the world.

Canada, Australia and New Zealand are also immigrant magnets. The British political class was a set abuzz last week by a government reportshowing a 50 percent increase in net immigration in 2014 compared with 2013. The government has a goal of limiting immigration to 100,000 a year, but, in 2014, net inbound migration was estimated to be 318,000. Britain has the most diverse immigrant community of any nation on earth.

Some of the those people went to Britain from outside of Europe, but a great many flow from the sclerotic economies in the European Union: Italy, Spain and France. Compared with many other European countries, Britain is a job-creating paragon.

Across the English-speaking world, immigrants are drawn by the same things: relatively strong economies, good universities, open cultures and the world’s lingua franca.

The nature of global migration is slowly evolving, too. We have an image of immigrants as the poor, huddled masses yearning to breathe free. According to this stereotype, immigrants are driven from their homes by poverty and move elsewhere to compete against the lowest-skilled workers.

But immigrants do not come from the poorest countries. Nations like Central African Republic, the Democratic Republic of Congo and Niger — some of the poorest countries in the world — have some of the lowest outmigration rates. Less than 3 percent of their populations live outside their borders. Their citizens don’t have the resources to move.

Instead, immigrants tend to come from middle-class countries, and they migrate to rich, open ones. You might have thought that as the world gets more middle class, global immigration would decline because of more opportunity at home. In fact, the reverse is happening. As the developing world gets more middle class, immigration has increased because educational and income gains have led to ever higher aspirations.

The situation is complex. Less than a decade ago, six Mexicans migrated to the United States for every Indian or Chinese. But as Mexico has prospered, immigration has dropped. Meanwhile, as India and China have gotten richer, the number of Indians and Chinese living abroad has doubled.

Some of the Asian immigrants are quite wealthy. According to the China International Immigration Report, among Chinese with assets of more than $16 million, 27 percent had emigrated abroad and an additional 47 percent were considering such a move. The real estate website Soufun.net surveyed 5,000 people and found that 41 percent of such people were drawn to move abroad for better living conditions, 35 percent for better educational opportunities for their children and 15 percent for better retirement conditions.

And this talent pool has barely been tapped. According to a Gallup surveyin 2012, 22 million Chinese wanted to move to the U.S., as did 10 million Indians, 3 million Vietnamese and a surprising 5 million Japanese.

In short, it might be time to revise our stereotypes about the immigration issue. A thousand years ago, a few English noblemen unwittingly heralded in a decentralized political and intellectual model. This model was deepened over the centuries by people ranging from Henry VIII to the American founding fathers. It’s a model that is relatively friendly to outsider talent. We didn’t earn this model; we’re the lucky inheritors.

Meanwhile, globalization, with all its stresses and strains, has created a large international class of middle-class dreamers: university graduates who can’t fulfill their aspirations at home and who would enrich whatever nation is lucky enough to have them.

In this context, Hillary Clinton’s daring approach to immigration, supporting a “path to citizenship” for undocumented immigrants already in the United States, is clearly the right one. The Republican Party is insane if its conducts a 21st-century immigration policy based on stereotypes from the 1980s.

Bobo — letting his freak flag fly.  Here’s Mr. Nocera:

“We need a national debate on nicotine,” said Mitch Zeller.

Zeller is the director of the Center for Tobacco Products, a division of the Food and Drug Administration created in 2009 when Congress passed legislation giving the F.D.A. regulatory authority — at long last! — over cigarettes. In addition, the center will soon have regulatory authority over other tobacco products, including electronic cigarettes, which have become enormously controversial even as they have gained in use. Through something called a “deeming rule,” the center is in the process of asserting that oversight over e-cigarettes.

Opponents of electronic cigarettes, which include many public health officials, hope that the center will treat these new devices like it treats cigarettes: taking steps to discourage teenagers from “vaping,” for instance, and placing strict limits on the industry’s ability to market its products.

Proponents, meanwhile, hope that the center will view e-cigarettes as a “reduced harm” product that can save lives by offering a nicotine fix without the carcinogens that are ingested through a lit cigarette. In this scenario, e-cigarette manufacturers would be able to make health claims, and adult smokers might even be encouraged to switch from smoking to vaping as part of a reduced harm strategy.

