"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister
"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."
- Daenerys Targaryen
"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"
- Tyrion Lannister
"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."
- Jorah Mormont
"These bad people are what I'm good at. Out talking them. Out thinking them."
- Tyrion Lannister
"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."
- Michael Barone
"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker
Thursday, May 19, 2016
Tuesday, May 17, 2016
Economic platitudes about how trade is always worthwhile as long as the winners can compensate the losers are an insult in the age of inequality, where the winners increasingly use their political power to claim ever more winnings.
If we don’t deal with these costs by creating real, substantive, remunerative opportunities for those hurt by trade, some demagogue is sure to come along Trumpeting a case for xenophobia, walls, tariffs and protectionism. If he’s not … um … here already.
Monday, May 16, 2016
Saturday, May 14, 2016
Friday, May 13, 2016
History of the U.S. (1865-1918) Progressive Era (Wikipedia)
Progressive Era website
The Progressive Era was one of general prosperity after the Panic of 1893—a severe depression—ended in 1897. The Panic of 1907 was short and mostly affected financiers. However, Campbell (2005) stresses the weak points of the economy in 1907–1914, linking them to public demands for more Progressive interventions. The Panic of 1907 was followed by a small decline in real wages and increased unemployment, with both trends continuing until World War I. Campbell emphasizes the resulting stress on public finance and the impact on the Wilson administration's policies. The weakened economy and persistent federal deficits led to changes in fiscal policy, including the imposition of federal income taxes on businesses and individuals and the creation of the Federal Reserve System. Government agencies were also transformed in an effort to improve administrative efficiency.
In the Gilded Age (late 19th century) the parties were reluctant to involve the federal government too heavily in the private sector, except in the area of railroads and tariffs. In general, they accepted the concept of laissez-faire, a doctrine opposing government interference in the economy except to maintain law and order. This attitude started to change during the depression of the 1890s when small business, farm, and labor movements began asking the government to intercede on their behalf.
By the start of the 20th century, a middle class had developed that was leery of both the business elite and the radical political movements of farmers and laborers in the Midwest and West.
Monday, May 09, 2016
NYT comes around to @karpmj's argument two months later.
Bernie Sanders’s Legacy? The Left May No Longer Need the Rich by Nate Cohn
When Bernie Sanders started gaining in the polls, it was easy to place him in a long line of idealistic insurgents like Barack Obama, Howard Dean, Bill Bradley or Jerry Brown.
They built strong bases of support among white liberal voters, excelling in places like Boulder, Colo., and Vermont, but their chances of being nominated hinged on building a broader coalition that included nonwhite voters. Only Mr. Obama managed it.
Mr. Sanders, despite his success in Indiana this week, has effectively lost the Democratic nomination, and for a familiar reason: He didn’t do well enough among black voters. But he gained the enthusiasm of a subtly different — and potentially larger — coalition than his liberal predecessors.
His brand of progressivism played far better among white working-class voters than that of past liberal outsiders. At the same time, he fared far worse among the affluent Democrats who represented the core of Mr. Obama and Mr. Bradley’s coalitions.
Mr. Sanders’s weakness among affluent Democrats and his strength among working-class Democrats might seem unsurprising, given his class-focused message. Mr. Sanders himself anticipated it in an interview with The Upshot in July.
But in broader historical terms, it might be something of a turning point in Democratic politics: the moment when the party’s left no longer needs an alliance with wealthy liberals to compete in national elections.
Connecticut, which held its primary April 26, vividly illustrates the huge difference between Mr. Sanders’s coalition and that of past liberal challengers.
In 2000, a flagging Mr. Bradley lost the state by 13 percentage points to Al Gore. He lost badly among nonwhite voters — losing cities like Bridgeport and Hartford by more than 40 points. He lost by more modest margins in the rural, white, working-class eastern part of the state. But he won many of the state’s affluent areas — like Greenwich and New Canaan, along with much of the traditionally liberal western and northwestern part of the state near the border with New York and Massachusetts.
Mr. Obama won almost all of the same areas in 2008, but then added strong support from nonwhite voters — enough to give him a narrow victory over Mrs. Clinton in the state. He won places like Bridgeport and Hartford, even as he fared similarly to Mr. Bradley in places like Greenwich and New Canaan. He fared little or no better in the white, working-class parts of eastern and central Connecticut.
The Sanders-Clinton race reversed this map. Mrs. Clinton lost almost all of the white, working-class areas of rural eastern Connecticut to Mr. Sanders, even though she had won most of it in 2008, as Mr. Gore had in 2000. But she beat Mr. Sanders by huge margins in the affluent parts of western Connecticut where Mr. Obama and Mr. Bradley fared well. She won back the nonwhite voters she lost to Obama in 2008, giving her wins in Bridgeport and Hartford that nearly matched Mr. Gore’s victory in 2000. It was enough for a clear if modest 5.4-point victory.
It’s a pattern that has repeated itself across the country. Mr. Sanders was routed in the wealthy, liberal parts of New York where recent progressive heroes such as Bill de Blasio or Zephyr Teachout fared well — like the Upper West Side, Greenwich Village and parts of Brooklyn.
