Archive | July, 2011

Mike Konczal Responds to Me and Yglesias (and Yglesias responds yet again)

15 Jul

Mike Konczal, whose blog Rortybomb is must reading on the economic and financial questions we’ve been talking about here, has a thoughtful post on my exchange with Matt Yglesias.  Konczal argues that the left needs to think hard about monetary policy and not assume fiscal policy will take care of all of our concerns.  I’ll be responding, but very curious to hear your thoughts.

Update (11:10 pm)

Prompted by Konzal’s post, Matt Yglesias has yet another response to our exchange. Again, I’ll be writing something about this in the next few days, so all thoughts are welcome.

Matt Yglesias Responds to My Post

14 Jul

Matt Yglesias sent me two emails last night in response to my critique of his proposal that the government should decrease unemployment by increasing inflation targets.

In the first email, he writes:

You’re attributing views to me I don’t hold. I was asked by the Atlantic for one idea, and I didn’t want an idea that would need to go through congress. So I said the Fed should set a higher inflation target (as FDR did: which I think it should. But this is hardly the only thing we can or should be doing. The government should be borrowing money and spending it on public works ( and the federal government should be giving fiscal support to state and local governments so they can avoid destructive layoffs (

I’m writing like a dozen posts a day, so it’s rare that any of them give a full view of the whole range of things that I think are worth doing. You just picked out a couple that I wrote on a specific idea and then assume that’s all I’d be willing to consider.

In his second email, he writes:

If you like a last thought: I do think it’s difficult to think of any single fiscal measure that would have as large an impact. It’s a large and diverse country with a modern economy, we can’t just employ millions of people on chain gangs or what have you. There are a bunch of different medium-sized fiscal measures that would help, but I don’t see any single shot great idea on that front.

Fair enough: it’s true that Yglesias has advocated these other policies.

But the post I was responding to begins with the following sentence: “The best step to create jobs and boost the economy would be for the Federal Reserve’s Open Market Committee to announce a plan to target inflation at 3 or 4 percent.”  I took “the best step” to mean that Yglesias thought increasing inflation targets was not just a step but, well, the best step.

In his second post on the jobs question, Yglesias began thus:

I’m participating in a “Great Jobs Debate” at the Atlantic sponsored by McKinsey. The exercise is supposed to be to answer the question, “What is the single best thing Washington can do to jumpstart job creation?” I perhaps took the question a little too literally and offered the actual single best thing Washington can do to jumpstart job creation, namely adopt a higher inflation target.

Again, I took Yglesias’ words to mean what they say: in this instance, that adopting a higher inflation target was not just something Washington could do but the actual single best thing Washington could do.

Perhaps it was I who took Yglesias too literally.

I’m happy to now concede that increasing inflation targets is just one of many policies Yglesias thinks the government should adopt.  But that still doesn’t answer the concerns I raised yesterday about whether it’s a policy that should be adopted.

The Roosevelt precedent cited by Yglesias in his email is a little misleading: in that situation, the country was experiencing severe deflation, so an uptick in inflation did give the economy a jolt.  That’s not the situation we’re in today.

And, as I said yesterday, two of the reasons Yglesias offers in defense of his proposal—it enables the Fed to circumvent the problem of zero nominal interest rates; it will push capital to start investing, hiring, and procuring—seem to assume that the problem is a lack of cash in the system or in the hands of employers, when the real problem is a lack of cash in the hands of consumers.

Given all that, it struck me as strange that Yglesias would offer this proposal, especially in the context of something billed as the “Great Jobs Debate.”  It was very decent and generous of him to respond to me—the guy does write, with great intelligence, an extraordinary amount of well-informed and well-argued posts, on a dizzying array of topics, prompting an even greater amount of much less well-informed responses from people like me—but I have to say, having re-read his original posts and his responses to me, it still strikes me as strange.

Other People’s Money

13 Jul

Matt YglesiasIn response to the question “What is the single best thing Washington can do to jumpstart job creation?” Matt Yglesias writes, “The best step to create jobs and boost the economy would be for the Federal Reserve’s Open Market Committee to announce a plan to target inflation at 3 or 4 percent.” In a follow-up post, he’s even more emphatic: “The actual single best thing Washington can do to jumpstart job creation” is “adopt a higher inflation target.”

I’m no economist—the worst grade I got in college was in Econ 101; the professor was a newly hired economist by the name of Ben Bernanke—but I would have thought the single best thing the government could do to create jobs (and boost the economy) is, well, create jobs.  You know, hire people, pay them, that sort of thing.