When I requested an interview with Zeller, I didn’t expect him to tip his hat on which direction he wanted the center to go, and he didn’t. Indeed, one of the points he made was that the F.D.A. was conducting a great deal of scientific research — more than 50 studies in all, he said — aimed at generating the evidence needed to better understand where to place e-cigarettes along what he calls “the continuum of risk.”

Zeller is a veteran of the “tobacco wars” of the 1990s, working alongside then-F.D.A. Commissioner David Kessler, who had audaciously labeled cigarettes a “drug-delivery device” (the drug being nicotine) and had claimed regulatory authority. Zeller left the F.D.A. in 2000, after theSupreme Court ruled against Kessler’s interpretation, and joined the American Legacy Foundation, where he helped create its hard-hitting, anti-tobacco “Truth campaign.” After a stint with a consulting firm, Pinney Associates, he returned to the F.D.A. in early 2013 to lead the effort to finally regulate the tobacco industry.

“I am fond of quoting Michael Russell,” Zeller said, referring to an important South African tobacco scientist who died in 2009. In the early 1970s, Russell was among the first to recognize that nicotine was the reason people got addicted to cigarettes. “He used to say, ‘People smoke for the nicotine but die from the tar,’ ” Zeller recalled.

This is also why Zeller found e-cigarettes so “interesting,” as he put it, when they first came on the market. A cigarette gets nicotine to the brain in seven seconds, he said. Nicotine gum or patches can take up to 60 minutes or longer, which is far too slow for smokers who need a nicotine fix. But e-cigarettes can replicate the speed of cigarettes in delivering nicotine to the brain, thus creating real potential for them to become a serious smoking cessation device.

But there are still many questions about both their safety and their efficacy. For instance, are smokers using e-cigarettes to quit cigarettes, or they using them to get a nicotine hit at times when they can’t smoke cigarettes? And beyond that there are important questions about nicotine itself, and how it should be dealt with.

“When nicotine is attached to smoke particles, it will kill,” said Zeller. “But if you take that same drug and put it in a patch, it is such a safe medicine that it doesn’t even require a doctor’s prescription.” That paradox helps explain why he believes “there needs to be a rethink within society on nicotine.”

Within the F.D.A., Zeller has initiated discussions with “the other side of the house” — the part of the agency that regulates drugs — to come up with a comprehensive, agency-wide policy on nicotine. But the public health community — and the rest of us — needs to have a debate as well.

“One of the impediments to this debate,” Zeller said, is that the e-cigarette opponents are focused on all the flavors available in e-cigarettes — many of which would seem aimed directly at teenagers — as well as their marketing, which is often a throwback to the bad-old days of Big Tobacco. “The debate has become about these issues and has just hardened both sides,” Zeller told me.

It’s not that Zeller believes nicotine is perfectly safe (he doesn’t) or that we should shrug our shoulders if teenagers take up vaping. He believes strongly that kids should be discouraged from using e-cigarettes.

Rather, he thinks there should be a recognition that different ways of delivering nicotine also come with different risks. To acknowledge that, and to grapple with its implications, would be a step forward.

“This issue isn’t e-cigarettes,” said Mitch Zeller. “It’s nicotine.”

Krugman’s blog, 5/22 and 5/23/15

May 25, 2015

There were two posts on 5/22 and three on 5/23.  Here’s the first from 5/22, “Blogging Begins:”

Brad DeLong has a little note on how and when he began blogging, which comes at a perfect moment for me — I’m scheduled to talk with some Oxford undergraduates about changing forms of communication in economics, and Brad’s note both tells his own story and jogs my memory about how things changed in the late 1990s.

In my own case, I began writing online in 1996, when Michael Kinsley signed me up to write a monthly column for Slate. This was still traditional column-writing — length constraints were less rigid, editing less intrusive, and gratification less delayed than in print, but still relatively old-fashioned. But it did get me accustomed to the online format.

Then came the Asian financial crisis. Everyone was scrambling to make sense of what was happening, and both events and new ideas were coming far too fast for traditional publications to keep up. So I began posting little essays, thoughts, and models on my MIT home page — which is still extant! No blogging software; I just uploaded stuff and put links on the page. But it was still effectively a form of blogging, and it turned out that a lot of people read it. That’s where I put my initial efforts to model the liquidity trap, my thoughts on macro, and more. Most of the links there seem to still work, by the way.

