Krugman’s blog, 7/9/13

There were three posts yesterday.  The first was “Whites and the Safety Net:”

For a brief period after the 2012 election, it looked as if there might be some serious introspection among Republicans, some reconsideration of where their scorched-earth opposition to everything Obama had gotten them. But it didn’t last long. Even the notion that the GOP might need to accommodate itself a bit to an increasingly nonwhite nation has been fading fast; the big thing now is that the trouble in 2012 was missing white voters, and that the GOP just needs to redouble its efforts to identify itself as the party of white people.

But if there really is a missing-white-voter issue — and I’d like to see some more analysis by serious political scientists before I completely buy in — what will it take to bring these people back out to play? Sean Trende, who has been making the missing-whites case, describes the missing as “downscale, rural, Northern whites”. What can the GOP offer them?

Well, the trendy answer now is “libertarian populism” — but the question is what that means. And for a lot of Republicans, as Mike Konczal notes, it seems to mean lower tax rates on the wealthy, tight money, and deregulation. And this is supposed to appeal to downscale whites because, um, because.

True believers will say that this kind of agenda is actually great for low-income workers because it would lead to wonderful economic growth. This happens to be a view contradicted by all the evidence, but more to the point, what on earth would make anyone think that it’s a workable political strategy? Yelling even more loudly about the wonders of sound money and supply-side economics isn’t going to persuade anyone who hasn’t been persuaded already.

But wait, it gets worse. As a practical matter, the current GOP agenda isn’t so much about hard money or even lower top marginal rates as it is about slashing safety-net programs. There has been a highly successful attack on unemployment benefits, and the party has worked itself into a lather about food stamps too.

So, news flash: these programs don’t just benefit Those People; they’re also very important to downscale whites, the very people that will supposedly rescue the GOP. This is especially true of unemployment insurance (pdf):

Data are scrappier on food stamps (pdf), with a lot of states failing to report the race of many recipients; but if we look at, for example, Pennsylvania, which does have almost complete reporting, we find that 59 percent of food stamp recipients are non-Hispanic whites.

In short, the idea behind libertarian populism seems to be to bring back disaffected whites by preaching, even more forcefully, the virtues of the pro-wealthy policies the GOP has been following all along, and meanwhile destroying the safety net programs many of those disaffected whites depend on. Sounds like a winner.

The second post yesterday was “A Whiter Shade of Fail:”

Aha. In my last post, I wrote about the claims that there were a lot of missing white voters, which are emboldening those calling for “libertarian populism”; as I pointed out, this supposed populism is actually just the same old economic royalism, wrapped in different rhetoric — and “downscale” whites very much need the safety net the GOP is tearing down. I also wondered, however, how much I should trust Sean Trende’s claim that missing white voters are a real, important thing.

Well, Alan Abramowitz sends me to new analysis saying, no, missing whites aren’t a real thing. When it comes to serious political science, it seems, Trende is not your friend (sorry, couldn’t help myself):

So what starts out looking like a mysterious epidemic of “missing” white voters becomes mostly a reflection of the simple fact that 2012 was a low turnout election. This unremarkable outcome is then hyped by Trende as the big demographic development of 2012 by doing something that is really quite misleading. He adds back in all the missing white voters to the 2012 electorate while leaving out all the missing minority voters.

But this probably won’t stop the GOP from going with the story anyway. Empirical failure hasn’t changed their minds about economics, or for that matter anything else, so why should this be different?

The last post yesterday was “Caches of Cash:”

Zachary Goldfarb marvels over the fact that even as we use less and less cash in transactions, the amount of currency in circulation has been soaring. Why? He suggests that it’s fear — worries about political and financial stability.

But I’d suggest a different explanation. The motives for holding cash, especially in the form of $100 bills, have been around for a long time; in large part it’s about evading taxes, and the law in general. (Latin American drug lords hoard high-denomination dollar currency; Russian beeznessmen do the same with big euro notes). What has changed is that with zero interest rates, the opportunity cost of holding cash has gone way down.

We’ve seen this phenomenon before, in Japan; way back in the 1990s, Japanese economists used to joke that the only consumer durable selling well was safes. Here’s the ratio of Japanese currency in circulation to GDP, as the country sank deeper into the liquidity trap:

So it’s not fear, it’s despair: there’s nothing to invest in, so why not keep stuff under your mattress?



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