As my friend Doug Henwood, the economics whiz kid journalist of the left, pointed out to me in a Facebook exchange (reproduced here and here), the multiplier effects of a jobs program are far higher than, say, tax cuts (not something, it should be said, that Yglesias advocates):  1.60 to 1.70 in GDP growth for every dollar spent on a jobs program versus under .40 in GDP growth for every dollar lost in extending the Bush tax cuts. That’s because poor and middle-income people spend the money they have (not a lot of room for savings when your wages are so low to begin with), as opposed to the corporations and wealthy who’ve been squirreling it away of late.

And as my friend Gordon Lafer, one of the leading experts on labor politics in the country, pointed out to me in that same exchange, the House Labor Committee estimated it would cost the government less than $150 billion to create 1 million jobs for 2 years. “By comparison,” he adds, “last December’s extension of the Bush tax cuts just for those making over $250,000 is projected to cost $700 billion over 10 years.”

The government hiring people, in other words, is a lot cheaper—and more economically beneficial—than tax cuts or employer tax credits or the stimulus bill.

But if the idea of the government creating jobs seems too retro or radical, how about if the government just stopped firing people? Based on his work with the Labor Committee, Gordon estimates that the government—federal, state, and local—has shed anywhere from 1.5 million to 2 million employees in the last five years (that includes government-funded non-profits doing vital service-sector work like drug rehabilitation, soup kitchens, and so on).  And as the recent jobs report demonstrates, letting government workers go is a major reason for the latest jump in unemployment, a point Yglesias himself has made here and here.

Instead of the government creating or not cutting jobs, Yglesias proposes it increase inflation.  He offers three reasons for his position:

Higher inflation expectations would have a number of benefits. For starters, they would reduce real interest rates, mitigating the problem of the zero lower bound on nominal rates. They would also increase the cost of hoarding cash. This would encourage wealthy individuals and cash-rich firms to purchase real goods and services, or else invest in productive assets. Last, since mortgage debt is denominated in nominal terms, a faster rate of inflation would speed the deleveraging process and let households repair their balance sheet.

The first reason seems to assume the problem is that there is insufficient money out there for employers to hire people or purchase goods and services. Make it cheaper to borrow money, and employers will do so. But isn’t that what the Fed has been doing for a while now? The result, as Doug points out, is corporations (and financial markets) awash in cash, without much movement on employment.

Also, the fact that Yglesias (like so many others) is trying to figure out how to overcome a nominal interest rate that is nearing zero should tell us something about the utility of lowering interest rates in today’s economy.  Seems like a classic, almost literal, case of “keep digging” when you’re in a hole.

As for the second reason, as I asked Doug and he confirmed, if hoarding cash becomes too expensive because of inflation, capital has plenty of other options, including taking its toys elsewhere, to keep its money safe.

What both of these reasons have in common is that instead of putting money into the hands of people who not only need it but would spend it, thereby stimulating demand and more jobs, they keep (or put more) money into the hands of people who already have it and don’t need to spend it in economically beneficial ways. Presumably because they are, in Yglesias’ eyes, the real movers and shakers of the economy, as opposed to the vast majority of middle- and working-class people or the government that represents them.

In a follow-up post, Yglesias says, “America would produce more real goods and services if people were spending more money, and people would spend more money if there was more money around to spend.” To my mind, that sounds like government should hire workers, wages should be increased, etc.  But as Yglesias proceeds to gloss his own comment, it becomes clear that the money being spread around is not going to go into the hands of working people (at least not directly).  Instead, channeling Ryan Avent, Yglesias suggests that the Fed should buy more Treasury bonds—something, Doug points out, the Fed has done twice since in recent years (since 2007, money in circulation has gone up by $1,350 billion), without much effect—and lower interest rates on the cash reserves of banks, thereby prodding them to lend more money.  Share and spread the wealth, in other words, among the wealthy.

If you wanted a purer distillation of the Reaganite temper of our times, you’d be hard pressed to find it in any other notion than this: get more money into the hands of people with money, for they are the truly productive agents in our society, rather than into the hands of the people who might actually spend more money if they had more money to spend.

Again, I’m no economist, so I don’t want to claim a knowledge or expertise I don’t have. I come to this discussion as a political theorist and historian of political ideas.  And what strikes me, in that capacity, is less the wrongness of these arguments than the historically bounded assumptions they reveal.