Other people were doing some similar things; and Nouriel Roubini took things to the next step by creating an Asian financial crisis page (which seems to be gone) that acted as a compendium and clearing house for most of the interesting stuff being written on the subject. So by the end of the 1990s a lot of the substantive discussion of international macroeconomics and finance was already taking place online, bypassing the traditional channels.

A proper blog came much later, when I realized that I wanted a place to put the backstory behind my Times columns; the Times added a Twitter feed (which I didn’t even know existed until Andy Rosenthal casually mentioned that I had 600,000 followers). And so here we are today.

The second post from 5/22 was “Hypocritical Sloth:”

Yesterday Politico posted a hit piece on Elizabeth Warren, alleging that she’s being hypocritical in her opposition to a key aspect of TPP, that’s interesting in several ways. First, it was clearly based on information supplied by someone close to or inside the Obama administration – another illustration of the poisonous effect the determination to sell TPP is having on the Obama team’s intellectual ethics. Second, the charge of hypocrisy was ludicrous nonsense – “You say you’re against allowing corporations to sue governments, yet you were a paid witness against a corporations suing the government!” Um, what?

And more generally, the whole affair is an illustration of the key role of sheer laziness in bad journalism.

Think about it: when is the charge of hypocrisy relevant? Basically, only when a public figure is preaching about individual behavior, and perhaps holding himself or herself up as a role model. So yes, it’s fair to go after someone who preaches morality but turns out to be a crook or a sexual predator. But articles alleging that someone’s personal choices are somehow hypocritical given their policy positions are almost always off point. Someone can declare that inequality is a problem while being personally rich; they’re calling for policy changes, not mass self-abnegation. Someone can declare our judicial system flawed while fighting cases as best they can within that system — until policy change happens, you have to live in the world as it is.

Oh, and it’s very definitely OK to advocate policies that would hurt one’s own financial interests — it’s just bizarre when the press suggests that there’s something insincere and suspect when high earners propose tax increases.

So why are charges of hypocrisy so popular? Mainly, I think, as a way to avoid taking on policy substance. Is Elizabeth Warren right or wrong about TPP? Never mind, let’s sneer at her for having been a prominent law professor.

The same motives drive the preoccupation with flip-flopping. You once said that deficits were bad, now you say that they’re OK. Hah! Never mind whether deficits are in fact OK right now, and whether either the situation has changed or you have learned something. (As someone pointed out, both Mitt Romney and Hillary Clinton have rejected policies they used to support — but Romney has rejected policies that worked, while Clinton has rejected policies that didn’t. A bit of a difference.)

So maybe this head-scratchingly weird hit on Warren will serve as a teachable moment, a reminder that journalism about policy should be, you know, journalism about policy.

You can’t expect that from Tiger Beat on the Potomac.  The first post from 5/23 was “Regimes and Regressions (Wonkish):”

Some people have asked me about the chart in this post on interest rates and their effect: why did I truncate the time period, so as not to include the past couple of decades? I actually did explain my reasoning right there in the post (although I should know by now that careful reading is, let’s say, not a universal skill), but let’s revisit that anyway — and while we’re at it, let me talk about the broader principle involved.

Here’s what I said in the post:

Here’s the inverse of the Fed funds rate versus housing starts during the period when major moves in monetary policy were mainly driven by concerns about inflation (as opposed to bursting bubbles) [emphasis added]

To see what I was talking about, compare the interest-rate housing correlation in the early 1980s with the correlation after 2006 (sorry, you may have to squint a bit):

In the left panel, you see the Fed funds rate seesawing as the Fed tried to grapple with inflation — and you see housing starts move strongly in the opposite direction, plunging when rates rose and soaring when they fell. In the right panel, however, you see housing starts and interest rates moving in the same direction — plunging together. So is there no relationship?

Bad answer. The situations are different in a fundamental way. In the 80s interest rates were being driven by fear of inflation; from the point of view of the housing market, they were more or less endogenous. In the post-2006 period they were being driven largely by the housing bust itself. So the 80s experience was a sort of natural experiment in the effects of rate changes, whereas more recent events are an illustration of reverse causation.

And I’ve been arguing for a long time that there was a regime shift in the late 1980s, that as inflation fears were replaced by the Great Moderation, we entered an era of postmodern recessions in which monetary policy was trying to clean up after bubbles rather than curb inflation.

The point, then, is that when you look for the effects of monetary policy, it’s often important to distinguish between eras when interest rates are a cause and eras when they’re an effect — and it’s not that hard to know which eras we’re talking about.

