“The Obama Recovery”: You Shouldn’t Conclude That Hitting Yourself In The Head Is Smart Because It Feels So Good When You Stop
Suppose that for some reason you decided to start hitting yourself in the head, repeatedly, with a baseball bat. You’d feel pretty bad. Correspondingly, you’d probably feel a lot better if and when you finally stopped. What would that improvement in your condition tell you?
It certainly wouldn’t imply that hitting yourself in the head was a good idea. It would, however, be an indication that the pain you were experiencing wasn’t a reflection of anything fundamentally wrong with your health. Your head wasn’t hurting because you were sick; it was hurting because you kept hitting it with that baseball bat.
And now you understand the basics of what has been happening to several major economies, including the United States, over the past few years. In fact, you understand these basics better than many politicians and commentators.
Let’s start with a tale from overseas: austerity policy in Britain. As you may know, back in 2010 Britain’s newly installed Conservative government declared that a sharp reduction in budget deficits was needed to keep Britain from turning into Greece. Over the next two years growth in the British economy, which had been recovering fairly well from the financial crisis, more or less stalled. In 2013, however, growth picked up again — and the British government claimed vindication for its policies. Was this claim justified?
No, not at all. What actually happened was that the Tories stopped tightening the screws — they didn’t reverse the austerity that had already occurred, but they effectively put a hold on further cuts. So they stopped hitting Britain in the head with that baseball bat. And sure enough, the nation started feeling better.
To claim that this bounceback vindicated austerity is silly. As Simon Wren-Lewis of Oxford University likes to point out, if rapid growth after a gratuitous slump counts as success, the government should just close down half the economy for a year; the next year’s growth would be fantastic. Or as I’d put it, you shouldn’t conclude that hitting yourself in the head is smart because it feels so good when you stop. Unfortunately, the silliness of the claim hasn’t prevented its widespread acceptance by what Mr. Wren-Lewis calls “mediamacro.”
Meanwhile, back in America we haven’t had an official, declared policy of fiscal austerity — but we’ve nonetheless had plenty of austerity in practice, thanks to the federal sequester and sharp cuts by state and local governments. The good news is that we, too, seem to have stopped tightening the screws: Public spending isn’t surging, but at least it has stopped falling. And the economy is doing much better as a result. We are finally starting to see the kind of growth, in employment and G.D.P., that we should have been seeing all along — and the public’s mood is rapidly improving.
What’s the important lesson from this late Obama bounce? Mainly, I’d suggest, that everything you’ve heard about President Obama’s economic policies is wrong.
You know the spiel: that the U.S. economy is ailing because Obamacare is a job-killer and the president is a redistributionist, that Mr. Obama’s anti-business speeches (he hasn’t actually made any, but never mind) have hurt entrepreneurs’ feelings, inducing them to take their marbles and go home.
This story line never made much sense. The truth is that the private sector has done surprisingly well under Mr. Obama, adding 6.7 million jobs since he took office, compared with just 3.1 million at this point under President George W. Bush. Corporate profits have soared, as have stock prices. What held us back was unprecedented public-sector austerity: At this point in the Bush years, government employment was up by 1.2 million, but under Mr. Obama it’s down by 600,000. Sure enough, now that this de facto austerity is easing, the economy is perking up.
And what this bounce tells you is that the alleged faults of Obamanomics had nothing to do with the pain we were feeling. We weren’t hurting because we were sick; we were hurting because we kept hitting ourselves with that baseball bat, and we’re feeling a lot better now that we’ve stopped.
Will this improvement in our condition continue? Britain’s government has declared its intention to pick up the baseball bat again — to engage in further austerity, which does not bode well. But here the picture looks brighter. Households are in much better financial shape than they were a few years ago; there’s probably still a lot of pent-up demand, especially for housing. And falling oil prices will be good for most of the country, although some regions — especially Texas — may take a hit.
