“How Conservatives Are Destroying Capitalism”: The GOP Is Working Nonstop To Exacerbate The System’s Worst Excesses
I’ve written before about how Thomas Piketty’s great new book Capital in the Twenty-First Century has made free-market conservatives distinctly uneasy. Perhaps for the first time in the post-war era, a genuine American socialist movement might be on the horizon, thanks to growing awareness both of rising income inequality and of a system that is flagrantly rigged in favor of the financial elite.
Paradoxically, conservatives are more responsible for this socialist resurgence than anyone. By fanatically opposing the kind of mild — and yes, socialist-tinged — reforms that would make capitalism more tolerable for the most vulnerable in society, conservatives are stoking a leftist bonfire.
Some conservatives, like the reformist Michael Strain, seem to grasp the problem. But most appear to exist in a kind of time warp in which the Soviet Union still exists and leftist ideas are obviously self-discrediting. Jim Pethokoukis gave us an example of this at National Review:
Thanks to Piketty, the Left is now having a Galaxy Quest moment. All that stuff their Marxist economics professors taught them about the “inherent contradictions” of capitalism and about history’s being on the side of the planners — all the theories that the apparent victory of market capitalism in the last decades of the 20th century seemed to invalidate — well, it’s all true after all. In their progressive hearts, they always knew it, knew it, knew it! The era of big government is back! Let the redistribution commence! [National Review]
Sorry, Jim, jeering just isn’t going to cut it anymore.
Take it from someone who had no stake in the intellectual arguments that dominated the postwar era. When I graduated from college in 2008, the American economy was hemorrhaging 600,000 jobs per month. The country was undergoing a crash course in subprime mortgage-backed securities, collateralized debt obligations, and credit default swaps. Aggregate demand was collapsing, and liquidity was freezing up. The appropriate response would have been to spend like a drunken sailor until unemployment was restored, then cut back slowly and start paying down accrued debt. Thank God we were about to elect this Obama fellow, because he knew what he was doing, right?
Wrong. We did pass the (badly underrated) stimulus, but the likes of Paul Krugman were howling themselves hoarse that it wouldn’t be enough to restore full employment. He was, of course, completely right.
Unemployment rose steadily, peaking at over 10 percent before coming down with agonizing slowness. Meanwhile, the vast bulk of newly created wealth went straight to the rich. If all of this isn’t indicative of an enormous failure of capitalism, then I don’t know what is.
Then the Left watched with increasing horror as the entire United States political mainstream turned from stimulus to austerity, abandoning a job that was not even half-done.
Then the Republican Party — which not even two years before had proposed its own $713 billion stimulus — won a sweeping victory in the 2010 midterms, and with a crazed messianic fervor dedicated itself to making everything worse as fast as possible. They demanded Herbert Hoover–style austerity and repeatedly held the government’s credit rating hostage to get it, which they succeeded in doing (abetted by Democratic “moderates,” to be fair). As a result, we’re well past the halfway point of our first lost decade with no end in sight.
Current political debates, while not quite so mind-blowingly bizarre as those in 2010–11, are still striking in that even political moderates are willing to toss millions of the most vulnerable people overboard for very poorly defined reasons. Unemployment isn’t even close to low, and yet repeatedly discredited inflation paranoiacs are, again, cooking up highly suspect new reasons to crush wage growth.
In short, political elites have been doing all they can to convince lefties that Marx was pretty close to the mark on that whole rich-exploiting-the-poor thing. Republicans in power are against even the mildest moderating structures to keep the middle class and poor from being left behind by galloping inequality; instead, they are for obliterating what inadequate protection we do have and for savage austerity that would increase the population of desperate jobless.
Every new Paul Ryan budget — all of which openly gut safety net programs — is another bundle of kindling on a potential leftist bonfire.
By: Ryan Cooper, The Week, April 10, 2014
“Crumbling Walls”: Boehner’s Anti-Unemployment Insurance Excuse Is Falling Apart
Nearly three months after federal unemployment benefits expired for over a million Americans nationwide, House Speaker John Boehner’s excuse for refusing to take up a bill to renew the federal Emergency Unemployment Compensation (EUC) program is falling apart.
When Senate Democrats and five Republicans struck a deal that would reauthorize the EUC program for five months and retroactively pay the benefits that expired on December 28, Speaker Boehner immediately dismissed the bill.
Citing a letter from the National Association of State Workforce Agencies (NASWA) – the state agencies that distribute the unemployment checks – Boehner argued that extending unemployment benefits would be too “difficult” and “unworkable,” due to the complications involved in ensuring that beneficiaries were actually looking for work during the proceeding three months.
Abandoning the House’s continuous claims that an extension would hinder job creation and dissuade long-term unemployed Americans from seeking employment, the Speaker argued that “the Senate bill would be costly, difficult to administer, and difficult to determine an individual’s eligibility.”
The bottom line, according to Boehner: ”This could increase the likelihood of fraud and abuse.”
