Actual economist Nick Rowe points out that I am wrong about Monetarism. It too is demand based. Some thought has shown this to be true. By lowering interest rates, the government (or Fed if you want to be technical) makes borrowing more attractive and thus increases demand. This has left me with some questions about what actual “supply side” economics is. I’m sure I’ll bring that up in later posts. It also should be noted that the current crop of crazy conservatives don’t like Monetarism because they think it to is a kind of tax. If you talk to libertarians, they usually think that the Fed is just a conspiracy to devalue the dollar and thus steal money from hard working people. Regardless, my error about the nature of Monetarism doesn’t affect the point of this article. However, I greatly appreciate that Professor Rowe took the time to correct me. I’m a generalist and need as much of that as I can get. -FM

There are a lot of loony ideas in economics. The reason, I think, is because even though a particular economic policy might not be best for the economy overall, it can be very good for a particular group. And when that group is rich and powerful, there are going to be a lot of people using all their brain power to justify why such a policy is really good for everyone. But in the macroeconomics world, there really are only two serious approaches to fix an economy that is under performing. The first is for the government to spend extra money to increase demand and thus get the economy moving again. Much of this kind of stuff happens automatically: unemployment insurance works this way. We call people who believe in this kind of intervention in the economy Keynesians.

Whereas Keynesians look at propping up economic demand, the second group looks at propping up economic supply. They do this with money flow. By allowing businesses to borrow more cheaply, they will invest more and expand, thus putting money into the economy. We call people who believe in this kind of intervention in the economy Monetarists. They tend to be a more conservative lot than the Keynesians.

Matt Yglesias is always saying that if you want to help poor people, give them money. This is a response to neoliberal and conservative policies that want to do everything indirectly. Rather than just give an unemployed person money or a job with the government, we give a tax break to employers, hoping they will hire the guy. This is kind of how I see the Monetarists. I think what their real fear about the Keynesians is that more government spending will lead to higher taxes. That is a big concern. But the main thing is that the Monetarists just seem to have an ideological problem with the government spending money.

So there has been a small argument between Monetarist Nick Rowe and Keynesian Paul Krugman. And while Simon Wren-Lewis has nothing but nice things to say about Rowe, he makes a really important point in an article yesterday, What Annoys Me About Market Monetarists. And it gets right to the heart of the liberal-conservative divide in this country. (I don’t mean to say that Rowe is a conservative; I don’t know; and these days, the thinking of people like Rowe are considered terrible by conservatives; so even if he is a conservative, he isn’t a crazy one.)

The point that Wren-Lewis is making is that Keynesians don’t say that only fiscal policy will work; they believe in monetary policy too. It is just that when monetary policy isn’t working, Keynesians believe fiscal policy should be used. The Monetarists are rigid and I think it all comes down to ideology. They don’t want to use government spending so they come up with reasons why government spending would be terrible. (Again: Wren-Lewis isn’t talking about Rowe here—just the Monetarists generally.)

My take on American politics is that conservatism has ossified into a strictly ideological movement. So when approaching any problem, they start with a long list of things that can’t be done. For example, if they are looking at inequality between school funding, the solution cannot be federal funding to equalize them. Instead they push more testing or ending teacher tenure or neoliberal policies like providing tax incentives to manufactures to give computers to low income schools.

Liberals, on the other hand, are open to all policies. That is, for example, how we got the conservative healthcare reform law now known as Obamacare. But even on education policy, I don’t see liberal resistance to the elimination of tenure as not being open to the idea. It is rather that elimination of tenure has little is anything to do with helping children, and everything to do with the conservative desire to destroy teachers’ unions.

It seems that even a reasonable academic like Nick Rowe falls into his own kind of false equivalence. He seems to think that just because Monetarists are against fiscal policy, that means Keynesians are against monetary policy. But that’s not true. It goes along with the claim by conservatives that they want small government as an end in itself. (They don’t actually want small government, but that’s what they claim.) Thus they assume that liberals want big government as an end in itself. That’s simply not true. We want certain things to be done, and it really does matter to us if it uses a little government, a lot of government, or no government.