So I’m fairly optimistic about 2015, and probably beyond, as long as we avoid any more self-inflicted damage. Let’s just leave that baseball bat lying on the ground, O.K.?
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 28, 2014
“Trouble Behind The Lines”: Sam Brownback, A Mad Scientist Whose Lab Has Blown Up
The strangest thing about the battle for the Senate going on this year is how much trouble Republicans are having in states won by Mitt Romney, and not necessarily the ones where they expected trouble. Contests in South Dakota, Kentucky and Georgia have all spent some time panicking Republicans, and none of those states has been put away by the GOP in the interim. But the biggest surprise still has to be Kansas, a profoundly Republican state with multiple struggling statewide Republican campaigns. Playing off Mark Benelli’s fine profile of events in Kansas for Rolling Stone, I discussed the plight of the GOP there at Washington Monthly today:
[Benelli’s] precis of how Sam Brownback made the state an experiment for the discredited fiscal theories of doddering supply-siders is an instant classic:
Back in 2011, Arthur Laffer, the Reagan-era godfather of supply-side economics, brought to Wichita by Brownback as a paid consultant, sounded like an exiled Marxist theoretician who’d lived to see a junta leader finally turn his words into deeds. “Brownback and his whole group there, it’s an amazing thing they’re doing,” Laffer gushed to The Washington Post that December. “It’s a revolution in a cornfield.” Veteran Kansas political reporter John Gramlich, a more impartial observer, described Brownback as being in pursuit of “what may be the boldest agenda of any governor in the nation,” not only cutting taxes but also slashing spending on education, social services and the arts, and, later, privatizing the entire state Medicaid system. Brownback himself went around the country telling anyone who’d listen that Kansas could be seen as a sort of test case, in which unfettered libertarian economic policy could be held up and compared right alongside the socialistic overreach of the Obama administration, and may the best theory of government win. “We’ll see how it works,” he bragged on Morning Joe in 2012. “We’ll have a real live experiment.”That word, “experiment,” has come to haunt Brownback as the data rolls in. The governor promised his “pro-growth tax policy” would act “like a shot of adrenaline in the heart of the Kansas economy,” but, instead, state revenues plummeted by nearly $700 million in a single fiscal year, both Moody’s and Standard & Poor’s downgraded the state’s credit rating, and job growth sagged behind all four of Kansas’ neighbors. Brownback wound up nixing a planned sales-tax cut to make up for some of the shortfall, but not before he’d enacted what his opponents call the largest cuts in education spending in the history of Kansas.
Brownback added political to fiscal risk by securing big bags of money from friends like the Koch Brothers and using it in a 2012 primary purge of moderate Republican state senators who didn’t support his fiscal plans. And it’s all blown up on him this year, with the shock waves potentially engulfing the state’s senior U.S. Senator. Binelli’s portrait of Pat Roberts as an “unloved Beltway mediocrity” who stands by trembling with fatigue as more famous and charismatic conservatives campaign to save his bacon is as acute as his portrayal of Brownback as a mad scientist whose lab has blown up.
Because of the nature of the state and the year and the outside (and inside, from the Kochs Wichita HQ) money flooding Kansas, Brownback and Roberts may survive–Brownback to preside over the damage he’s done to the state’s fiscal standing and schools, and Roberts to return to a final stage of his long nap in the Capitol. But both men have richly earned the trouble they are in.
At a minimum, Browback’s presidential ambitions are now officially laughable, and moderate Republicans have gotten his full attention. But it would be nice to see an object lesson taught in the limits of Republican extremism.
