Dean Baker made a brilliant observation, Germany Leaves the Euro Zone, and the Problem Is? This goes along with my general theory that there really is something wrong with the German people. And I say this having once had a wonderful time in Germany. Hell of a place and hell of a people. But that’s if you are drinking with them. If you are on the outside, well, let’s just say that they are not the most empathic of people.

Throughout the crisis in the European Union over the past six years, Germany has behaved atrociously. The whole time, they have told themselves a narrative that is both self-congratulatory about their own success and dismissive of the pain of others. In this narrative, Germany is doing well because of their strong work ethic and fiscal rectitude. The countries of southern Europe are suffering because they are lazy and were fiscally profligate before. That’s just not true in either case. In fact, people in southern Europe generally work more than Germans. And other than Greece (Really: how long are conservatives going to continue to reduce everything to Greece?!) the other European governments did not misbehave.

Because Germany is the largest economy involved with the Euro, the strength of the Euro is pretty much dictated by Germany. In order for the other countries to recover from the current economic stagnation, Germany needs to allow itself a little inflation: let wages go up! But instead, Germany has kept wages artificially low both before the crisis and since. What this means is that German exports continue to be overly competitive compared to exports from, say, Spain. I could accept that better if Germany didn’t pretend that this situation was great and if everyone just acted more German everything would be fine.

Really, I don’t want to overstate this. But it seems to me that Germany is bullying Europe very much as they have in the past. It is just that now they are doing it economically instead of with tanks. There is even the same kind of ideology present: Deutschland über alles! That’s not in the sense of Germany destroying all others. But it is in the sense of Germany thinking it is better than everyone else. I’ve seen this same kind of repugnant attitude in myself, “Why isn’t everyone as smart as I am? Why isn’t everyone as thin as I am? Why isn’t everyone as whatever as I am?!” Generally, if it is even true (and it isn’t for Germany or me), it is due to things we have no control over and shouldn’t be something that we take pride in.

Right now, Germany takes pride in its fiscal rectitude, but its effect is to harm the rest of the Eurozone. Matt O’Brien was discussing how maybe the European Central Bank (ECB) could do some quantitative easing, even though it is outside its charter. He noted that this might cause Germany to leave the Euro. And Baker’s response was, “So what?” As it is, Germany gets a great advantage pegging the Deutsche Mark to the Euro. And the rest of the countries would be better off without that.

It’s really very simple. If Germany left the Eurozone, the Deutsche Mark would go up in value relative to the Euro. This would immediately cause all the other countries in Europe to be more competitive in exports. It would create jobs. It would be great. The down side is that people who had a bunch of money stored in the Euro would see it go down in value one time. But even this would be reversed to some extent by the rebounding economy.

I think this is a great idea. A bunch of little countries leaving the Euro could be disruptive. But a single, orderly exit of Germany? It sounds like a great, pragmatic solution to the problem in Europe. Of course, Germany won’t do it. It is getting too much benefit from staying in the Eurozone and pretending like it is doing everyone else a favor.

Afterword

Let’s be clear about a few terms here. First, the European Union is the group of states that are linked politically and economically to a degree. The Eurozone is the group of European Union nations whose national currency is the euro. So, for example, the United Kingdom is in the European Union, but not in the Eurozone.

This morning, Charlie Pierce wrote a interesting article over at his perch at Esquire, American Exceptionalism. It follows up on a great bit of reporting by Liz Alderman, Steven Greenhouse, and Anna-Katarina Gravgaard in The New York Times yesterday, Living Wages, Rarity for US Fast-Food Workers, Served Up in Denmark. It compares two young men who work for Burger King — one in the US and one in Denmark. In Denmark, he makes $20 per hour and in the US he makes $9 per hour. And the guy in America is a shift manager. Moving on up!

The critical element of the story is this line, “Many American economists and business groups say the comparison is deeply flawed because of fundamental differences between Denmark and the United States.” And what are those differences? Basically, they are reasons why the situation is bad here. They aren’t reasons for keeping the current situation. For example, in Denmark, the workers are unionized. Well, yeah. There is also universal healthcare in Denmark. All these things mean is that fast-food workers in Denmark are doing even better than the wage comparison would indicate.

There is a kind of Catch-22 thing here. Because of our huge inequality problem in the United States, we have policies that take from the poor and give to the rich. And because we have these policies, we must have our high levels of inequality and they need to get even higher. That doesn’t indicate that we have to continue on with poverty wages. It just means that when one part of a political economy is screwed up, many other parts are screwed up as well. If we still had strong unions, we would doubtless have universal healthcare and higher wages. That doesn’t mean that because we have low wages we must therefore have no unions. Organizing can work wonders if we do still have a democracy.

