“Beliefs, Facts And Money”: Conservative Delusions About Inflation
On Sunday The Times published an article by the political scientist Brendan Nyhan about a troubling aspect of the current American scene — the stark partisan divide over issues that should be simply factual, like whether the planet is warming or evolution happened. It’s common to attribute such divisions to ignorance, but as Mr. Nyhan points out, the divide is actually worse among those who are seemingly better informed about the issues.
The problem, in other words, isn’t ignorance; it’s wishful thinking. Confronted with a conflict between evidence and what they want to believe for political and/or religious reasons, many people reject the evidence. And knowing more about the issues widens the divide, because the well informed have a clearer view of which evidence they need to reject to sustain their belief system.
As you might guess, after reading Mr. Nyhan I found myself thinking about the similar state of affairs when it comes to economics, monetary economics in particular.
Some background: On the eve of the Great Recession, many conservative pundits and commentators — and quite a few economists — had a worldview that combined faith in free markets with disdain for government. Such people were briefly rocked back on their heels by the revelation that the “bubbleheads” who warned about housing were right, and the further revelation that unregulated financial markets are dangerously unstable. But they quickly rallied, declaring that the financial crisis was somehow the fault of liberals — and that the great danger now facing the economy came not from the crisis but from the efforts of policy makers to limit the damage.
Above all, there were many dire warnings about the evils of “printing money.” For example, in May 2009 an editorial in The Wall Street Journal warned that both interest rates and inflation were set to surge “now that Congress and the Federal Reserve have flooded the world with dollars.” In 2010 a virtual Who’s Who of conservative economists and pundits sent an open letter to Ben Bernanke warning that his policies risked “currency debasement and inflation.” Prominent politicians like Representative Paul Ryan joined the chorus.
Reality, however, declined to cooperate. Although the Fed continued on its expansionary course — its balance sheet has grown to more than $4 trillion, up fivefold since the start of the crisis — inflation stayed low. For the most part, the funds the Fed injected into the economy simply piled up either in bank reserves or in cash holdings by individuals — which was exactly what economists on the other side of the divide had predicted would happen.
Needless to say, it’s not the first time a politically appealing economic doctrine has been proved wrong by events. So those who got it wrong went back to the drawing board, right? Hahahahaha.
In fact, hardly any of the people who predicted runaway inflation have acknowledged that they were wrong, and that the error suggests something amiss with their approach. Some have offered lame excuses; some, following in the footsteps of climate-change deniers, have gone down the conspiracy-theory rabbit hole, claiming that we really do have soaring inflation, but the government is lying about the numbers (and by the way, we’re not talking about random bloggers or something; we’re talking about famous Harvard professors.) Mainly, though, the currency-debasement crowd just keeps repeating the same lines, ignoring its utter failure in prognostication.
You might wonder why monetary theory gets treated like evolution or climate change. Isn’t the question of how to manage the money supply a technical issue, not a matter of theological doctrine?
Well, it turns out that money is indeed a kind of theological issue. Many on the right are hostile to any kind of government activism, seeing it as the thin edge of the wedge — if you concede that the Fed can sometimes help the economy by creating “fiat money,” the next thing you know liberals will confiscate your wealth and give it to the 47 percent. Also, let’s not forget that quite a few influential conservatives, including Mr. Ryan, draw their inspiration from Ayn Rand novels in which the gold standard takes on essentially sacred status.
And if you look at the internal dynamics of the Republican Party, it’s obvious that the currency-debasement, return-to-gold faction has been gaining strength even as its predictions keep failing.
Can anything reverse this descent into dogma? A few conservative intellectuals have been trying to persuade their movement to embrace monetary activism, but they’re ever more marginalized. And that’s just what Mr. Nyhan’s article would lead us to expect. When faith — including faith-based economics — meets evidence, evidence doesn’t stand a chance.
