"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
Friday, July 21, 2017
Must-Read: Ryan Avent: MAKING MONETARY POLICY GREAT AGAIN: "Obama’s response to the economic crisis... the timidity of his stimulus plan... his failure to provide broad support to struggling homeowners... his premature pivot to deficit cutting...
...While Roosevelt’s New Deal programs left an indelible mark on the American economy and society, it was his decisive monetary action that saved America from continuing depression. On just his third day... Roosevelt declared a bank holiday... suspended... the... gold standard... a policy of reflation. The economic response was immediate.... Obama would not pursue any comparably radical policy.... His Administration left the hard work of rehabilitating the economy to the Federal Reserve, while the federal government turned to deficit reduction....
The decades prior to the crisis taught political leaders that economic management was the Fed’s job, one it could handle ably. Experience since the financial crisis strongly suggests that assumption was mistaken. It should not have taken six years to return the unemployment rate to the pre-crisis level, nor should so much of the reduction in unemployment have come in the form of frustrated workers leaving the labor force. American incomes should not have been allowed to fall below the pre-crisis trend, and at least some of that shortfall ought to have been made up. Most critically, now, nearly ten years after the start of the Great Recession, the economy should be far better prepared to deal with the next crisis, not trapped with interest rates stuck near zero and the labor market still signaling that more people could be put to work for longer hours at higher rates of pay.
As the Great Recession recedes into the past, the sense that urgent change in the making of economic policy is needed also fades...
Thursday, July 20, 2017
Wednesday, July 19, 2017
Tuesday, July 18, 2017
Monday, July 17, 2017
What's the gift Euron Greyjoy plans to bring Cersei? Tyrion's head. A horn which controls dragons?
Does Ayra wipe out Ed Sheeran and the nice Lannister soldiers? Probably.
Doesn't really matter who leads the Karstarks and Umbers. The White Walkers are heading straight for their castles in the north east and will overwhelm them.
I read speculation that the Night King is really in the west as the Hounds saw a mountain, which are only located in the west. That means the army of the dead traveled west pretty quickly. Bran will know!
Previews have Sansa making out with a Sand Snake from Dorne???
New Republic discussion
Ask the Maester
Saturday, July 15, 2017
If you go further and allow that wages and prices can inflate at different rates (which you must, given recent decades), you have extremely large and changing differentials between price inflation, wage inflation, and (especially) asset-price inflation.
"Asset price inflation" is not inflation by Noah Smith
Thursday, July 13, 2017
Tuesday, July 11, 2017
Monday, July 10, 2017
Sunday, July 09, 2017
- With savings low and debt high, households might respond to higher wages by saving more. If so, we’ll not get higher aggregate demand and hence incentives to invest. There’s a warning here from the 70s. One reason why the positive-sum game broke down then was that workers saved increasing proportions of their wages.
These doubts don’t make me side with neoliberalism. They just make me think that wage-led growth is nothing like sufficient.
In 2015, Medicare provided health insurance for over 55 million—46 million people age 65 and older and nine million younger people. On average, Medicare covers about half of the health care charges for those enrolled.
Saturday, July 08, 2017
Thursday, July 06, 2017
Let's talk about some of the drivers of the changing of society. I see three. You talk a lot about two, and less about the third.
The first is this giant question about the future of work — what is happening to the economic situation of people who don't own capital or have internationally traded skills.What an odd way of putting it. Isn't it the job of the Fed to keep unemployment low?
Wednesday, July 05, 2017
by Paul Krugman
NOVEMBER 23, 2012 12:48 PM
Suzy Khimm writes about the contrast between what financial industry honchos say worries them and what financial markets seem to be saying. The honchos declare that failure to reach a Grand Bargain would
spark a damaging loss of confidence in the U.S. government’s fiscal prospects, a run on Treasury bonds, and a spike in interest rates.
But the bond markets are saying what me worry, with long-term rates at near-record lows.
