Krugman’s blog, 6/23/15

June 24, 2015

There were three posts yesterday.  The first was “More on Slavery’s Shadow:”

Harvard’s Maya Sen points me to a recent paper with Avidit Acharya and Matthew Blackwell, The Political Legacy of American Slavery. They show a strong relationship, at the county level, between the slave share of the population in 1860 and political attitudes today:

We show that contemporary differences in political attitudes across counties in the American South in part trace their origins to slavery’s prevalence more than 150 years ago. Whites who currently live in Southern counties that had high shares of slaves in 1860 are more likely to identify as a Republican, oppose affirmative action, and express racial resentment and colder feelings toward blacks.

Remarkably, the slave share in 1860 is a better predictor of attitudes than the share of African-Americans in the population today. They attribute this surprising fact to what happened after the Civil War, when

Southern whites faced political and economic incentives to reinforce existing racist norms and institutions to maintain control over the newly free African-American population.

It seems relevant, then, to note that the “Confederate” flag we’re now focusing on was not, in fact, the flag of the Confederacy; it was a battle flag, but it became a standard emblem of the South thanks to its adoption by the Ku Klux Klan and other white supremacists.

The second post yesterday was “Talking Britain:”

OK, I somehow missed this, but here’s the panel Martin Wolf, David Hendry, and yours truly did about Britain today. Martin is tougher and harsher than I am!

Yesterday’s last post was “Cowboys, Aliens, and Stimulus:”

Some years ago I facetiously suggested that we should invent a fake threat from space aliens as a way to break the destructive obsession with deficits and get the fiscal stimulus the economy needed. (It was actually an episode of The Outer Limits, not The Twilight Zone.) My suggestion was not followed up.

But something along the same lines is now going on in Texas. Texas is, of course, a Medicaid-rejection state, unwilling to accept billions of federal dollars to help its less fortunate. But money for a largely pointless border-protection project? Now you’re talking:

In Rio Grande City, named for the river that splits the U.S. from Mexico, footpaths cut from the brush by drug-smugglers and illegal immigrants have a new look, rehabbed into family-friendly hike-and-bike trails.

Now that the state has authorized $800 million to ratchet up security on the Mexico line, more troopers are on their way to deliver another shot to what might be the biggest stimulus program this needy part of Texas has ever seen.

It really is Keynes and burying bottles in coal mines: spending that actually helps people is unacceptable, but pure waste is OK.

Friedman, solo

June 24, 2015

Mr. Bruni is off today.  TMOW has been out in the sun too long, and has produced a thing called “Cold War Without the Fun” in which he tells us that the world has changed, and so has the way the game of nations is played.  In the comments “Kevin Rothstein” from somewhere east of the GWB had this to say:  “Mr. Friedman seems to have an illusion that the Cold War was “fun”. However tongue-in-cheek his assertion may be, there are millions of dead in numerous third world nations who, if they could still speak, would take issue with the notion that the Cold War was “fun”.”  Maybe it’s time for TMOW to sit down in the shade…  Here he is:

Let’s see, America is prepositioning battle tanks with our East European NATO allies to counterbalance Russia; U.S. and Russian military planes recently flew within 10 feet of each other; Russia is building a new generation of long-range ballistic missiles; and the U.S. and China are jostling in the South China Sea. Did someone restart the Cold War while I was looking the other way?

If so, this time it seems like the Cold War without the fun — that is, without James Bond, Smersh, “Get Smart” Agent 86’s shoe phone, Nikita Khrushchev’s shoe-banging, a race to the moon or a debate between American and Soviet leaders over whose country has the best kitchen appliances. And I don’t think we’re going to see President Obama in Kiev declaring, à la President Kennedy, “ich bin ein Ukrainian.” Also, the lingo of our day — “reset with Russia” or “pivot to Asia” — has none of the gravitas of — drum roll, please — “détente.”

No, this post-post-Cold War has more of a W.W.E. — World Wrestling Entertainment — feel to it, and I don’t just mean President Vladimir Putin of Russia’s riding horses bare-chested, although that is an apt metaphor. It’s just a raw jostling for power for power’s sake — not a clash of influential ideas but rather of spheres of influence: “You cross that line, I punch your nose.” “Why?” “Because I said so.” “You got a problem with that?” “Yes, let me show you my drone. You got a problem with that?” “Not at all. My cyber guys stole the guidance system last week from Northrop Grumman.” “You got a problem with that?

The Cold War had a beginning, an end and even a closing curtain, with the fall of the Berlin Wall. But the post-post-Cold War has brought us full circle back to the pre-Cold War and the game of nations. There was a moment when it seemed as though it would all be otherwise — when it seemed that Arabs and Israelis would make peace, that China would evolve into a more consensual political system and that Russia would become part of Europe and the G-8. That was a lifetime ago.

Now Western reporters struggle to get visas to China, no American businessman with a brain takes his laptop to Beijing, Chinese hackers have more of your personal data now than LinkedIn, Russia is still intent on becoming part of Europe — by annexing a piece here and a piece there — and the G-8 is now the G-1.5 (America and Germany).

When did it all go sour? We fired the first shot when we expanded NATO toward the Russian border even though the Soviet Union had disappeared. Message to Moscow: You are always an enemy, no matter what system you have. When oil prices recovered, Putin sought his revenge for this humiliation, but now he’s just using the NATO threat to justify the militarization of Russian society so he and his fellow kleptocrats can stay in power and paint their opponents as lackeys of the West.

NATO’s toppling of the Libyan leader Muammar el-Qaddafi, the Arab Spring and the Moscow street protests that followed rattled Putin, said Sergei Guriev, the noted Russian economist now based in Paris. “Putin understood that he lost the Russian middle class and so he started to look for legitimacy somewhere else” — in hypernationalism and anti-Americanism.