This can’t be said enough: liberalism is practical. Liberals are not trying to turn the United States into a socialist utopia. This is in stark contrast to conservatives who are ideological. They are trying to turn the United States into a utopia, although they disagree as to whether it would be a theocracy or an anarchy. This difference between the ways that liberals and conservatives see policy is our fundamental problem. Liberals can’t compromise with conservatives who won’t even consider any ideas outside their tiny ideological box. And as we saw with Obamacare, even when liberals do squeeze into that tiny ideological box, the conservatives make the box even smaller.

And if fairly reasonable Monetarists can’t agree that when monetary policies aren’t working, we should use fiscal policies, how can we possibly get Ted Cruz to admit that tax loopholes for oil companies ought to be closed?

I made the mistake of posting a kind of silly comment on a Google+ political post. That meant that I got updates on every comment made to the post and it wasn’t pretty. And I wasn’t interested. It was a comparison of Obama and Bush the Younger, and as you can imagine, there wasn’t a great deal of thought on either side. But one person on the Republican side made a comment about the need for Congressional term limits, and I lost it: I replied. I actually went out of my way to be nice, so no one responded. But it got me thinking about the issue of term limits and I figured that now is as good a time as any to explain my thoughts on the matter.

In general, terms limits are something that appeals to both conservatives and to people who don’t think much about politics. The reason is that it is built on the idea that governing isn’t a skill; anyone can do it! Well, we in California got a chance to try that out. We made Arnold Schwarzenegger governor for four years. Say what you will about the man, he is smart and capable. And he was a disaster. Then in came Jerry Brown—a career politician—and he showed how it is done. Politics is a skill. And we need as many skilled professionals in government as possible.

Imagine having the equivalent of term limits for auto mechanics. After eight years—generally when someone has finally become really good at his job—we don’t allow him to fix cars anymore. That would make no sense. Yet that is what we do with politicians, even though they get better at representing their constituencies over time. Yet, in the recent Mississippi Republican primary, a big argument against Thad Cochran was exactly that he was good at bring federal money back to his state. That’s nonsense!

I understand the corruption issue, of course. But that isn’t solved by term limits; that’s solved by taking money out of politics and not turning our politicians into corporate whores. If anything, term limits make politicians more dependent upon campaign money. At least established politicians have high name recognition. But what conservatives are really concerned about is “ideological corruption.” What they don’t want is for politics to be politics. They want politicians to stay ideologically pure so that no compromises are ever made. This is not the problem what most people worry about.

What’s more, inexperienced politicians are more dependent upon lobbying groups like the American Legislative Exchange Council (ALEC). So the question really is, who do you want writing your laws: career politicians and their own trusted support staff, or special interest groups who are totally unaccountable. Additionally, politicians who know they are out after two terms (or whatever), have a huge incentive to do special favors for people who can give them good paying jobs after they are out of office. And yes, yes, yes! This problem too already exists, but term limits would only make it worse.

Above all, the problem with term limits (and I’m against them even for president) is that they are anti-democratic. They are a way of limiting the voting choices of other people. Congress is rightly disliked. But most people are pretty happy with their own members of Congress. So there isn’t a single reason that Congress is disliked; in fact, the reasons are largely completely at odds with each other. Republicans don’t like Congress because the Democrats control the Senate and Democrats don’t like Congress because Republicans control the House.

The way I see it is that I want representatives who work for the interests of my district and my state. If voters in Mississippi feel differently, that’s fine: throw the bums out. But making me throw out my representatives just because you think they are bums sounds a lot like tyranny to me. But even if it isn’t quite that bad, it is anti-democratic and it promotes bad government.

I’m very fond of Martin Longman. He is an excellent writer and commentator. But he is having a bad day today over at Political Animal. First, he completely misread Ron Fournier’s recent National Journal article, “We Don’t Suck As Much!” a Motto Your Party Can Honestly Embrace. Longman actually gave Fournier credit for making some progress on false equivalence, The Democrats are the Least-Lousy Party.

