Raining on the Parade

In an op-ed in the Wall Street Journal John F. Cogan and John B. Taylor throw some rain on the parade of those who support $2,000 relief checks:

Since the mid-1970s, one-time cash payments to individuals to stimulate economic growth have been tried on at least five separate occasions. Presidents Gerald Ford and Jimmy Carter promised that their stimulus checks would restore economic growth by inducing higher consumption. Yet in both instances the payments failed to deliver the promised results. Their impact on economic output was at best negligible and only temporary.

More recent attempts by Presidents George W. Bush and Barack Obama were similar flops. The one-time cash payments under Mr. Bush in early 2008 had no discernible impact on the economy. Having seemingly learned nothing from this experience, Mr. Obama proposed the same remedy in 2009 as part of a larger economic stimulus plan. His temporary and targeted cash assistance had, if anything, only a negligible near-term impact. Over the longer run, the economy experienced a remarkably anemic recovery.

These failures are consistent with the permanent-income and life-cycle theories of individual consumption behavior. Both theories suggest that individuals’ consumption is determined primarily by their income over the long term. Hence, a one-time cash assistance grant doesn’t boost consumption. As we wrote on these pages about such programs in 2010, theory and evidence shows that “they did not work then and they are not working now.”

Although data are still coming in on the effects of the one-time cash payments authorized by last March’s Cares Act, so far the pattern is the same. Using a large-scale survey of its effects, a National Bureau of Economic Research study by Olivier Coibion, Yuriy Gorodnichenko and Michael Weber found that “most respondents report that they primarily saved or paid down debts with their transfers, with only about 15 percent reporting that they mostly spent it.” Thus the payments have done little to boost the economy.

As I’ve been saying these aren’t “stimulus checks” because they don’t stimulate. Temporary grants paid to state and local governments for the same purpose have the same defect—they don’t stimulate spending.

If the primary motivation is humanitarian, spending should be focused on those business and individuals that have experienced hardships due to the state and local government imposed lockdowns. Broadbrush one-time handouts are mostly political gimmicks rather than based on humanitarian or economics grounds.

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Which Is the Problem?

In an op-ed in the Washington Post former Congressional representative Donna F. Edwards has an op-ed about her experiences travelling through Red States alone in an RV. Here is an example of the horrors she endured during her 4 month adventure:

On Inauguration Eve 2017, I set up at Gulf Islands National Seashore near Pensacola, Fla. But I didn’t quite have the hang of backing up Lucille yet — an essential skill. Out of nowhere, two older White men appeared to direct me into my spot, and they gave me helpful advice: “Set a chair at the back of the drive and use that as your rearview focus in your side mirrors.” My guides, a retired union electrician from southern Illinois and a small-business owner from rural Alabama, and I became friends for a couple of days.

On Inauguration Day, I heard televisions inside and out broadcasting the festivities. There was an air of celebration in the campground when I took my morning stroll before the swearing-in. It was one that I did not feel as I watched the “American carnage” speech in my own “home.”

That evening, my neighbors and I shared a beer around a glowing firepit. We talked about our travels, as well as the events of the day. They were excited about the new president, and they wanted to talk politics. It was clear they believed Trump was the answer to their concerns about immigration, job loss to China and a range of other grievances.

We went back and forth, in the way that friends do — friendly, teasing, laughing. At one point the electrician began sharing a story about an experience with his union — more new members and fewer jobs. But then he slipped as he described the new union members, the “colored” ones. I didn’t bat an eye in the momentary awkwardness, while he quickly corrected himself.

But there it was — the heart of the Trump thing.

Race.

Even as we shared pictures of our children and grandchildren (one with a Black grandchild, the other with a Latino grandchild) and talked about their dreams, they did not seem to perceive the irony. We all complained about health-care costs, me with my multiple sclerosis and them with high blood pressure, cancer remission and a wife with Parkinson’s disease. Still, there was no recognition of our shared interests.

That’s her sole example. Perhaps she experienced worse.

I guess this is a “glass half empty” sort of thing. I read her anecdote as a sign of the enormous and remarkably rapid progress that we have made on race over the past 50 years. But it’s certainly true that if you look for racism you are sure to find it. I wonder if she think that things would have been materially different if her travels had been in New York or Massachusetts rather than Florida and Texas.