What Khimm doesn’t note, however, is that the problem with bond vigilante scare tactics runs even deeper than that — because it’s actually quite hard to tell a story in which a loss of confidence in U.S. bonds hurts the real economy. Why wouldn’t it just drive down the dollar, and thereby have an expansionary effect?
Yes, I know, Greece — but Greece doesn’t have its own currency. What’s the model under which a country that does have its own currency and borrows in that currency can experience a slump due to an attack by bond vigilantes? Or failing that, where are the historical examples?
The closest I can come to anything resembling the danger supposedly lurking for America is the tale of France in the 1920s, which emerged from World War I burdened by large debt, and which did in fact face an attack by speculators as a result. Yet the French story does not, if you look at it closely, offer any support to the deficit scare talk we keep hearing.
So, France did indeed have a big debt problem. Here’s debt as a percentage of GDP, from the IMF debt database:
How did France achieve that big drop in debt after 1925? Basically by inflating it away.
And markets sort of saw that coming. This study (pdf) by the Bank of France show medium-term interest rates (black line) rising substantially for much of the 1920s, before dropping off sharply:
It’s important to note, however, that France wasn’t a depressed economy in the 1920s, and therefore didn’t look much like America today:
Meanwhile, the really big effect was a sharp depreciation of the franc, which made France highly competitive and strengthened the economy:
But what about the brief but nasty slump in 1927? That wasn’t caused by spiking interest rates; it was, instead, caused by fiscal austerity, by the measures taken to stabilize the franc.
So even when we look at the closest thing I can find to the scenario the deficit scolds want us to fear, it doesn’t play out at all as described.
It’s quite remarkable: our policy discourse remains largely dominated by fears of an event that the fear-mongers can’t explain in theory, and for which they can offer no historical examples in practice.
Tuesday, July 04, 2017
video of a bit
Marc Maron Opens Up About Friend and Comedian Bill Hicks
Arguably, what stands out most in Maron's description of his old friend is how, unlike most comics, Hicks wasn't desperately eager to please the audience. In fact, he didn't seem to care whether they were pleased. And if you watch old clips on YouTube, you can see that sometimes they weren't. "Bill was very much in his own time zone," Maron says. "He went through his entire presentation, whether people were responding or not. There are a few guys who took his approach to details and description, but not many. It's hard. The stuff Bill wrote is positively Rabelaisian.
"If I could say anything about Hicks, it's that he was doing his best to destroy anything he perceived as hypocrisy," Maron concludes. "While also revealing stuff that was overly embraced by moralizers. He was a misanthropic moralist, who did his best to get to the bottom of religious hypocrisy, moral hypocrisy, and societal hypocrisy. But he also made you laugh when he did it. That's a tough trick. But it's what Bill did."
Sunday, July 02, 2017
Will Wilkinson CATO review
Gregg Easterbrook New York Times review
Brad DeLong's review
Krugman and Beauchamp are wrong:
No easy answers: why left-wing economics is not the answer to right-wing populism by Zack Beauchamp Mar 13, 2017
And yet, and yet: Trump did in fact win over white working-class voters, who thought they were voting for a populist; Democrats, who did a lot for those voters, got no credit — rural whites, in particular, who were huge beneficiaries of the ACA, overwhelmingly supported the man who may destroy their healthcare.
This ties in with an important recent piece by Zack Beauchamp on the striking degree to which left-wing economics fails, in practice, to counter right-wing populism; basically, Sandersism has failed everywhere it has been tried. Why?