But Guriev makes an important point. “If not for the Western sanctions on Russia, East Ukraine would already have been part of Russia today,” he said, adding that there is nothing Putin fears more than Ukraine succeeding in diminishing corruption and building a modern economy that would be everything Putin’s Russia is not. Guriev is worried, though, that the anti-Western propaganda Putin has been pumping into the veins of the Russian public will have a lasting effect and make his successor even worse. Either way, “Russia will be a big challenge for your next president.”

The Chinese leadership is not as dumb or desperate as Putin — and needs access to U.S. markets more — so, for now, China’s leaders still behave with some restraint in asserting their claims in the South China Sea. But the fact is, as the Asia expert Andrew Browne noted in The Wall Street Journal,“the U.S.-China relationship has lost its strategic raison d’être: the Soviet Union, the common threat that brought the two countries together.” They have not forged a new one, like being co-managers of global stability.

In short, the attraction of the U.S. economy and the bite of U.S. sanctions are more vital than ever in managing the post-post-Cold War game of nations, including bringing Iran to nuclear talks. We may be back to traditional geopolitics, but it’s in a much more interdependent world, where our economic clout is still a source of restraint on Moscow and Beijing. Putin doesn’t disguise his military involvement in Ukraine for nothing; he’s afraid of more U.S. banking sanctions. China doesn’t circumscribe its behavior in the South China Sea for nothing; it can’t grow without exporting to America. It’s not just our guns; it’s our butter. It’s why we should be expanding U.S.-shaped free-trade deals with Asia and Europe, and it’s why the most important source of stability in the world today is the health of the U.S. economy. We can walk softly only as long as we carry a big stick — and a big wallet.

Well, Tommy wasn’t born until 1953 so maybe he doesn’t remember hiding under his desk during bomb drills at school, or the Cuban Missile Crisis…  Such fun.  What a putz…

Krugman’s blog, 6/22/15

June 23, 2015

There was one post yesterday, “2013 And All That:”

Those who can, cite evidence to support their position; those who cannot play gotcha. Events have overwhelmingly supported a Keynesian view of the effects of fiscal policy, but the anti-Keynesians have responded, not by reconsidering their views, but by seeking to discredit the messengers. In particular, there’s a lot of “Krugman said X would happen, and it didn’t, so Keynesian economics is wrong.” And in particular particular, the experience of 2013 – when British growth accelerated, and US growth continued despite the budget sequester, is claimed as some sort of decisive experiment.

I’ve already written about the British story – short version: the Cameron government more or less paused in its austerity drive, putting a hold on further tightening. But what about the US story?

Keynesians certainly did argue that the sequester would be a drag on the US recovery, and the economy did in fact continue to recover despite this drag. But in considering the events of 2013 you need to bear in mind two important things.

First, in Keynesian models the economy’s rate of growth depends, other things equal, on the change in fiscal policy. The sequester certainly imposed fiscal tightening; but was it more or less than the fiscal tightening that took place over the previous couple of years, as the ARRA faded out and state governments continued to retrench?

Second, even in 2013, and even on the fiscal front, the sequester wasn’t the only thing going on.

What we should have realized, but I didn’t – at least not fully – was that the sequester just wasn’t that big relative to the economy. TheCBO put the first-year impact on the deficit at $68 billion, or 0.4 percent of GDP, in the first year with much smaller additional impacts thereafter – not trivial, but not huge either.

And the sequester did have a real, visible effect on federal spending – particularly federal consumption. Here’s the annual change in that expenditure:

But this impact was, as I said, not that big relative to the economy, and there were other things going on – such as a sharp slowdown in the rate of fiscal tightening at the state and local level:

So what happened overall? Well, here’s the IMF measure of the cyclically adjusted primary surplus for government as a whole – measured not in levels but in changes from the previous year, which is what should matter for the growth rate:

According to the IMF’s estimates (which are similar to other estimates), there was indeed fiscal tightening in 2013 – but the pace of that tightening was no faster than it had been in 2012 or 2011. So there is no reason we should have seen a sharp growth slowdown, and the fact that growth persisted is in no sense a refutation of Keynesian economics.

I know what the response will be: “But you said blah blah blah!” So what? Even if I did, and even if my remarks aren’t being taken out of context, I am not the Oracle of Keynes, and my fallibility says nothing about how the economy works. If gotcha is all you’ve got, then you’ve got nothing.

Bobo, solo

June 23, 2015

Bobo’s decided to take on the Pope.  Who is, by the way, a scientist.  Something Bobo most certainly is not.  In “Fracking and the Franciscans” he babbles that Pope Francis’ new encyclical contains beautiful ideas that would make for terrible environmental and economic policy.  Since the word “Franciscan” is never mentioned in his column one must assume he thinks the Pope is a Franciscan because of the name he chose.  Wrong, Bobo, wrong again.  He’s a Jesuit.  As Charles Pierce at Esquire repeatedly reminds us, don’t fck with the Jesuits…  Here’s Bobo:

Pope Francis is one of the world’s most inspiring figures. There are passages in his new encyclical on the environment that beautifully place human beings within the seamless garment of life. And yet over all the encyclical is surprisingly disappointing.

Legitimate warnings about the perils of global warming morph into 1970s-style doom-mongering about technological civilization. There are too many overdrawn statements like “The earth, our home, is beginning to look more and more like an immense pile of filth.”

Hardest to accept, though, is the moral premise implied throughout the encyclical: that the only legitimate human relationships are based on compassion, harmony and love, and that arrangements based on self-interest and competition are inherently destructive.