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Krugman’s Economic Advice for the Incoming Administration

In his latest New York Times column Paul Krugman offers his advice to the incoming Biden Administration. In brief it amounts to spend as much as you want on anything you want and be prepared to ram it through the Congress using reconciliation:

Putting all of this together, the message is “damn the torpedoes, full speed ahead.” Neither defunct ideology, nor bogus economic concerns, nor the vain hope of comity should be allowed to stand in the way of delivering the policies America needs.

His advice actually consists of four points:

Rule #1: Don’t doubt the power of government to help.

This first point is one on which I’m in partial agreement with Dr. Krugman. It’s the reason I’m a Democrat. Yes, government can help. Not just the federal government but state and local governments as well and it’s darned helpful if they’re all rowing in the same direction. Where I differ from Dr. Krugman and many Democrats is that don’t believe that everything that the federal government does is de facto helpful. It may be helpful, counter-productive, or not do much at all other than pay bureaucrats and political cronies. And beware of unforeseen secondary effects! You can’t just enact a law and trust the bureaucrats to do the right thing.

Rule #2: Don’t obsess about debt.

On this point I’m in partial agreement as well. Don’t obsess about it. But don’t dismiss it or ignore it, either. Going into debt is reasonable for long-term investments but not for consumption. An updated sewer system or electrical grid is a valid long-term investment. A “bridge to nowhere” isn’t. You can torture the meaning of investment to include things like healthcare spending and spending on higher education but beware! Paying operating expenses or for consumption with debt is a losing proposition even for the federal government.

Rule #3: Don’t worry about inflation.

I don’t agree with him on this one or at best I think his explanation is a part-truth. Consumer inflation has been low for many things for the last decade. But asset prices have soared. When Barack Obama took office the DJIA was around 8,000. Now it’s around 31,000. I don’t think there’s any credible explanation for that other than asset inflation.

The prices of some services have risen sharply, too, education and healthcare in particular. So, for example, healthcare spending per person has increased more than 40% 2009 to 2019. You can rationalize that in all sorts of ways but I think that we need to acknowledge that inflation is one of the causes.

Rule #4: Don’t count on Republicans to help govern.

This, too, is at best a part-truth. His explanation:

The original sin of Obama economic policy was the underpowered stimulus of 2009. The American Recovery and Reinvestment Act helped stabilize the economy, but it was much too small given the depths of the crisis. This isn’t hindsight; some of us were very publicly tearing our hair out in real time.

One reason the plan was too small was that Obama was trying to gain bipartisan support, rather than using reconciliation to push it through with Democratic votes (which is how Republicans passed the 2017 tax cut).

I can and have produced copious evidence from December through January of 2008-2009 of President-Elect Obama and his chief economic advisors saying unequivocally that the amount they were seeking was exactly the right amount. Not too hot, not too cold, just right. If they were wrong, it was not simply because they were trying to secure bipartisan support. They were equally trying to appease members of their own caucus. As H. L. Mencken to every problem there is a well-known solution to every human problem—neat, plausible, and wrong. For the first several years of Obama’s first term the Democratic-led Congress was passing things in reconciliation. If you don’t want reconciliation to be abused, don’t abuse reconciliation yourself.

I also wonder how Dr. Krugman explains the uncomfortable truth that the Great Recession was over before a dollar of the money appropriated under the ARRA was disbursed?

In summary I think that Dr. Krugman’s column shows us the contours of what unifying the country may look like. Fasten your seat belts, we’re in for a bumpy ride.

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Searching for Moral Clarity

As is frequently the case I both agree and disagree with Nikolas Kristof’s latest New York Times column. In the column he makes a plea, I presume to Democrats, to use President Trump’s second impeachment as a opportunity to “invoke moral clarity”:

Invoke “moral clarity.” We instinctively reach for the military toolbox when we’re attacked, but it’s also important to fight a war of ideas and delegitimize certain behaviors and speech. To me, that’s why it’s crucial that impeachment be a teachable moment.

Pursuit of moral clarity always leads to flurries of whataboutism and bothsidesism, and there are usually elements of truth to such objections. But we can accept that the world is nuanced and inconsistent without giving up a moral compass to navigate it.

