“Doomsday Prepper Economics”: The Weird Obsession That’s Ruining The GOP
Call it doomsday prepper economics. For more than five years, many Republicans and conservatives have warned that catastrophe is nigh. Washington’s deficit spending and the Federal Reserve’s excessive money printing will lead to a financial crisis worse than the Great Recession, they prophesied. Inflation will skyrocket, the dollar will collapse, and the Chinese will dump treasuries, they swore. As Ron Paul, the libertarian former GOP congressman and presidential candidate, said back in 2009: “More inflation is absolutely the wrong way to go. We’re taking a recession and trying to turn it into a depression. We’re going to see a real calamity.”
Many GOP politicians have since echoed Paul’s prediction. But the Next Great Inflation never happened. The Consumer Price Index, including food and energy, has risen by an annual average of just 1.6 percent since 2008, below the Fed’s 2 percent inflation target. During the Great Inflation of the 1970s and early 1980s, by contrast, prices rose five times faster.
This information isn’t a secret. The Labor Department releases inflation data monthly on its website. Yet inflation fears still rage on the right. Those concerns are a big reason why Republicans continue to push for a balanced budget ASAP. They’re why the GOP wants to saddle the Fed with restrictive new rules.
Regardless of the potential merits of those policy ideas, the inflation alarmism driving them is taking a weird turn. Some Republicans and conservatives now argue that Washington is figuring inflation all wrong, maybe even intentionally. Better, they say, to trust independent outside sources such as the website ShadowStats, which “exposes and analyzes flaws” in government economic data. According to one set of ShadowStats calculations, the true inflation rate is nearly 10 percent today. The inflation truth is out there.
In a recent National Review Online article, conservative author Amity Shlaes approvingly cites ShadowStats as supporting her thesis that “inflation is higher than what the official data suggest.” Others fans include conservative intellectual Niall Ferguson, Sen. Tom Coburn (R-Okla.), and a good chunk of the conservative blogosphere.
ShadowStats’ popularity on the right is crazy — because the site’s methodology has been roundly ridiculed by both economists and business journalists. Critics also note that the subscription price for the ShadowStats newsletter has remained unchanged for years. Inflation for thee, but not for me. Beyond that, MIT’s Billion Price Project, which tracks prices from online retailers every day, puts U.S. inflation at just over 2 percent. And consider this: If inflation were really 10 percent, that would mean the real economy, adjusted for inflation, has been sharply shrinking — yet somehow still adding 2 million net new jobs a year.
If GOP inflationistas had their way, the weak U.S. recovery would almost surely be even weaker. Just look at Europe. Unlike the Fed, the inflation-phobic European Central Bank sat on its hands despite weak growth. The result has been an unemployment rate nearly twice America’s and a nasty double-dip recession. Of course, inflation is lower than in America — so low, in fact, that the region risks a dangerous deflationary spiral of falling prices and falling wages.
Why this GOP inflation obsession? Maybe it’s a legacy of how rapidly rising prices in the 1970s swept conservatives into power in both America and Great Britain. Maybe it’s how many conservative talk radio shows are sponsored by gold companies who stand to benefit from inflation hysteria. Maybe it’s a belief that every single economic metric must be a nightmare under President Obama.
But whatever the reason, the GOP’s preoccupation with phantom price increases is distracting it from the actual problems afflicting the U.S. economy — such as low social mobility, stagnant wages, and the decline of middle-class work. The price of not addressing those issues is rising every year. And that is the kind of inflation worth obsessing over.
By: James Pethokoukis, DeWitt Wallace Fellow at the American Enterprise Institute: The Week, July 23, 2014
“Five Days Of Togetherness”: Congress’ Holiday To-Do List Will Never Be Finished
The House of Representatives is back in session this week and facing a laundry list of issues that were not dealt with in the first 11 months of the year. The House plans to be in session for two weeks, sending members home for the rest of the year on Friday, Dec. 13. Friday the 13th; that seems like a bad omen. And it may, indeed, be a very unlucky day for the nation if the House really does adjourn for the year.