The pope has a section on work in the encyclical. The section’s heroes are St. Francis of Assisi and monks — emblems of selfless love who seek to return, the pope says, to a state of “original innocence.”

He is relentlessly negative, on the other hand, when describing institutions in which people compete for political power or economic gain. At one point he links self-interest with violence. He comes out against technological advances that will improve productivity by replacing human work. He specifically condemns market-based mechanisms to solve environmental problems, even though these cap-and-trade programs are up and running in places like California.

Moral realists, including Catholic ones, should be able to worship and emulate a God of perfect love and still appreciate systems, like democracy and capitalism, that harness self-interest. But Francis doesn’t seem to have practical strategies for a fallen world. He neglects the obvious truth that the qualities that do harm can often, when carefully directed, do enormous good. Within marriage, lust can lead to childbearing. Within a regulated market, greed can lead to entrepreneurship and economic innovation. Within a constitution, the desire for fame can lead to political greatness.

You would never know from the encyclical that we are living through the greatest reduction in poverty in human history. A raw and rugged capitalism in Asia has led, ironically, to a great expansion of the middle class and great gains in human dignity.

You would never know that in many parts of the world, like the United States, the rivers and skies are getting cleaner. The race for riches, ironically, produces the wealth that can be used to clean the environment.

A few years ago, a team of researchers led by Daniel Esty of Yale looked at the environmental health of 150 countries. The nations with higher income per capita had better environmental ratings. As countries get richer they invest to tackle environmental problems that directly kill human beings (though they don’t necessarily tackle problems that despoil the natural commons).

You would never suspect, from this encyclical, that over the last decade, one of the most castigated industries has, ironically, produced some of the most important economic and environmental gains. I’m talking of course about fracking.

There was recently a vogue for polemical antifracking documentaries like “Gasland” that purport to show that fracking is causing flammable tap water and other horrors.

But a recent Environmental Protection Agency study found that there was no evidence that fracking was causing widespread harm to the nation’s water supply. On the contrary, there’s some evidence that fracking is a net environmental plus.

That’s because cheap natural gas from fracking displaces coal. A study by the Breakthrough Institute found coal-powered electricity declined to 37 percent from 50 percent of the generation mix between 2007 and 2012. Because natural gas has just half as much global-warming potential as coal, energy-related carbon emissions have declined more in the U.S. than in any other country over that time.

Fracking has also been an enormous boon to the nation’s wealth and the well-being of its people. In a new report called “America’s Unconventional Energy Opportunity,” Michael E. Porter, David S. Gee and Gregory J. Pope conclude that gas and oil resources extracted through fracking have already added more than $430 billion to annual gross domestic product and supported more than 2.7 million jobs that pay, on average, twice the median U.S. salary.

Pope Francis is a wonderful example of how to be a truly good person. But if we had followed his line of analysis, neither the Asian economic miracle nor the technology-based American energy revolution would have happened. There’d be no awareness that though industrialization can lead to catastrophic pollution in the short term (China), over the long haul both people and nature are better off with technological progress, growth and regulated affluence.

The innocence of the dove has to be accompanied by the wisdom of the serpent — the awareness that programs based on the purity of the heart backfire; the irony that the best social programs harvest the low but steady motivations of people as they actually are.

Well, since Mr. Nocera is off today I guess he left it up to Bobo to do the water carrying for Big Energy…

Krugman’s blog, 6/20 and 6/21/15

June 22, 2015

There were three posts on Saturday, and two yesterday.  The first post on Saturday was “Obamacare and Labor Supply:”

I was critical of CBO yesterday — probably excessively — for giving what seemed like undue cover for deficit scolds in its long-run budget projection. So credit where credit is due: the new report on the consequences of repealing the ACA is definitely not what the Congressional majority wants to hear. Despite including “dynamic scoring”, the report finds, unambiguously, that Obamacare reduces the deficit and repealing it would enlarge the deficit.

Is there anything in the report that provides fodder for the opponents? I see that the Times report says that there are “mixed effects”, because CBO says that GDP would be higher if the ACA were repealed. And maybe the usual suspects will try to spin it that way.

But the truth is that this report is much, much closer to what supporters of reform have said than it is to the scare stories of the critics — no death spirals, no job-killing, major gains in coverage at relatively low cost.

And there’s another important point: while the ACA may lead to somewhat lower GDP because it reduces labor supply, this does not imply a one-for-one loss in welfare. Suppose that a family’s second earner, now assured of being able to get health insurance, chooses as a result to work shorter hours and spend more time taking care of the children. GDP goes down — but there is a compensating non-monetary gain.

In fact, in a perfectly competitive economy the gain would fully offset the fall in GDP: if workers are paid their marginal product, the fall in GDP from the ACA is equal to the lost wages, but workers choosing to work less clearly prefer to have the extra time to the extra wages. Or to put it a bit differently, other things equal it’s agood thing if workers, freed from the fear that they won’t be able to get health insurance, respond by voluntarily working less.

OK, the story is made more complicated by taxes, which place a wedge between wages paid and income received; so there probably is a net cost to a fall in labor supply. But this effect is fully captured by the loss in revenue, which CBO doesn’t think would be large.

So overall this isn’t at all a “mixed” report — it’s a very big win for Obamacare supporters.

Saturday’s second post was “Voters Always Want a Strong Currency:”

Even as the prospect of Grexit moves from inconceivable to plausible, polls consistently show that Greek voters want to stay on the euro. But what does this tell us?

Not very much, I think — because I’m pretty sure that voters consistently want their currency to be strong. The advantages seem obvious, and there’s also an element of national pride; meanwhile, the difficulties created by an overvalued currency are obscure except to those directly engaged in exporting.