It is unclear to me how Democrats can “invoke moral clarity” when the Democratic leadership is neither moral nor clear. Quite to the contrary I find them ruthlessly and predictably pragmatic and remarkably ambiguous.

It is not merely “whataboutism” when you impeach a president for speech that stopped short of advocating violence while you engage in precisely the same sort of speech yourself. It is cognitive dissonance. Using “fight” in a political context is completely normal political speech—it’s among the first words on the Democrats’ own home page.

But, as I’ve said before, context matters. When angry people are demonstrating on the steps of the Capitol, urging them to fight is reckless and inflammatory. And, as I have been counseling for months, we need to dial back on the rhetoric and that doesn’t just pertain to Republicans.

He goes on to advocate deplatforming of those advocating “rightwing terrorism” and stripping advertising from media outlets who support them as well as “disarming terrorists”. IMO there are serious risks actually involved. Is a media outlet that covers those of whom Mr. Kristof disapproves but does not endorse them guilty of something? Is just shooting off your mouth enough to trigger the actions Mr. Kristof advocates or are some actual acts required?

More broadly when does politics as usual become terrorism? Is advocacy of ideas, even ideas that are demonstrably false, sufficient? What about ideas that aren’t demonstrably false but would be better characterized as “unproven allegations”?

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One Month In


Today marks the end of one month of vaccinating Americans against SARS-CoV-2. Here’s a report by Madeline Buckley and Joe Mahr from the Chicago Tribune on the State of Illinois’s progress to date:

Though COVID-19 vaccines could be available soon for essential workers and older people throughout the state, most county health departments in the Chicago area are still working to vaccinate those included in the initial phase — health care workers, and those working and residing in long-term care facilities.

Data released on Tuesday shows that roughly 1 in 45 Illinoisans has gotten at least the first shot of a vaccine, with wide variations across the state.

The new batch of data — the state’s first broad release of COVID-19 vaccination numbers since vaccinations began about four weeks ago — comes a day after Illinois Gov. J.B. Pritzker said county health departments can begin vaccinating people in phase 1b if they have already run through people in the initial phase who want the inoculation, so as not to leave doses sitting on the shelf. The state as a whole remains in phase 1a.

The data comes as Illinois grapples with how best to roll out the vaccine, including when and where to expand vaccinations to senior citizens and front-line essential workers. The state’s 1b phase includes people 65 and older, and workers such as first responders, teachers, grocery store workers and public transit workers.

The graphic at the top of this post is from the Illinois Department of Public Health. The two dips in vaccinations you see in the trend line represent Christmas and New Years. If that trend holds I would say it actually looks pretty favorable but at this point it’s really to early to tell. The accompanying heatmap illustrates how far we have to go.

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What’s Next?

Yesterday Donald Trump gained the unwanted distinction of being the first American president to be impeached twice. Bill Chappell reports at NPR:

The House of Representatives voted Wednesday to impeach President Trump for “high crimes and misdemeanors” — specifically, for inciting an insurrection against the federal government at the U.S. Capitol.

Just one week before he will leave office, Trump has now become the first U.S. president to be impeached twice.

Wednesday’s vote came a week after Trump supporters stormed the Capitol in a chaotic scene that left five people dead.

Ten Republicans broke party ranks to vote in favor of impeachment, including Rep. Liz Cheney of Wyoming, who chairs the House Republican Conference.

To the best of my ability to determine the House has not yet conveyed that conviction to the Senate where it would be tried.

I don’t believe that President Trump’s statements meet the legal definition of inciting a riot in the federal code. But context matters and in context Mr. Trump’s remarks were reckless, inflammatory, and contributed to the breaching of the Capitol by rioters. Under the circumstances in my opinion the House was correct in impeaching him.

My present understanding of Republican politics is extremely fuzzy. I just don’t get it. The materially party line vote in the House signals that very few House Republicans thought that the president’s remarks rose to the level of impeachment. I haven’t done a review of those who voted to impeach. I can’t interpret the votes either way.

Now the questions are

  1. Will the House convey the article of impeachment to the Senate?
  2. What will happen in the Senate?

As I read the calendar the first day on which a Senate trial could begin would be Inauguration Day. That seems excessively inflammatory to me as well. Will they bother? Will they engage in a symbolic trial? Will they try and convict? Will they take some other action?

I genuinely have no idea.