Yglesias might think, shrewd and sharp man of policy that he is (and, believe me, he’s sharp; one thing Matt Yglesias does not lack is intelligence), that he’s just following the facts.  But the overwhelming fact I see in his  argument is a refusal to consider or inability to imagine any policy lying beyond the perimeters of contemporary opinion.

It’s not our wages that are sticky; it’s our ideas.

A Fistful of Crazy, Starring Jonathan Rauch, in Which Our Hero Argues that Primo Levi was an American Enemy

13 Jul

A Fistful of DollarsThis post from Jonathan Rauch—no, not the one where he complains about the blogosphere spirit of “Roman gladiatorial entertainment”—is just a fistful of crazy. According to Rauch:

If you wanted a simple criterion to demarcate America’s enemies, you could do worse than ask a single question: Is this country, movement, or ideology antisemitic? Since at least the 1930s, the Axis of Evil and the Axis of Antisemitimism [sic] have been basically congruent (imperial Japan and Asian Communism being the major exceptions).

“Simple” is the operative word here.

Let’s start with those exceptions.  Imperial Japan occupied a not insignificant portion of America’s attention during World War II.  “Asian Communism” produced the only wars America fought, officially and semi-officially, between 1945 and 1991.

Moving beyond the exceptions, Italian fascism, the second prong of that original Axis, was not an anti-Semitic movement (Primo Levi, let’s not forget, was initially a Fascist, like many Italian Jews.Primo Levi: America's Enemy?Throughout the Cold War, but particularly after Vietnam, the United States engaged in proxy wars with all manner of non-Asian Communisms and socialisms, especially in Africa and Latin America. None of these were anti-Semitic movements. And of course the United States opposed Bolshevism from the very start, even though in the early years the Reds were far friendlier to Jews than were the Whites, and Eastern European Communism had a much more complicated relationship with anti-Semitism than Rauch seems to realize.

So, on the one side, you have Nazi Germany, some fitful decades in East European history, Iraq (twice), and radical Islamist terrorism (setting aside the question of the relationship between anti-Semitism and anti-Zionism).  On the other side, you have Italy, Japan, Korea, Vietnam, El Salvador, Nicaragua, Guatemala, Chile, Cuba, Argentina, Angola, Namibia, Laos, and more.  And, remember, in some of these cases the US was supporting regimes that were extraordinarily anti-Semitic.  (“Argentina has three main enemies,” declared a spokesperson for the junta.  “Karl Marx, because he tried to destroy the Christian concept of society; Sigmund Freud, because he tried to destroy the Christian concept of the family; and Albert Einstein, because he tried to destroy the Christian concept of time and space.”)

If this post is an example of what Rauch calls his “mild, moderate, think-it-through-and-get-it-right style,” I’ll take the wild, extreme, knee-jerk-and-get-it-wrong style of the blogosphere anyday.

Update (2:45 pm)

On a second read through Rauch’s post, I see it’s even crazier than I initially thought. Rauch argues that that if there is any academic pursuit that has justification for being more (or less) than scholarly—i.e., work that does not meet “the highest standards of academic scholarship” or “exemplify academic rigor,” work that “venture[s] beyond pure scholarship”—it is the study of anti-Semitism. One reason he offers is the claim I discuss above, which is just nonsense. The second reason is even kookier: anti-Semitism is the locus classicus of anti-liberalism. Now, Rauch isn’t wrong that anti-Semitism is anti-liberal (though calling any pre-modern form of anti-Semitism anti-liberal is a bit anachronistic; it’s like complaining that Plato didn’t care about global warming).  But racism and sexism and homophobia are also anti-liberal, and, in the case of racism, of far greater geographic (and thus historical) significance than anti-Semitism. Should students of these social ills—the very disciplines Rauch mocks at the beginning of his post for being intellectually sub-par—be encouraged to dispense with high standards, academic rigor, pure scholarship, and so on? Also, as Yale political scientist Andrew March pointed out to me in a Facebook exchange, Rauch’s notion that anti-Semitism is “the prototype of the intellectual virus, the bad idea that crops up again and again in one ideological context after another, detached from any reality or philosophy” would seem to argue for more rigorous academic study, not less.


12 Jul

A new book about Proudhon sets out to prove his dictum that property is theft by selling for $125.