The answer, presumably, is that what we call populism is really in large degree white identity politics, which can’t be addressed by promising universal benefits. Among other things, these “populist” voters now live in a media bubble, getting their news from sources that play to their identity-politics desires, which means that even if you offer them a better deal, they won’t hear about it or believe it if told. For sure many if not most of those who gained health coverage thanks to Obamacare have no idea that’s what happened.Any answer to right-wing populism requires left-wing economics:
Why Zack Beauchamp’s piece arguing otherwise is wrong by eshhou
No Easy Answers, Just Bad History by Marshall Steinbaum
Saturday, July 01, 2017
Instead, he argues in “The Retreat of Western Liberalism,” Trump’s election is a part of larger trends on the world stage, including the failure of two dozen democracies since the turn of the millennium (including three in Europe — Russia, Turkey and Hungary) and growing downward pressures on the West’s middle classes (wrought by the snowballing forces of globalization and automation) that are fomenting nationalism and populist revolts. These developments, in turn, represent a repudiation of the naïve hopes, after the fall of the Berlin Wall, that liberal democracy was on an inevitable march across the planet, and they also pose a challenge to the West’s Enlightenment faith in reason and linear progress.
The strongest glue holding liberal democracies together, Luce argues, is economic growth, and when that growth stalls or falls, things tend to take a dark turn. With growing competition for jobs and resources, losers (those he calls the “left-behinds”) seek scapegoats for their woes, and consensus becomes harder to reach as politics devolves into more and more of a zero-sum game.
“Many of the tools of modern life are increasingly priced beyond most people’s reach,” Luce writes. One study shows it now takes the median worker more than twice as many hours a month to pay rent in one of America’s big cities as it did in 1950; and the costs of health care and a college degree have increased even more. There is rising income inequality in the West; America, which “had traditionally shown the highest class mobility of any Western country,” now has the lowest.”
As nostalgia for a dimly recalled past replaces hope, the American dream of self-betterment and a brighter future for one’s children recedes. Among the symptoms of this dynamic: a growing opioid epidemic and decline in life expectancy, increasing intolerance for other people’s points of view, and brewing contempt for an out-of-touch governing elite (represented in 2016 by Hillary Clinton, of whom Luce writes: “her tone-deafness towards the middle class was almost serene”).
Tuesday, June 27, 2017
Monday, June 26, 2017
Saturday, June 24, 2017
Friday, June 23, 2017
Thursday, June 22, 2017
Many of my friends have recently issued a statement asserting that the Fed should change its inflation target. I suspect, for reasons I will write about in the next few days, that moving away from inflation targeting to something like nominal gross domestic product-level targeting would be a better idea. But I think that this issue is logically subsequent to the question of how policy should be made in the near term with the given 2 percent inflation target.
Tuesday, June 20, 2017
Sunday, June 18, 2017
At 68, Jeremy Corbyn has been on the Labour Party’s left flank longer than many of his most enthusiastic supporters — the ones who nearly propelled him to an upset victory in this month’s British general election — have been alive. Bernie Sanders, who won more votes from young people in the 2016 primaries than Donald Trump and Hillary Clinton combined, is 75, and has a demeanor that, honestly, reminds me of my Jewish grandfather. Jean-Luc Mélenchon, the Communist-backed candidate who, thanks to support from young people, surged in the polls ahead of the first round of France’s presidential election, is a sprightly 65.
What has driven so many young people into passionate political work, sweeping old socialists with old ideas to new heights of popularity? To understand what is going on, you have to realize that politicians like Mr. Sanders and Mr. Corbyn have carried the left-wing torch in a sort of long-distance relay, skipping generations of centrists like Bill Clinton and Tony Blair, to hand it to today’s under-35s. And you have to understand why young people are so ready to grab that torch and run with it.
Both Britain and the United States used to have parties that at least pledged allegiance to workers. Since the 1970s, and accelerating in the ’80s and ’90s, the left-wing planks have one by one been ripped from their platforms. Under Mr. Blair, Labour rewrote its famous Clause IV, which had committed the party to the goal of “common ownership of the means of production, distribution and exchange.” Under Mr. Clinton, the Democratic Party cut welfare programs and pushed anti-worker international trade deals. Writing in 1990, Kevin Phillips, a former strategist for Richard Nixon, called the Democrats “history’s second-most enthusiastic capitalist party.” Elsewhere in Europe, traditional socialist parties became sclerotic and increasingly business-friendly.
