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“Not So Fast”: No, Ted Cruz Is Not an ‘Economic Populist’

There are few words in the political lexicon more frequently misused and abused than populist, particularly in times of strong public hostility toward elites, like the present. Still, Time magazine has truly jumped the shark in publishing an interview with Ted Cruz in which he is encouraged without contradiction to call himself an “economic populist.” If Cruz is an “economic populist,” then the term has truly lost all meaning beyond the pixie dust of rhetorical enchantment.

We are supposed to believe Cruz is a populist because he opposes a few relatively small but symbolically rich corporate-subsidy programs like the Export-Import Bank and regulatory thumbs-on-the-scale for the use of ethanol — both objects of ridicule among libertarians for decades. In the Time interview, he leaps effortlessly from the argument that sometimes government helps corporations to the idea that government should not help anybody.

[B]oth parties, career politicians in both parties get in bed with the lobbyist and special interest. And the fix is in. Where Washington’s policies benefit big business, benefit the rich and the powerful at the expense of the working men and women.

Now the point that I often make, and just a couple of days ago in Wisconsin I was visiting with a young woman who said she was a Bernie Sanders supporter. And I mentioned to her that I agreed with Bernie on the problem.

But I said if you think the problem is Washington is corrupt, why would you want Washington to have more power? I think the answer to that problem is for Washington to have less power, for government to have less power over our lives.

Is there any K Street or Wall Street lobbyist who would not instantly trade whatever preferments they’ve been able to wring from Washington in exchange for a radically smaller government that lets corporations do whatever they want? I don’t think so.

Yet it’s hard to find a politician more inclined to get government off the backs of the very rich and the very powerful. My colleague Jonathan Chait summed it up nicely this very day in discussing Cruz’s Goldwater-ish extremism:

In addition to the de rigueur ginormous tax cut for rich people, Cruz proposes a massive shift of the tax burden away from income taxes to sales taxes. So, not only would Cruz’s plan give nearly half of its benefit to the highest-earning one percent of taxpayers (who would save, on average, nearly half a million dollars a year in taxes per household), but it would actually raise taxes on the lowest-earning fifth …

He advocates for … deregulation of Wall Street, and would eliminate the Clean Power Plan and take away health insurance from some 20 million people who’ve gained it through Obamacare. He has defined himself as more militant and uncompromising than any other Republican in Congress, and many of his fellow Republican officeholders have depicted him as a madman.

Cruz would have you believe his unsavory reputation among Beltway Republicans flows from his identification with the working class as opposed to the special interests. As a matter of fact, he’s considered a madman (or a charlatan) for insisting Republicans ought to shut down the federal government rather than compromise or abandon their anti-working-class policies (and their reactionary social policies as well).

Aside from the policies Chait mentions, Cruz also favors (in contrast to Donald Trump) that populist perennial, “entitlement reform,” including the kind of Social Security benefit cuts and retirement-age delays promoted by George W. Bush back in 2005.

And for dessert, in a position that would certainly make William Jennings Bryan roll in his grave, Cruz is on record favoring tight money policies to combat the phantom menace of inflation, along with a commission to consider a return to the gold standard.

One might argue the description of Cruz as an “economic populist” is a small journalistic excess justified by the heat of the GOP nominating contest. But in a general-election matchup between Cruz and Hillary Clinton, we could find ourselves hearing misleading contrasts of Cruz as a “populist” to Hillary Clinton, the “Establishment” pol. Let’s head that one off at a distance, people. Whatever you think of her set side by side with Bernie Sanders, compared to Cruz she’s a wild leveler and class-warfare zealot, favoring minimum-wage increases, more progressive taxes, large new mandates on businesses, continuation and expansion of Obamacare, action on global climate change, a constitutional amendment to overturn Citizens United, and (of course) opposition to the many reactionary policies Ted Cruz holds dear.

Get a grip, gabbers and scribblers: Call Ted Cruz a “constitutional conservative,” as he would have it, or the reincarnation of Barry Goldwater, as many of us regard him. But he’s no economic populist.


By: Ed Kilgore, Daily Intelligencer, New York Magazine, April 7, 2016

April 10, 2016 Posted by | Economic Populists, Monetary Policy, Ted Cruz | , , , , , , , | 2 Comments

“Decisions, Decisions”: Why Cruz Is Worse Than Trump

On economics, that is. On other issues — well, who was worse, Mussolini or Torquemada? Decisions, decisions.

But on economics, Trump is a big protectionist, while Cruz is a devotee of the gold standard. And we know quite a lot about what these policies would do.

Protectionism makes economies less efficient, but it does not, in general, destroy jobs. Put a tariff on imports and people will spend less on imports — but they will normally spend more on other things instead. So a worldwide turn toward protectionism would both reduce everyone’s exports and reduce their imports, with the overall effect on spending and hence on employment more or less a wash.

