Archive for the ‘Krugman’s Blog’ Category

Krugman’s blog, 7/17/17

July 18, 2017

There was one post yesterday, “The Healthcare Debacle: The Roles of Ignorance and Evil:”

The important things to understand about the Republican health care bill are that it is (a) a cruel assault on the health and financial security of tens of millions of Americans (b) being sold via a campaign of lies that is unprecedented in US politics. Defeating this bill, and/or making its supporters pay a massive political price, is priority #1.

But there are a number of secondary questions, involving how Republicans got to this point. Some of these are big and long-term: how did a whole party succumb to such moral rot? Others are more tactical: how did they get into this immediate political mess?

So I was struck by today’s report in Politico suggesting that leading Republicans — in Congress as well as the Trump administration — thought repealing Obamacare would be quick and easy:

The longer Republican efforts to repeal Obamacare flounder, the clearer it becomes that President Donald Trump’s team and many in Congress dramatically underestimated the challenge of rolling back former President Barack Obama’s signature achievement.

The Trump transition team and other Republican leaders presumed that Congress would scrap Obamacare by President’s Day weekend in late February, according to three former Republican congressional aides and two current ones familiar with the administration’s efforts.

How could they have believed this? Anyone who paid the least attention to health issues knew that the ACA had dramatically reduced the number of uninsured, and that rolling it back would have devastating effects on many people — including many working-class whites. Never mind the morality: It should have been obvious that the political cost of repeal would be very high.

But apparently nobody with influence in the GOP saw the obvious. Why?

The answer, I think, is that they were living in a bubble created out of their own ignorance and cynicism.

They had spent years attacking Obamacare for things they had no intention of fixing — in fact, had every intention of making worse — like high deductibles. They appear never to have considered what would happen if they were called upon to deliver on their promises to make these things better.

They also appear to have been so wrapped up in their own propaganda that they never noticed the good Obamacare was doing. You saw that when the Indiana GOP asked for “Obamacare horror stories” and were flooded with testimonials instead.

Truly, Republicans, you know nothing. And it’s finally starting to matter.

 

Krugman’s blog, 7/15/17

July 16, 2017

There was one post yesterday, “Ted Cruz’s Giant Leap Into the Known:”

When it comes to health care, there are lies, damned lies, and CBO-bashing.

Republicans are deploying all three strategies, with Mike Pence’s vile lie about the disabled – the utterly false claim that Medicaid expansion has actually hurt those most in need of help – drawing lots of justified outrage. But the really big push over the next couple of days will be the attempt to trash CBO estimates that are almost sure to show massive losses, even if the CBO is somehow prevented from considering the Cruz amendment.

One answer to this stuff is to notice that everyone, and I mean everyone, who knows something about insurance markets is declaring the same thing: that this proposed bill would be a disaster. We’ve got the insurance industry declaring it “simply unworkable”; the American Academy of Actuaries saying effectively the same thing; AARP up in arms; the Urban Institute forecasting disaster; and more.

But, say the usual suspects, CBO got the effects of the ACA all wrong. Actually, it didn’t. Yes, it overestimated the number of people who would sign up for the exchanges. But this was largely because it overestimated the number of employers who would drop coverage and send their workers to the exchanges. Overall, its estimates of coverage gains and premiums weren’t that far off, especially when you consider that this was a big leap into the unknown: aside from limited experience in Massachusetts, we didn’t have very good evidence on how an ACA-type system would work.

Which brings me to a point I haven’t seen emphasized: whereas the creation of the ACA was a leap into the unknown, Trumpcare – or maybe we should call it Cruzcare – is a leap into the known. Before the ACA, most states allowed insurers to discriminate based on medical history. Many also restricted access to Medicaid as much as they could. So we have a very good idea what health care in America would look like if the BCRA passes: it would look like health care in unregulated, low-aid states pre-ACA.

Or to not put too fine a point on it, it would look like health care in Texas circa 2010, with 26 percent of the nonelderly population uninsured.

So the burden of proof should lie completely with anyone who claims that this bill would NOT cause drastic coverage losses. It would establish a system very much like that which existed in those parts of America in which vast numbers of people lacked coverage in the past; why would this time be different?