Update
Here’s Ben Shapiro’s explanation, reproduced at Politico of House Republican thinking:

Opposition to impeachment comes from a deep and abiding conservative belief that members of the opposing political tribe want their destruction, not simply to punish Trump for his behavior. Republicans believe that Democrats and the overwhelmingly liberal media see impeachment as an attempt to cudgel them collectively by lumping them in with the Capitol rioters thanks to their support for Trump.

and

Conservatives see the game. It doesn’t matter whether you held your nose when voting for Trump; it doesn’t matter if you denounced his prevarications about a “stolen election” (for the record, I was met with great ire when I declared the night of the election that Trump’s declaration of victory was “deeply irresponsible”).

If you supported Trump in any way, you were at least partially culpable, the argument goes. It’s not just Trump who deserves vitriol — it’s all 74 million people who voted for him.

And that claim, many conservatives believe, will serve as the basis for repression everywhere from social media to employment. Evidence to support that suspicion wasn’t in short supply this week…

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Madigan’s Out As Speaker

The Illinois House has elected a new speaker and it’s not Mike Madigan. Greg Hinz reports at Crain’s Chicago:

Rep. Emanuel “Chris” Welch, D-Hillside, will become Speaker of the Illinois House, ending Michael Madigan’s decades-long hold on the position.

The House voted 70-44 in favor of Welch, with 44 votes going to House GOP Leader Jim Durkin. Another Democratic candidate, downstate Rep. Jay Hoffman, dropped out of the race.

Welch becomes Illinois’ first Black speaker, with Mayor Lori Lightfoot calling his election “a momentous day in Illinois” in a tweet.

The good news is that he’s not Mike Madigan. The bad news is that he’s a Madigan lieutenant who may well be tarred by the same can of brushes heading for Madigan himself:

Rep. Emanuel “Chris” Welch, D-Hillside, will become Speaker of the Illinois House, ending Michael Madigan’s decades-long hold on the position.

The House voted 70-44 in favor of Welch, with 44 votes going to House GOP Leader Jim Durkin. Another Democratic candidate, downstate Rep. Jay Hoffman, dropped out of the race.

Welch becomes Illinois’ first Black speaker, with Mayor Lori Lightfoot calling his election “a momentous day in Illinois” in a tweet.

He received substantial support from the House’s black and Hispanic caucuses, consistent with the changing times for the Democratic Party.

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If You Liked 2020 You’ll Love 2021

In a piece at Bloomberg Tyler Cowen warns us not to expect a tremendous improvment in 2021 over 2020:

If you had expected 2021 to be a relief from the horrors of 2020, sorry: So far it’s looking worse. Covid indicators, including deaths, are reaching new highs. The vaccine rollout has been badly botched. A violent insurrection, cheered on by the president, reached the inner sanctum of the Capitol.

The obvious question is whether bad news comes in waves, and so far the evidence seems to indicate that it does.

Consider bad economic news, which is relatively unambiguous. With stock market returns, volatility is correlated over time, and it is higher in bear markets. To some extent the bad mood is contagious, and the bad events behind the volatility may be interlinked as well.

To be clear, the stock market has done fine lately. The latest bad news is about politics and public health, not corporate earnings. Still, the stock market is readily measurable and can offer clues about how broader social processes are connected over time — and one obvious conclusion is that volatility tends to feed upon itself, not usually in positive ways.

Much of the recent turmoil in America has been connected to the presidency of Donald Trump, and that will be ending soon. The associated volatilities, however, will not simply fade away. Trump’s ascendancy was a symptom of other social processes already gone askew. Even when Trump leaves the scene, a particular group of irresponsible men is likely to continue as a source of domestic terrorism and unrest, and they will (to the extent they need to) find new icons. This problem seems to be intensifying.

And while social media seems to have a positive effect on interpersonal relations, it is difficult to deny that it helps to organize such protests and riots. That trend seems unlikely to disappear anytime soon, and it will fuel additional volatility.

Another problem is what my colleague Bryan Caplan has labeled “the idea trap.” Social science research indicates that in troubled times people are more likely to turn to bad ideas. The distressed German economy of the 1920s and early 1930s, for example, helped to breed support for the Nazis.