That’s an impressionistic view, but are there data? Well, searchingiPoll doesn’t turn up very much, but here’s an interesting result from 1985, when the U.S. dollar was very strong — so strong that the G5 famously met at the Plaza Hotel to agree on a plan to push it down:

So if Greek voters oppose the idea of a new drachma that would surely be weak against the euro, they are just echoing the preferences of voters always and everywhere.

Now, that consistent preference may itself matter, just as the eternal popularity of the household metaphor for fiscal policy — voters always favor a balanced budget — is one reason Keynesian economics is so hard to apply. But I don’t think there’s much news in Greek sentiment in favor of keeping the euro.

The last post on Saturday was “The Issue That Won’t Go Away:”

So another atrocity has us talking about race again. And rightly so. Nothing about America makes sense without understanding the long shadow cast by the original sin of slavery.

And yes, it’s an integral part of the left-right divide. Look at “Why Doesn’t the United States Have a European-Style Welfare State?” by Alberto Alesina — yes, that Alesina — Ed Glaeser, and Bruce Sacerdote. The authors are hardly big lefties; nonetheless, they were driven to the conclusion that it’s mainly about you-know-what:

Racial discord plays a critical role in determining beliefs about the poor. Since racial minorities are highly overrepresented among the poorest Americans, any income-based redistribution measures will redistribute disproportionately to these minorities. Opponents of redistribution in the United States have regularly used race-based rhetoric to resist left-wing policies. Across countries, racial fragmentation is a powerful predictor of redistribution. Within the United States, race is the single most important predictor of support for welfare. America’s troubled race relations are clearly a major reason for the absence of an American welfare state.

To see what they’re talking about, and why their point remains so relevant, look at two maps. First, the implementation of the Affordable Care Act:

Second, this:

The first post yesterday was “Avoiding Apocalypse:”

Larry Summers has written a scary column warning that Greece may be on the verge of becoming a “failed state”. It’s a useful corrective to the extraordinary complacency I’m hearing from too many European officials. But I do think it’s worth pointing out that this need not happen, even if there is no deal.

What Summers seems to portray is a scenario in which Greek banks collapse and take down the economy with them. But what if Greece abandons the euro and issues its own currency to keep cash flowing?

For sure there would be a sharp devaluation, which would lead to a spike in inflation. But would hyperinflation follow? Remember that Greece is running a large cyclically adjusted primary surplus — that is, given even a modest economic recovery it would not need to roll the printing presses to pay its bills. And a a devaluation would, other things equal, promote recovery.

I know that many people are telling stories about immediate collapse due to inability to buy raw materials, complete failure of exports to respond, and so on. They could be right. But I actually can’t think of any historical examples that fit this story — in particular, all the hyperinflations I know about involved governments too weak to collect taxes, and believe it or not, that’s not true of Greece despite all you’ve heard.

So even if Greece goes over the edge in the next few days, there may be another off-ramp from the road to hell. And at that point the European problem would turn on its axis, as Wolfgang Munchau says, and become one of coping with the euro’s evident reversibility.

Yesterday’s second post was “No Shaving Grace:”

Serious matters are afoot, but I don’t know if there’s anything more I can say about them right now. So, on to a subject where I think I can make a useful intervention: Peter Dorman’s query about why so many economists wear beards.

Actually, others have asked the same question — and found that bearded Nobelists are not quite as prevalent as one might have thought. Mostly, I think, it’s the impression conveyed by myself and Joe Stiglitz, although Simon Wren-Lewis has an even more impressive display.

But to the extent that there is a pattern here, it’s basically about the whiz-kid culture of economics, in which careers can take off very quickly — and one’s appearance may not have kept up with one’s professional reputation. I grew my beard when I was 26, and it was very definitely a defensive move: there I was, writing what I hoped were ground-breaking papers — everything everyone has said about international trade is wrong! — and looking like an undergraduate. (Seriously — when I went in to see a colleague some of the students complained that I was cutting ahead of the line). So I was looking for a bit of hairy gravitas.

And by the time I no longer needed that, the beard had become part of my persona.

Blow and Krugman

June 22, 2015

In “In Charleston, A Millennial Race Terrorist” Mr. Blow says some are even hesitant to call the Charleston killings a hate crime, despite many signs that it was that and more.  Prof. Krugman, in “Slavery’s Long Shadow,” says despite changing attitudes on several fronts, race in America is an issue that won’t go away.  And today the New York Times is reporting that the campaigns of Ted Cruz, Rick Santorum and Rand Paul got donations from the leader of an extremist group tied to Dylann Roof, the suspected gunman in the attack at a church in Charleston.  Here’s Mr. Blow:

“You don’t have to do this,” said Tywanza Sanders to the young man who suddenly rose and drew a gun, and according to witnesses, said he was there “to shoot black people.”

He had been sitting in the Bible study session at Charleston, S.C.’s historic Emanuel African Methodist Episcopal Church for an hour, next to the pastor, debating scripture.

Dylann Storm Roof, the unassuming, boyish-looking man with the bowl-cut hair, replied: “Yes. You are raping our women and taking over the country.”

Then he “took aim at the oldest person present, Susie Jackson, 87.” This according to Sanders’s cousin, Kristen Washington, as reported in The New York Times.

Roof opened fire, killing nine; Jackson was the eldest slain, and her nephew, Sanders, the youngest at 26. Four of the dead were reverends — one of whom was the church’s pastor, a South Carolina state senator, Clementa Pinckney.

This was a savage act of barbarism by a young man baptized in a theology of race hate.

