“The Inflation Cult”: The Broad Appeal Of Prophets Whose Prophecies Keep Failing
Wish I’d said that! Earlier this week, Jesse Eisinger of ProPublica, writing on The Times’s DealBook blog, compared people who keep predicting runaway inflation to “true believers whose faith in a predicted apocalypse persists even after it fails to materialize.” Indeed.
Economic forecasters are often wrong. Me, too! If an economist never makes an incorrect prediction, he or she isn’t taking enough risks. But it’s less common for supposed experts to keep making the same wrong prediction year after year, never admitting or trying to explain their past errors. And the remarkable thing is that these always-wrong, never-in-doubt pundits continue to have large public and political influence.
There’s something happening here. What it is ain’t exactly clear. But as regular readers know, I’ve been trying to figure it out, because I think it’s important to understand the persistence and power of the inflation cult.
Whom are we talking about? Not just the shouting heads on CNBC, although they’re certainly part of it. Rick Santelli, famous for his 2009 Tea Party rant, also spent much of that year yelling that runaway inflation was coming. It wasn’t, but his line never changed. Just two months ago, he told viewers that the Federal Reserve is “preparing for hyperinflation.”
You might dismiss the likes of Mr. Santelli, saying that they’re basically in the entertainment business. But many investors didn’t get that memo. I’ve had money managers — that is, professional investors — tell me that the quiescence of inflation surprised them, because “all the experts” predicted that it would surge.
And it’s not as easy to dismiss the phenomenon of obsessive attachment to a failed economic doctrine when you see it in major political figures. In 2009, Representative Paul Ryan warned about “inflation’s looming shadow.” Did he reconsider when inflation stayed low? No, he kept warning, year after year, about the coming “debasement” of the dollar.
Wait, there’s more: You find the same Groundhog Day story when you look at the pronouncements of seemingly reputable economists. In May 2009, Allan Meltzer, a well-known monetary economist and historian of the Federal Reserve, had an Op-Ed article published in The Times warning that a sharp rise in inflation was imminent unless the Fed changed course. Over the next five years, Mr. Meltzer’s preferred measure of prices rose at an annual rate of only 1.6 percent, and his response was published in another op-ed article, this time in The Wall Street Journal. The title? “How the Fed Fuels the Coming Inflation.”
So what’s going on here?
I’ve written before about how the wealthy tend to oppose easy money, perceiving it as being against their interests. But that doesn’t explain the broad appeal of prophets whose prophecies keep failing.
Part of that appeal is clearly political; there’s a reason why Mr. Santelli yells about both inflation and how President Obama is giving money away to “losers,” why Mr. Ryan warns about both a debased currency and a government that redistributes from “makers” to “takers.” Inflation cultists almost always link the Fed’s policies to complaints about government spending. They’re completely wrong about the details — no, the Fed isn’t printing money to cover the budget deficit — but it’s true that governments whose debt is denominated in a currency they can issue have more fiscal flexibility, and hence more ability to maintain aid to those in need, than governments that don’t.
And anger against “takers” — anger that is very much tied up with ethnic and cultural divisions — runs deep. Many people, therefore, feel an affinity with those who rant about looming inflation; Mr. Santelli is their kind of guy. In an important sense, I’d argue, the persistence of the inflation cult is an example of the “affinity fraud” crucial to many swindles, in which investors trust a con man because he seems to be part of their tribe. In this case, the con men may be conning themselves as well as their followers, but that hardly matters.
This tribal interpretation of the inflation cult helps explain the sheer rage you encounter when pointing out that the promised hyperinflation is nowhere to be seen. It’s comparable to the reaction you get when pointing out that Obamacare seems to be working, and probably has the same roots.
But what about the economists who go along with the cult? They’re all conservatives, but aren’t they also professionals who put evidence above political convenience? Apparently not.
The persistence of the inflation cult is, therefore, an indicator of just how polarized our society has become, of how everything is political, even among those who are supposed to rise above such things. And that reality, unlike the supposed risk of runaway inflation, is something that should scare you.