In Massachusetts, Mr. Sanders lost the affluent, liberal voters in the Boston area, and he might well lose the Bay Area, another enclave of the wealthy and liberal.
This is the first time since 1992 that there’s been a real split between the progressive left and affluent liberals in a Democratic primary. In that race, an iconoclastic outsider, Mr. Brown, excelled among liberals in places like Ann Arbor, Mich., with a progressive message (including opposition to trade agreements), while a more technocratic candidate, Paul Tsongas, won in wealthy liberal areas like Montgomery County, Md., which includes many suburbs northwest of Washington. Bill Clinton easily prevailed over a divided left-liberal wing of the party with strong support among working-class white Democrats and black voters.
Why did affluent liberals support Mrs. Clinton?
One possibility is simple class politics: Mr. Sanders’s class-oriented message didn’t resonate among this group. If true, a candidate of the progressive left would struggle to reunite the left-liberal coalition against an establishment challenger in future Democratic primaries.
But the left might have a better opportunity to reassemble the left-liberal coalition with a different progressive candidate if the problem were Mr. Sanders, not his views. (Anecdotally, I run into a lot of Hillary Clinton supporters who supported Mr. Obama in 2008 and say they would have supported Elizabeth Warren, who’s more technocratic and policy-focused than Mr. Sanders.)
Equally important to the future of progressives in the Democratic Party is Mr. Sanders’s strength in the white working-class areas where Mr. Bradley, Mr. Obama, and both Mr. Brown and Mr. Tsongas faltered. It was Mr. Sanders’s strength among these voters that let him stay fairly competitive, even though he lost half of the traditional left-liberal coalition.
Mr. Sanders won white voters without a college degree by a double-digit margin in Connecticut, as he did in Maryland, Wisconsin, North Carolina, New Hampshire, Illinois, Oklahoma, Indiana, Vermont and Michigan. He probably did so in Rhode Island as well (no exit polls were conducted there).
Outside the South, Mrs. Clinton probably won white voters without a college degree only in Ohio (the exit polls there show she prevailed with that group by one point).
One possible explanation, again, is policy. Income inequality has become a vastly more important issue to Democrats since the Great Recession, and it’s reasonable to assume that white working-class Democrats might be especially drawn to the issue. This is the best case for the progressive left; it would mean that a future progressive populist could count on similar levels of support with a strong, class-oriented message.
The evidence for this view is somewhat mixed. According a compilation of exit polls, around 40 percent of white voters without a college degree wanted more liberal policies than those of Mr. Obama, and Mr. Sanders won these voters handily. The highest number was in Vermont, where 46 percent of white voters without a degree wanted more liberal policies than Mr. Obama’s.
That’s a big bloc that progressives can count on in the future, but it’s not a majority and it’s less than Mr. Sanders’s share of white voters without a degree. That’s in part because Mr. Sanders also won among those white working-class voters who wanted less liberal policies than those of Mr. Obama, a fact that makes Mr. Sanders look as much like a protest vote against Mrs. Clinton as the harbinger of a new Democratic socialism.
But it is nonetheless striking that so many white Democrats without a degree wanted more liberal policies than Mr. Obama’s. In fact, white voters without a college degree were often more likely than either college-educated white voters or minorities to support more liberal policies.
That’s consistent with the notion that white working-class Democrats really have become more receptive to a progressive candidate over the last decade, in some cases even going from being the principal impediment to a left-liberal coalition to the strongest bloc in favor of a more progressive agenda.
According to exit poll data, liberals represented a majority of white Democrats without a college degree in nearly every primary contest. It’s a huge change from just a decade or two ago, when so many white working-class Democrats were conservative (check out this 1995 Pew Research typology of voters if you want to see what the Democratic base used to look like). Mrs. Clinton tended to win “moderate” white voters without college degrees in these states, but she lost among the self-described liberals.
A lot of this is a generational divide. Mrs. Clinton won among white voters without a college degree who were over age 30, but she was pummeled among those who were younger.
Whether Mrs. Clinton was so weak among young white voters because of her weaknesses or the appeal of Mr. Sanders’s policy message will probably decide whether the “Sanders Coalition” can be replicated in a future Democratic primary.
The exit polls, again, send a mixed message. Around half of young white voters didn’t think that Mrs. Clinton was liberal enough, or they wanted policies that were more liberal than Mr. Obama’s. But Mr. Sanders also won among those younger voters who thought Mrs. Clinton and Mr. Obama were liberal enough; her weakness might have had as much (or more) to do with questions about ethical governance as about policy.
Either way, Mr. Sanders’s success — in spite of weakness among wealthy Democrats — is important. There hasn’t been a viable candidate of the progressive left in a Democratic primary in a long time.
Elite Democrats in places like Manhattan; Cambridge, Mass.; and Santa Monica, Calif., have been anchors of liberal politics in the United States for decades. The ability to build a robust progressive coalition without these voters — or their donations — is a new phenomenon, and it could free candidates to pursue progressive policies in future Democratic primaries, and win.
The Democratic Party has moved far enough to the left where it’s possible to imagine a candidate of the progressive left cobbling together a majority without much support from affluent liberals. It isn’t easy — Democrats are basically satisfied with Mrs. Clinton and Mr. Obama’s positions — but it’s possible.
