A “bear market” is a declining stock market in which stocks have declined 20% or more. NASDAQ is technically in a bear market; neither the S&P 500 nor the Dow-Jones Industrial Average are in that territory. So, technically, what’s going on right now is a correction.

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What Actually Happened During the Clinton Administration?

In his Wall Street Journal column William A. Galston leaps to the defense of neoliberalism and the Clinton Administration of which he was a part:

In this narrative of the past half-century, critics often mark the Clinton administration as the moment when establishment Democrats capitulated to the ideology of the unfettered market. Poor and working-class Americans paid the price, they charge, with lower pay, diminished job security, and the collapse of entire sectors exposed to trade competition.

The historical record tells a different story.

Begin with the economic aggregates. During eight years of the Clinton administration, annual real growth in gross domestic product averaged a robust 3.8% while inflation was restrained, averaging 2.6%. Payrolls increased by 22.9 million—nearly 239,000 a month, the fastest on record for a two-term presidency. (Monthly job growth during the Reagan administration averaged 168,000.) Unemployment fell from 7.3% in January 1993 to 3.8% in April 2000 before rising slightly to 4.2% at the end of President Clinton’s second term. Adjusted for inflation, real median household income rose by 13.9%.

Mr. Clinton inherited a substantial budget deficit. Despite this, one group of administration officials, headed by Labor Secretary Robert Reich, urged him to propose a major stimulus package to accelerate economic growth and reduce unemployment more quickly. He refused, focusing instead on reducing inflation and interest rates to create the conditions for long-term growth. (I worked in the White House at the time but had no role in economic policy.) During the administration, federal spending as a share of GDP fell from 21.2% to 17.5%, and federal debt as a share of GDP fell from 61.4% to 54.9%.

He goes on to defend NAFTA, applaud gains made by the poor, minorities in particular, and reduced income inequality. He concludes:

In sum, during the heyday of neoliberalism, Americans weren’t forced to choose between high growth and low inflation or between aggregate growth and fairness for the poor, working class and minorities. This helps explain why Mr. Clinton’s job approval stood at 65% when he left office.

We can’t go back to the 1990s, but there are lessons from the past. Deregulation can go too far, but so can regulation. The market doesn’t automatically produce acceptable results for society, but neither does government. In these and other respects, policy makers need to find a reasonable balance, the location of which depends on ever-changing circumstances. No algorithm can substitute for good judgment guided by study and common sense.

In our effort to respond to the pandemic generously and humanely, we lost our balance. We have learned the hard way that demand doesn’t automatically create its own supply and that bad things happen when too much money chases too few goods. As we struggle to regain equilibrium, the critics of neoliberalism have much to learn from an administration whose economic performance will be hard to beat.

There are multiple different sorts of leaders. There are autocrats who just tell people what to do. There are visionaries who set out a vision and convince people to follow them. And then there are leaders who figure out which way the band is marching and get out in front it. I think that Bill Clinton was that sort of leader.

By the time Bill Clinton became president American companies had been investing in computing and network technology at a furious pace for almost ten years. Why? They were convinced it would pay off eventually. During that period I remember reading many articles that documented how poor the return on those investments had been. There’s a comment (Heinlein?) that when it’s time to railroad everybody railroads. That was what was happening.

While those investments may not have produced much in the way of returns in the 1980s or early 1990s it left the companies that made those investments well positioned to take advantage of the Internet as that went mainstream. A major step in that direction happened when Microsoft, in a panic, did a major course correction and started bundling Internet Explorer with Windows 95. That was in the third quarter of 1995. After that the returns began to pour in and the “dot com boom” was born. Bill Clinton didn’t create that development. He didn’t even help it along. He did benefit from it.

There are a couple of other developments Mr. Galston does not mention. For example, it was the tax reforms of early in Bill Clinton’s first term which made the enormous income increases of the very highest earners possible. And the Clinton Administration were the champions of granting China Most Favored Nation trading status and WTO membership which the Bush Administration pulled pulled across the finish line. That was what produced the enormous manufacturing job losses of early in the Bush Administration. I also note that Mr. Galston does not mention the work requirements of what is called “welfare reform”. That is a primary criticism of today’s progressives.

So, while I will give Bill Clinton credit for not getting in the way of the Internet Revolution and the “dot com boom”, I think the credit should largely be limited to that. That’s pretty faint praise.