By: Paul Krugman, Op-Ed Columnist, The New York Times, September 12, 2014
“That Old-Time Whistle”: The Kind Of Things Conservatives Say To Each Other All The Time
There are many negative things you can say about Paul Ryan, chairman of the House Budget Committee and the G.O.P.’s de facto intellectual leader. But you have to admit that he’s a very articulate guy, an expert at sounding as if he knows what he’s talking about.
So it’s comical, in a way, to see Mr. Ryan trying to explain away some recent remarks in which he attributed persistent poverty to a “culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working.” He was, he says, simply being “inarticulate.” How could anyone suggest that it was a racial dog-whistle? Why, he even cited the work of serious scholars — people like Charles Murray, most famous for arguing that blacks are genetically inferior to whites. Oh, wait.
Just to be clear, there’s no evidence that Mr. Ryan is personally a racist, and his dog-whistle may not even have been deliberate. But it doesn’t matter. He said what he said because that’s the kind of thing conservatives say to each other all the time. And why do they say such things? Because American conservatism is still, after all these years, largely driven by claims that liberals are taking away your hard-earned money and giving it to Those People.
Indeed, race is the Rosetta Stone that makes sense of many otherwise incomprehensible aspects of U.S. politics.
We are told, for example, that conservatives are against big government and high spending. Yet even as Republican governors and state legislatures block the expansion of Medicaid, the G.O.P. angrily denounces modest cost-saving measures for Medicare. How can this contradiction be explained? Well, what do many Medicaid recipients look like — and I’m talking about the color of their skin, not the content of their character — and how does that compare with the typical Medicare beneficiary? Mystery solved.
Or we’re told that conservatives, the Tea Party in particular, oppose handouts because they believe in personal responsibility, in a society in which people must bear the consequences of their actions. Yet it’s hard to find angry Tea Party denunciations of huge Wall Street bailouts, of huge bonuses paid to executives who were saved from disaster by government backing and guarantees. Instead, all the movement’s passion, starting with Rick Santelli’s famous rant on CNBC, has been directed against any hint of financial relief for low-income borrowers. And what is it about these borrowers that makes them such targets of ire? You know the answer.
One odd consequence of our still-racialized politics is that conservatives are still, in effect, mobilizing against the bums on welfare even though both the bums and the welfare are long gone or never existed. Mr. Santelli’s fury was directed against mortgage relief that never actually happened. Right-wingers rage against tales of food stamp abuse that almost always turn out to be false or at least greatly exaggerated. And Mr. Ryan’s black-men-don’t-want-to-work theory of poverty is decades out of date.
In the 1970s it was still possible to claim in good faith that there was plenty of opportunity in America, and that poverty persisted only because of cultural breakdown among African-Americans. Back then, after all, blue-collar jobs still paid well, and unemployment was low. The reality was that opportunity was much more limited than affluent Americans imagined; as the sociologist William Julius Wilson has documented, the flight of industry from urban centers meant that minority workers literally couldn’t get to those good jobs, and the supposed cultural causes of poverty were actually effects of that lack of opportunity. Still, you could understand why many observers failed to see this.
But over the past 40 years good jobs for ordinary workers have disappeared, not just from inner cities but everywhere: adjusted for inflation, wages have fallen for 60 percent of working American men. And as economic opportunity has shriveled for half the population, many behaviors that used to be held up as demonstrations of black cultural breakdown — the breakdown of marriage, drug abuse, and so on — have spread among working-class whites too.
These awkward facts have not, however, penetrated the world of conservative ideology. Earlier this month the House Budget Committee, under Mr. Ryan’s direction, released a 205-page report on the alleged failure of the War on Poverty. What does the report have to say about the impact of falling real wages? It never mentions the subject at all.