The Senate, on the other hand, is not back in session until Dec. 9 and plans to stay in town until Dec. 20. For everyone keeping track, that means the two chambers will only be in town at the same time for five “working” days.
If the Congress had been doing its job all year, this scheduling mismatch might not be such a problem. But it hasn’t. Not a single regular appropriations bill funding a government department or agency for the coming fiscal year has passed the Senate. The House has passed four of 12 required spending bills. Even if there was no other business to do, Congress could not complete the remaining work to fund government for the rest of fiscal year 2014 in a single week of “togetherness” in Washington.
And there is other business to do. The conference of the House and Senate Budget Committees, the result of the deal that ended the government shutdown, has apparently made progress in the last week, but hopes are not high for any real solution to the long-term budget problems facing the nation. A narrow agreement to set spending limits that will replace sequestration with other revenue or cuts for the next two years may be better than nothing … or it may not. The devil is always in the details and we don’t know the details yet. The deadline for those negotiations to conclude is also Friday the 13th, but that deadline has no real teeth since the current continuing resolution to keep the government funded doesn’t expire until Jan. 15 of next year.
The bill setting policy for the Department of Defense, a bill that has been successfully passed and signed into law every year for more than 50 years, has not been passed by the Senate. The House finished its work in June. This bill was on the Senate floor when Majority Leader Harry Reid, D-Nev., brought up the resolution that finally granted the Senate majority the so-called “nuclear option,” changing Senate procedure to allow most executive branch and judicial nominations to be resolved with a simple majority vote.
And speaking of confirmations, that brings up another deadline. The Senate needs to confirm a new chairman of the Board of Governors of the Federal Reserve System by Jan. 31, 2014, the expiration of Chairman Ben Bernanke’s term.
But that’s not all Congress has on its “must pass” list. The current farm bill extension expired on Sept. 30, but that doesn’t have much impact. Nutrition programs continue, crop insurance never expires. But on Jan. 1, taxpayers meet the dreaded “dairy cliff.” This is when the administration, because of 60-year old laws aggies refuse to repeal, will have to take us back to 1950s era dairy policy and guarantee milk producers artificially high prices resulting in as much as $8 per gallon milk on a grocery store shelf near you. (Of course, another alternative is that Congress could simply repeal the outdated law and allow the market to set milk prices. But we know that is too logical of an action for this Congress to take).
The fiscal cliff deal made a permanent fix for the encroaching alternative minimum tax, but another hardy perennial, the Medicare doctor payment fix, was left out. This would reduce the payments to doctors under Medicare. While it was adopted as a budget control measure, it’s been legislatively “fixed” each year. That issue looms.
Also, there’s the tax extenders package. That’s the cat and dog mix of various special interest tax breaks benefitting everyone from NASCAR track owners to liquor distillers that gets tacked on to moving pieces of legislation every year. Except this year there doesn’t seem to be moving legislation to hitch the caboose to.
Remember, the House and the Senate currently plan to be together in Washington for only five days in December. Perhaps they will have a burst of efficiency and effectiveness by Dec. 20, but I’m not holding my breath.
By: Ryan Alexander, U. S. News and World Report, December 3, 2013
“A Lot Of Homework To Do”: Rand Paul’s Terrible, Horrible, No Good, Very Bad Week
It’s probably safe to say Sen. Rand Paul (R-Ky.) has had better weeks. Just over the last few days he started to lose his cool on NPR when asked about a neo-confederate he co-authored a book with; he was caught making ridiculous boasts about his record on minority rights; and he repeated a bizarre conspiracy theory about George Stephanopoulos that’s already been debunked.
And then, after all of this, the Kentucky Republican sat down for a chat with Businessweek‘s Josh Green.
Green: A recent article in the New Republic said your budget would eviscerate the departments of Energy, State, Commerce, EPA, FDA, Education, and many others. Would Americans support that?