Bigotry, Inequity, and Antiracism

In an op-ed in the New York Times and in the aftermath of the murders in Buffalo, John McWhorter defends himself against the charge that he’s living in a fantasy world. Here’s the meat of the op-ed:

I’d like to clarify, at a juncture like this, why I take issue with most strains of what is today called antiracism, despite the reality of racist violence.

The key difference is between outright bigotry and the more abstract operations of what we call “systemic racism.” Yes, there is a synergy between the two. But as the difficulty in our conversations about racism attests, there is a wide gulf between personal prejudice (Racism 1.0) and the societal and sociohistorical operations that render Black physicists, for example, rare relative to Black people’s proportion of the population — Racism 2.0, sometimes even termed “white supremacy.” In an alternate universe, those two things might not go under the same name.

On Racism 1.0, the lamentable thing is that I see no reason it will ever completely vanish, at least not in our lifetimes. Studies have revealed that a degree of fear and distrust of “the other” exists in our species, for better or worse. Call it conservative of me, but I see little point in hoping that human nature will entirely change. Educated Westerners, especially, have already acquired a more robust habit of self-monitoring for racism than perhaps any humans in history. In our country, this habit noticeably gained traction in the 1960s. Some argue that white Americans need to go further, plumbing more deeply for subtle racist assumptions in their hearts. I understand the desire for it but wonder just how realistic that expectation is at this point.

I assume, with regret, that there will always be racists among us. As long as our gun laws make it easy to obtain assault-style weapons, there will be people, some mentally imbalanced and some just plain evil, who decide to commit mass shootings. There is no reason the hatred in people like this will mysteriously step around racism; the question would be why such people would not often be motivated by it. We live with this horror.

However, there isn’t enough of a nexus between this grim reality and disparities between Black people and white people — in, for example, wealth and educational opportunity — to gracefully put both under the general heading of “racism.” That is, we increasingly apply the term in reference both to violent hate crimes and to the fact that, for example, in the aggregate, Black students don’t perform as well on standardized tests as some of their counterparts. But while we tend to use the term “racism” for both things, it isn’t readily obvious to most how both prejudice and a differential in performance are versions of the same thing, referred to with one word. One of the thorniest aspects of today’s race debate is that we have come to apply that word to a spread of phenomena so vast as to potentially confuse even the best-intended of people.

I’m materially in agreement with that. I also think there’s presently a lot of overgeneralization going on. There’s a lot of white people who have much the same problems as black people do. It’s not simply whiteness that conveys privilege but location, money, class, status, contacts, and a host of other factors. Plus I wonder how much of “systemic racism” is just another way of saying “in an identifiable minority”?

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A Plague On Both Green and Brown Houses

In his New York Times column Tom Friedman is sour on both environmental activists and oil companies. His complaint about environmental activists is that they’re underestimating the difficulty of changing from fossil fuels to solar and wind power and overestimating the significance of cost per kilowatt-hour. His complaint about the oil companies is their insistence on increasing the production of oil. Here’s his summation:

Well, they’re both wrong, and accepting the repetition of either of these tired shibboleths is hurting us economically, environmentally and geopolitically — especially, of late, geopolitically.

Because our continued addiction to fossil fuels is bolstering Vladimir Putin’s petrodictatorship and creating a situation where we in the West are — yes, say it with me now — funding both sides of the war. We fund our military aid to Ukraine with our tax dollars and some of America’s allies fund Putin’s military with purchases of his oil and gas exports.

And if that’s not the definition of insanity, then I don’t know what is.

Have no illusion — these sins of the green movement and the oil industry are not equal. The greens are trying to fix a real, planet-threatening problem, even if their ambition exceeds their grasp. The oil and coal companies know that what they are doing is incompatible with a stable, healthy environment. Yes, they are right that without them there would be no global economy today. But unless they use their immense engineering talents to become energy companies, not just fossil fuel companies, there will be no livable economy tomorrow.

Let’s look at both. For too long, too many in the green movement have treated the necessary and urgent shift we need to make from fossil fuels to renewable energy as though it were like flipping a switch — just get off oil, get off gasoline, get off coal and get off nuclear — and do it NOW, without having put in place the kind of transition mechanisms, clean energy sources and market incentives required to make such a massive shift in our energy system.

and here’s his primary criticism of the “green movement”:

If you can’t install the transmission lines — to get that sun and wind power from the vast open spaces where it is generated to the big urban areas where it is needed — and if you cannot set aside more land to install the scale of solar and wind farms you need to replace coal, gas or nuclear, it doesn’t matter that your renewables are cheaper on a per-kilowatt-hour basis.