All of this left many voters with a sense that there is no left-wing party devoted to protecting the interests of the poor, the working class and the young.
Meanwhile, people my age — I’m 29 — are more in need of a robust leftist platform than ever. The post-Cold War capitalist order has failed us: Across Europe and the United States, millennials are worse off than their parents were and are too poor to start new families. In the United States, they are loaded with college debt (or far less likely to be employed without a college degree) and are engaged in precarious and non-unionized labor. Also the earth is melting.
There’s nothing inherently radical about youth. But our politics have been shaped by an era of financial crisis and government complicity. Especially since 2008, we have seen corporations take our families’ homes, exploit our medical debt and cost us our jobs. We have seen governments impose brutal austerity to please bankers. The capitalists didn’t do it by accident, they did it for profit, and they invested that profit in our political parties. For many of us, capitalism is something to fear, not celebrate, and our enemy is on Wall Street and in the City of London.
Because we came to political consciousness after 1989, we’re not instinctively freaked out by socialism. In fact, it seems appealing: In a 2016 poll conducted by Harvard, 51 percent of Americans between 18 and 29 rejected capitalism, and a third said they supported socialism. A Pew poll in 2011 showed that the same age bracket had more positive views of socialism than capitalism. What socialism actually means to millennials is in flux — more a falling out with capitalism than an adherence to one specific platform. Still, within this generation, certain universal programs — single-payer health care, public education, free college — and making the rich pay are just common sense.
At the ballot box, our options have been relatively limited. Clinton- and Blair-era liberals have hobbled their parties’ abilities to confront the ills of capitalism. But while left-of-center parties ran into the waiting arms of bankers, Mr. Sanders and Mr. Corbyn held fast to left-wing politics.
In May, when Labour’s manifesto calling for free university education and increased spending on the National Health Service was leaked, Britain’s mainstream press responded with derision: “Labour’s Manifesto to Drag Us Back to the 1970s” read a headline in the Daily Mail. (In fact, some of Mr. Corbyn’s proposals, like nationalizing rail and water companies, hark directly back to Labour’s Clause IV commitments.) To some readers it may have sounded like a threat, but to many young people it was a promise. Following the headlines, Labour’s poll numbers surged. In the election on June 8, the party finished with a shocking 40 percent of the vote, its highest share in years. And much of the success was thanks to young voters.
Of course, Mr. Corbyn, who is famous for cycling to work and being “totally anti-sugar on health grounds,” has a certain ascetic charm. And there’s something appealingly unpretentious about Mr. Sanders’s Brooklyn accent and disheveled appearance. But it seems safe to say that their success with young people has been based on their platforms, not their charisma.
That’s a good thing, too, since, sooner or later, those platforms will need to acquire new representatives. America’s working class is increasingly racially diverse. Hotly contested politics around race, gender and sexuality shape our political terrain (and our experience of downward mobility). Mr. Sanders suffered shortcomings on this front: He freely confessed to not comprehending the scale of American police brutality when he began his campaign; he can sound awkward when it comes to race and gender.
The upside is that Mr. Sanders’s campaign and Mr. Corbyn’s leadership of the Labour Party have paved the way for a socialist politics that doesn’t just look like them.
The day after the election in Britain, I flew to Chicago to speak at the People’s Summit, a national convention of progressive and left-wing activists organized by people from the Bernie Sanders campaign alongside National Nurses United.
Also attending were a next generation of leftist organizers and candidates: Linda Sarsour, a 37-year-old Palestinian-American organizer from New York known for her skill in building bridges among communities; Dante Barry, the 29-year-old executive director of the Million Hoodies Movement for Justice; and Maria Svart, also in her 30s, who became the national director of the Democratic Socialists of America in 2011.
I encountered many young people who found themselves radicalized over the last couple of years and are now joining campaigns in their communities for state-level single payer health care or for better housing. Those campaigns exist because older campaigners have carried the torch. Out of all this activity, a next generation of socialist candidates who actually reflect America is almost guaranteed to emerge.