There are so many threads to pull on this story that one hardly knows where to begin, but let’s begin here: Roof was only 21 years old. He is a millennial race terrorist. Roof was born in 1994, 30 years after President Johnson signed the Civil Rights Act into law.

He had a white power flag fetish. He was once pictured wearing a jacket emblazoned with an apartheid-era South African flag and another flag of “Rhodesia, as modern-day Zimbabwe was called during a period of white rule,”according to The Times. Apartheid ended the year Roof was born, and Rhodesia became Zimbabwe long before that.

Who radicalized Roof? Who passed along the poison? We must never be lulled into a false belief that racism is dying off with older people. As I’ve written in this space before, Spencer Piston, an assistant professor of political science at Syracuse University, has found that “younger (under-30) whites are just as likely as older ones to view whites as more intelligent and harder-working than African-Americans.”

Racism is to social progress what cockroaches are to nuclear fallout — extraordinarily resilient.

Furthermore, there is a widely published photo of Roof sitting on his car with an ornamental license plate with Confederate flags on it. That is the same Confederate flag that flies on the grounds of the state Capitol. What signal is South Carolina sending?

There is the thread of couching his cowardice as chivalry, framing his selfish hatred as noble altruism in defense of white femininity from the black brute. So much black blood has been spilled and so many black necks noosed in the name of protecting white femininity, and by extension, white purity. Roof is only this trope’s latest instrument.

Then there is the question of whether to call this terrorism. Terrorism, as commonly defined, suggests that the act must have some political motivation. (By defining it this way, we conveniently exclude that long legacy of racial terrorism as a political tool of intimidation and control in this country.) And yet, this case may even reach that bar.

Reuters reported Friday that the case “is being investigated by the Justice Department as a possible case of domestic terrorism.” But whether it reaches the legal definition of domestic terrorism (it has already passed the common sense definition), some conservatives have even been reticent to call it a hate crime, which it surely is, rather preferring to twist this massacre into their quixotic crusade to establish evidence of a war on Christianity in this country.

On Fox News’s “Fox and Friends,” one host called the killings “a horrifying attack on faith.”

Another anchor on the show chimed in, responding to the comments of a guest: “Extraordinarily, they called it a hate crime. Uh, and some look at it as, ‘Well, it’s because it was a white guy, apparently, and a black church,’ but you made a great point just a moment ago about the hostility towards Christians. And it was a church! So, maybe that’s what they’re talking about. They haven’t explained it to us.”

Oh Fox, there is so much that needs explaining to you. First, Roof was a member of a Lutheran church in Columbia, S.C. As Rev. Tony Metze of St. Paul’s Lutheran Church confirmed to the Huffington Post, “He was on the roll of our congregation.” Lutheranism is one of the branches of Protestant Christianity.

Beyond that, according to CNN, “a friend recalled a drunken Roof ranting one night about his unspecified six-month plan ‘to do something crazy’ in order ‘to start a race war.’ ”

CNN also reported that Roof confessed his intention to cause a race war to investigators. This wasn’t a war on Christianity, but a war on black people.

Roof was a young man radicalized to race hatred who reportedly wanted to start a race war and who killed nine innocent people as his opening salvo. If that’s not terrorism, we need to redefine the term.

Now here’s Prof. Krugman:

America is a much less racist nation than it used to be, and I’m not just talking about the still remarkable fact that an African-American occupies the White House. The raw institutional racism that prevailed before the civil rights movement ended Jim Crow is gone, although subtler discrimination persists. Individual attitudes have changed, too, dramatically in some cases. For example, as recently as the 1980s half of Americans opposed interracial marriage, a position now held by only a tiny minority.

Yet racial hatred is still a potent force in our society, as we’ve just been reminded to our horror. And I’m sorry to say this, but the racial divide is still a defining feature of our political economy, the reason America is unique among advanced nations in its harsh treatment of the less fortunate and its willingness to tolerate unnecessary suffering among its citizens.

Of course, saying this brings angry denials from many conservatives, so let me try to be cool and careful here, and cite some of the overwhelming evidence for the continuing centrality of race in our national politics.

My own understanding of the role of race in U.S. exceptionalism was largely shaped by two academic papers.

The first, by the political scientist Larry Bartels, analyzed the move of the white working class away from Democrats, a move made famous in Thomas Frank’s “What’s the Matter With Kansas?” Mr. Frank argued that working-class whites were being induced to vote against their own interests by the right’s exploitation of cultural issues. But Mr. Bartels showed that the working-class turn against Democrats wasn’t a national phenomenon — it was entirely restricted to the South, where whites turned overwhelmingly Republican after the passage of the Civil Rights Act and Richard Nixon’s adoption of the so-called Southern strategy.

And this party-switching, in turn, was what drove the rightward swing of American politics after 1980. Race made Reaganism possible. And to this day Southern whites overwhelmingly vote Republican, to the tune of 85 or even 90 percent in the deep South.

The second paper, by the economists Alberto Alesina, Edward Glaeser, and Bruce Sacerdote, was titled “Why Doesn’t the United States Have a European-style Welfare State?” Its authors — who are not, by the way, especially liberal — explored a number of hypotheses, but eventually concluded that race is central, because in America programs that help the needy are all too often seen as programs that help Those People: “Within the United States, race is the single most important predictor of support for welfare. America’s troubled race relations are clearly a major reason for the absence of an American welfare state.”

Now, that paper was published in 2001, and you might wonder if things have changed since then. Unfortunately, the answer is that they haven’t, as you can see by looking at how states are implementing — or refusing to implement — Obamacare.