 

Krugman’s blog, 7/14/17

July 15, 2017

There was one post yesterday, “The New Climate Of Treason:”

The title of this post comes from a once-famous book about the senior British officials who, it turned out, spied for Stalin. I found myself thinking about that book’s title while watching the conservative movement react to news that yes, the Trump campaign was in contact with Russian agents, and was willing, indeed eager, to engage in collusion.

With very few exceptions, this reaction has taken two forms: defining collusion down, or celebrating it. Some are arguing that saying “I love it!” when Russian agents offer damaging information about your opponent doesn’t count as collusion unless it’s sustained (which it might have been, by the way – we just don’t know yet), or unless it determined the election outcome. By that standard, of course, Kim Philby did nothing wrong, since the West ended up winning the Cold War.

Others are basically saying that cooperating with a foreign dictator is no big deal if it protects us against real threats, like universal health care.

The important thing to notice is that almost the entire conservative movement has bought into one or both of these arguments. After all the flag-waving, all the attacks on Democrats’ patriotism, essentially the whole GOP turns out to be OK with the moral equivalent of treason if it benefits their side in domestic politics. Which raises the question: what happened to these people?

One answer might be that right-wing ideology, the commitment to tax cuts for the rich and pain for the poor, has such a grip on conservative minds that nothing else matters. But while this is true for some apparatchiks, my guess is that it’s not nearly as true for many – certainly not for the Republican base in the general public. So why has partisanship become so extreme that it trumps patriotism?

Well, I have a thought inspired by something my CUNY colleague Branko Milanovic wrote recently about civil wars. Branko – who knows something about Yugoslavia! – argues against the view that civil wars are caused by deep divisions between populations who don’t know each other. The causation, he argues, goes the other way: when a civil war begins for whatever reason, that’s when the lines between the groups are drawn, and what may have been minor, fairly benign differences become irreconcilable gulfs.

My suggestion is that something like this happened to America, minus the mass bloodshed (so far, anyway.)

The radicalization of the GOP began as a top-down affair, driven by big-money interests that financed campaigns and think tanks, pushing the party to the right. But to win elections, the forces engaged in this push cynically appealed to darker impulses – racism first and foremost, but also culture war, anti-intellectualism, and so on. To make this appeal, they created a media establishment – Fox News, talk radio, and so on – which drew in many working-class whites. This meant that a large segment of the population was no longer hearing the same news – basically not experiencing the same account of reality – as the rest of us. So what had been real but not extreme differences became extreme differences in political outlook.

And political figures either adapted or were pushed out. There once were Republicans who would have reacted with horror to Trump’s embrace of Putin, but they’ve left the scene, or are no longer considered Republicans.

This has troubling implications for both the short and the long run. In the short run, it probably means that no matter how bad the Trump revelations get, most Republicans, both in the base and in Congress, will stick with him – because taking him down would be a victory for liberals, who are worse than anything.

In the long run, it makes you wonder whether and how we can get the country we used to be back. As Branko says, there was a time when Serbs and Croats seemed to get along fairly well, indeed intermarrying at a high rate. But could anyone now put Yugoslavia back together? At this rate, we’ll soon be asking the same question about America.

 

Krugman’s blog, 7/13/17

July 14, 2017

There was one post yesterday, “Takers and Fakers:”

While we wait to see exactly what’s in the latest version of the Senate health bill, a reminder: throughout the whole campaign against Obamacare, Republicans have been lying about their intentions.

Believe it or not, conservatives actually do have a more or less coherent vision of health care. It’s basically pure Ayn Rand: if you’re sick or poor, you’re on your own, and those who are more fortunate have no obligation to help. In fact, it’s immoral to demand that they help.

Specifically:

1.Health care, even the most essential care, is a privilege, not a right. If you can’t get insurance because you have a preexisting condition, because your income isn’t high enough, or both, too bad.

2.People who manage to get insurance through government aid, whether Medicaid, subsidies, or regulation and mandates that force healthy people to buy into a common risk pool, are “takers” exploiting the wealth creators, aka the rich.

3.Even for those who have insurance, it covers too much. Deductibles and copays should be much higher, to give people “skin in the game” and make them cost-conscious (even if they’re, um, unconscious.)

4.All of this applies to seniors as well as younger people. Medicare as we know it should be abolished, replaced with a voucher system that can be used to help pay for private policies – and funding will be steadily cut below currently projected levels, pushing people into high-deductible-and-copay private policies.