Fournier had written, “To those on the far right and far left who will accuse me of ‘false equivalence,’ I beg your pardon and say, OK, the other side sucks a bit more. Feel better? The rest of us don’t.” Far from making progress, Fournier is embracing false equivalence. He’s saying that’s something that only extremists think about and all the good people like himself in the “middle” know that the Democrats and the Republicans are equally bad.

What I find interesting is that false equivalence coming from Fournier is an indication of just how bad the Republicans are. As you can see from his Wikipedia page, Fournier is a consistent Republican with a history of bashing Democrats from a supposed centrist position. One commenter called him a “Republican apparatchick.” I don’t think that’s quite right, because apparatchicks didn’t pretend to be disinterested centrists. Fournier is something far more loathsome. And the fact that the best he can say is that “both sides suck” shows he doesn’t have anything real to complain about the Democrats nor anything good to say about the Republicans.

So Longman messed that up. It happens. Doing a blog is a lot of work, and as the “weekend guy” at Political Animal, I don’t think he gets an editorial help. And to be fair, Fournier’s article does claim that on the boarder crisis, Obama was “a little less bad than the Republicans.” But the point of the article is broadly: both parties are exactly the same! After I read the article, I was just going to discuss Fournier with a hat tip to Longman. But then I read a later article.

Longman wrote, Movement Conservatism is Dead as a National Ideology. This is where we get into dangerous territory. As I discuss a lot around here, Ted Cruz or even Michele Bachmann could become president under the right economic conditions. Many liberals were thrilled when the Republicans nominated Reagan in 1980 because of his extremism. The truth is that the Republicans could have nominated anyone that year and he, she, or it would have been elected.

This is why I found it so upsetting when Longman wrote:

No. No. No! There is absolutely no way that any Republican could have won the presidency in 2008. The economic conditions for a Democratic victory in 2008 are the best of all races back through Carter-Ford in 1976. And that’s just because I haven’t looked any further. The case for 2012 is not as strong, but it is still quite strong. Romney’s problem was not that he ran as a movement conservative; it was that he ran on the economy. If you are the challenger and the economy is improving, you don’t run on the economy. See Lynn Vavreck’s The Message Matters for details.

What most bugs me about this idea that the Republicans might have won if only they had moderated their views is what it implies about the Democrats. Now I’ve been reading Longman for a long time and I know he doesn’t think this, but it implies that the Democrats have won the presidency because they have moderated. The standard line is that Clinton and Obama won because they are New Democrats—you know, economically conservative Democrats. And this just isn’t the case.

Just look at how stupid the Democratic Party is. In 1980, when the economy said the Republicans were certain to win, they nominated their most conservative headline candidate. In 2008, when the economy said the Democrats were certain to win, we nominated a milquetoast moderate. And what do we get for not sticking it to the Republicans as they stuck it to us? Cries of “Socialism!” and “Tyranny!”

Like I said, Martin Longman is an excellent writer and commentator. But he’s only human (despite his image above). He just had a bad day.

Update (20 July 2014 8:05 pm)

Longman noticed my tweet. I still don’t know how that happens. Anyway, it turns out that yesterday, he wrote, My Day Could Have Gone Better. It is about his mistake of buying baseball tickets for his son and him, but for the wrong day—a work day. And so it ended mostly with sitting in traffic. It sounds a lot worse than discovering my little article. But how bad could this article be when I twice refer to him as an “excellent writer and commentator”? Dave Weigel should get such plaudits!

This morning, Jonathan Chait wrote, Why Optimism Is Still America’s Greatest Strength. Basically, I agree with him. Cynicism and pessimism don’t generally lead to reform. But a mixture is important, because there is a dark side to optimism; it can cause complacency. I want to talk about optimism from a different perspective, however.