The same principle applies to fiscal policy. I do a lot of scatterplots over the period from 2009 onward, because that’s the era of panic-driven austerity, when big changes in spending and taxes were a response to fears and arguably exogenous to real GDP. A scatterplot that includes other eras — in particular, eras when the zero lower bound wasn’t binding and governments weren’t worried about bond vigilantes — is not going to give the same result.

Again, we’re looking for reasonable approximations to natural experiments here. Really clean natural experiments are hard to find, but some eras provide better experiments than others.

The second post on 5/23 was “Time Zones, Columns, and Comments (Trivial):”

A few West Coast readers have complained to me that columns are no longer posted as early as in the past — they go up in the small hours of the East Coast morning, not 11 PM or so. There has indeed been a change in policy. But it’s not about you. It is, as I understand it, about the Europeans.

You see, our columnists — and me in particular — do have a lot of European readers. And what we were finding was that hundreds of comments from those readers were piling up in the queue long before our East Coast readers had their first cup of coffee. The result was a lot of loyal NYT readers complaining that whatever they had to say was buried so deep in the stack that nobody saw it.

Is the current policy a good solution? I don’t know. But we’re trying.

Oh, and by the way: to commenters who allege that there’s some sinister ideological screening going on in the threads on this blog — you have to be kidding. The staff who do the moderating (I very rarely do it myself these days) don’t have the time or inclination to do anything of the sort.

The third post on 5/23 was “A Conversation About Inequality and Atkinson:”

Tony Atkinson, in many ways the father of modern inequality research, has a terrific new book — “Inequality: What Can be Done?” — that is, um, about inequality and what can be done. A few weeks ago Janet Gornick, director of the LIS data center, led Bob Solow and yours truly in a wide-ranging discussion of issues raised by Tony’s book. Here it is:

 

Blow, Cohen and Krugman

May 25, 2015

In “Restoring Memoriam to Memorial Day” Mr. Blow says our country keeps drifting further away from the spirit behind the holiday because fewer of us have served or have family members who serve in the military.  Mr. Cohen, in “The Great Unease,” says we have access to everything and certainty about nothing. The Day of Judgment has given way to days of endless judgment.  Prof. Krugman, in “The Big Meh,” says a growing number of economists, looking at the data on productivity and incomes, are wondering if the technological revolution has been greatly overhyped.  Oh, gawd, don’t tell The Moustache of Wisdom…  Here’s Mr. Blow:

This Memorial Day, as we head to the lake and the beach, grill and drink, shop and save, lay out in the sun or seek shady places, we must remain cognizant that the holiday didn’t begin as a day of celebration or commerce but one of solemnity and, indeed, memoriam.

As David W. Blight, a professor of history and the director of the Gilder Lehrman Center for the Study of Slavery, Resistance and Abolition at Yale wrote in The New York Times in 2011, during the final year of the Civil War, a racetrack was converted to an outdoor prison for Union captives; “at least 257 died of disease and were hastily buried in a mass grave behind the grandstand.”

Blight wrote: “After the Confederate evacuation of Charleston, black workmen went to the site, reburied the Union dead properly, and built a high fence around the cemetery” and the freed people, “in cooperation with white missionaries and teachers, staged a parade of 10,000 on the track.”

He continued: “After the dedication, the crowd dispersed into the infield and did what many of us do on Memorial Day: enjoyed picnics, listened to speeches and watched soldiers drill.”

Blight concluded: “The war was over, and Memorial Day had been founded by African-Americans in a ritual of remembrance and consecration. The war, they had boldly announced, had been about the triumph of their emancipation over a slaveholders’ republic. They were themselves the true patriots.”

This is the history from which this holiday springs: honoring sacrifice. And honoring sacrifices can exist apart from endorsing missions. Many of our veterans have given life, and increasingly, limb for this country, and that must be saluted.

Some of our wars are those of disastrous execution, others of deceptive inception, some a bit of both, but they are all ours.

Yet we are drifting away from this tradition of honoring sacrifice. The public in general and the elected officials who have sanctioned and sustained our wars, sometimes over substantial public objection, have a diminishing personal stake on the battlefields — few of their own lives and the lives of their children, siblings and spouses.

President Obama isn’t a military veteran, nor are many of the presidential hopefuls who have declared or might declare a run for the White House in 2016.