By: Ed Kilgore, Contributing Writer, Political Animal, The Washington Monthly; The Democratic Strategist, October 24, 2015
“Cut, Cut, And Cut Some More”: Republican’s ‘Blame Ebola On Obama’ Ploy Backfires
The instant the Ebola crisis hit American shores, the inevitable happened. The GOP blamed President Obama for it. First, it was the lame brained borderline racist charge that Obama either deliberately or through sheer incompetence did nothing to seal the borders to keep the virus at bay. The only slightly more intelligible attack was that Obama did nothing to command the Centers for Disease Control and Prevention to take panic measures to insure no incidence of the disease would turn up in the country. Then the GOP campaign strategists stepped in and had some of its top candidates suddenly parroting the kooky line that Obama was to blame for a supposedly porous and negligent CDC and border security lapse. Obama’s appointment of an “Ebola Czar” provided even more grist for the GOP hit mill on Obama. It was variously blown off as too little, too late or ridiculed as a desperate appointment of a supposedly medically unqualified political crony.
This is political gamesmanship of the lowest order, playing on media and public fears over a legitimate and terrifying health crisis, to again belittle Obama. And with the stakes sky high in the 2014 midterm elections, the dirty political pool by the GOP was totally predictable.
But the twist in the Ebola saga is that the dirty hit job has backfired. The attack opened the GOP wide open to media and public scrutiny of the galling fact that the GOP has systematically whittled away vital funding for dozens of health programs since 2010. The CDC, much the whipping agency for the supposed Obama health dereliction, was stripped of nearly $600 million; millions that could have gone to ramp up monitoring, screening, and education programs, as well as research on vaccines to deal with infectious and communicable diseases. The names of the more than two dozen Republicans who poleaxed the CDC budget have been published. And to no surprise the bulk of them are either directly affiliated with or have been in part bankrolled by tea party factions. In September, there were initial reports that House Republicans would cut almost half of the nearly $100 million that the White House wanted earmarked to fight Ebola. It didn’t happen not because of any sudden epiphany by the GOP House members to provide all the funding that the White House asked for the program, but because word had quickly leaked out about the defunding possibility, and that would have been a PR nightmare that even the most rabid anti-Obama House Republicans knew was fraught with deep peril.
GOP leaders have hit back hard on the charge that they are somehow to blame for any laxity in the fight against Ebola by claiming that Obama and the Democrats have also made cuts in the NIH budget and that those cuts are the reason for any shortfall in the CDC’s funding for programs. That’s true as far as it goes. But what the GOP conveniently omits is that the cuts to the NIH budget and indeed all other health and education and domestic spending program cuts were agreed to by Obama with the GOP jamming a virtual political gun to his head demanding he sign off on cuts as the draconian price for ending gridlock over the deficit war.
Now in the backdrop of a potential catastrophic health nightmare, the cuts have suddenly become as big a political campaign tug of war as the blame game about Ebola. But it’s one that the GOP can’t win. Because it, not Obama and the Democrats, have been firmly identified in the public eye as the ones that have consistently sledge hammered the Obama administration and Congress to cut, cut, and cut some more spending. No matter how much the right wing gnashes its teeth, shouts and moans and attempts to turn the table and finger-point Obama for the funding fall off in the Ebola fight, it won’t change that naked reality. The hit ads that Democrats took out lambasting the GOP for the funding cuts are believable not because of any numbers accuracy or inaccuracy but in part because of public belief that when it comes to pound saving, the GOP will go to any length to save a dollar at the expense of vital programs.
The ads are believable in greater part because the GOP has left no stone unturned in its ruthless and relentless drive to use any and every crisis real or manufactured to paint Obama as a weak, ineffectual and failed president and presidency. It has banked on, and stoked, the frozen political divide in the country knowing that a wide segment of the public has open, unabashed contempt for his policies and his administration. The GOP banks that it can swivel this divisiveness into sustained opposition to those policies, and that it can further boost its numbers in the House and especially the Senate in the 2014 midterm elections. The ultimate aim is to translate the incessant hit attacks on Obama into a White House win in 2016.
The Ebola scare gave the GOP another seemingly readymade opportunity to blame Obama for yet another crisis. But this time the signs are good that the ploy has backfired.