When Mr. Sanders took to the stage, I looked around to see hundreds of young organizers cheering his democratic socialist agenda. I hit the convention floor and saw people my own age tabling for new lefty magazines and organizations. A friend texted me a Corbyn emoji: thumbs up.
Three days after Britain’s general election, Mr. Corbyn sat down for an interview with Andrew Marr on the BBC. Mr. Marr grilled the Labour leader on the feasibility of turning his platform into governing policy. Was Mr. Corbyn, at this point in his career, really in it for the long haul? “Look at me!” he said. “I’ve got youth on my side.”
Monday, June 12, 2017
Sunday, June 11, 2017
Saturday, June 10, 2017
Thursday, June 08, 2017
Monday, June 05, 2017
Sunday, June 04, 2017
May 31, 2017
Saturday, June 03, 2017
Friday, June 02, 2017
Tuesday, May 30, 2017
Monday, May 29, 2017
Sunday, May 28, 2017
Saturday, May 27, 2017
Friday, May 26, 2017
Monday, May 22, 2017
Sunday, May 21, 2017
Saturday, May 20, 2017
Friday, May 19, 2017
Tuesday, May 16, 2017
Monday, May 15, 2017
Friday, May 12, 2017
Thursday, May 11, 2017
The lesson of all of this is something that Scandinavian countries learned long ago. The region’s small countries understood that openness was the key to rapid economic growth and prosperity. But if they were to remain open and democratic, their citizens had to be convinced that significant segments of society would not be left behind.
The welfare state thus became integral to the success of the Scandinavian countries. They understood that the only sustainable prosperity is shared prosperity. It is a lesson that the US and the rest of Europe must now learn.
Wednesday, May 10, 2017
Tuesday, May 09, 2017
It seems to me that these various explanations are quite compatible with each other. Where what we might call neoliberal policies had been strong - weak unions, declining welfare state, stagnant wages - these policies created a very large group in society that were looking for someone to blame. In a managed economy that allowed the parties of the right either to use nationalism and anti-immigration rhetoric to deflect blame from themselves, or for the far right to capture those parties. As that rhetoric also hit out at globalisation it potentially was a direct threat to global business interests, but those interests could either do nothing about this or felt they could manage that threat.
Monday, May 08, 2017
Which brings me back to the French election. We should be terrified at the possibility of a Le Pen victory. But we should also be worried that a Macron victory will be taken by Brussels and Berlin to mean that Brexit was an aberration, that European voters can always be intimidated into going along with what their betters say is necessary.
So let’s be clear: Even if the worst is avoided this Sunday, all the European elite will get is a time-limited chance to mend its ways.
Sunday, May 07, 2017
Saturday, May 06, 2017
Wednesday, May 03, 2017
Tuesday, April 18, 2017
The False Promise of Universal Basic Income by Alyssa Battistoni
Thursday, April 13, 2017
Monday, April 10, 2017
Tuesday, March 28, 2017
Saturday, March 25, 2017
Thursday, March 23, 2017
Tuesday, March 21, 2017
Sunday, March 19, 2017
Zack Beauchamp of Vox has written an article entitled “No easy answers: why left-wing economics is not the answer to right-wing populism.” In this piece, he argues that “tacking to the left on economics won’t give Democrats a silver bullet to use against the racial resentment powering Trump’s success [and] could actually wind up [making] Trump [stronger.]” Matt Bruenighas written about the piece’s odd moral implications; I want to discuss some of the evidence Beauchamp provides, and why I don’t find it all that convincing.
Assuming the Democratic party does not totally abandon redistributive politics, racism will always pose a problem. The question then is: what redistributive programs and policies are most capable of overcoming this and generating cross-racial coalitions? There is little reason to believe that the means-tested programs favored by the Democratic mainstream are more capable of doing this than the more universal programs favored by those on the Left.