What Pierce added to this discussion is that we have such a screwed up system because the business community has gone insane:

Since the 1970s, the business community (and this includes business majors at college) have taken on this Ayn Rand kind of idea that by making as much money as they can they are by definition doing good. We’ve gotten so used to it that it is shocking to hear business owners in Denmark say things like, “We don’t want people living on the streets. If that happens, we consider that we as a society have failed.” But notice: that’s the kind of thing that you could imagine most humans saying. It is an aberration that this kind of talking is anathema to the American business community. I’m not even referring to what actual practices here. In the United States, the capitalist class has gotten to the point where they don’t even give lip service to the good of the society or even the country. Indeed, on that last item, the business position seems to be that if you can bilk some money from the government, it’s just great. Remember when Mitt Romney while running for President of the United States proudly announced that he would be unfit for the job if he had paid any more than the law required? Because, you know, freedom!

As we see, this kind of thinking has infected our entire society. When Mitt Romney made his vile comment, there was no outrage from the mainstream media sources. It was just taken as part of the continuum of acceptable discourse. And this is at the same time that the mainstream media are dismissive of the idea of raising the minimum wage to $15 per hour — a rate that would still be below its late 1960s rate if it had been raised at the rate of productivity increases. It’s disgusting and the journalism industry would be ashamed if it hadn’t lost the ability.

This is American Exceptionalism: the vast majority of the people live much worse than their peers in other advanced economies. I’m so proud.

See Also

Property Rights
Be a Patriot, Pay Your Taxes!
Conservatives and the Lucky Duckies

Danny Vinik wrote a great article over at New Republic, Republicans Have Big Plans for a GOP Senate. Here’s What Will Come of Them: Nothing. It is primarily about House Majority Leader Kevin McCarthy’s claim that if the Republicans take the Senate, then they can show the people that they really can govern. Vinik’s article is one big eye-roll. He wrote, “The 114th Congress will probably look a lot like the 113th.”

According to McCarthy, the Republicans in the House and Senate will get together and grind out deals. But that makes no sense. By and large, the problem with the House Republicans has not been that they don’t agree with the Democratic Senate. The problem is that they don’t get along with themselves. To many, even most, House Republicans, the Senate Republicans are a bunch of sellouts. If the extremists in the party were not willing to compromise on anything when they only controlled one chamber, why would they suddenly be willing to compromise when they have both chambers?

Vinik made the excellent point that having control of both houses of Congress is going to make a Debt Ceiling debacle even more likely. And it sets up a very dangerous battle. They could easily put together a Debt Ceiling bill larded with a wish list of their usual demands so that the president is forced to either accept it or allow the government to default. And don’t kid yourself: there are a whole lot of Republicans in Congress who would love to see that happen. Remember, this is the party that continues to refuse free money to help their working poor and their economies just to “send a message” to the president. They are itching for a clear flight. In fact, they itching for nothing else.

There is still, however, the biggest liberal concern: Obama might start bargaining with the Republican Congress. But this seems unlikely for the same reason that the chambers are unlikely to get along. Any deal with Obama will be by definition selling out. Obama is, after all, the Antichrist. Remember back in 2011 when Boehner made a deal with Obama? By his own calculation, Boehner got 98% of what he wanted. Still, this was seen as heresy. I expect them to hold out for what they see as their ultimate rout in 2016 when they will hold all the levers of power and can get 100% of what they want.

But here is the ultimate state of things:

That gets to a fundamental issue: the Republicans don’t actually have any ideas other than tax cuts and deregulation. They haven’t been able to come up with an immigration reform bill because they don’t want to do anything about immigration reform. They haven’t been able to come up with a replacement for Obamacare because they don’t want to do anything about healthcare. The list goes one. And Kevin McCarthy’s idea that they will show the nation that they can govern is just nonsense. When it comes down to it, everyone knows that the voters are not going to reward them for that even if the Republicans managed to do it. So they will fall back on what they do get support for: making high minded but meaningless political statements about how Obama wants to destroy America.

The only real change we are likely to see with Republican control of both chambers of Congress is that there will be more crises. They may be minor and they may be catastrophic. But they will come. And I’ll make a prediction: they will not be harmed by these crises. The media will portray it as a simple partisan issue. There will be many columns asking, “Why can’t they just get along?!” And if they manage to actually destroy the American economy going into the 2016 presidential election, the people will reward them with the White House. If that happens, we’ll get to see that the Republicans really can govern — like George W Bush.

This remarkable graph comes to us from Sam Wang, In State Races, as Much Suspense as 2006 and 2010 Combined. For all the years before this year, it shows the number of Senate and gubernatorial races that that were won by less than three percentage points. And for this year, it shows the number of races that are this close based upon Wang’s aggregation of polling data. This isn’t a partisan breakdown. There are Democrats and Republicans and Independents on this graph. But the point is that the election is incredibly close by historical standards.