By: Earl Ofari Hutchinson, The Huffington Post Blog, October 18, 2014
“Secret Deficit Lovers”: The GOP Deficit Scolds Are Having A Hard Time Letting Go
What if they balanced the budget and nobody knew or cared?
O.K., the federal budget hasn’t actually been balanced. But the Congressional Budget Office has tallied up the totals for fiscal 2014, which ran through the end of September, and reports that the deficit plunge of the past several years continues. You still hear politicians ranting about “trillion dollar deficits,” but last year’s deficit was less than half-a-trillion dollars — or, a more meaningful number, just 2.8 percent of G.D.P. — and it’s still falling.
So where are the ticker-tape parades? For that matter, where are the front-page news reports? After all, talk about the evils of deficits and the grave fiscal danger facing America dominated Washington for years. Shouldn’t we be making a big deal of the fact that the alleged crisis is over?
Well, we aren’t, and once you understand why, you also understand what fiscal hysteria was really about.
First, ordinary Americans aren’t celebrating the deficit’s decline because they don’t know about it.
That’s not mere speculation on my part. Earlier this year, YouGov polled Americans on fiscal issues, asking among other things whether the deficit had increased or declined since President Obama took office. (In case you’re wondering, the pollsters carefully explained the difference between annual deficits and the level of accumulated debt.) More than half of those polled said it had gone up, while only 19 percent correctly said that it had gone down.
Why doesn’t the public know better? Probably because of the way much of the news media report this and other issues, with bad news played up and good news downplayed if it’s reported at all.
This has been glaringly obvious in the case of health reform, where every problem with the Affordable Care Act has been the subject of headlines, while in right-wing media — and to some extent in mainstream news sources — favorable developments go unremarked. As a result, many people — even, in my experience, liberals — have the impression that the rollout of Obamacare has been a disaster, and have no idea that enrollment is above expectations, costs are lower than expected, and the number of Americans without insurance has dropped sharply. Surely something similar has happened on the budget deficit.
But what about people who pay a lot of attention to the budget, the self-proclaimed deficit hawks? (Some of us prefer to call them deficit scolds.) They’ve spent the past few years telling us that budget shortfalls are the most important issue facing the nation, that terrible things will happen unless we act to stem the flow of red ink. Are they expressing satisfaction over the fading of that threat?
Not a chance. Far from celebrating the deficit’s decline, the usual suspects — fiscal-scold think tanks, inside-the-Beltway pundits — seem annoyed by the news. It’s a “false victory,” they declare. “Trillion dollar deficits are coming back,” they warn. And they’re furious with President Obama for saying that it’s time to get past “mindless austerity” and “manufactured crises.” He’s declaring mission accomplished, they say, when he should be making another push for entitlement reform.
All of which demonstrates a truth that has been apparent for a while, if you have been paying close attention: Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs. A few years ago they almost managed to bully the nation into cutting Social Security and/or raising the Medicare eligibility age; they even had hopes of turning Medicare into an underfinanced voucher program. Now that window of opportunity is closing fast.
But isn’t the falling deficit just a short-term blip, with the long-run outlook as dire as ever? Actually, no. Falling deficits right now have a lot to do with a strengthening economy plus some of that “mindless austerity” the president condemned. But there has also been a dramatic slowdown in the growth of health spending — and if that continues, the long-run fiscal outlook is much better than anyone thought possible not long ago. Yes, current projections still show a rising ratio of debt to G.D.P. starting some years from now, and uncomfortable levels of debt a generation from now. But given all the clear and present dangers we face, it’s hard to see why dealing with that distant and uncertain prospect should be any kind of policy priority.
So let’s say goodbye to fiscal hysteria. I know that the deficit scolds are having a hard time letting go; they’re still trying to bring back the days when Bowles and Simpson bestrode the Beltway like colossi. But those days aren’t coming back, and we should be glad.