Hillary Clinton, Martin O’Malley and Bernie Sanders have never served. Jeb Bush, Ted Cruz, Rand Paul, Marco Rubio, Scott Walker, Chris Christie, Ben Carson, Mike Huckabee, Rick Santorum, Carly Fiorina and Bobby Jindal have not either. Only Rick Perry, Lindsey Graham and Jim Webb have.

As USA Today reported in 2012:

“In 2013, just 19 percent of the 535 combined members in the U.S. House and Senate will have active-duty military service on their résumé, down from a peak in 1977 when 80 percent of lawmakers boasted military service.”

The newspaper explained:

“The transition from the draft to an all-volunteer military in 1973 is a driving force of the decline, but veterans and their advocates say they face more challenges running for office in the modern era of political campaigns.”

As for the current Congress, as the “PBS NewsHour” noted in November: “In all, 97 members of the next session of Congress will have served in the U.S. military. That means less than 18 percent of the new congressional delegation served in the armed forces. (Note: This number includes one nonvoting delegate from the Northern Marianas.)”

Krugman’s blog, 5/20 and 5/21/15

May 22, 2015

There were 2 posts on 5/20.  The first was “Conservatives and Keynes:”

Tony Yates asks, “Why can’t we all get along?” Lamenting another really bad, obviously political defense of austerity, he declares that

it’s disappointing that the debate has become a left-right thing. I don’t see why it should.

But the debate over business-cycle economics has always been a left-right thing. Specifically, the right has always been deeply hostile to the notion that expansionary fiscal policy can ever be helpful or austerity harmful; most of the time it has been hostile to expansionary monetary policy too (in the long view, Friedman-type monetarism was an aberration; Hayek-type liquidationism is much more the norm). So the politicization of the macro debate isn’t some happenstance, it evidently has deep roots.

Oh, and some of us have been discussing those roots in articles and blog posts for years now. We’ve noted that after World War II there was a concerted, disgraceful effort by conservatives and business interests to prevent the teaching of Keynesian economics in the universities, an effort that succeeded in killing the first real Keynesian textbook. Samuelson, luckily, managed to get past that barrier — and many were the complaints. William Buckley’s God and Man at Yale was a diatribe against atheism (or the failure to include religious indoctrination, which to him was the same thing) and collectivism — by which he mainly meant teaching Keynesian macroeconomics.

What’s it all about, then? The best stories seem to involve ulterior political motives. Keynesian economics, if true, would mean that governments don’t have to be deeply concerned about business confidence, and don’t have to respond to recessions by slashing social programs. Therefore it must not be true, and must be opposed. As I put it in the linked post,

So one way to see the drive for austerity is as an application of a sort of reverse Hippocratic oath: “First, do nothing to mitigate harm”. For the people must suffer if neoliberal reforms are to prosper.

If you think I’m being too flip, too conspiracy-minded, or both, OK — but what’s your explanation? For conservative hostility to Keynes is not an intellectual fad of the moment. It has absolutely consistent for generations, and is clearly very deep-seated.

The second post on 5/20 was “I’m With Stupid:”

Via FT Alphaville, James Montier has an interesting piece castigating economists for their “interest rate idolatry”, their belief that central bank-set interest rates matter a lot for the economy and that therefore it is useful, at least conceptually, to think about the “natural” rate of interest that would lead the economy to full employment. There is no evidence that interest rates matter in that way, he says, and economists who talk about natural rates are simply engaged in groupthink.

In particular, he identifies three blind and/or stupid economists leading everyone astray: Janet Yellen, Larry Summers, and yours truly.

Well, it could be true; there’s plenty of stupidity in the world, and much of it imagines itself wise. But in my experience people who declare confidently that “economists don’t understand X” usually turn out to be wrong both about X and about what economists understand. As I wrote in one context, often what they imagine to be a big conceptual or empirical failure is just a failure of their own reading comprehension.

Let me also say that if you were going to look for economists who blindly repeat doctrine, without the intelligence or courage to challenge conventional wisdom, neither Janet Yellen nor Larry Summers would be top picks.