Paul: My budget is similar to the Penny Plan, which cuts 1 percent a year for five or six years and balances the budget. Many Americans who have suffered during a recession have had to cut their spending 1 percent, and they didn’t like doing it, but they were able to do it to get their family’s finances back in order. I see no reason why government can’t cut 1 percent of its spending.
Except, whether the senator realizes it or not, his description of his plan is extremely deceptive. As Ezra Klein explained, Paul’s response wasn’t actually an answer: “Paul’s budget eliminates the Department of Commerce. It also eliminates the Department of Education. And the Department for Housing and Urban Development. And the Department of Energy. The State Department gets cut by more than 50 percent. Meanwhile, it increases spending on defense by $126 billion. Perhaps these are good ideas! But Paul doesn’t defend them. He obscures them. He tries to make his cuts sound small even though, in the areas Green asked about, they’re huge.”
In theory, Paul could at least try to explain why he thinks cutting the State Department budget in half would be good for the United States. But he either can’t or won’t do that, so he repeats vague talking points that obscure the facts.
Wait, it gets worse.
Green: Any political consultant who saw that list [of cabinet agencies Paul intends to eliminate] would tear out his hair and say the American people would never accept it. You disagree with that conventional wisdom?
Paul: You know, the thing is, people want to say it’s extreme. But what I would say is extreme is a trillion-dollar deficit every year. I mean, that’s an extremely bad situation.
Except, we’re not running trillion-dollar deficits every year. If the senator takes this issue so seriously, shouldn’t he keep up with the basics of current events?
Green: Who would your ideal Fed chairman be?
Paul: Hayek would be good, but he’s deceased.
Green: Nondead Fed chairman.
Paul: Friedman would probably be pretty good, too, and he’s not an Austrian, but he would be better than what we have.
Again, Paul doesn’t seem to know what he’s saying. As Jon Chait explained, the senator’s answer “makes no sense” because, “Paul is a hard-money fanatic who wants to abolish the Federal Reserve’s role in using money policy to stabilize the economy. That’s the joke. Milton Friedman, though, had the complete opposite view of monetary policy. His central academic insight was support for very active monetary policy.”
My principal concern with Rand Paul is not his ideology. On plenty of subjective questions, he and I would recommend very different courses of action, which is what spirited political debate is all about.
Rather, what troubles me about the senator is that he doesn’t seem to have the foggiest idea what he’s talking about. Worse, it’s not like he’s ignorant of obscure policy details on issues he deems irrelevant — Paul is strikingly confused about the issues he claims to care about most.
This Businessweek interview was a mess for the senator on economic matters, but let’s not forget that Paul also doesn’t seem to understand his own views on the use of drones, which is another issue he says he cares deeply about.
If this guy intends to seek national office and ask the American mainstream to consider him credible, he has a lot of homework to do — homework he probably should have done before making the transition from self-accredited ophthalmologist to U.S. senator.
By: Steve Benen, The Maddow Blog, August 9, 2013
“She Will Be Heard”: Elizabeth Warren Knows Where A Lot Of The Bodies Are Buried, Puts AIG On Notice
When new members arrive in the US Senate, they are supposed to take a seat on a back bench and listen quietly for a couple of years. That is not in Elizabeth Warren’s nature. She had been a US Senator from Massachusetts for only about a week when she broke with etiquette. Warren was outraged that AIG investors were urging the insurance giant’s directors to join them in a lawsuit against the federal government, claiming damages from the federal bailout of their company during the financial crisis.
The freshman senator sent out a tartly worded statement to her many fans and followers. “AIG should thank American taxpayers for their help—not bite the hand that fed them,” Warren wrote. The message swept the blogosphere like wild fire. The AIG directors folded the next day. It is perhaps mistaken to assume her voice alone stopped this corporate ingratitude in its tracks, but that may well be the message absorbed in Washington politics. Try not to provoke this new senator, especially on the stuff she knows a lot about. She might bite back.