This is a coherent doctrine; it’s what conservative health care “experts” say when they aren’t running for public office, or closely connected to anyone who is. I think it’s a terrible doctrine – both cruel and wrong in practice, because buying health care isn’t and can’t be like buying furniture. Still, if Republicans had run on this platform and won, we’d have to admit that the public agrees.

But think of how Republicans have actually run against Obamacare. They’ve lambasted the law for not covering everyone, even though their fundamental philosophy is NOT to cover everyone, or accept any responsibility for the uninsured. They’ve denied that their massive cuts to Medicaid are actually cuts, pretending to care about the people they not-so-privately consider moochers. They’ve denounced Obamacare policies for having excessively high deductibles, when higher deductibles are at the core of their ideas about cost control. And they’ve accused Obamacare of raiding Medicare, a program they’ve been trying to kill since 1995.

In other words, their whole political strategy has been based on lies – not shading the truth, not spinning, but pretending to want exactly the opposite of what they actually want.

And this strategy was wildly successful, right up to the moment when Republicans finally got a chance to put their money – or actually your money – where their mouths were. The trouble they’re having therefore has nothing to do with tactics, or for that matter with Trump. It’s what happens when many years of complete fraudulence come up against reality.

 

Krugman’s blog, 7/12/17

July 13, 2017

There was one post yesterday, “We Don’t Need No Education:”

A few days ago Pew reported that Republicans, who were already much less positive than Democrats about higher education, have turned very negative on the role of colleges in America. True to form, this worries some liberal commentators, who are calling for outreach – universities should examine their implicit biases, make an effort to hire more conservative faculty, etc..

And you can see the point. After all, among college professors 59 percent identify as Democrats versus only 13 percent as Republicans; senior faculty were even more liberal, with very few identifying themselves as conservatives.

Oh, wait – that wasn’t a survey of college professors; it was a 2004 survey of the military, and the 59-13 comparison was of Republicans versus Democrats. Support for Republicans in the military has eroded since then, but the officer corps is still far more conservative than the country at large. Strange to say, however, I haven’t seen a lot of op-eds demanding that the military change its recruiting practices and practice what amounts to affirmative action on behalf of liberals.

The point is that your political orientation isn’t something handed to you, like your race or ethnicity. It’s a choice, reflecting your values – and those same values are likely to influence your choice of profession, and possibly how well you perform in that profession. Is there discrimination against would-be academics who express conservative beliefs? I’m sure it happens, but it’s not the main reason conservatives are less likely than liberals to join the academy, just as discrimination against would-be officers with liberal views probably isn’t the main reason the military trends conservative.

But hasn’t the anti-conservative lean of academics gotten more pronounced over time? Yes – but surely that has a lot to do with the changing nature of what it means to be a conservative. When denial of climate change, and for that matter the theory of evolution, become tribal markers, you shouldn’t be surprised to find academics, very much including those in the hard sciences, decline to be identified as members of the tribe.

Which brings me to the abrupt decline in Republican views of colleges? What’s that about? Did the colleges get a lot more liberal? I doubt it.

But Republicans have changed in the age of Trump: what was already a strong strain of anti-intellectualism has become completely dominant. The notion that there was a golden age of conservative intellectuals is basically a myth. But there used to be at least some pretense of taking facts and hard thinking seriously. Now anyone pointing out awkward facts – immigrants haven’t brought a reign of terror, coal jobs can’t be brought back, Trump lost the popular vote – is the enemy. In fact, I’d argue that anti-intellectualism was, in its own way, as big a factor in the election as racism.

What this means for the future is grim. America basically invented the modern, educated society, leading the way on universal K-12 education, building the world’s finest and most comprehensive higher education system; this in turn was an important factor in how we became leader of the free world. Now a powerful political movement basically wants to make America ignorant again.

And oh, boy, howdy are they ever succeeding.

Krugman’s blog, 7/10/17

July 11, 2017

There was one post yesterday, “Formerly True Theories (Wonkish and Self-Indulgent)”:

Taking a break from health care, treason, and all that to read David Glasner on the price-specie-flow mechanism. The exposition of this mechanism by David Hume in his 1752 “Of the balance of trade“, was a landmark in the development of economics — arguably the first real economic model, making sense of the real world (and giving important policy guidance) via a simplified thought experiment, basically a model despite the absence of explicit math. Glasner argues, however, that it had ceased to be a good model by the 19th century due to the rise of fractional reserve banking and central bank discretion.