Yes, I know there’s a Moody’s study claiming that Trumponomics would be a yuuge job destroyer, but I really don’t know where they got that result; the best guess seems to be that they’re assuming that former spending on imports just goes away, which is not a good assumption.

And no, protectionism didn’t cause the Great Depression. It was a consequence, not a cause — and much less severe in countries that had the good sense to leave the gold standard.

Which brings us to Cruz, who is enthusiastic about the gold standard — which did play a major role in spreading the Depression.

The problem with gold is, first of all, that it removes flexibility. Given an adverse shock to demand, it rules out any offsetting loosening of monetary policy.

Worse, relying on gold can easily have the effect of forcing a tightening of monetary policy at precisely the wrong moment. In a crisis, people get worried about banks and seek cash, increasing the demand for monetary base — but you can’t expand the monetary base to meet this demand, because it’s tied to gold. On top of that, a slump drives interest rates down, increasing the demand for real assets perceived as safe — like gold — which is why gold prices rose after the 2008 crisis. But if you’re on a gold standard, nominal gold prices can’t rise; the only way real prices can rise is a fall in the prices of everything else. Hello, deflation!

So on economics, again, Trump is ignorant and unpredictable — but Cruz knows what isn’t so, and would lead us to predictably dire results.


By: Paul Krugman, The Conscience of a Liberal, Opinion Pages; The New York Times, April 8, 2016

April 10, 2016 Posted by | Donald Trump, Monetary Policy, Ted Cruz | , , , , , , | 2 Comments

“Crazy About Money”: Cruz’s Obsession With Gold Would Do Even More Economic Damage Than Trump

In this year of Trump, the land is loud with the wails of political commentators, rending their garments and crying out, “How can this be happening?” But a few brave souls are willing to whisper the awful truth: Many voters support Donald Trump because they actually agree with his ideas.

This is not, however, a column about Mr. Trump. It is, instead, about Ted Cruz, who has emerged as the favored candidate of the G.O.P. elite now that less disagreeable alternatives have imploded.

In a way, that’s quite a remarkable development. For Mr. Cruz has staked out positions on crucial issues that are, not to put too fine a point on it, crazy. How can elite Republicans back him?

The answer is the same for Mr. Cruz and the elites as it is for Mr. Trump and the base: Leading Republicans support Mr. Cruz, not despite his policy positions, but because of them. They may not like his style, but they agree with his substance.

This is true, for example, when it comes to Mr. Cruz’s belligerent stance on foreign policy. Establishment Republicans may wince at the candidate’s fondness for talking about “carpet bombing” or his choice of a noted anti-Muslim bigot and conspiracy theorist as an adviser.

But both Jeb Bush and Marco Rubio chose foreign policy teams dominated by the very people who pushed America into the Iraq debacle, and learned nothing from the experience. I know I wasn’t the only observer who looked at those rosters and thought, “They will, in fact, be greeted as liberators.”

And then there’s a subject dear to my heart: monetary policy. You might be surprised to learn that few of the subjects I write on inspire as much passion — or as much hate mail. And it’s a subject on which Mr. Cruz has staked out a distinctive position, by calling for a return to the gold standard.

This is, in case you’re wondering, very much a fringe position among economists. When members of a large bipartisan panel on economic policy, run by the University of Chicago business school, were asked whether a gold standard would be an improvement on current arrangements, not one said yes.

In fact, many economists believe that a destructive focus on gold played a major role in the spread of the Great Depression. And Mr. Cruz’s obsession with gold is one reason to believe that he would do even more economic damage in the White House than Mr. Trump would.

So how can elite Republicans — people who have denounced Mr. Trump in part because they claim that he advocates terrible economic policies — be supporting a candidate with such fringe views? The answer is that many of them are also out there on the fringe.

This wasn’t always true. As recently as 2004, Bush administration economists lauded the very kind of policy activism a return to the gold standard is supposed to prevent, declaring that “aggressive monetary policy can help make a recession shorter and milder.” But today’s leading Republicans, living in their own closed intellectual universe, are a very different breed.

Take, as a not at all arbitrary example, Paul Ryan, the speaker of the House and arguably the de facto leader of the Republican establishment.

As I have pointed out on a number of occasions, Mr. Ryan is fundamentally a con man on his signature issue, fiscal policy. Incidentally, for what it’s worth, Mr. Cruz has been relatively honest by his party’s standards on this issue, openly declaring his intention to raise taxes that hit the poor and the middle class even as he slashes them on the rich.

But Mr. Ryan seems to be a true believer on monetary policy — the kind of true believer whose faith cannot be shaken by contrary evidence. It’s now five years since he accused Ben Bernanke of pursuing inflationary policies that would “debase” the dollar; if the rising dollar and slumping inflation that followed has ever given him pause, he has shown no sign of it.