So Montier offers a lot of evidence that interest rates move a lot, which isn’t news to anyone, and then one argument he apparently thinks is a big thing economists don’t know — that business investment is basically unaffected by interest rates. Who would have suspected such a thing? Well, everyone. Here’s what I wrotesome years ago:

Back in the old days, when dinosaurs roamed the earth and students still learned Keynesian economics, we used to hear a lot about the monetary “transmission mechanism” — how the Fed actually got traction on the real economy. Both the phrase and the subject have gone out of fashion — but it’s still an important issue, and arguably now more than ever.

Now, what you learned back then was that the transmission mechanism worked largely through housing. Why? Because long-lived investments are very sensitive to interest rates, short-lived investments not so much. If a company is thinking about equipping its employees with smartphones that will be antiques in three years, the interest rate isn’t going to have much bearing on its decision; and a lot of business investment is like that, if not quite that extreme. But houses last a long time and don’t become obsolete (the same is true to some extent for business structures, but in a more limited form). So Fed policy, by moving interest rates, normally exerts its effect mainly through housing.

But Montier seems to have forgotten about housing, which is actually a fairly common problem among certain kinds of econocritics.

And do interest rates move housing? Here’s the inverse of the Fed funds rate versus housing starts during the period when major moves in monetary policy were mainly driven by concerns about inflation (as opposed to bursting bubbles):

Looks like a relationship to me. And I would say that for many economists of a certain age, the events of the early 1980s were especially important in convincing us that monetary policy can matter a lot. Paul Volcker decided to tighten; interest rates soared, housing collapsed, and the economy plunged into a deep recession. He decided that the economy had suffered enough, rates plunged, housing surged, and it was morning in America.

Beyond that, the general proposition that money matters also rests on a lot of careful empirical work — in fact, on two styles of careful work. There’s the Romer-Romer narrative approach, which examines Fed minutes to identify “episodes in which there were large monetary disturbances not caused by output fluctuations”, and the Sims approach, which uses time-series methods. Both find that monetary policy does indeed matter.

Are there times when monetary policy — or at least conventional monetary policy — can’t do the job? Of course. Summers and I have been talking about the zero lower bound since the 1990s — he introduced the argument that the ZLB justifies a positive inflation target, I brought liquidity-trap analysis out of the mists and back into modern economics.

The bottom line here is that there’s plenty of real stupidity in the world; we don’t need to add to the cloud of confusion with a critique of imaginary stupidity.

Yesterday there were three posts, the first of which was “Making Hay While the Sun Shines:”

Well, that’s the weather forecast, anyway, although this being England I have my doubts.

Anyway, I’ll be going to the Hay Festival this weekend, talking on a couple of panels Monday, and mainly soaking up whatever there is to soak up (which I hope doesn’t include rain.)

The second post yesterday was “Nobody Cares About the Deficit:”

Sitting here in the UK, where everyone continues to believe that budget deficits are the central issue despite overwhelming evidence to the contrary, it’s refreshing to look home once in a while and contemplate the utter collapse of the deficit-scold agenda.

One way to see this is to track the disappearance of Alan Simpsonfrom the radar; another is to look at polls that ask people to name important issues. For example, CNN/ORC has been asking consistent questions for several years; here’s the percentage of voters naming the budget deficit as the most important issue:

January 2013: 23 percent

May/June 2014: 15 percent

Sept. 2014: 8 percent

In the most recent CBS/NYTimes poll, which was open-ended, the deficit didn’t even make it onto the list.

And you know what? The public is right, and the Very Serious People were and are wrong.

The last post yesterday was “Tariffs Versus Currencies:”

While it’s not remotely in the same league as the execrable Daley op-ed, the CEA report in support of TPP is, as Josh Bivens notes, an odd document. It’s not wrong, or not mostly wrong — I don’t even share all of Bivens’s complaints. It’s just off-topic; at best, it’s a celebration of the results of all the trade liberalization that has taken place since the 1930s, and tells us nothing about policy when trade barriers are already very low, and “trade” agreements are actually about investment and intellectual property.

As I said, the report doesn’t make any clearly false claims — I do think Furman et al are too scrupulous for that. But there is some missing context. The very first bullet point declares, in bold type, that

U.S. businesses must overcome an average tariff hurdle of 6.8 percent, in addition to numerous non-tariff barriers (NTBs), to serve the roughly 95 percent of the world’s customers outside our borders.

You’re clearly meant to think of 6.8 as a big number. Is it?