I think this critique may go both too far and not far enough. In systems where bank reserves still took the form of specie — and bank notes were backed by specie, as in the United States — a lot of the specie-flow mechanism remained in place for most of the 19th century. On the other hand, the simple link between trade balances and specie flows was broken by the rise of widespread capital mobility: when British investors were buying lots of US railroad bonds, we were no longer in Hume’s world.

But that doesn’t mean that Hume was wrong about *his* world. And reading Glasner made me think of a category of economic ideas that’s crucial, I’d argue, in making sense of part of the history of economic thought — the category of “formerly true” ideas. That is, ideas that were either good descriptions of the world the classical economists lived in, or had been good descriptions of the world just before the classicals wrote.

Pride of place here surely goes to Malthusian economics. You still see people saying flatly that Malthus was wrong. But over the roughly 60 centuries that have passed since civilization emerged in Mesopotamia, the Malthusian proposition — population pressure swallows up any gains in productivity, so that most people live on the edge of subsistence — was true for 58. It just so happens that the two centuries for which the proposition didn’t hold were the two centuries after Malthus wrote.

Actually, of course, this wasn’t an accident. Malthus didn’t kill Malthusian economics; but the rise of intellectual curiosity, of systematic hard thinking, of the scientific attitude, gave rise both to people like Malthus — who tried to approach economics in a recognizably modern manner — and to the dramatic acceleration of technological progress that took us out of the 58-century Malthusian trap.

Similarly, I don’t think there can be any doubt that something like Hume’s specie-flow mechanism did indeed operate through all of history from the first introduction of metallic money to sometime in the late 18th or early 19th century. How did Spanish silver end up fueling a rise in prices all across Europe? As Hume himself said, because silver raised Spanish prices, leading to trade deficits, and the silver flowed out to Spain’s trading partners.

Eventually, however, people — especially the Scots! — developed modern banking and learned to invest capital across borders. These commercial innovations were part of a general spirit of inquiry and innovation that produced, among other things, David Hume and Adam Smith.

Are there other examples? The self-correcting economy — in which unemployment leads to deflation, which increases the real money supply, and thus restores full employment — is another thing that probably did work for most of history, but began to fall apart as agrarian economies gave way to industrialized economies with less flexible prices. David Ricardo’s rejection of the possibility of demand shortfalls eventually turned out to be very wrong — and was surely already wrong in Britain by 1817 — but had been true in the past.

Is there a moral to this story? Maybe it is that things economic do change. By and large they change more slowly than many people think; understanding the 1930s was still immensely valuable to understanding the world after 2008. But economic “laws” — I generally hate that term — aren’t immutable, and good economists can be both right about the past and wrong for today.

I now return you to our regularly scheduled Trump coverage.

 

Krugman’s blog, 7/9/17

July 10, 2017

There was one post yesterday, “When Was The Golden Age Of Conservative Intellectuals?”:

A few days late, but a few thoughts on Bret Stephens’s columnabout the intellectual decline of conservatism. As you might guess, I agree completely with his take on the modern degeneracy of the movement. But Stephens harks back to a golden age of deep thought; and my question is, when was this age, exactly?

William F. Buckley is a problematic icon. Surely one needs to mention his spirited defense of white supremacy in the South, and National Review’s weird infatuation with Generalissimo Francisco Franco. I’d also note that while God and Man at Yale castigated my alma mater for its downgrading of religion, he seemed equally dismayed by the fact that it was teaching Keynesian economics — you know, the stuff that has been so thoroughly vindicated these past few years.

But leave that aside. When did conservatives have good ideas, and when did they stop? Let’s talk about four areas I know pretty well: macroeconomics, environment, health care, and inequality.

In macroeconomics, there’s no question that Milton Friedman and, initially, Robert Lucas performed a useful service by challenging the case for policy activism, especially fiscal activism. Circa 1976 the track record of Chicago macroeconomics was impressive indeed.