By: Paul Krugman, Op-Ed Columnist, The New York Times, July 6, 2014
“The GOP Is Not Trying To Change”: The Direction The Republican Party Is Headed Is Destined For Political Ruin
John Harwood has an article in today’s New York Times with the headline: Shut Out of White House, G.O.P. Looks to Democrats of 1992. What’s not clear is whom the headline writer means by G.O.P. As best as I can tell, the subject here isn’t any of the likely candidates or any kind of consensus from the party base. It’s these people:
“A lot of work to do,” said Kate O’Beirne, a veteran conservative commentator. Pete Wehner, who was an aide to President George W. Bush, fears that Republican gains expected in the midterm elections this fall will offer another “false dawn,” as they did in 2010.
Kate O’Beirne and Peter Wehner are not representative of the Republican Party. They are Washington insiders who are well paid to spin the party’s message. But they aren’t so much spinning at the moment as hoping for a miracle.
A nominee’s power to recast the party’s image on high-profile issues offers a safety valve for Republicans in 2016, whatever they do now on immigration or other issues. At least, they hope so.
As Ms. O’Beirne, the conservative commentator, observed hopefully, “A talented politician can turn things around pretty handily, right?”
Mr. Wehner and Ms. O’Beirne are in no way representative of their party, but they are both savvy political observers who realize that the direction the Republican Party is headed is destined for political ruin. Their salvation idea is that a candidate will win the nomination and then turn sharply to the middle, thereby bringing the party faithful back to positions that have national viability.
A parallel is offered by Harwood:
But Mr. Clinton, then governor of Arkansas, used discretion in targeting Democratic constituencies such as labor unions. He embraced ratification of the North American Free Trade Agreement, for instance — but not until he had secured the Democratic nomination.
So, what we are supposed to expect is a Republican nominee who embraces gay marriage and immigration reform, but not until they have secured the Republican nomination. The thing is, this is a seemingly impossible task. To pull it off, the GOP would need to find a candidate like Dwight D. Eisenhower who could be embraced for reasons entirely separated from political ideology. A consensus bipartisan national hero could conceivably win the Republican nomination and then feel free to forge a completely independent stance on the issues, resulting in a remolded party that isn’t wedded 100% to the conservative movement, particularly on social issues.
It’s a pleasant thought, even for Democrats, but there are no Eisenhowers in contemporary American culture. In 2012, we saw a version of what Wehner and O’Beirne are looking for in the candidacy of former Utah governor and ambassador to China, Jon Huntsman. In the end, Huntsman earned two delegates to the Republican National Convention and .04 percent of the primary vote.
So far, the only evidence that any entity that can be termed the “GOP” is looking to emulate the 1992 Democrats led by Clinton and the Democratic Leadership Council is the autopsy report that RNC Chairman Reince Priebus solicited after the 2012 election. That report said that Republicans must pass comprehensive immigration reform and embrace gay equality or they’ll be unable to even get a hearing from young voters or Latinos. Assuming that analysis was valid, and I think it was, there has been little progress so far and there are no reasons to think that a nominee running on those issues would have snowball’s chance in hell of winning the Republican nomination.
The only sign of heterodoxy I can detect is Rand Paul’s uneven willingness to buck the status quo on foreign policy, privacy rights, and voting rights. But let’s not forget that Rand Paul is on the record as believing that the Civil Rights Act of 1964 is unconstitutional because it forces private businessmen to serve blacks in their restaurants.
That’s not exactly a Sister Souljah moment. And I don’t think dissing Sister Souljah was key to Clinton’s success in any case.
By: Martin Longman, Washington Monthly Political Animal, July 5, 2014
“Supreme Anointment Court”: Sheltered From Sun And Light In Our Nation’s Holiest Building
True Blood, the magic, devilish, vampire TV world of shape-shifters where blood is a bottled commodity to drink in a bar and extreme graphic violence and sex is recklessly paired will finally have the stake driven into its heart and exit at the conclusion of this seventh season.