And today transmission is a huge problem in the U.S. and Europe, where many people don’t want wind farms, solar fields, electricity lines — or natural gas pipelines — in their backyard.

He misses the importance of baseline power. And he makes an error common to notional environmentalists, confusing subsidies including export subsidies with lower prices.

If we genuinely wanted to reduce the use of fossil fuels in transportation we’d stop subsidizing new highway construction and do a lot more additive manufacturing rather than importing inexpensive manufactured goods from far away. There’s still no such thing as a green container ship.


Apologia Pro Consilium Suum

“Apologetics” means the organized justification of something, typically religious doctrine. An “apologia” is a formal written defense. At Andrew Prokop offers what appears to be an apologia for the Biden Administration’s signature bill, the American Rescue Plan. He confesses that it did, indeed, increase inflation beyond what it otherwise would have been:

Countries around the world are struggling with inflation due to pandemic disruptions, but the Biden stimulus made the US’s inflation problem more severe, to at least some extent. “I think we can say with certainty that we would have less inflation and fewer problems that we need to solve right now if the American Rescue Plan had been optimally sized,” said Wendy Edelberg, a senior fellow in economic studies at the Brookings Institution.

Maybe I’m missing something but to my eye a shortened version of his argument would be:

  • Inflation in the U. S. is higher than in any other developed economy.
  • Core inflation in the U. S. is higher than in any other developed economy.
  • Not all of the effects of the ARP were bad: GDP and employment have recovered well.
  • The Biden Administration had good intentions.

but he offers no alternative explanation for why inflation if worse here than in other OECD countries. Blaming supply chain disruption, as the Administration does, is facile for reasons I make clear later in this post.

I also wanted to call out this passage:

Giving money to people who don’t need it isn’t necessarily a bad thing in and of itself.

I wish he had expanded on that sentence a little more since I disagree with it categorically. I think it reflects a view of government completely different from mine. In what view of economy and government is “giving money to people who don’t need it” a good thing?

I also think there is a fact he omits completely. The U. S. has a higher trade deficit as a percentage of GDP than any other developed economy. Not just higher than the China, the UK, Germany, and France. Higher than Russia. Higher than Mexico. Higher than Canada, New Zealand, or Australia. We’re not in the same fix as economic basket cases like Somalia but we’re about in the same situation as the poor countries of Africa and South America.

That has serious implications. We are more vulnerable to global supply chain disruptions than any other developed economy. Consequently, increasing demand as the ARP demonstrably did inherently raises prices more than it will in any other developed economy.

It is said that the Roman orator Cato the Censor concluded all his speeches with Carthago delenda est (Carthage must be destroyed). Maybe I should start ending all of my posts with Increase. Domestic. Production.


The Ordinary Weekend Massacre

The editors of the Wall Street Journal make an observation very similar to the one I made:

The shooting in Buffalo on Saturday has horrified Americans, but it was massacre as usual in Chicago this weekend and few outside the Windy City noticed.

At least 33 people were shot, five fatally, according to police. Five of the victims were in the 1st police district, which covers the downtown Loop and Near South Side. The city’s daily mayhem isn’t limited to high-crime neighborhoods but has spread to busy commercial areas. Shootings in the 1st district are up 60% over last year.

Sixteen-year-old Seandell Holliday was shot in the chest and killed in downtown Millennium Park. He’s the 97th child shot and 20th slain this year. The previous weekend 24 people were shot, six fatally.

Sunday was the first day in three weeks without a homicide. The balance of the editorial is devoted to an analysis of Mayor Lightfoot and the City Council’s strategy for restoring peace to downtown Chicago.

Missing from their analysis is a reality: Chicago has more police officers relative to its population than either New York or Los Angeles. Frankly, I’m skeptical that more police officers even more better-trained police officers will do much about the situation in Chicago. What will they do when flash mobs consisting of a couple of hundred teenagers suddenly appear downtown? My guess: nothing. There is clearly a pathology at work far beyond the capacity of the Chicago Police Department.