NASWA president Mark Henry, however, is now clarifying that the organization does not endorse a particular position on whether or not the bill should proceed. As Politico reports, Henry says that some in Washington had “conflated” the concerns mentioned in NASWA’s letter.
“The letter that I wrote did not label the legislation ‘unworkable’; that was Speaker Boehner’s word,” Henry said, distancing himself from the Speaker’s stance.
Also, as The New York Times points out, state agencies managed to overcome that same “difficulty” back in 2010, when benefits were renewed after a lapse.
Even others in the GOP are not buying Boehner’s excuse, which seeks to appease House Republicans, who, for the most part, oppose an extension of the EUC program.
According to Politico, Senator Rob Portman, a powerful Republican also from Ohio, shot back at Boehner, saying he understands the “concern” over implementation, “but it’s been done before.”
“We’re eager to hear [the House’s] ideas as to how it could be implemented more effectively,” he added.
Portman was not alone in speaking out against the House’s opposition to the program’s renewal.
“There’s a lot of things that the Speaker doesn’t like that we do over here,” says Republican Senator Lisa Murkowski of Alaska. “What we have out there is a fair proposal.”
Senator Mark Kirk (R-IL) also spoke out, describing the deal as a “good compromise that takes care of people who are running out of their checks and does it in a way that is paid for appropriately.”
By: Elissa Gomez, The National Memo, March 26, 2014
“The Timidity Trap”: The Best Lack All Conviction, While The Worst Are Full Of Passionate Intensity
There don’t seem to be any major economic crises underway right this moment, and policy makers in many places are patting themselves on the back. In Europe, for example, they’re crowing about Spain’s recovery: the country seems set to grow at least twice as fast this year as previously forecast.
Unfortunately, that means growth of 1 percent, versus 0.5 percent, in a deeply depressed economy with 55 percent youth unemployment. The fact that this can be considered good news just goes to show how accustomed we’ve grown to terrible economic conditions. We’re doing worse than anyone could have imagined a few years ago, yet people seem increasingly to be accepting this miserable situation as the new normal.
How did this happen? There were multiple reasons, of course. But I’ve been thinking about this question a lot lately, in part because I’ve been asked to discuss a new assessment of Japan’s efforts to break out of its deflation trap. And I’d argue that an important source of failure was what I’ve taken to calling the timidity trap — the consistent tendency of policy makers who have the right ideas in principle to go for half-measures in practice, and the way this timidity ends up backfiring, politically and even economically.
In other words, Yeats had it right: the best lack all conviction, while the worst are full of passionate intensity.
About the worst: If you’ve been following economic debates these past few years, you know that both America and Europe have powerful pain caucuses — influential groups fiercely opposed to any policy that might put the unemployed back to work. There are some important differences between the U.S. and European pain caucuses, but both now have truly impressive track records of being always wrong, never in doubt.
Thus, in America, we have a faction both on Wall Street and in Congress that has spent five years and more issuing lurid warnings about runaway inflation and soaring interest rates. You might think that the failure of any of these dire predictions to come true would inspire some second thoughts, but, after all these years, the same people are still being invited to testify, and are still saying the same things.
Meanwhile, in Europe, four years have passed since the Continent turned to harsh austerity programs. The architects of these programs told us not to worry about adverse impacts on jobs and growth — the economic effects would be positive, because austerity would inspire confidence. Needless to say, the confidence fairy never appeared, and the economic and social price has been immense. But no matter: all the serious people say that the beatings must continue until morale improves.
So what has been the response of the good guys?
For there are good guys out there, people who haven’t bought into the notion that nothing can or should be done about mass unemployment. The Obama administration’s heart — or, at any rate, its economic model — is in the right place. The Federal Reserve has pushed back against the springtime-for-Weimar, inflation-is-coming crowd. The International Monetary Fund has put out research debunking claims that austerity is painless. But these good guys never seem willing to go all-in on their beliefs.
The classic example is the Obama stimulus, which was obviously underpowered given the economy’s dire straits. That’s not 20/20 hindsight. Some of us warned right from the beginning that the plan would be inadequate — and that because it was being oversold, the persistence of high unemployment would end up discrediting the whole idea of stimulus in the public mind. And so it proved.
What’s not as well known is that the Fed has, in its own way, done the same thing. From the start, monetary officials ruled out the kinds of monetary policies most likely to work — in particular, anything that might signal a willingness to tolerate somewhat higher inflation, at least temporarily. As a result, the policies they have followed have fallen short of hopes, and ended up leaving the impression that nothing much can be done.
And the same may be true even in Japan — the case that motivated this article. Japan has made a radical break with past policies, finally adopting the kind of aggressive monetary stimulus Western economists have been urging for 15 years and more. Yet there’s still a diffidence about the whole business, a tendency to set things like inflation targets lower than the situation really demands. And this increases the risk that Japan will fail to achieve “liftoff” — that the boost it gets from the new policies won’t be enough to really break free from deflation.