You probably already know that despite people constantly complaining about politicians, incumbents do really well. They tend to get re-elected at a rate just shy of 90%. That isn’t so much the case this time. Of course, as always, this is just about fundamentals. Four years ago, the Republicans had a wave election and a whole bunch of Republicans ended up as governors — including in states that aren’t red. So they are vulnerable. On the other side, six years ago, the Democrats had a wave election and a whole bunch of Democrats ended up as Senators — including in bright red states like Alaska. So they are vulnerable.

But a big part of what is going on is that Democrats are simply doing a lot better than they should be. We will have to see how the vote turns out. It may be that for some reason, all the polls are favoring the Democrats and that the races that look close aren’t. But I tend to think that these are close races. It will take some serious statistical analysis after the election to say whether we are seeing the edge of demographic changes. But I wonder if it isn’t just that the country is exhausted from years of the same old nonsense from the Republicans.

I understand that “the party of ‘No'” is just a Democratic talking point. But how long can a party continue to push the same ideas that don’t work before the voters just give up? We’ve been living in Reagan’s world for more than 30 years now. The only improvement in the lives of the middle class was under Bill “Socialist! He’s a socialist, I tell you!” Clinton. And no one can seriously look at Obama and think that he is the bogeyman. He most clearly isn’t that. He may be detached and too inclined to a world view that is divorced from the day-to-day struggles of regular Americans. I certainly think that. But he isn’t out to harm America. He’s the President of the United States, for Christ’s sake! No reasonable person is going to buy the whole Antichrist Manchurian Candidate ranting that is now well inside the Republican mainstream.

The close elections are a source of comfort for Democrats, because it could turn out that we do a lot better than is expected. But it also means that 2014 could be a rout for the Republicans, and we have to look forward to Obama talking about his “shellacking” — showing that he still doesn’t understand how politics works. But I have seven days to hope that things go reasonably well for the Democrats. (It would also be good for the Republicans too, but that’s long-term.) After that, we will all know — except for Georgia and Louisiana most likely.

We expect that politicians are going to be demagogues. It is almost part of the job description — at least in the modern United States. What we don’t expect are wimpy demagogues who backtrack the moment anyone pushes back. But we should! Demagoguery is a form of bullying, and it is what weak people engage in. I’ve argued this in a general sense for a very long time. A parent can beat a small child into submission, but I think we all understand that that doing that is a sign of weakness, not strength. Similarly, strength is trying to win a political fight on the merits — not trying to push people’s emotional buttons.

So when wimp-bully duo Andrew Cuomo and Chris Christie announced their automatic 21-day quarantine for people exposed to Ebola in West Africa, it was just a matter of time before they folded. It might have helped if the deceitful duo had, I don’t know, listened to people who know about this kind of stuff. But that would have ruined it! The only way they could simultaneously foment fear and elevate themselves to the status of “brave statesmen” was by avoiding, you know, the facts.

But alas, Dumb and Dumber didn’t know what they were up against, as Alex Altman reported in Time, Why Christie’s Ebola Quarantine Gambit Backfired:

That brave nurse, of course, was Kaci Hickox. On Saturday, she published an oped in the Dallas Morning News about what exactly had happened to her on her return to the United States through Newark Liberty International Airport on Friday. In addition to being heartbreaking, it also highlighted the total incompetence of the people involved in the “brave” new quarantine effort. This part is especially good, and in a movie would be downright hilarious:

Jonathan Cohn provided a good rundown of the weekend, Chris Christie Isn’t Backing Down on the Ebola Quarantine. It turns out that officials in charge of this kind of stuff only found out as a result of the press conference. That’s just more evidence that this was all about politics: Cuomo trying to look strong following his embarrassing performance in the primary against Teachout and Christie looking for his chance to take the lead for the 2016 Republican presidential nomination.

The problem, I think, is that men like Cuomo and Christie are used to beating up poor people. The most powerful target they ever take on are teachers. But Hickox was something more. Bill DeBlasio said, “This hero is coming back from the front, having done the right thing, was treated with disrespect was treated with a sense that she had done something wrong when she hadn’t.” Cohn wrote this before she had been released:

What I think has to be kept in mind is that treating Ebola in Africa makes us safer as well. This is actually a case where we need to fight it over there so we don’t have to fight it here.

One of the most mystifying things about the conservative movement for the last 25 years has been its labeling of moderate to conservative Democratic presidents as lawless socialists out to destroy the country. This was true of their reaction to Clinton and it is true of their reaction to Obama. Now we have the endless Darrell Issa hearings on everything short of how long Malia takes in the bathroom each morning. And these hearings are now and forever just one revelation away from finding anything. And remember that under Clinton, Monica Lewinsky was the net result of years of digging into every right wing conspiracy imaginable. This is what happens to a political party when it has no ideas and its obsession with ideological purity make coming up with any ideas impossible: it focuses on political nonsense.