For those who haven’t been following this issue, in 2012 the Supreme Court gave individual states the option, if they so chose, of blocking the Affordable Care Act’s expansion of Medicaid, a key part of the plan to provide health insurance to lower-income Americans. But why would any state choose to exercise that option? After all, states were being offered a federally-funded program that would provide major benefits to millions of their citizens, pour billions into their economies, and help support their health-care providers. Who would turn down such an offer?

The answer is, 22 states at this point, although some may eventually change their minds. And what do these states have in common? Mainly, a history of slaveholding: Only one former member of the Confederacy has expanded Medicaid, and while a few Northern states are also part of the movement, more than 80 percent of the population in Medicaid-refusing America lives in states that practiced slavery before the Civil War.

And it’s not just health reform: a history of slavery is a strong predictor of everything from gun control (or rather its absence), to low minimum wages and hostility to unions, to tax policy.

So will it always be thus? Is America doomed to live forever politically in the shadow of slavery?

I’d like to think not. For one thing, our country is growing more ethnically diverse, and the old black-white polarity is slowly becoming outdated. For another, as I said, we really have become much less racist, and in general a much more tolerant society on many fronts. Over time, we should expect to see the influence of dog-whistle politics decline.

But that hasn’t happened yet. Every once in a while you hear a chorus of voices declaring that race is no longer a problem in America. That’s wishful thinking; we are still haunted by our nation’s original sin.

Krugman’s blog, 6/19/15

June 20, 2015

There were three posts yesterday.  The first was “Does Greece Need More Austerity?”:

As many of us have noted, it’s hugely unfair when people claim that Greece has done nothing to adjust. On the contrary, it has imposed incredibly harsh austerity and substantial reforms on other fronts. Yet you might be tempted to argue that the results show that Greece hasn’t done enough — after all, last year it was running only a tiny primary budget surplus (that is, not counting interest), and this year it has slipped back into primary deficit. So more adjustment is needed, right?

Well, step back for a minute and imagine that we weren’t talking about Greece but about the U.S. or the UK. When we look at our budgets, we normally focus not on the headline budget balance but on the cyclically adjusted balance — an estimate of what it would be at more or less full employment. This helps avoid pressure to pursue procyclical policies that make the economy unstable, and also gives a better idea of the long-run sustainability of the position. And while cyclical adjustment can be controversial, there are standard estimates from third parties like the IMF and the OECD.

So here’s a picture you probably haven’t seen: the IMF’s estimatesof the cyclically adjusted primary balances of eurozone countries in 2014:

Greece is, by this measure, the most fiscally responsible, indeed crazily austere, nation in Europe.

So why is it in fiscal crisis? Because the economy is deeply depressed.

Suppose that there were a way to end this depression. Then Greece’s fiscal problems would melt away, with no need for further cuts. But is there any way to do that?

The answer is, not as long as Greece remains in the euro. It can pursue reforms that might make it more competitive, but anyone promising dramatic, quick results has no idea what he is talking about.

On the other hand, Grexit would produce a rapid improvement in competitiveness, at the cost of possible financial chaos.This is not a route anyone has been willing to go down, but one does have to say that as the crisis worsens it becomes a more plausible outcome.

The thing to understand, in any case, is that if Grexit does come, fiscal issues will immediately cease to be central to the story. Instead, it will all be about handling bank panic, managing the transition to a new currency, and possibly removing structural obstacles to increased exports (which would very much include tourism).

In truth, this has never been a fiscal crisis at its root; it has always been a balance of payments crisis that manifests itself in part in budget problems, which have then been pushed onto the center of the stage by ideology.

Yesterday’s second post was “The Politicization of CBO Begins:”

Update: Richard Kogan has contacted me to say that while the claim of a worsening budget situation is made at the beginning of the report, the analysis that follows is in fact clean and careful. So we’re talking about a misleading statement rather than a misleading analysis. And sources close to CBO insist that the misleading statement was careless drafting rather than deliberate politicization. OK, I guess.

But this is not a place to be careless. My inbox filled up this morning with deficit scold cries of triumph — who knew that Fix the Debt was still out there? — saying, “see, CBO confirms that the deficit is spinning out of control”.That’s why I guessed that we were seeing political influence. If not, good — but in this charged environment, you have to be very, very careful.

What with everything else going on, a seemingly technical note from Richard Kogan at the Center on Budget and Policy Priorities may be slipping under the radar. But this is really important.

As Kogan notes, the Congressional Budget Office has released its latest set of long-run budget projections, declaring that “The long-term outlook for the federal budget has worsened dramatically over the past several years.” And this is quite scary — not the projections, but the fact that CBO would say this. Because as Kogan points out, the budget office’s own numbers contradict its claims.

The key point is that CBO makes what Kogan rightly calls an apples-to-oranges comparison, comparing pre-2010 current-law estimates that assumed that the Bush tax cuts would expire in full with later projections that incorporate their partial extension (as well as a related issue involving the Alternative Minimum Tax.) This doesn’t mark a real deterioration in the outlook, and it certainly doesn’t indicate out of control policy. In fact, the outlook isn’t particularly scary.

Oh, and as Kogan noted in another paper, CBO’s estimates are almost surely too pessimistic on interest rates, so that the long-run budget outlook is even less scary than it appears.

So what’s going on here? I can’t believe that CBO staff were confused about these issues. What it looks like, I’m sorry to say, is the first indication that the new, GOP-dominated CBO is in fact going to be politicized, engaging in deficit scare tactics when that suits the majority, pro-tax-cut scoring, and more.

The last post yesterday was “Two Centuries of Taylor Swift:”

I did an interview with Billboard on the economics of music; I’m not a real expert here, I just played one at SXSW, but I had some fun (and it is something I care about!)

Free day!

June 20, 2015

Both Ms. Collins and Mr. Nocera are off today, so there’s nothing to report about the 2016 Clown Car, and no water to carry for Big Energy.  Go play outside.