By: Paul Krugman, Op-Ed Columnist, The New York Times, October 9, 2014
“Fear Of Wages”: For Some People, It’s Always 1979
Four years ago, some of us watched with a mixture of incredulity and horror as elite discussion of economic policy went completely off the rails. Over the course of just a few months, influential people all over the Western world convinced themselves and each other that budget deficits were an existential threat, trumping any and all concern about mass unemployment. The result was a turn to fiscal austerity that deepened and prolonged the economic crisis, inflicting immense suffering.
And now it’s happening again. Suddenly, it seems as if all the serious people are telling each other that despite high unemployment there’s hardly any “slack” in labor markets — as evidenced by a supposed surge in wages — and that the Federal Reserve needs to start raising interest rates very soon to head off the danger of inflation.
To be fair, those making the case for monetary tightening are more thoughtful and less overtly political than the archons of austerity who drove the last wrong turn in policy. But the advice they’re giving could be just as destructive.
O.K., where is this coming from?
The starting point for this turn in elite opinion is the assertion that wages, after stagnating for years, have started to rise rapidly. And it’s true that one popular measure of wages has indeed picked up, with an especially large bump last month.
But that bump is probably a snow-related statistical illusion. As economists at Goldman Sachs have pointed out, average wages normally jump in bad weather — not because anyone’s wages actually rise, but because the workers idled by snow and storms tend to be less well-paid than those who aren’t affected.
Beyond that, we have multiple measures of wages, and only one of them is showing a notable uptick. It’s far from clear that the alleged wage acceleration is even happening.
And what’s wrong with rising wages, anyway? In the past, wage increases of around 4 percent a year — more than twice the current rate — have been consistent with low inflation. And there’s a very good case for raising the Fed’s inflation target, which would mean seeking faster wage growth, say 5 percent or 6 percent per year. Why? Because even the International Monetary Fund now warns against the dangers of “lowflation”: too low an inflation rate puts the economy at risk of Japanification, of getting caught in a trap of economic stagnation and intractable debt.
Over all, then, while it’s possible to argue that we’re running out of labor slack, it’s also possible to argue the opposite, and either way the prudent thing would surely be to wait: Wait until there’s solid evidence of rising wages, then wait some more until wage growth is at least back to precrisis levels and preferably higher.
Yet for some reason there’s a growing drumbeat of demands that we not wait, that we get ready to raise interest rates right away or at least very soon. What’s that about?
Part of the answer, I’d submit, is that for some people it’s always 1979. That is, they’re eternally vigilant against the danger of a runaway wage-price spiral, and somehow they haven’t noticed that nothing like that has happened for decades. Maybe it’s a generational thing. Maybe it’s because a 1970s-style crisis fits their ideological preconceptions, but the phantom menace of stagflation still has an outsized influence on economic debate.
Then there’s sado-monetarism: the sense, all too common in banking circles, that inflicting pain is ipso facto good. There are some people and institutions — for example, the Basel-based Bank for International Settlements — that always want to see interest rates go up. Their rationale is ever-changing — it’s commodity prices; no, it’s financial stability; no, it’s wages — but the recommended policy is always the same.
Finally, although the current monetary debate isn’t as openly political as the previous fiscal debate, it’s hard to escape the suspicion that class interests are playing a role. A fair number of commentators seem oddly upset by the notion of workers getting raises, especially while returns to bondholders remain low. It’s almost as if they identify with the investor class, and feel uncomfortable with anything that brings us close to full employment, and thereby gives workers more bargaining power.
Whatever the underlying motives, tightening the monetary screws anytime soon would be a very, very bad idea. We are slowly, painfully, emerging from the worst slump since the Great Depression. It wouldn’t take much to abort the recovery, and, if that were to happen, we would almost certainly be Japanified, stuck in a trap that might last decades.
Is wage growth actually taking off? That’s far from clear. But if it is, we should see rising wages as a development to cheer and promote, not a threat to be squashed with tight money.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 13, 2014
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