Indeed, Senator Warren has renewed the accusation about the AIG bailout she had made a year ago during her Senate campaign. While the Federal Reserve pumped a fortune ($182 billion) into saving AIG from failure and thereby protected Wall Street megabanks from huge losses, the Treasury Department was arranging its own “sleuth bailout,” as Warren charged. Treasury granted an exception to the standard tax rules that delivered billions more to AIG in the form of a special tax break.
The company was effectively relieved from paying any taxes despite the fact that it has returned to profitability and repaid the Federal Reserve loans. The senator called on her supporters to join a campaign to end AIG’s special tax break. “Enough is enough…,” she wrote. “These special tax giveaways give AIG a competitive advantage over its competitors—all the while inflating AIG’s profit numbers and compensation for executives.”
What separates Elizabeth Warren from your typical newcomer to Congress—in addition to the rare gutsiness—is her deep knowledge of banking and finance. For many years, while she taught at the Harvard law school, Warren was a lonely crusader, exposing predatory bankers and the cruel terms by which millions of families were driven into bankruptcy.
Her reputation led to appointment as the chair of the Congressional Oversight Panel that investigated the AIG bailout in great depth. The COP final report is itself an extraordinary document of government—clear and concise, an unflinching analysis that describes exactly how the Federal Reserve and the Treasury failed to serve the public interest in their incestuous bailout of Wall Street titans.
“The AIG rescue demonstrated that Treasury and the Federal Reserve would commit taxpayers to pay any price and bear any burden to prevent the collapse of America’s largest financial institutions,” Warren’s report concluded.
She will be heard. The new senator will serve on the Senate banking committee and she already knows where a lot of the bodies are buried. I suspect some of those disgruntled AIG investors are wishing they had kept their whining to themselves.
By: William Greider, The Nation, January 10, 2013
“An Inane Idea”: With A Trillion Dollar Coin, President Obama Can Fight Dumb With Silly
A trillion dollar platinum coin? Really? Has our politics really reached a point where such an obviously inane idea is gaining traction? Well, yes. When your capitol has become Clowntown, U.S.A., you sometimes need to fight bad ideas with silly ones.
The idea, if you haven’t heard, is for President Obama to defuse the forthcoming debt ceiling crisis Republicans are busily manufacturing by directing the Treasury to mint a platinum coin worth $1 trillion. With an extra trillion on the books, the debt ceiling would no longer be an issue. While the Federal Reserve ordinarily is in charge of printing money, there’s a law on the books allowing the Treasury secretary to produce platinum coinage of whatever value s/he sees fit.
Sure, the purpose of the law was to permit the Treasury to issue commemorative coins. But so what? The purpose of the debt ceiling wasn’t to give one party the leverage for a global, economic hostage crisis. Were the debt ceiling not raised, the Washington Post’s Ezra Klein writes, “the damage to the economy would be tremendous, and it would occur at every level, from individuals looking for a loan to buy a house to hedge funders trying to play the markets.” His full article on what happens if we breach the debt ceiling is worth a read.
So when one political party is acting like a political version of a James Bond villain (“Give in to my demands or I will wreck the world economy!”) maybe the answer is for the president to channel his inner Dr. Evil (“One trillion dollars.”)
Again, it all sounds silly but some very serious folks are lining up behind it, including the New York Times’s Paul Krugman, who has a Nobel Prize lying around his office. New York Rep. Jerrold Nadler is also a fan. And despite some suggestions that none of this is legal because it’s not what the law was intended for, Philip Diehl, a former director of the Mint, told Klein that it’s perfectly legal.
So is it a silly idea? Yes. But Republican extremists have brought us into an age of political asymmetrical warfare, passing off crazy, dangerous ideas as serious. Why should the president unilaterally disarm on that front?
By: Robert Schlesinger, U. S. News and World Report, January 9, 2013
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