The Fog of War

The editors of the Washington Post declaim that a Ukrainian victory is imminent in Ukraine:

In the face of stiff Ukrainian resistance — bolstered by timely and massive shipments of Western arms — Russia has retreated from Kharkiv, the second-largest city in Ukraine, reportedly, in some areas, all the way back to the international border Mr. Putin sought to erase. Russia has “likely abandoned the objective of completing a large-scale encirclement of Ukrainian units” in eastern Ukraine, the Washington-based Institute for the Study of War reported Sunday. It now appears to be aiming to take, at most, the entirety of a single Ukrainian region, Luhansk.

And even that might be beyond the capability of Russia’s depleted, poorly led forces. Quite the contrary: The more likely next game changer in this war would be a widening Ukrainian counteroffensive that brought still more of the Russian-held south and east of Ukraine back under the control of its legitimate government. Certainly that is the result that would do the most to compound the strategic defeat of Mr. Putin, and that Ukraine’s supporters in the United States, Europe and elsewhere should therefore be pursuing in unison.

Now is not the time, therefore, to go for a negotiated cease-fire between Ukraine and Russia, as France, Germany and Italy have proposed in recent days. Their desire to shorten this destructive war — and thus limit the damage both to Ukraine and to their own hard-pressed economies — is understandable. Their promises not to impose terms on Kyiv are undoubtedly well intentioned. Still, the risks of relaxing the pressure on Mr. Putin before he is thoroughly beaten, and maybe not even then, are too high.

Meanwhile at 1945 Daniel Davis provides a more sobering assessment:

If Kyiv has hopes of eventually winning the war, it will need to make some significant changes in its approach to the fighting in the near term. It will also need to develop a new plan for the longer term. Kyiv must continue to hold in the Donbas while simultaneously starting the process of building an offensive force with the capacity to push Russian troops from its soil.

As I have written many times in these pages – both before the war started and since it began – I assess the most logical course of action for Kyiv is to make the best deal it can with Moscow and end the war through negotiations. That is the best way to stop the fighting, end the killing of thousands of Ukrainian citizens, and halt the destruction of still more Ukrainian cities.

Yes, that would result in the likely loss of the Donbas, but it would prevent tens or perhaps hundreds of thousands more Ukrainians from being killed, allowing the rebuilding of the country to begin. Negotiations would prevent Putin from escalating the war, thus precluding an even worse outcome for Kyiv later.

But as both Ukrainian President Volodymyr Zelenskyy and his foreign minister, Dmytro Kuleba, said following the May 9 Victory Day commemorations, many Ukrainians would rather continue fighting. No matter how long it takes or how much risk they incur, Ukraine would like to win back all of the territory Russia has occupied.

Attempting to retake all lost territory by force of arms will certainly impose a high cost on Ukraine, and there is no guarantee of eventual success. If the people of Ukraine decide they are willing to take on this burden, however, there is a path to ultimate victory.

which he follows with a rather detailed prescription of the steps that the Ukrainian forces should take.


Democrats’ Prospects for November

You could do worse than heeding Kyle Kondik’s advice about the 2022 midterms at Larry Sabato’s Crystal Ball:

Under the new lines and as reflected in Table 5, there are 153 districts where Biden got more than 55% of the vote. We can say with some confidence that Democrats will get an additional 2 such seats from Missouri and a dozen or more from New York. For the sake of argument, let’s say 15 Biden 55%+ seats in New York, one fewer than now.

That’s 170 Democratic seats where Republicans will have a hard time competing, although they may be able to put a few truly in play: We do list a handful of seats Biden won with more than 55% of the vote as Likely Democratic in our ratings.

That leaves 48 seats in Table 5 where Biden got 55% or less. Again, just in the interest of trying to paint a more complete picture here, let’s assume that 4 current Democratic seats in New York end up below that mark as well as both seats in New Hampshire. That would be 54 seats within the truly vulnerable range for Democrats. Meanwhile, Democrats may be able to put a few of the Democratic-leaning Republican seats in play. Even in wave years, the party on the wrong side of the wave usually wins at least one seat held by the other party (2006 is a rare exception).

The 13 Democratic-held districts where Biden won less than 50% could very well all flip in this election, or at the very least we should expect many of them to based on the recent midterm history described above and assuming a good Republican environment. Four of these are redrawn seats in Georgia, Florida, and Tennessee that were designed by Republicans to flip and are virtually guaranteed to (Democratic incumbents are not defending them).

Beyond that, history suggests that Republicans should be able to take a considerable bite out of the Democratic tally in the districts Biden won 50%-55% of the vote. How big a bite is the main House question for 2022.