Things You Get to Do When You’re a Great Writer

12 Jul

If you’re Tolstoy, you get to:

  1. Say that Shakespeare was a dreadful playwright.
  2. Tell Chekhov he’s worse than Shakespeare.

If you’re Chekhov, you get to:

  1. Be told by Tolstoy you’re worse than Shakespeare.
  2. Be Chekhov.

The Financialization of Political Discourse (or more on David Frum)

9 Jul

As a follow-up to my earlier post on David Frum, it occurs to me that I overlooked one additional peculiarity in his use of the word “constituency.”

(Just as a reminder, this is the comment from Frum that sent me into such a tizzy: “[Obama] issued no public call to constituencies like the financial industry to bring pressure to bear on the issue.” I know, I know.  Political theorists can work themselves up over the durndest things.)

Not only does Frum assume the banks are Obama’s constituency. He also assumes the banks are the natural constituency in a debate about the national debt because they are the ones—perhaps the only ones—with an interest in how that debate turns out. It’s as if the debate about the debt is primarily between the bankers and politicos only.

Viewed historically, that’ s somewhat unprecedented. Public debt has traditionally been one of the major political questions of any era. It was a key issue, if memory serves correctly, in 18th century debates in Britain between the Whigs and the Tories (otherwise known as the Court and the Country parties). It was a leading cause of the French Revolution (perhaps all major revolutions?  Isn’t that one of Theda Skocpol’s arguments in States and Social Revolutions?  It’s been a while…), insofar as the French monarchy was veering toward bankruptcy (in part b/c of its support for the American Revolution) and had to convene the Estates General in order to raise revenue.  It was of course a major source of the divide between the Hamiltonians and Jeffersonians, resulting in one of Hamilton’s most brilliant tracts, his First Report on Public Credit.  And as we now know from the debate about the current debt and the 14th Amendment, it was a major concern of the Reconstruction Congress after the Civil War.

That we now assume so easily that it’s the banks who care most about the debt because it is they who have most at stake, again, testifies to the steady financialization of not only our economy but also of our political discourse.

For more on this and related issues, check out this post and the discussion over at the excellent new blog The Current Moment, run by my friend Alex Gourevitch.

All I Really Need to Know I Learned in Freshman English. Or So Says the NYT.

9 Jul

Ever since I read Dwight Macdonald’s essay “Masscult and Midcult”—in Andrew Ross’s excellent undergraduate seminar on intellectuals and popular culture, which formed the basis for his equally excellent book No Respect: Intellectuals and Popular Culture—I’ve known better than to complain about the literary tastes of the mainstream media. But this list (h/t Michael Busch) of what the staff at the New York Times Magazine considers to be “the best fiction of all time” brought me up short.

Dwight Macdonald

It’s not just that the staffers had a lengthy debate as to which was better:  Lolita or The Amazing Adventures of Kavalier & Clay (Nabokov v. Chabon?  Really?)  Nor is it that they were debating which of these two books is the finest novel of all time (ahead, one gathers, of Middlemarch, Anna Karenina, and so on.)

No, what made me wince is the list of books each of the staffers proposed as his or her personal candidate for “the best fiction of all time.”  Nominees included: Catcher in the Rye, To Kill a Mockingbird, Slaughterhouse Five, A Prayer for Owen Meany, The Heart is a Lonely Hunter, The Great Gatsby.

What do these novels have in common (aside from being written in the 20th century)? I read them in high school.  (Except for A Prayer for Owen Meany, which I’ve never read; I have, however, read The World According to Garp.  In high school.) Indeed, the author of the Times piece writes, “Tenth-grade English teachers all over the country can congratulate themselves on a job well done.”  Though judging by the preceding sentence (“The biggest lesson learned from this exercise are that we have some high-falutin’ readers in this office”), I gather he has something else in mind.

These books—again, with the exception of Owen Meany—aren’t masscult or midcult, though there’s plenty of that on the list, starting with Chabon himself, too.  What they are is starter novels for new readers.  Or, as it turns out, favorite novels of terminal readers, who’ll never pick up another good book again.

Contra Macdonald, it seems that the literary taste of the mainstream media is neither highbrow nor lowbrow; it’s just juvenile, a syllabus of arrested development.

David Frum, Regular Pain in the GOP Ass, Writes the Most Honest Sentence In Journalism I’ve Seen

7 Jul

David FrumThis statement from David Frum is one of the more honest sentences in journalism I’ve read in some time. Analyzing Obama’s bungling of the debt crisis—having failed to back the GOP into a corner, Obama is now hoping for a best-case deal in which he gets massive cuts in Democratic programs with not much in the way of tax increases—Frum writes:

[Obama] issued no public call to constituencies like the financial industry to bring pressure to bear on the issue.