But what, exactly, is the nature of his monetary faith? The same as the nature of Mr. Cruz’s beliefs: Both men are devotees of Ayn Rand, even if Mr. Ryan now tries to downplay his well-documented Rand fandom.

At one point Mr. Ryan got quite specific about his intellectual roots, declaring that he always goes back to “Francisco d’Anconia’s speech on money” — one of the interminable monologues in Rand’s “Atlas Shrugged” — “when I think about monetary policy.” And that speech is a paean to the gold standard and a denunciation of money-printing as immoral.

The moral here is that we shouldn’t be surprised by the Republican establishment’s willingness to rally behind Mr. Cruz. Yes, Mr. Cruz portrays himself as an outsider, and has managed to make remarkably many personal enemies. But while his policy ideas are extreme, they reflect the same extremism that pervades the party’s elite.

There are no moderates, or for that matter, sensible people, anywhere in this story.


By: Paul Krugman, Op-Ed Contributor, The New York Times, March 25, 2016

March 25, 2016 Posted by | Donald Trump, Establishment Republicans, Monetary Policy, Ted Cruz | , , , , , | Leave a comment

“Who Wants A Depression?”: The Rich Believe That What’s Good For Them Is Good For America

One unhappy lesson we’ve learned in recent years is that economics is a far more political subject than we liked to imagine. Well, duh, you may say. But, before the financial crisis, many economists — even, to some extent, yours truly — believed that there was a fairly broad professional consensus on some important issues.

This was especially true of monetary policy. It’s not that many years since the administration of George W. Bush declared that one lesson from the 2001 recession and the recovery that followed was that “aggressive monetary policy can make a recession shorter and milder.” Surely, then, we’d have a bipartisan consensus in favor of even more aggressive monetary policy to fight the far worse slump of 2007 to 2009. Right?

Well, no. I’ve written a number of times about the phenomenon of “sadomonetarism,” the constant demand that the Federal Reserve and other central banks stop trying to boost employment and raise interest rates instead, regardless of circumstances. I’ve suggested that the persistence of this phenomenon has a lot to do with ideology, which, in turn, has a lot to do with class interests. And I still think that’s true.

But I now think that class interests also operate through a cruder, more direct channel. Quite simply, easy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent.

The story so far: For more than five years, the Fed has faced harsh criticism from a coalition of economists, pundits, politicians and financial-industry moguls warning that it is “debasing the dollar” and setting the stage for runaway inflation. You might have thought that the continuing failure of the predicted inflation to materialize would cause at least a few second thoughts, but you’d be wrong. Some of the critics have come up with new rationales for unchanging policy demands — it’s about inflation! no, it’s about financial stability! — but most have simply continued to repeat the same warnings.

Who are these always-wrong, never-in-doubt critics? With no exceptions I can think of, they come from the right side of the political spectrum. But why should right-wing sentiments go hand in hand with inflation paranoia? One answer is that using monetary policy to fight slumps is a form of government activism. And conservatives don’t want to legitimize the notion that government action can ever have positive effects, because once you start down that path you might end up endorsing things like government-guaranteed health insurance.

But there’s also a much more direct reason for those defending the interests of the wealthy to complain about easy money: The wealthy derive an important part of their income from interest on bonds, and low-rate policies have greatly reduced this income.

Complaints about low interest rates are usually framed in terms of the harm being done to retired Americans living on the interest from their CDs. But the interest receipts of older Americans go mainly to a small and relatively affluent minority. In 2012, the average older American with interest income received more than $3,000, but half the group received $255 or less. The really big losers from low interest rates are the truly wealthy — not even the 1 percent, but the 0.1 percent or even the 0.01 percent. Back in 2007, before the slump, the average member of the 0.01 percent received $3 million (in 2012 dollars) in interest. By 2011, that had fallen to $1.3 million — a loss equivalent to almost 9 percent of the group’s 2007 income.

That’s a lot, and it surely explains a lot of the hysteria over Fed policy. The rich are even more likely than most people to believe that what’s good for them is good for America — and their wealth and the influence it buys ensure that there are always plenty of supposed experts eager to find justifications for this attitude. Hence sadomonetarism.

Which brings me back to the politicization of economics.

Before the financial crisis, many central bankers and economists were, it’s now clear, living in a fantasy world, imagining themselves to be technocrats insulated from the political fray. After all, their job was to steer the economy between the shoals of inflation and depression, and who could object to that?

It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority. And, as a result, monetary policy is as bound up in class and ideological conflict as tax policy.

The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.


By: Paul Krugman, Op-Ed Columnist, The New York Times, July 10, 2014

July 12, 2014 Posted by | Economic Recovery, Economy, Monetary Policy | , , , , , , | 1 Comment


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