The traditional conservative take on liberals is that we are pessimistic and think America is weak and evil. I think this is kind of a contradiction. For one thing, evil in the weak doesn’t really matter. I think that the United States is extremely powerful and that we often use that power to do great evil. But I am surprisingly optimistic about the future. Most of the time I think that the arc of history bends toward justice. But for the last almost four decades, it has been bending decidedly toward injustice.

On the other side, the conservative take on themselves is that they are optimistic and think America is powerful and good. But this isn’t really true of conservatives—today anyway. In particular, they only think we are strong in terms of our military. I guess that is to be expected, because to a conservative, power is only manifested in terms of bending others to your will. Regardless, they do not think we are powerful when it comes to anything else. In their eyes, America will always be less than some mythical America they apparently got from watching Leave It To Beaver.

What’s more, they are permanently pessimistic on the domestic front. Crime is always out of control, regardless of how much it falls. The Federal Reserve is powerless to help the economy, but it just might destroy it. We can’t take care of the poor because we are too far in debt. (Note: we are never too far in debt to fight another unnecessary war.) We can’t provide anything even close to equality of opportunity because rich children must be given better schools than poor children. In the conservative mind, we can’t do anything because times are bad and they are only getting worse.

The weird thing is that they are right to think this. Any given conservative is just a snapshot of the movement at a particular time. But if you go through American history, you will see that the conservatives lose basically every battle they fight. A conservative may be someone who stands athwart history, yelling, “Stop!” But history mows them down and moves on to younger conservatives yelling stop about something else. Conservatives were for the monarchy. Conservatives were for slavery. Conservatives were against women voting. Conservatives are always on the wrong side of history.

So conservatives are right to be pessimistic. As I’ve written elsewhere, “Conservative opinion only has a shelf life of a generation.” Today they celebrate Martin Luther King Jr, but at the time they hated and feared him and claimed he was a communist; they were at best apologists for Jim Crow. (And don’t bring up liberal Republicans from the past, because the parties used to not line up that well ideologically.) But as Corey Robin has argued at great length, conservatives will always be against expanding rights and so will always see the country slipping further and further from their ideal.

Of course, it is the conservatives who are always out there chanting, “We’re number one!” And that has always struck me as the kind of thing done by really insecure people. And I think this is why. Barring a fascist takeover of the United States (and I won’t rule it out), history will continue to run them down. And in addition to everything else, they’ll have to pretend that, “Of course I was always for same sex marriage!”—and everything else they were against when it mattered.

Shadow Government Statistics, usually referred to as simply Shadow Stats, is a company that provides, “Analysis Behind and Beyond Government Economic Reporting.” And by and large, people who ought to know think they do a pretty decent job of gather information and grind it into data. But it is also conspiratorial. It claims to be a newsletter that “exposes and analyzes flaws in current US government economic data and reporting.” And it is the ultimate fallback source for those who claim that inflation is actually really high but the government is hiding it from you.

Let me say something about that “inflation is higher than the government claims” claim. Wouldn’t you notice? I mean, a Sausage McMuffin is one dollar. And a Sausage McMuffin has been one dollar since at least the last Bush administration. If inflation were really high, I would have noticed it. Everyone would have noticed it! Some things, like milk do go up and down in price. So do gas prices, but even that tends to be pretty stable. But there is no talking to some people. I think it mostly comes from libertarians and others who really believe in the gold standard. They want there to be high inflation so they can justify their preferred policy. But the fact remains that inflation in the United States has been far lower and less volatile than it was when we were on the gold standard. Really: I want to pull my hair out talking to these people.

Anyway, there is this guy Cullen Roche. He runs a financial research company called, Orcam Financial Group, LLC. So unlike Shadow Stats that seems mostly to appeal to cranks who have an ideological ax to grind, Orcam has customers who have actual money on the line and need good information. Thus, we have a bit of a conflict here. Back in 2011, Roche wrote, “Shadow Stats has been predicting hyperinflation for at least 6 years now and every year the forecast gets bumped to the next year.”