Actually, no. There are various ways to think about that; one is to compare those tariffs with the kind of currency fluctuations that occur all the time. Here’s the recent history of the dollar:

That’s a 20 percent rise between the summer of last year and early 2015, partly given back recently. Since inflation is low everywhere, that’s more or less one-for-one a loss in competitiveness by US exporters, and far bigger than the tariff barriers.

Non-tariff barriers (NTBs) add to the wedge, of course. But even they are no big deal (NDB).

Brooks and Krugman

May 22, 2015

This morning Rabbi Bobo’s sermon is all about “Building Spiritual Capital.”  He babbles that spiritual awareness is innate, and it is an important component in human development.  In the comments “Joseph Huben” from upstate New York had this to say:  “It is a bit offensive to be preached to by a proponent of incentivizing the poor by cutting food stamps, unemployment benefits and Social Security. ”  In “Trade and Trust” Prof. Krugman says all the bad arguments for the Trans-Pacific Partnership suggest that it isn’t a deal we should support.  Here’s Rabbi Bobo:

Lisa Miller is a professor of psychology and education at Columbia University. One day she entered a subway car and saw that half of it was crowded but the other half was empty, except for a homeless man who had some fast food on his lap and who was screaming at anybody who came close.

At one stop, a grandmother and granddaughter, about 8, entered the car. They were elegantly dressed, wearing pastel dresses and gloves with lace trim. The homeless man spotted them and screamed, “Hey! Do you want to sit with me?” They looked at each other, nodded and replied in unison, “Thank you” and, unlike everybody else, sat directly next to him.

The man offered them some chicken from his bag. They looked at each other and nodded and said, “No, thank you.” The homeless man offered several more times, and each time they nodded to each other and gave the same polite answer. Finally, the homeless man was calmed, and they all sat contentedly in their seats.

Miller was struck by the power of that nod. “The nod was spirituality shared between child and beloved elder: spiritual direction, values, taught and received in the loving relationship,” she writes in her book “The Spiritual Child.” The grandmother was teaching the granddaughter the wisdom that we were once all strangers in a strange land and that we’re judged by how we treat those who have the least.

Miller’s core argument is that spiritual awareness is innate and that it is an important component in human development. An implication of her work is that if you care about social mobility, graduation rates, resilience, achievement and family formation, you can’t ignore the spiritual resources of the people you are trying to help.

Miller defines spirituality as “an inner sense of relationship to a higher power that is loving and guiding.” Different people can conceive of this higher power as God, nature, spirit, the universe or just a general oneness of being. She distinguishes spirituality, which has a provable genetic component, from religious affiliation, which is entirely influenced by environment.

I’d say Miller doesn’t pay sufficient attention to the many secular, this-world ways people find to organize their lives. Still, it does seem true that most children are born with a natural sense of the spiritual. If they find a dead squirrel on the playground, they understand there is something sacred there, and they will most likely give it a respectful burial. They have a natural sense of the oneness of creation, and a sense of a transcendent, nonmaterial realm. Miller cites twin studies that suggest that the strength of a child’s spiritual awareness is about 29 percent because of broad genetic heritability, 24 percent because of family environment and 47 percent because of a person’s unique individual environment.

Spiritual awareness, she continues, surges in adolescence, at about the same time as depression and other threats to well-being. Some level of teenage depression, she says, should be seen as a normal part of the growth process, as young people ask fundamental questions of themselves. The spiritual surge in adolescence is nature’s way of responding to this normal crisis.

Taken together,” Miller writes, “research supports the idea of a common physiology underlying depression and spirituality.” In other words, teenagers commonly suffer a loss of meaning, confidence and identity. Some of them try to fill the void with drugs, alcohol, gang activity and even pregnancy. But others are surrounded by people who have cultivated their spiritual instincts. According to Miller’s research, adolescents with a strong sense of connection to a transcendent realm are 70 percent to 80 percent less likely to engage in heavy substance abuse. Among teenage girls, having a strong spiritual sense was extremely protective against serious depression. Adults who consider themselves highly spiritual at age 26 are, according to her research, 75 percent protected against recurrence of depression.

Innate spiritual capacities can wither unless cultivated — the way innate math faculties can go undeveloped without instruction. Loving families nurture these capacities, especially when parents speak explicitly about spiritual quests. The larger question, especially in this age of family disruption, is whether public schools and other institutions should do more to nurture spiritual faculties.