Krugman’s blog, 6/18/15

June 19, 2015

There was one post yesterday, “Thinking About the All Too Thinkable:”

The path toward non-Grexit — toward Greece and its creditors reaching a deal that keeps it in the euro — is getting narrower, although it’s not yet completely closed. I’ve been reticent on the subject, for fear of adding my bit to the crisis atmosphere, and I still intend to keep it cool. But there are a few things that seem to need saying.

First, the first line of defense against euro exit has been overrun. Way back when Barry Eichengreen made an argument many of us found persuasive, namely that no country would dare even hint at leaving the euro because such a move would trigger “the mother of all financial crises” as everyone raced to pull funds out of banks. Assome of us noted, however, this would become moot if the financial crisis and bank runs happened in advance, Argentine style, forcing the imposition of capital controls and other measures.

As it turned out, the Argentine scenario was headed off by the political determination of elites to stay in the euro and the success of the ECB’s “whatever it takes” declaration of willingness to act as lender of last resort. But the reprieve wasn’t permanent; in this respect, at least, Athens 2015 is Buenos Aires 2001. Financial stability is already greatly compromised, so the costs of thinking about the formerly unthinkable have fallen.

How did we get to this point? Nothing fills me with quite as much despair as the persistence of the story line that it’s all about continuing Greek fecklessness, that the Greeks haven’t done anything. In fact, Greece has imposed almost inconceivable pain on itself. Here’s a comparison between Greece and Spain, the current favorite son of the austerity camp (although the Spaniards themselves aren’t impressed):


European Commission

The problem has been that severe spending cuts in an economy with no independent monetary policy and no ability to devalue lead to severe economic contraction, which in turn means that a large part of what’s gained fiscally at the front end gets lost via reduced revenue. This isn’t the fault of the Greeks, it’s basically a design flaw in the euro itself.

So what about Grexit? At this point quite a few people on the creditor/Troika side of the negotiations seem almost to welcome the prospect. But this is bizarre in terms of their underlying interests. Yes, the lives of the officials would become easier, for a while, because they wouldn’t have to deal with Syriza. But from the point of view of the creditors, Grexit would be a pure negative. They would almost surely receive less in payments than they would under any deal that keeps Greece in, and the proof that the euro is in fact reversible would grease the rails for future crises, even if the ECB is able to contain this one.

And as Martin Wolf points out, Greece will still be there, and will still need dealing with.

The Greeks, on the other hand, should feel conflicted. There would probably be a lot of financial chaos in the immediate aftermath of euro exit. And maybe the apocalyptic warning from the Bank of Greece that devaluation would push the nation back into the Third World is right, although I’d like to know about the model and historical examples that would justify this claim. But absent that kind of implosion, a devalued currency should eventually produce an export-led recovery — I understand the cynicism one hears, but demand curves do slope downwards even in Greece.

The point is that nobody should be casual or confident here. But the creditors should actually be even more worried than the Greeks about a potential exit that has no upside for the rest of Europe.

Brooks and Krugman

June 19, 2015

Bobo was too busy to do his own writing, so he presents us with “Hearts Broken Open.” In this second batch of personal takes on how some readers found purpose in life, raising children or confronting illness or death are major factors.  I still for the life of me cannot figure out why anyone would write to Bobo.  Prof. Krugman has a question in “Voodoo, Jeb! Style:”  Why did Jeb Bush claim to know the secrets to achieving growth that even economists don’t know?  Here’s Bobo:

Last month, I asked readers if they had discovered a purpose in life and, if so, how they had discovered it. A few thousand wrote essays. I was struck by how elemental life is. Most people found their purpose either through raising children or confronting illness or death.

Scott Addington writes, “As is often the case, my purpose became clearly evident after I had stopped looking for it. On October 11, 1995, my daughter was born. Beginning with that moment, there has never been the slightest doubt regarding the purpose and source of meaning in my life. Being a father is the most meaningful and rewarding pursuit a man could ever hope to experience.”

Not only in parenting, but also in teaching. The essays from teachers ring with special clarity and force. Many of them see clearly how their day-to-day activities are in line with their ultimate end. This has its downside after people leave teaching.

Carolyn from Michigan writes, “Before class, I sometimes would sit in the chair of a student who was having a lot of trouble and pray that I might be a blessing to him that day. Yes, for 37 years I was a teacher, the last 25 as a high school special education teacher. That was my purpose; that was my calling.

“But now I am retired, and I am adrift. What is my purpose now? I struggle with it every day. When I was teaching, I would bound out of bed at 6:15 every morning. Now I wake early, but stay under the covers, filled with a world’s worth of anxiety. It might have been better had I died while trying to teach students with learning disabilities the basics of geometry.”

Quite frequently purpose emerges from loss. Greg Sunter from Brisbane, Australia, writes: “Four years ago, my wife of 21 years passed away as the result of a brain tumor. Her passage from diagnosis to death was less than six months. As shocking as that time was, almost as shocking was the sense of personal growth and awakened understanding that has come from the experience for me through reflection and inner work — to a point that I feel almost guilty about how significant my own growth has been as a result of my wife’s death.

“In his book ‘A Hidden Wholeness,’ Parker Palmer writes about the two ways in which our hearts can be broken: the first imagining the heart as shattered and scattered; the second imagining the heart broken open into new capacity, holding more of both our own and the world’s suffering and joy, despair and hope. The image of the heart broken open has become the driving force of my life in the years since my wife’s death. It has become the purpose to my life.”