Saturday, May 07, 2016
This fact has largely been missing from reporting on the issue. For example a Washington Post piece warning of the end of the world if Trump tried to negotiate on the debt, told readers that the government would pay roughly $255 billion this year in interest on the debt. This includes the $113 billion that the Federal Reserve Board will receive and refund back to the Treasury. That leaves a net interest burden of $142 billion, a bit less than 0.8 percent of GDP. By comparison, the interest burden was over 3.0 percent of GDP in the early 1990s.
Friday, May 06, 2016
Thursday, May 05, 2016
Wednesday, May 04, 2016
Ben Bernanke and Democratic Helicopter Money
by Simon Wren-Lewis
“The fact that no responsible government would ever literally drop money from the sky should not prevent us from exploring the logic of Friedman’s thought experiment, which was designed to show—in admittedly extreme terms—why governments should never have to give in to deflation.”
The quote above is from a post by Ben Bernanke (who, in case anyone does not know, used to be in charge of US monetary policy). I put it up front because it expresses a macroeconomic truth that no one should ever forget: persistent recessions and deflation are never inevitable, and always represent the failure of policy makers to do the right thing.
There are many useful points in his post, but I just want to talk about one: Bernanke is in fact not talking about helicopter money in its traditional sense, but what I have called elsewhere ‘democratic helicopter money’.
When most people talk about HM, they imagine some scheme whereby the central bank sends ‘everyone’ a cheque in the post, or transmits some money to each individual some other way. It is what economists would call a reverse lump sum tax, or reverse poll tax: the amount you get is independent of your income. That makes it different from a normal tax cut.
In practice the central bank could only really do this with the cooperation of governments. It would not want to take the decision about what everyone means on its own. (Do we include children or not. How do we find everyone?) But once those details had been sorted out, a system would be in place that the central bank could operate whenever it needed to.
Bernanke suggests an alternative. The central bank sets aside a sum of newly created money, and the fiscal authorities then spend it as they wish. They could decide to use all the money to build bridges or schools rather than give it to individuals. There might be two reasons for doing HM this way. First, for some reason the fiscal authorities are reluctant to spend if they have to fund it by creating more debt, so it may allow them to get around this (normally self-imposed) ‘constraint’. Second, a money financed fiscal expansion could be more expansionary than a bond financed fiscal expansion. Lets leave the second advantage to one side, as the first is sufficient in a world obsessed by government debt.
I have talked about something similar in the past (first here, but later here and here), which I have called democratic helicopter money. This label also seems appropriate for Bernanke’s scheme, because the elected government decides on the form of fiscal expansion. The difference between what I had discussed earlier under this label and Bernanke’s suggestion is that in my scheme the fiscal authorities and the central bank talk to each other before deciding on how much money to create and what it will be spent on (although the initiative always comes from the central bank, and would only happen in a recession where interest rates were at their lower bound). The reason I think talking would be preferable is simply that it helps the central bank decide how much money it needs to create. 
Imagine, for example, you had a fiscal authority in one country that wanted to spend the money on ‘shovel ready’ public investment projects, and an authority in another country that wanted to spend it on some temporary tax cuts for the rich. The impact of the two different stimulus policies on demand and output are very different. If the two economies were in similar conjunctural positions, then the central bank with the tax cutting fiscal authorities would want to create a lot more money than would be required in the other economy.
In some countries it is easier for central banks to talk to the fiscal authorities than in others. When it is difficult, Bernanke’s scheme may appear attractive, but it leaves the central bank somewhat in the dark about how much money it needs to create. The big advantage of the more popular conception of HM (a cheque in the post) is that the impact of any money creation is much clearer. (As it is important to end recessions quickly, waiting to see what happens is not helpful advice.)
When central banks and governments do happily talk to each other (as in the UK, for example) then my version of democratic HM becomes an option. Arguments that this makes the central bank less independent are spurious in my view. The central bank initiates the discussion, in clearly defined circumstances. They simply ask what the government would spend any newly created money on. This question should be accompanied by the central bank’s current view on what the multipliers for various fiscal options are. The government then makes a choice, and the central bank then decides how much money to create.
While democratic HM is not talked about much among economists (Bernanke excepted), I think there are good political economy reasons why it may be the form of HM that is eventually tried. As I have said, conventional HM of the cheque in the post kind almost certainly requires the involvement of government. Once governments realise what is going on, they may naturally think why set up something new when they could decide how the money is spent themselves in a more traditional manner. Democratic HM is essentially a method of doing a money financed fiscal expansion in a world of independent central banks.
Which brings me back to the quote at the head of this post. The straight macroeconomics of most versions of HM is clear: all the discussion is about institutional and distributional details. If it is beyond us to manage to set in place any of them before the next recession that would be a huge indictment of our collective imagination, and is probably a testament to the power of imaginary fears and taboos created in very different circumstances.
 A sequential set-up of the kind Bernanke suggests is also more vulnerable to cheating: the government uses the money to finance something they were going to do anyway, and in effect largely offsets the money creation by reducing its own borrowing.