Saturday, March 18, 2017
Thursday, March 16, 2017
The health policy tightrope. The Republican plan health care plan, the CBO says, would increase the number of uninsured Americans by 24 million. I don’t know any reason to question this number. By some estimates, this will result in 40,000 additional deaths a year. By the same estimate, the Democratic status quo leaves 28 million people uninsured, implying a similar body count. Paul Ryan’s idea that health care should be a commodity to be bought in the market is cruel and absurd but the Democrats’ idea that heath insurance should be a commodity bought in the market is not obviously less so. Personally, I’m struggling to find the right balance between these two sets of facts. I suppose the first should get more weight right now, but I can’t let go of the second. Adam Gaffney does an admirable job managing this tightrope act in his assessment of the Obama health care legacy inJacobin. (But I think he’s absolutely right, strategically, to focus on the Republicans for the Guardian’s different readership .)
Tuesday, March 14, 2017
"This ties in with an important recent piece by Zack Beauchamp on the striking degree to which left-wing economics fails, in practice, to counter right-wing populism; basically, Sandersism has failed everywhere it has been tried. Why?
The answer, presumably, is that what we call populism is really in large degree white identity politics, which can’t be addressed by promising universal benefits. Among other things, these “populist” voters now live in a media bubble, getting their news from sources that play to their identity-politics desires, which means that even if you offer them a better deal, they won’t hear about it or believe it if told. For sure many if not most of those who gained health coverage thanks to Obamacare have no idea that’s what happened.
That said, taking the benefits away would probably get their attention, and maybe even open their eyes to the extent to which they are suffering to provide tax cuts to the rich.
In Europe, right-wing parties probably don’t face the same dilemma; they’re preaching herrenvolk social democracy, a welfare state but only for people who look like you. In America, however, Trumpism is faux populism that appeals to white identity but actually serves plutocrats. That fundamental contradiction is now out in the open."
Monday, March 13, 2017
Sunday, February 26, 2017
Friday, February 24, 2017
Thursday, February 23, 2017
Tuesday, February 21, 2017
There are an awful lot of things to really dislike about Donald Trump and his conduct as president to date, but that doesn’t mean everything his administration does is wrong. In particular, there is considerable truth to what he has said about trade costing a large number of good paying manufacturing jobs and hurting the living standards of the middle class.
Unfortunately, rather than acknowledging this point, the media show the same determination as global warming denialists in saying that trade cannot be a problem. We got two examples of this sort of denialism in recent days.
The first was a piece in the Washington Post criticizing Trump adviser Peter Navarro’s view of trade and the trade deficit. While Navarro makes many questionable arguments in pushing his views on trade, his point that the trade deficit can reduce growth and employment is absolutely correct.
Ever since the crash in 2008 the bulk of economics profession has agreed that we faced a situation of “secular stagnation,” where the economy faced a persistent shortfall of demand. In this context, anything that boosts demand, such as an increase in government spending, private consumption, or a reduction in the trade deficit, leads to more output and employment.
In this context, the piece’s comment, taken from Harvard University economics professor N. Gregory Mankiw, “that a smaller trade deficit means lower investment along with possibly higher interest rates and less consumption” is completely wrong. If the economy is operating below full employment, as it certainly has been through most of the period from 2008 then reducing the trade deficit certainly can be a net addition to growth. As Mankiw says, “even a freshman at the end of ec 10 knows that.”
In this context, Navarro’s claim that a lower trade deficit could bring in $1.74 trillion in tax revenue over the course of a decade cannot be so easily dismissed even though the Post tells us:
“Hooey, say economists across the political spectrum.”
The key question here is whether the economy is now at potential GDP and whether it is likely to be over the next decade, even with a trade deficit that is close to 3.0 percent of GDP ($538 billion in the most recent quarter). On this question, the Congressional Budget Office (CBO) might be on the side of Navarro.
According to CBO, potential GDP for the 4th quarter of 2016 was $19,049 billion. This is 1.0 percent higher than the estimate of GDP for the quarter of $18,860.8 billion. This means that if CBO is right, if there had been more demand in the economy, for example due to imports being replaced by domestically produced goods, GDP could have been 1.0 percent higher last quarter.