But then it all fell apart. Lucas-type models failed the test of eventsin the 1980s, while updated Keynesianism held up. Rather than admitting that they had overreached, however, conservative macroeconomists just dug themselves deeper into the rabbit hole — effectively turning their back on Friedman-style monetarism as well as Keynesianism. Vigorous monetary expansion to fight a deep slump, originally a conservative idea, became anathema on the right even as it was welcomed on the left. What was once a good conservative idea was incorporated by liberals while rejected by the right.

On environment, a similar turn took place a bit later. The use of markets and price incentives to fight pollution was, initially, a conservative idea condemned by some on the left. But liberals eventually took it on board — while cap-and-trade became a dirty word on the right. Crude slogans –Government bad! — plus subservience to corporate interests trumped analysis.

On health care, ObamaRomneycare — relying on mandates, regulation, and subsidies rather than a single-payer system — was, famously, a conservative idea developed at the Heritage Foundation. But liberals took it on board — pretty quickly, actually — while conservatives began denouncing their own side’s clever idea as evil incarnate.

Finally, on inequality, conservative intellectuals were terrible from the very beginning. I wrote a long piece in 1992 detailing their evasions and distortions, many of which remain unchanged to this day. It wasn’t just that they were wrong; as I wrote at the time,

the combination of mendacity and sheer incompetence displayed by the Wall Street Journal, the U.S. Treasury Department, and a number of supposed economic experts demonstrates something else: the extent of the moral and intellectual decline of American conservatism.

Remember, this was a quarter-century ago.

So when was the golden age of conservative intellectuals? Actually, there never was one. Certainly, the supposed era in which only conservatives had all the interesting ideas while liberals rehashed tired dogma never happened in any field I know well. That said, there was a period when conservatives contributed some useful stuff to the discourse. But that era ended a long, long time ago.

 

Krugman’s blog, 6/23/17

June 24, 2017

There was one post yesterday, “Pure Class Warfare, With Extra Contempt:”

The Senate version of Trumpcare – the Better Care Reconciliation Act – is out. The substance is terrible: tens of millions of people will experience financial distress if this passes, and tens if not hundreds of thousands will die premature deaths, all for the sake of tax cuts for a handful of wealthy people. What’s even more amazing is that Republicans are making almost no effort to justify this massive upward redistribution of income. They’re doing it because they can, because they believe that the tribalism of their voters is strong enough that they will continue to support politicians who are ruining their lives.

In this sense – and in only this sense – what we’re seeing now is a departure from previous Republican practice.

In the past, laws that would take from the poor and working class while giving to the rich came with excuses. Tax cuts, their sponsors declared, would unleash market dynamism and make everyone more prosperous. Deregulation would increase efficiency and lower prices. It was all voodoo; the promises never came true. But at least there was some pretense of working for the common good.

Now we have none of this. This bill does nothing to reduce health care costs. It does nothing to improve the functioning of health insurance markets – in fact, it will send them into death spirals by reducing subsidies and eliminating the individual mandate. There is nothing at all in the bill that will make health care more affordable for those currently having trouble paying for it. And it will gradually squeeze Medicaid, eventually destroying any possibility of insurance for millions.

Who benefits? It’s all about the tax cuts, almost half of which will go to people with incomes over $1 million, the great bulk to people with incomes over 200K.

So, is this bill good for you? Yes, if you meet the following criteria:

1.Your income is more than $200,000 a year
2.You have a job that comes with good health insurance
3.You can’t imagine any circumstances under which you lose that job or income
4.You don’t have any family members or friends who don’t meet those criteria
5.You have zero empathy for anyone else

The set of people who can check all these boxes is not a winning political coalition. But Republican leaders believe that their voters are tribal enough, sufficiently walled off from information, that they’ll ignore the attack on their lives and keep voting R – indeed, that as they lose health care, get hit with crushing out-of-pocket bills, see their friends and neighbors face ruin, they’ll blame it on Democrats.

I wish I were sure that this belief was false.

 

Krugman’s blog, 6/16/17

June 17, 2017

There was one post yesterday, “The Silence of the Hacks:”

The actual text of the Senate version of Trumpcare is still a secret, even from almost all the Senators who are expected to vote for it. But that’s actually a secondary issue: never mind the precise details, what’s the organizing idea? What is the bill supposed to do, and how is it supposed to do it?