And since conservatives can’t bring themselves to acknowledge the reality of what’s happening to opportunity in America, they’re left with nothing but that old-time dog whistle. Mr. Ryan wasn’t being inarticulate — he said what he said because it’s all that he’s got.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 16, 2014
“A War On The Poor”: This Is Now The Central And Defining Issue Of American Politics
John Kasich, the Republican governor of Ohio, has done some surprising things lately. First, he did an end run around his state’s Legislature — controlled by his own party — to proceed with the federally funded expansion of Medicaid that is an important piece of Obamacare. Then, defending his action, he let loose on his political allies, declaring, “I’m concerned about the fact there seems to be a war on the poor. That, if you’re poor, somehow you’re shiftless and lazy.”
Obviously Mr. Kasich isn’t the first to make this observation. But the fact that it’s coming from a Republican in good standing (although maybe not anymore), indeed someone who used to be known as a conservative firebrand, is telling. Republican hostility toward the poor and unfortunate has now reached such a fever pitch that the party doesn’t really stand for anything else — and only willfully blind observers can fail to see that reality.
The big question is why. But, first, let’s talk a bit more about what’s eating the right.
I still sometimes see pundits claiming that the Tea Party movement is basically driven by concerns about budget deficits. That’s delusional. Read the founding rant by Rick Santelli of CNBC: There’s nary a mention of deficits. Instead, it’s a tirade against the possibility that the government might help “losers” avoid foreclosure. Or read transcripts from Rush Limbaugh or other right-wing talk radio hosts. There’s not much about fiscal responsibility, but there’s a lot about how the government is rewarding the lazy and undeserving.
Republicans in leadership positions try to modulate their language a bit, but it’s a matter more of tone than substance. They’re still clearly passionate about making sure that the poor and unlucky get as little help as possible, that — as Representative Paul Ryan, the chairman of the House Budget Committee, put it — the safety net is becoming “a hammock that lulls able-bodied people to lives of dependency and complacency.” And Mr. Ryan’s budget proposals involve savage cuts in safety-net programs such as food stamps and Medicaid.
All of this hostility to the poor has culminated in the truly astonishing refusal of many states to participate in the Medicaid expansion. Bear in mind that the federal government would pay for this expansion, and that the money thus spent would benefit hospitals and the local economy as well as the direct recipients. But a majority of Republican-controlled state governments are, it turns out, willing to pay a large economic and fiscal price in order to ensure that aid doesn’t reach the poor.
The thing is, it wasn’t always this way. Go back for a moment to 1936, when Alf Landon received the Republican nomination for president. In many ways, Landon’s acceptance speech previewed themes taken up by modern conservatives. He lamented the incompleteness of economic recovery and the persistence of high unemployment, and he attributed the economy’s lingering weakness to excessive government intervention and the uncertainty he claimed it created.
But he also said this: “Out of this Depression has come, not only the problem of recovery but also the equally grave problem of caring for the unemployed until recovery is attained. Their relief at all times is a matter of plain duty. We of our Party pledge that this obligation will never be neglected.”
Can you imagine a modern Republican nominee saying such a thing? Not in a party committed to the view that unemployed workers have it too easy, that they’re so coddled by unemployment insurance and food stamps that they have no incentive to go out there and get a job.
So what’s this all about? One reason, the sociologist Daniel Little suggested in a recent essay, is market ideology: If the market is always right, then people who end up poor must deserve to be poor. I’d add that some leading Republicans are, in their minds, acting out adolescent libertarian fantasies. “It’s as if we’re living in an Ayn Rand novel right now,” declared Paul Ryan in 2009.
But there’s also, as Mr. Little says, the stain that won’t go away: race.
In a much-cited recent memo, Democracy Corps, a Democratic-leaning public opinion research organization, reported on the results of focus groups held with members of various Republican factions. They found the Republican base “very conscious of being white in a country that is increasingly minority” — and seeing the social safety net both as something that helps Those People, not people like themselves, and binds the rising nonwhite population to the Democratic Party. And, yes, the Medicaid expansion many states are rejecting would disproportionately have helped poor blacks.
So there is indeed a war on the poor, coinciding with and deepening the pain from a troubled economy. And that war is now the central, defining issue of American politics.
By: Paul Krugman, Op-Ed Columnist, The New York Times, October 31, 2013