Of course CBO’s estimates of potential GDP are not especially accurate. Its most recent estimates for potential GDP in 2016 are more than 10 percent below what it had projected for potential GDP in 2016 back in 2008, before the severity of the crash was recognized. It is possible it overstated potential by a huge amount in 2008, but it is also possible it is understating potential today. It also hugely understated potential GDP in the mid-1990s, with 2000 GDP coming in more than 5 percent above the estimate of potential that CBO made in 1996. In other words, it would not be absurd to think that the economy could sustain a level of output that is 2.0 percent above the current level. (The fact that the employment rate of prime age workers [ages 25-54] is still 4.0 percentage points below the 2000 peak is certainly consistent with this view.)
Suppose that GDP were consistently 2.0 percent higher than current projections over the next decade due to a lower trade deficit. This would imply an additional $4.6 trillion in output over this period. If the government captures 30 percent of this in higher taxes and lower spending on transfer programs like unemployment insurance and food stamps, this would imply a reduction in the projected deficit of $1.38 trillion over the decade. That’s not quite the $1.74 trillion projected by Navarro, but close enough to make the derision unwarranted.
In terms of how you get a lower trade deficit, Navarro’s strategy of beating up on China is probably not the best way to go. But there is in fact precedent for the United States negotiating a lower value for the dollar under President Reagan, which had the desired effect of reducing the trade deficit.
There is no obvious reason it could not pursue a similar path today, especially since it is widely claimed in business circles that China actually wants to raise the value of its currency. The U.S. could help it.
The second area of seemingly gratuitous Trump trade bashing comes from a Wall Street Journal news article on the Trump administration’s efforts to correct for re-exports in trade measures. Before getting to the article, it is important to understand what is at issue.
Most of what the United States exports to countries like Mexico, Japan, or elsewhere are goods and services produced in the United States. However, some portion of the goods that we export to these countries consists of items imported from other countries which are just transshipped through the United States.
The classic example would be if we offloaded 100 BMWs on a ship in New York and then 20 were immediately sent up to Canada to be sold there. The way we currently count exports and imports, we would count the 20 BMWs as exports to Canada and also as imports from Germany. These re-exports have zero impact on our aggregate trade balance, but they do exaggerate out exports to Canada and our imports from Germany.
If we wanted better data on bilateral trade flows, then it would be desirable to pull out the re-exports from both our exports to Canada and our imports from Germany. This adjustment would make our trade deficit with Canada appear larger and trade deficit with Germany smaller, but would leave our total trade balance unchanged.
This better measure of trade flows would be useful information to have if we wanted to know what happened to trade with a specific country following a policy change, for example the signing of a trade deal like NAFTA. The inclusion of re-exports in our export data would distort what had happened to actual flows of domestically produced exports and imports for domestic consumption.
The United States International Trade Commission already produces a measure of trade balances that excludes imports that are re-exported. However this measure is still not an accurate measure of bilateral trade balances since it still includes the re-exports on the import side. In the case mentioned above, it would include the BMWs imported from Germany that were immediately sent to Canada, as imports. In principle, we should be able to construct a measure that excludes these items on the import side as well. If this is what the Trump administration is trying to do, then it is asking for a perfectly reasonable adjustment to the data.
This is where we get to the WSJ article. According to the piece, the Trump administration was asking the Commerce Department to produce measures of bilateral trade balances that took out the re-exports on the export side, but left them in on the import side. This would have the effect of artificially inflating our trade deficit with a bogus number. If this is in fact what the Trump administration is trying to do, then we should be shooting at them with all guns. (This is metaphorical folks, I’m not advocating violence.)
However some skepticism might be warranted at this point. No one with a name actually said the Trump administration asked for this bogus measure of trade balances. The sole source listed is “one person familiar with the discussions.”