Reading along, noting those strong declarative terms—issued, public, call, constituency—you think Frum is going to say something like: Obama “issued no public call to constituencies like the labor movement” or Obama “issued no public call to constituencies like the elderly.” Instead, he slips in that mention of the financial industry, which is not, to put it politely, what we ordinarily think of as a constituency.

Constituency is a weighty political term. With its connections to “constitution,” it evokes the act of founding a new polity and constructing its fundamentals.  Like a constitution, constituents constitute (parties, presidencies, congresses). It also has strong biblical and democratic overtones. Biblical because constituting has a suggestion of creation about it: governments are created; they also create (laws, charters, wars, colonies).  Democratic because it is ultimately only the people—or those who speak in their name—who can truly create something. When the leaders of the French Revolution decided that France should be governed as a republic, not a feudal monarchy, they convened not as three separate estates but as the National Constituent Assembly. It was the people who constituted the government; they were the government’s constituency.

Moving back to Frum territory, it is governments that constitute banks (and corporations), not the other way around. That is why we don’t ordinarily think of banks as a constituency. Indeed, Thomas Macaulay, the 19th century British Whig often cited by tonier conservatives like Frum as a predecessor, admitted in a 1831 letter to his sister that he had tried to attach the word constituency to business interests but that it somehow felt inappropriate: “I happened, in speaking about the Reform Bill, to say that I wished that it had been possible to form a few commercial constituencies, if the word constituency were admissible.” (His aristocratic interlocutor replied that she thought constituency “an odious word.” She got its indelible democratic association.)

Frum, former speechwriter to George W. Bush, is now a regular pain in the GOP ass, poking his erstwhile colleagues on the right to move to the center.  He’s also one of the shrewder observers of the Democratic scene.  I’m not sure if he’s being snide or sincere here, but that artful equation of the financial industry and Obama’s constituency stings. Not just because it’s true, but also because it shows how degraded a political term like “constituency” has become when it is so easily and mellifluously applied to something as undemocratic and unpolitical as a bank.

Update (11:55 am)

Ezra Klein has an excellent chart, comparing the budget deals (specifically, the ratio of spending cuts to tax increases) negotiated by Reagan, Bush I, Clinton, and Obama. Totally confirms what Frum says about how Obama is getting screwed and screwing himself (assuming, of course, that in an ideal world he’d prefer to see a different outcome—an assumption it’s getting increasingly difficult to sustain). As a side note: it’s a sad commentary on the state of the left that increasing taxes is how we count a Democratic win these days.  It just confirms in the public mind that the only thing the Democrats have to offer is more taxes, as opposed to valuable government programs.  For more on this, see my earlier post.

I knew Abe Lincoln, Abe Lincoln was a friend of mine. Mr. President, you’re no Abe Lincoln.

6 Jul

I agree with much of what historian Michael Kazin has to say about Obama here.  But this notion, which we often hear from Obama defenders, puzzles me:

For all his talk about “winning the future”(and his undeniable intellectual gifts), Obama seems to think that solving immediate problems is the key to political victory.

In fairness, the economic collapse has provided a surfeit of crises that must be addressed, and quickly. But, from the Great Depression until the great stagflation of the 1970s, Democrats dominated national politics by balancing crisis management with the building of a multi-ethnic, cross-class coalition tied together both by such programs as Social Security, the National Labor Relations Act, and Medicare, and by expressing a generous ideology and moral perspective Roosevelt in 1941 called “the Four Freedoms”—freedom of speech, freedom of worship, freedom from want, and freedom from fear.

My impression of American history was that those presidents universally considered great—Washington, Lincoln, Roosevelt—were beset by crises: the founding of a new nation, the Civil War, the Depression, World War II. And far from “balancing crisis management” with their pursuit of long-term goals, the great presidents saw, or found, in those crises an opportunity for reconstructing American politics from the bottom up. It was the crises, in other words, or at least how they handled those crises, that enabled them to pursue their long-term goals.

That at any rate was the final judgment Teddy Roosevelt rendered on his own presidency: that he would never be remembered as another Lincoln because he didn’t have the benefit of confronting catastrophe.  Or so I remember reading somewhere, perhaps here.

Whatever one thinks about Obama, it really makes no sense to say that he can’t be all that his supporters want him to be because of the Great Recession, two (now three) wars in Arab and Muslim world, a recalcitrant opposition, and so on. Other presidents would have killed for opportunities like these.


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