In summary Republicans are likely to gain 13 seats but may pick up as many as 54 seats. The lower figure means Republicans gain a majority in the House. The larger figure would be a bloodbath for the Democrats.


Scylla and Charybdis

In ancient Greek myth, Scylla and Charybdis were two sea monsters that inhabited the Straits of Messina between Sicily and the Italian mainland. The phrase “between Scylla and Charybdis” means being caught between two unpleasant alternatives. Defense policy expert Benjamin Friedman’s advice in his piece at UnHerd presents two alternatives, each of which is undoubtedly unacceptable to Western countries:

U.S. and European leaders repeat the talking point that the terms and timing of peace should be up to Ukraine. Western support should be automatic and unquestioning, they imply. But there are both strategic and humanitarian reasons why this is the wrong approach.

First, trying to weaken Russia is probably counterproductive, past a point, to NATO countries’ security. Russia has dashed itself on the rocks in Ukraine, losing a chunk of its fighting force, degrading its military morale, and demonstrating shocking military deficiencies. This weakness makes it quite unlikely to invade another country soon. Maybe some further humbling could help, but Russia is not going to disappear as an energy exporter that can fund a substantial military force and large nuclear arsenal. Endless sanctions and continual proxy wars will create a resentful garrison state, with more revanchist nationalism and desire for payback.

Second, encouraging Ukraine to hold out for a full victory may be bad for the country itself. Of course, Ukraine should be best positioned to judge what’s best for it. But, on the other hand, Ukraine’s political situation may make it impossible for any Ukrainian leader to accept the limits of what war can achieve. And what Ukrainians want depends in some sense on what their sponsors will bankroll.

Pre-invasion Ukraine is instructive. Since 2014, when Russia seized Crimea and stoked insurgency in Donbas, Ukraine’s perilous circumstances suggested a compromise with Russia, by accepting neutrality, giving up on Crimea, and implementing Minsk II, which effectively meant allowing rebel areas autonomy. This was never a great deal for Ukraine, except compared to the alternatives: being endlessly menaced or invaded.

After this deal, the U.S. went on about “ironclad support” and held out the prospect of NATO membership. This was gross negligence, not just because Ukraine’s prospective NATO membership was at once a chimera and provocative to Russia, but because it tempted Kyiv’s belief that western support would prevent the need for painful compromise.

I presume that the Western preference would be for Putin just to go away. Or for Russia just to go away. I doubt that either of those are realistic prospects.

The larger question is whether ceding Western foreign and defense policy to Ukraine is prudent either for the countries of the West or for Ukraine?


Why They Kill

In an op-ed in the Washington Post criminologists James Densley and Jillian Peterson throw some shade on the hate hypothesis for identifying the motives of mass killers:

Our research shows that mass shooters walk a common route to violence through early childhood trauma. If they fail to achieve what they’ve been socialized to believe is their destiny — material wealth, success, power, happiness — as they age, they reach an existential crisis point.

When they no longer feel connected to the people and places around them, this becomes a suicidal crisis — except the thought of merely taking their own lives leaves them unfulfilled. As the sister of one perpetrator told us, her brother went from asking, “What’s wrong with me?” to asking, “What’s wrong with them?”

Hate comes late along this pathway. Searching for answers, angry men comb through the words and deeds of other angry men who came before, including past mass shooters. In the darkest corners of the Internet, they eventually find someone or something else to blame for their despair.

Unlike many of those who identify problems they have some prescriptions:

There are many strategies to preempt mass shootings, none perfect on their own. These include improving access to mental health care and crisis support at schools and workplaces, expanding suicide prevention programs, holding media and social media companies accountable for hateful rhetoric on their platforms, and limiting access to firearms for high-risk individuals.

which are okay as far as they go I suppose but I think that we would find that all of those are much more difficult and of more limited effect than they may suppose.

Their diagnosis rings pretty true to me and I think it should be noted that the sense of entitlement to which they point is not limited to white supremacists but is common to white supremacists, black nationalists, and Muslim fundamentalist extremists, albeit for somewhat different reasons. Perhaps we should think a bit more critically about the factors. Has a generation of the cult of unearned self-esteem supported a fertile environment for developing such monsters? What role does isolation play? How much do social media cultivate that isolation? How about family structure and dynamics? Too much/too little/the wrong sort of parental attention?