There was an official statement from the Commerce Department’s Bureau of Economic Analysis (BEA), which collects and compiles the data:
“Any internal discussions about data collection methods are no more than the continuation of a longstanding debate and are part of the bureau’s normal process as we strive to provide the most precise statistics possible.”
I take very seriously efforts to mess with the data. We are fortunate to have independent statistical agencies with dedicated civil servants who take their work very seriously. However we should wait until we have a bit more solid evidence before assuming that the Trump administration is trying to interfere in their independence, as opposed to trying to make a totally legitimate adjustment to the data that the BEA staff would almost certainly agree is an improvement.
Monday, February 20, 2017
It was still a group of hikikomori — a group of primarily young males who spent a lot of the time at the computer, so much so they had retreated into virtual worlds of games, T.V., and now the networks of the internet. This was where most or all of their interaction, social or otherwise took place. The real world, by contrast, above their mothers’ basements, was a place they did not succeed, perhaps a place they did not fundamentally understand.
Sunday, February 19, 2017
Sunday, February 12, 2017
This is the Republican plot to kill the US corporate income tax as we know it by Tim Fernholz
Yet border adjustment—and the consumption tax behind it—deserves consideration because it is what Trump might propose if he were interested in crafting policy not with the aim of offending trade partners, liberals, and the Republican establishment, but rather with the goal of bringing investment back to the US while still conceding the reality of a globalized economy. It also would fit with the world view of his trade advisor Peter Navarro, who is eager to tear down the global supply chains that undergird the success of US multinationals today. And, together with the other big changes under consideration in Congress, it might actually shift more investment toward the US without the negative consequences of punitive tariffs or the ad hoc cronyism of Trump’s twitter bullying.
Tuesday, February 07, 2017
I suspect the politics around trade would be a bit different in the U.S. if the goods-exporting sector had grown in parallel with imports.
That is one key difference between the U.S. and Germany. Manufacturing jobs fell during reunification—and Germany went through a difficult adjustment in the early 2000s. But over the last ten years the number of jobs in Germany’s export sector grew, keeping the number of people employed in manufacturing roughly constant over the last ten years even with rising productivity. Part of the “trade” adjustment was a shift from import-competing to exporting sectors, not just a shift out of the goods producing tradables sector. Of course, not everyone can run a German sized surplus in manufactures—but it seems likely the low U.S. share of manufacturing employment (relative to Germany and Japan) is in part a function of the size and persistence of the U.S. trade deficit in manufactures. (It is also in part a function of the fact that the U.S. no longer needs to trade manufactures for imported energy on any significant scale; the U.S. has more jobs in oil and gas production, for example, than Germany or Japan).
Monday, February 06, 2017
Sunday, February 05, 2017
Saturday, February 04, 2017
The Fight in the Borderlands by Josh Marshall
We hear people constantly saying 'Nothing will change his supporters' minds. They're with him no matter what.' First of all this is enervating defeatism which is demoralizing and loserish. But it also misses the point. It is factually wrong. For the supporters those people have in mind, they're right. They're true believers, authoritarians who are energized by Trump's destructive behavior. But there are not that many of those people. A big chunk of Trump's voters voted for him in spite of their dislike. Those people can be carved away. But Democrats will regain power by winning it in what amount to our 21st century internal American borderlands, not in the big cities or rural areas mainly but in between. So what's happening now to lay that groundwork for 2018?
Friday, February 03, 2017
When, in 1947, Hayek founded the first organisation that would spread the doctrine of neoliberalism – the Mont Pelerin Society – it was supported financially by millionaires and their foundations.
With their help, he began to create what Daniel Stedman Jones describes inMasters of the Universe as “a kind of neoliberal international”: a transatlantic network of academics, businessmen, journalists and activists. The movement’s rich backers funded a series of thinktanks which would refine and promote the ideology. Among them were the American Enterprise Institute, the Heritage Foundation, the Cato Institute, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. They also financed academic positions and departments, particularly at the universities of Chicago and Virginia.