I remember the show’s big surprise lesson from season one that no matter how scary and powerful, vampires cannot enter your home without being invited. However, there is no end in site of the bad true bloody struggles between the five conservative and four liberal justices of our Supreme Court, and no matter how societal changing a Court decision is, the public mostly never gets invited in, never gets to be witness to these omnipotent secret cultish figures dressed in robes sitting elevated and fortressed behind sacred wood protected in their house from uninvited intruders while drinking their own ideological dogmatic “blood.” We never get to see their clever shape-shifting after taking up the bar forever in residence chambered and sheltered from sun and light in our nation’s holiest building. We never get to experience these high priests of the constitution experiencing the life we live that they interpret for us. We never get to see whose influential blood and money they drink that becomes the magic elixir of their last words that toss the ingredients of our melting pot. We never get to see their expressions as indicators of how bad the blood between them might really be as they depart company after each session to take solace and recharge in their secluded coffined off chamber.
Throughout much of our history, we have mostly accepted, obeyed, revered and patiently waited with undying respect for the Court’s directives. We knew they knew better what was better for our society. For Americans, this was the place where evil, malice, patronage, cronyism, politics, and the compromising inducements of avarice and greed humans are so easily soiled by held to a higher standard that truly defined how great a system ours was. We hardly ever get to see this side of the court any more. Just as divided and unpredictable as the world depicted in True Blood, the Supremes on the Court dominated by extremist conservatives are driving the stake into the disunited states of America.
Recent polling supports the perception of a society absolutely at odds with all forms of government. The Supreme Court has lost the confidence of Americans. We are now adrift without a moral compass, without checks and balances, without a credible mandate voice in any of our three plus media equals four branches of government. A majority of voters elected President Obama twice with such a mandate. But increasingly, we are witnessing a court that has anointed itself as representative to its secreted world to drive The Stake to drain the blood of Obama-ism. What after-world can and will emerge in such a divided state and in what state of health and personhood will each of us be in at that time? As we do get to witness many hot spots around the globe descend into horror, can we save America and ourselves?
By: Allen Schmertzler, The Huffington Post Blog, July 3, 2014
“Charlatans, Cranks And Kansas”: The Real Lesson From Kansas Is The Enduring Power Of Bad Ideas
Two years ago Kansas embarked on a remarkable fiscal experiment: It sharply slashed income taxes without any clear idea of what would replace the lost revenue. Sam Brownback, the governor, proposed the legislation — in percentage terms, the largest tax cut in one year any state has ever enacted — in close consultation with the economist Arthur Laffer. And Mr. Brownback predicted that the cuts would jump-start an economic boom — “Look out, Texas,” he proclaimed.
But Kansas isn’t booming — in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state’s budget has plunged deep into deficit, provoking a Moody’s downgrade of its debt.
There’s an important lesson here — but it’s not what you think. Yes, the Kansas debacle shows that tax cuts don’t have magical powers, but we already knew that. The real lesson from Kansas is the enduring power of bad ideas, as long as those ideas serve the interests of the right people.
Why, after all, should anyone believe at this late date in supply-side economics, which claims that tax cuts boost the economy so much that they largely if not entirely pay for themselves? The doctrine crashed and burned two decades ago, when just about everyone on the right — after claiming, speciously, that the economy’s performance under Ronald Reagan validated their doctrine — went on to predict that Bill Clinton’s tax hike on the wealthy would cause a recession if not an outright depression. What actually happened was a spectacular economic expansion.
Nor is it just liberals who have long considered supply-side economics and those promoting it to have been discredited by experience. In 1998, in the first edition of his best-selling economics textbook, Harvard’s N. Gregory Mankiw — very much a Republican, and later chairman of George W. Bush’s Council of Economic Advisers — famously wrote about the damage done by “charlatans and cranks.” In particular, he highlighted the role of “a small group of economists” who “advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue.” Chief among that “small group” was none other than Art Laffer.
And it’s not as if supply-siders later redeemed themselves. On the contrary, they’ve been as ludicrously wrong in recent years as they were in the 1990s. For example, five years have passed since Mr. Laffer warned Americans that “we can expect rapidly rising prices and much, much higher interest rates over the next four or five years.” Just about everyone in his camp agreed. But what we got instead was low inflation and record-low interest rates.