Public schools often give short shrift to spirituality for fear that they would be accused of proselytizing religion. But it should be possible to teach the range of spiritual disciplines, in order to familiarize students with the options, without endorsing any one.

In an era in which so many people slip off the rails during adolescence, we don’t have the luxury of ignoring a resource that, if cultivated, could see them through. Ignoring spiritual development in the public square is like ignoring intellectual, physical or social development. It is to amputate people in a fundamental way, leading to more depression, drug abuse, alienation and misery.

I think “Joseph Huben” said everything about this that needs to be said.  Here’s Prof. Krugman:

One of the Obama administration’s underrated virtues is its intellectual honesty. Yes, Republicans see deception and sinister ulterior motives everywhere, but they’re just projecting. The truth is that, in the policy areas I follow, this White House has been remarkably clear and straightforward about what it’s doing and why.

Every area, that is, except one: international trade and investment.

I don’t know why the president has chosen to make the proposed Trans-Pacific Partnership such a policy priority. Still, there is an argument to be made for such a deal, and some reasonable, well-intentioned people are supporting the initiative.

But other reasonable, well-intentioned people have serious questions about what’s going on. And I would have expected a good-faith effort to answer those questions. Unfortunately, that’s not at all what has been happening. Instead, the selling of the 12-nation Pacific Rim pact has the feel of a snow job. Officials have evaded the main concerns about the content of a potential deal; they’ve belittled and dismissed the critics; and they’ve made blithe assurances that turn out not to be true.

The administration’s main analytical defense of the trade deal came earlier this month, in a report from the Council of Economic Advisers. Strangely, however, the report didn’t actually analyze the Pacific trade pact. Instead, it was a paean to the virtues of free trade, which was irrelevant to the question at hand.

First of all, whatever you may say about the benefits of free trade, most of those benefits have already been realized. A series of past trade agreements, going back almost 70 years, has brought tariffs and other barriers to trade very low to the point where any effect they may have on U.S. trade is swamped by other factors, like changes in currency values.

In any case, the Pacific trade deal isn’t really about trade. Some already low tariffs would come down, but the main thrust of the proposed deal involves strengthening intellectual property rights — things like drug patents and movie copyrights — and changing the way companies and countries settle disputes. And it’s by no means clear that either of those changes is good for America.

On intellectual property: patents and copyrights are how we reward innovation. But do we need to increase those rewards at consumers’ expense? Big Pharma and Hollywood think so, but you can also see why, for example, Doctors Without Borders is worried that the deal would make medicines unaffordable in developing countries. That’s a serious concern, and it’s one that the pact’s supporters haven’t addressed in any satisfying way.

On dispute settlement: a leaked draft chapter shows that the deal would create a system under which multinational corporations could sue governments over alleged violations of the agreement, and have the cases judged by partially privatized tribunals. Critics like Senator Elizabeth Warren warn that this could compromise the independence of U.S. domestic policy — that these tribunals could, for example, be used to attack and undermine financial reform.

Not so, says the Obama administration, with the president declaring that Senator Warren is “absolutely wrong.” But she isn’t. The Pacific trade pact could force the United States to change policies or face big fines, and financial regulation is one policy that might be in the line of fire. As if to illustrate the point, Canada’s finance minister recently declared that the Volcker Rule, a key provision of the 2010 U.S. financial reform, violates the existing North American Free Trade Agreement. Even if he can’t make that claim stick, his remarks demonstrate that there’s nothing foolish about worrying that trade and investment pacts can threaten bank regulation.

As I see it, the big problem here is one of trust.

International economic agreements are, inevitably, complex, and you don’t want to find out at the last minute — just before an up-or-down, all-or-nothing vote — that a lot of bad stuff has been incorporated into the text. So you want reassurance that the people negotiating the deal are listening to valid concerns, that they are serving the national interest rather than the interests of well-connected corporations.

Instead of addressing real concerns, however, the Obama administration has been dismissive, trying to portray skeptics as uninformed hacks who don’t understand the virtues of trade. But they’re not: the skeptics have on balance been more right than wrong about issues like dispute settlement, and the only really hackish economics I’ve seen in this debate is coming from supporters of the trade pact.

It’s really disappointing and disheartening to see this kind of thing from a White House that has, as I said, been quite forthright on other issues. And the fact that the administration evidently doesn’t feel that it can make an honest case for the Trans-Pacific Partnership suggests that this isn’t a deal we should support.


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