Some people’s lives organize around a certain role or calling. “My moniker could be ‘formidable advocate,’ ” writes Georgian Lussier. After her brother suffered a brain injury, she learned to help people work through the maze of the health care system. Now she helps older women find work.

But, for many people, the purpose of life is simply to live it fully. Many people don’t necessarily see their lives as pointing toward God or as defined by some mission statement. They seek to drink in life at full volume, to experience and help others richly.

Jae Brown was driving after smoking weed and drinking when he was pulled over. He confessed everything to the cop, who saw that Brown was in college and whispered, “Don’t let your friends get you in trouble you can’t get yourself out of,” and let him go. “My purpose in life,” Brown writes, “is to mentor, provide that whisper in someone’s ear that changes their life.”

The great struggle in essay after essay is to remain emotionally vital and intellectually alive.

Zachary Krowitz, 21, read the essays written in response to the column and concluded that “this desire for something that is surely true is present in all of us, and reflects an attempt to know what we really want. … Unfortunately, based both on the essays written in response to your column and common experience, such meaning is often lost as one travels through life, emotions become duller and less clear.”

Alayne Crossman, 42, is able to keep her emotion flowing at full pitch. “Without the love of my family I wouldn’t be who I am today. It means I cry during ‘Frozen,’ every single time. It means I cry when I listen to Van Morrison’s ‘Ancient Highway.’ I am ridiculously sentimental because I choose to remain open to this vast, messy thing we call life.”

For many people, the purpose of life is to have more life. That may not have defined people’s purpose in past eras, when it might have had more to do with the next life, or obedience to a creed. But many today seek to live with hearts wide open.

I almost feel sorry for him [not really…] because he really must be dreading having to address the 2016 Clown Car at some point.  Unless he’s decided that he’s above considering the hurley-burley of politics now…  Here’s Prof. Krugman:

On Monday Jeb Bush — or I guess that’s Jeb!, since he seems to have decided to replace his family name with a punctuation mark — finally made his campaign for the White House official, and gave us a first view of his policy goals. First, he says that if elected he would double America’s rate of economic growth to 4 percent. Second, he would make it possible for every American to lose as much weight as he or she wants, without any need for dieting or exercise.

O.K., he didn’t actually make that second promise. But he might as well have. It would have been just as realistic as promising 4 percent growth, and considerably less irresponsible.

I’ll get to Jeb!onomics in a minute, but first let me tell you about a dirty little secret of economics — namely, that we don’t know very much about how to raise the long-run rate of economic growth. Economists do know how to promote recovery from temporary slumps, even if politicians usually refuse to take their advice. But once the economy is near full employment, further growth depends on raising output per worker. And while there are things that might help make that happen, the truth is that nobody knows how to conjure up rapid productivity gains.

Why, then, would Mr. Bush imagine that he is privy to secrets that have evaded everyone else?

One answer, which is actually kind of funny, is that he believes that the growth in Florida’s economy during his time as governor offers a role model for the nation as a whole. Why is that funny? Because everyone except Mr. Bush knows that, during those years, Florida was booming thanks to the mother of all housing bubbles. When the bubble burst, the state plunged into a deep slump, much worse than that in the nation as a whole. Taking the boom and the slump together, Florida’s longer-term economic performance has, if anything, been slightly worse than the national average.

The key to Mr. Bush’s record of success, then, was good political timing: He managed to leave office before the unsustainable nature of the boom he now invokes became obvious.

But Mr. Bush’s economic promises reflect more than self-aggrandizement. They also reflect his party’s habit of boasting about its ability to deliver rapid economic growth, even though there’s no evidence at all to justify such boasts. It’s as if a bunch of relatively short men made a regular practice of swaggering around, telling everyone they see that they’re 6 feet 2 inches tall.

To be more specific, the next time you encounter some conservative going on about growth, you might want to bring up the following list of names and numbers: Bill Clinton, 3.7; Ronald Reagan, 3.4; Barack Obama, 2.1; George H.W. Bush, 2.0; George W. Bush, 1.6. Yes, that’s the last five presidents — and the average rate of growth of the U.S. economy during their time in office (so far, in Mr. Obama’s case). Obviously, the raw numbers don’t tell the whole story, but surely there’s nothing in that list to suggest that conservatives possess some kind of miracle cure for economic sluggishness. And, as many have pointed out, if Jeb! knows the secret to 4 percent growth, why didn’t he tell his father and brother?

Or consider the experience of Kansas, where Gov. Sam Brownback pushed through radical tax cuts that were supposed to drive rapid economic growth. “We’ll see how it works. We’ll have a real live experiment,” he declared. And the results of the experiment are now in: The promised boom never arrived, big deficits did, and, despite savage cuts to schools and other public services, Kansas eventually had to raise taxes again (with the pain concentrated on lower-income residents).

Why, then, all the boasting about growth? The short answer, surely, is that it’s mainly about finding ways to sell tax cuts for the wealthy. Such cuts are unpopular in and of themselves, and even more so if, like the Kansas tax cuts for businesses and the affluent, they must be paid for with higher taxes on working families and/or cuts in popular government programs. Yet low taxes on the rich are an overriding policy priority on the right — and promises of growth miracles let conservatives claim that everyone will benefit from trickle-down, and maybe even that tax cuts will pay for themselves.

There is, of course, a term for basing a national program on this kind of self-serving (and plutocrat-serving) wishful thinking. Way back in 1980, George H.W. Bush, running against Reagan for the presidential nomination, famously called it “voodoo economic policy.” And while Reaganolatry is now obligatory in the G.O.P., the truth is that he was right.

So what does it say about the state of the party that Mr. Bush’s son — often portrayed as the moderate, reasonable member of the family — has chosen to make himself a high priest of voodoo economics? Nothing good.


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