So how did the charlatans and cranks end up dictating policy in Kansas, and to a more limited extent in other states? Follow the money.
For the Brownback tax cuts didn’t emerge out of thin air. They closely followed a blueprint laid out by the American Legislative Exchange Council, or ALEC, which has also supported a series of economic studies purporting to show that tax cuts for corporations and the wealthy will promote rapid economic growth. The studies are embarrassingly bad, and the council’s Board of Scholars — which includes both Mr. Laffer and Stephen Moore of the Heritage Foundation — doesn’t exactly shout credibility. But it’s good enough for antigovernment work.
And what is ALEC? It’s a secretive group, financed by major corporations, that drafts model legislation for conservative state-level politicians. Ed Pilkington of The Guardian, who acquired a number of leaked ALEC documents, describes it as “almost a dating service between politicians at the state level, local elected politicians, and many of America’s biggest companies.” And most of ALEC’s efforts are directed, not surprisingly, at privatization, deregulation, and tax cuts for corporations and the wealthy.
And I do mean for the wealthy. While ALEC supports big income-tax cuts, it calls for increases in the sales tax — which fall most heavily on lower-income households — and reductions in tax-based support for working households. So its agenda involves cutting taxes at the top while actually increasing taxes at the bottom, as well as cutting social services.
But how can you justify enriching the already wealthy while making life harder for those struggling to get by? The answer is, you need an economic theory claiming that such a policy is the key to prosperity for all. So supply-side economics fills a need backed by lots of money, and the fact that it keeps failing doesn’t matter.
And the Kansas debacle won’t matter either. Oh, it will briefly give states considering similar policies pause. But the effect won’t last long, because faith in tax-cut magic isn’t about evidence; it’s about finding reasons to give powerful interests what they want.
By: Paul Krugman, Op-Ed Columnist, The New York Times, June 30, 2014
“The ‘Conspiracy’ In Mississippi”: A Perilous Challenge Based On Mississippi’s Silly, Unenforceable And Probably Unconstitutional Law
Three days after his upset defeat in the MS GOP SEN runoff, Chris McDaniel is still keeping his counsel on what he might or might not do to challenge the results. All but one of the national conservative groups (the Tea Party Patriots being the exception) have written off the contest and moved on. And while there is some anecdotal evidence–much of it not necessarily credible–of plain violations of the law (people who voted in the Democratic primary on June 3 being allowed to participate in the runoff), it seems unlikely it’s sufficient to close a 6,000-vote deficit or mount a legal challenge to the outcome.
If that’s all accurate, that means what McDaniel may be pondering is an extremely perilous challenge based on Mississippi’s silly, unenforceable and probably unconstitutional law limiting primary participation to those who “intend” to support the party in the next general election. Here’s what he told Sean Hannity earlier this week:
McDaniel says Cochran’s campaign brought in Democrats to steal the GOP primary. He told Hannity he might launch a court challenge on “a civil conspiracy to violate state law.”
Sounds like given the inability of anyone without divine omniscience to establish individual violation of the “intent” law, McDaniel may claim that the open Cochran campaign appeals for crossover votes amount to a conspiracy to encourage violation of that law.
Legal niceties aside, this will come down to a toxic claim that by appealing to Democrats–which in Mississippi mostly means African-Americans–Cochran was “stealing the election.” Given Mississippi’s history, I don’t think this would redound to the benefit of a Republican Party struggling to overcome its reputation as a sort of national redoubt for Old White People, or of a conservative movement whose denizens become crazy furious (as my Twitter account can attest) at any suggestion “race” ever enters their minds.
As the days go by and Team McDaniel’s accusation that black people voting in “their” primary constitutes voter fraud hangs in the air, you wonder if he’ll be able to walk any of this back. Mark my words: if McDaniel does move forward with a conspiracy charge, “Establishment Republicans” may ultimately wish he had won the runoff after all.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, June 27, 2014
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