To that I would add that very few of the ideas being proposed to correct present problems will materially affect them, at least not in the near term and possibly not ever. Nothing I’ve seen even scratches the surface of the corruption, dishonesty, or incompetence that afflicts many of our institutions. And some of them bear a risk of making things significantly worse.

And those are just the known unknowns. We have no idea of what the unknown unknowns may bring.

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It’s Not Just Taibbi

Former New York Times writer Bari Weiss has her own jeremiad:

Thought comes before action. Words come before deeds. Media that profits from polarization will stoke it. Lies — maybe harmless for the moment, maybe even noble — create a lying world.

I’ve known this for a while. It’s why I left The New York Times. And it is why, as much as I miss doing journalism, I’ve been cautious at every next step.

Hate sells, as the journalist Matt Taibbi has convincingly argued, and as anyone looking at Twitter trending topics over the past few years can see. If Americans are buying rage, is there a real market for something that resists it?

I think we can conclude that the generations-long attempt to make a profession out of journalism has been a failure. A “profession” is defined as a calling that acts for the public good and operates under a code of ethics. I think it’s actually worse than that. I think that the problem is not limited to journalism but extends to the traditional professions as well. They have become or are becoming trades. Or even worse they’re being commoditized.

She then strikes pretty close to home for me:

I don’t know the answer. But I know that you have to be sort of strange to stand apart and refuse to join Team Red or Team Blue. These strange ones are the ones who think that political violence is wrong, that mob justice is never just and the presumption of innocence is always right. These are the ones who are skeptical of state and corporate power, even when it is clamping down on people they despise. The ones who still hold fast to the old ideas enshrined in our constitution.

Guilty as charged. Yes, I’m strange. I’ve been taken to task by both left and right for it. On last week’s CBS Sunday Morning they interviewed Norman Lear and I was gratified to hear him making what used to be normal liberal observations. He’s 98 years old. Liberals are old. Progressives are not liberals.

Ms. Weiss then quotes a passage from Heinrich Heine:

Do not smile at the visionary who anticipates the same revolution in the realm of the visible as has taken place in the spiritual. Thought precedes action as lightning precedes thunder. German thunder is of true Germanic character; it is not very nimble, but rumbles along ponderously. Yet, it will come and when you hear a crashing such as never before has been heard in the world’s history, then you know that the German thunderbolt has fallen at last. At that uproar the eagles of the air will drop dead, and lions in the remotest deserts of Africa will hide in their royal dens. A play will be performed in Germany which will make the French Revolution look like an innocent idyll.

That was written in 1834 and in it you can hear echoes of events that would unfold in full a century later.

She concludes by asking whether we are experiencing our own version of what Heine prophesied for Germany. I don’t believe so. What Heine was talking about was central to German character. What we are embarked on doing is selling our birthrights as Americans for a mess of pottage.

I have omitted remarking about a lengthy portion of her article in which she literally rages against the machines. Mark Zuckerberg, Jack Dorsey, Sundar Pinchai, and Jeff Bezos are not machines. They are motivated by the same forces that have motivated tyrants for millennia—wealth and power. The United States was founded to prevent tyrants from coming to power. You cannot simultaneously embrace unfettered power, public or private, and our founding documents, a belief in which is the foundation of our country.

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Throwing a Sop to the Base

At The Hill former Pennsylvania Ed Rendell proposes some immediate action items for the incoming Biden Administration. They are:

  • An beefed-up COVID-19 relief bill
  • $15/hour minimum wage
  • Reduction in prescription drug costs
  • A major infrastructure bill

In the past I’ve mentioned that it is quite typical for incoming administrations to “throw a sop” to their bases. For incoming Republican presidents that has been cuts in the personal and corporate income taxes. For Democrats it’s been infrastructure spending bills and new or expanded entitlements.

Given the composition of the new Congress, I think that accomplishing any or those let alone all of them will be a tall order. I expect that the most notable effect of a $15/hour minimum wage will be to subsidize increased immigration from Mexico and Central America. Some benefit might go to poor people in rich states. It will mean that the jobs of other people people in those same states will be eliminated.

For Red states where wages tend to be lower from a political standpoint it will be roughly equivalent to reducing the state and local tax deduction for Blue states so I expect it will receive substantial support from Democrats in the House. Don’t expect it to receive a lot of Republican support in the Senate.

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