And part of never ending “scandal” machine that is the Republican Party is John Boehner’s new lawsuit against President Obama. As you may recall, at the end of July, he decided that the House would sue Obama for delaying the implementation of the employer mandate in Obamacare. He did this to quiet his caucus that really wanted impeachment hearings. Why did they want this? Obama! The irony is great: they want to sue Obama, but the best thing they can come up with is a decision that they agreed with. If Obama were really the lawless president they claim, they should have been able to come up with something better like any of a half-dozen claims that Darrell Issa has made but has never been able to substantiate.

Yesterday, over at Washington Monthly, Simon Lazarus and Elisabeth Stein published an interesting item, The Congressional Research Service Finds that Boehner’s Lawsuit Has No Legal Basis. It seems that someone involved in the lawsuit — maybe Boehner himself — asked the CRS to look at the lawsuit and analyze its legal foundation. The result was finished on 4 September, A Primer on the Reviewability of Agency Delay and Enforcement Discretion (pdf). And the results are unequivocal: there is no basis for a lawsuit at all.

It is almost two months later and the report was never released. Clearly those who requested it do not like what it found. But this was not the first hit to the lawsuit. Lazarus and Stein noted that other, more public, sources have noted that the case had little or no merit. And then, there was this:

I assume that Boehner always knew that the lawsuit was a crock. As I mentioned above, it was mostly yet another “treat” to keep his caucus from eating itself. It was also probably seen as a good tool to use in the midterm elections. As for the CRS report, that was probably meant for use with the House Republican caucus to explain that they really don’t have a case against the president.

In this way, we should be grateful to Boehner. By getting his caucus to focus on this lawsuit, he created a falsifiable claim. The House doesn’t really need a reason for impeachment other than that they think he is a “doody pants.” But the courts are the courts. The Republicans can think the courts are corrupt, but there is nothing they can do. Of course, the way the Supreme Court is these days, you never know.

Paul Krugman is angry today, Ideology and Investment. He is never better than when he is angry. I think it is just that one so rarely hears a major commentator speak the truth about politics. There is so much mincing of words. And that is especially true when it comes partisan issues where no one can ever criticize one side without adding, “On the other hand…” And this is a very big problem when one of the two major political parties acts like an extremist third party where purity to their extremist ideology is all that matters. The Peace and Freedom Party is an extreme group on the left, but they are still more reasonable than the modern Republican Party. Yet still all mainstream pundits are supposed to pretend that the Republicans are no more extreme than the moderate and nonthreatening Democrats. Krugman is one of the few big name people who will actually admit that this isn’t the case.

His column is about something that readers here will be very familiar with: government investment. There is currently far too much savings and too little demand for it. So corporations are sitting on trillions of dollars. This isn’t supposed to be the case according to classical economics, right? The corporations would have to invest it. But they aren’t. Instead, they are using that money to buy back publicly traded stock to goose their stock prices. Bonuses for top level management and layoffs for workers. Hooray! Ain’t capitalism grand when you are on top?!

The government ought to be taking all that excess savings to invest in roads, bridges, the electrical grid, whatever. Currently, the federal government can borrow money at a real rate of 0.38%. But through most of 2012 and 2013, it could borrow money at negative real interest rates. You heard that right: people were paying the federal government to hold onto their money for a decade. Did we use this as an excuse to invest? Of course not! And who is to blame? Well, you already know unless you are a mainstream pundit. But Paul Krugman knows:

Reading that earlier felt like a hug from mom. I understand political realities. The Republicans have been shockingly good at getting people to vote against their economic interests and vote based upon fear and resentment. But that doesn’t mean we have to pretend that the Republican Party is acting reasonably. We also know, for example, that if a Republican were in the White House, they wouldn’t give a thought to the debt and they would be doing their normal thing (Tax cuts for the rich!) to stimulate the economy. And along with that would doubtless be infrastructure spending. And this only makes it worse. It means that not only is the Republican Party’s extreme policy hurting the country, it is an intentional and disingenuous tactic meant to give them more power.

Let’s think about the “dysfunction” claim. That implies that there is some kind of deal that the Republicans would take. For example, the Republicans might take cuts to Social Security (through chained-CPI) in exchange for infrastructure spending. But we know they wouldn’t. They have been offered similar deals and they’ve run for the hills. This is the Heritage Uncertainty Principle writ large. Every idea that Republicans have only exists as long as they are not agreed to by the Democrats. The moment it becomes a political reality, the Republicans run for the hills.

There is no “Washington dysfunction”; it is “Republican dysfunction.”