The answer — which I’ve been suggesting for a while — is that they have no idea, and more broadly, no ideas in general. Now Vox confirms this, by interviewing a series of Republican senators:

With the bill’s text still not released for public view, Vox asked GOP senators to explain their hopes for it. Who will benefit from the legislation? What problems is this bill trying to solve?

The answers, universally, were “Er. Ah. Um.”

Time was when even the worst legislation came with some kind of justification, when you could count on the hacks at Heritage to explain why eating children will encourage entrepreneurship, or something. On the right, these explanations have descended into ever deeper voodoo; the Kansas experiment was based on obvious nonsense, and has turned out even worse than cynics might have suggested. And you might have thought that this was as bad as it can get.

But now we have legislation that will change the lives of millions, and they haven’t even summoned the usual suspects to explain what a great idea it is. If hypocrisy is the tribute vice pays to virtue, Republicans have decided that even that’s too much; they’re going to try to pass legislation that takes from the poor and gives to the rich without even trying to offer a justification.

And they’ll try to do it by dead of night, of course.

This has nothing to do with Trump, who is, as I’ve been saying, an ignorant bystander — yes, he’s betraying every promise he made, but what else is new? It’s about Congressional Republicans.

Which Congressional Republicans? All of them. Remember, three senators who cared even a bit about substance, legislative process, and just plain honesty with the public, could stop this. So far, it doesn’t look as if there are those three senators.

This is a level of corruption that’s hard to fathom. Yet it’s the reality of one of our two parties.

 

Krugman’s blog, 6/14/17

June 15, 2017

There was one post yesterday:  “A Finger Exercise On Hyperglobalization:”

The days when surging world trade was the big story seem like a long time ago. For one thing, trade has stopped surging, and seems to have plateaued. For another, we have more pressing issues, like the rise of authoritarianism and the attempt to sabotage health care.

But I recently gave a presentation on trade issues, have been playing around with them again, and anyway want to take occasional breaks from the horror of today’s political economy. So I find myself trying to find simple ways to talk about “hyperglobalization,” the surge in trade from around 1990 to the eve of the Great Recession. None of the underlying ideas is new, but maybe some people will find the exposition helpful.

The idea here is to think about the effects of transport costs and other barriers to trade pretty much the same way trade economists have long thought about “effective protection.”

This concept was introduced mainly as a way to understand what was really happening in countries attempting import-substituting industrialization. The idea was something like this: consider what happens if a country places a tariff on car imports, but not on imports of auto parts. What it’s really protecting, then, is the activity of auto assembly, making it profitable even if costs are higher than they are abroad. And the extent to which those costs can be higher can easily be much bigger than the tariff rate.

Suppose, for example, that you put a 20% tariff on cars, but can import parts that account for half the value of an imported car. Then assembling cars becomes worth doing even if it costs 40% more in your country than in the potential exporter: a nominal 20% tariff becomes a 40% effective rate of protection.

Now let’s switch the story around, and talk about a good an emerging market might be able to export to an advanced economy. Let’s say that in the advanced country it costs 100 to produce this good, of which 50 is intermediate inputs and 50 assembly. The emerging market, we’ll assume, can’t produce the inputs, but could do the assembly using imported inputs. There are, however, transport costs – say 10% of the value of any goods shipped.

If we were talking only about trade in final goods, this would mean that the emerging market could export if its costs were 10% less – 91, in this case. But we’ve assumed that it can’t do the whole process. It can do the assembly, and will if its final costs including inputs are less than 91. But the inputs will cost 55 because of transport. And this means that to make exporting work it must have costs less than 91-55=36, compared with 50 in the advanced country.

That is, to overcome 10% transport costs this assembly operation must be 38% cheaper than in the advanced country.

But this in turn means that even a seemingly small decline in transport costs could have a large effect on the location of production, because it drastically reduces the production cost advantage emerging markets need to have. And it leads to an even more disproportionate effect on the volume of trade, because it leads to a sharp increase in shipments of intermediate goods as well as final goods. That is, we get a lot of “value chain” trade.

This, I think, is what happened after 1990, partly because of containerization, partly because of trade liberalization in developing countries. But it’s also looking more and more like a one-time thing.

I now return you to our regularly scheduled Trump coverage.

I’d pay money just to shake his hand…