You might ask why the good guys have been so timid, the bad guys so self-confident. I suspect that the answer has a lot to do with class interests. But that will have to be a subject for another column.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 20, 2014
“What’s Really Offensive About Paul Ryan’s Remarks”: He Has A Cartoonish View Of The People Who Live In Our Inner Cities
I’m of three minds about the controversy surrounding Rep. Paul Ryan’s (R-WI) recent comments about the work ethic of men living in our inner cities. Taken in isolation, the comments were deeply stereotypical and disrespectful. Any effort to take the racial assumptions out of his comments will fail for the simple reason that we know which ethnic groups predominate in our inner cities. Let’s look at the part of the interview he did with Bill Bennett that caused an uproar:
“And so, that’s this tailspin or spiral that we’re looking at in our communities. You know your buddy (conservative scholar) Charles Murray or (public policy professor) Bob Putnam over at Harvard, those guys have written books on this, which is we have got this tailspin of culture in our inner cities, in particular, of men not working and just generations of men not even thinking about working or learning the value and the culture of work; and so there’s a real culture problem here that has to be dealt with.”
As a kind of gesture of good faith, I’d like to warn all conservatives that you cannot cite Charles Murray approvingly on any matter touching on race without getting accused of peddling racism. It’s going to happen to you every time so, before you cite him, you should decide if it is really your desire to be seen in that light by a large number of people.
Having said that, if you read that Ryan excerpt in context, it doesn’t sound nearly as bad as it does in isolation. The basic premise he was addressing is that kids need mentors who will teach them certain values, including the importance of work, and that if kids are growing up without mentors it can lead to a cycle of grinding poverty. Put more innocuously, if you have very high persistent unemployment in the inner cities, you are going to have a lot of adults who aren’t holding down jobs and setting that example for their kids. But there are still two big problems with what Ryan said.
First, he went too far and argued that there are “generations of [black/Latino] men not even thinking about working.” This is a fundamental misunderstanding of how ghetto economics work. In 2004, I was a community organizer for ACORN/Project Vote working out of an office in predominantly black North Philadelphia. My job was to hire, train, and deploy (mainly) young adults from that blighted and crime-ridden community to do voter registration and Get Out the Vote drives in suburban Montgomery County. When I put an advertisement in the paper, I was completely deluged with people looking for work. My challenge was to try to find the people who would stick with it and succeed, but I had to turn most applicants away. The hunger for work was overwhelming.
I discovered over time that nearly everyone had a way of making money, despite the fact that they were officially unemployed. I learned about a shadow economy that encompassed more than a mere black market. There were the legitimate under-the-table jobs that aren’t accounted for in government statistics and are taken on day-to-day: unloading trucks, working as a construction laborer. There were the semi-legitimate jobs: using your car as an unlicensed taxi. There were the hustles: making DVD’s of movies with a camcorder, selling fake auto-tags for inspection and registration. There were other non-violent criminal enterprises, like selling stolen t-shirts and the like. Ironically, I found that the people who were the best at getting people to register to vote were the people who set their alarm clocks for early in the morning so that they could go out and work their hustle and make some money. They worked extremely hard, and when given something legitimate to do, they excelled. The reason these people came to me in droves for a low-paying job is because they craved the legitimacy of socially-approved work. Their community was absolutely starved for that kind of work.
That being said, a lot of these young adults were not prepared to enter a standard work place. I had tremendous difficulty getting them to provide all the documentation that you need to get a legitimate job. So many of them had no Social Security card, or driver’s license, or any clue where to find their birth certificate. They also spoke a dialect ill-suited for most workplaces, and they didn’t have the computer skills that are required for a lot of entry-level jobs. But they wanted those skills and I gave out a lot of advice about how to get them. Most of all, I came to love and respect these people and their culture, and not to look down on them as shiftless layabouts or violent criminals. Of course, there are plenty of those in our ghettos, too, but they aren’t the kind to answer my job postings.
Paul Ryan has a cartoonish view of the people who live in our inner cities, in part, because he doesn’t know them. Because he doesn’t know them, he doesn’t understand what they need. He’s right that they need jobs and would benefit from more mentors, but their work ethic is just fine. They work hard. What they need is legitimate work and access to the education and job-training that is required for legitimate work.
And that gets to the second thing wrong with Ryan’s remarks. His prescriptions won’t create jobs in our ghettos. If anything, by pulling a huge amount of capital out of our ghettos, he’ll increase the poverty rate and make it harder for people to pool enough money to take a step up.
This problem of persistent intergenerational poverty in our inner cities is vexing, but alleviating it isn’t rocket science. You need a combination of more jobs for low-skilled workers and big investments in job training. Because the manufacturing base in this country is no longer very low-skilled, the job training component is more important than ever.
So, the really offensive thing about Paul Ryan’s comments isn’t so much that he said that black and Latino men in our cities don’t even think about working. The offensive thing is that he thinks that convincing them to think about working will actually get them a job.
They’re already working. Everybody’s got to eat.
By: Martin Longman, Washington Monthly Political Animal, March 15, 2015
“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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