In that same article, he used the Wayback Machine to show that while the prices of some things might have gone up, the price for a subscription of Shadow Stats had not. In 2006, it was $175 per year. And in 2011, it was $175 per year. Well, two months ago, Roche was back, Update: There’s Still Deflation in Hyperinflation Forecasts. In it, he noted that it is now eight years and Shadow Stats is still $175 per year. I decided to graph it to look at the trend in the price:

Now, Cullen Roche is not serious and neither am I. Or at least, not especially serious. But let’s just imagine for a second that the inflation rate in the United States was 15% per year since 2006 when Shadow Stats began predicting hyperinflation. The $175 subscription price would now be the equivalent of less than $50—just over 25% of it’s original value. Or to put it the other way, if the price had kept up with this “real” inflation level of 15%, it would now cost over $500 for a subscription. So if John Williams (the owner and writer of Shadow Stats) really saw his cost of living increase at that rate (Much less 50% per month!) he would have increased the price.

But I’m sure that John Williams and everyone else knows intuitively that inflation isn’t high, because the cost of living is very much the same as it has been for a long time. Which of course, brings us back to Roche’s original complaint: that Shadow Stats (and all of the inflation hysterics) always say that next year the inflation will arrive. It’s like Linus after the Great Pumpkin doesn’t arrive, “Just wait until next year!” The only problem is that Linus is five years old and a cartoon character. I don’t know what excuse the Shadow Stats folks have.

H/T: Paul Krugman

Dean Baker posted something this morning, and I was planning to chastise him for faux naivete. But he was just waiting for the last line of his post. You see, the Washington Post published an article by Al Kamen, So Whatever Happened to the Deficit? That title is actually a bit misleading; the article is about how newspaper coverage of the federal deficit has decreased. The article is fatuous in the extreme.

According to Kamen, the main reason that the deficit isn’t in the news is because it has gone so far down. Well, that’s true, I suppose. But he finished the article by quoting conservative Douglas Holtz-Eakin as saying that the deficit has gone down thanks to the, “American workers, entrepreneurs and families for their work toward economic recovery.” And that, “Washington has done essentially nothing, unless you count stopping making it worse.” Um, no. The economy recovered because economies recover. There is nothing special that the bizarre melange of “workers, entrepreneurs, and families” did for the economic recovery. But it is certainly true that the recovery we’ve had (such as it is) has helped drive down the deficit. But it is also true that the disastrous 2011 budget deal and the 2013 fiscal cliff deals were huge in bringing down the deficit. So Washington has been hugely responsible for pushing the deficit down.

Baker responded, however, that the lower budget deficit is not a good thing. This, of course, is something I rant about all the time here. But he noted, The Washington Post Says it Doesn’t Miss Lower Unemployment and Rising Wages. Because that’s what has actually happened. That’s why the recovery has been so anemic. If federal spending had done what it has always done during recessions since at least Nixon, we would have a roaring recover and our deficit might be even lower than it now is. Baker snarkily noted, “If the deficit hawks at the Post think otherwise they could grab themselves a quick Nobel prize in economics by showing how.”

And what about the two parties? Well, Kamen quoted Bill Galston who rightly noted that Democrats weren’t ever too keen on the deficit obsession. But the Democratic elites certainly were. Obama had a lot of elite Democratic support for his sudden abandonment of jobs in 2011 and sudden obsession with the deficit. It was, of course, just another pathetic example of Obama trying to “reach across the isle.” But Kamen noted that as a result, Democrats haven’t been pushing for credit for the reduction of the deficit. That’s simply not true. What is true is that reporters haven’t been interested in giving them any credit. And example number one is Kamen’s article that ends by saying that Washington should get no credit for the lower deficit.

Meanwhile, he noted that the Tea Party has other things to scream about. But the truth is they are still screaming about the deficit. But that just sets up the same old false equivalence, “Democrats say they have cut the deficit, Republicans say they haven’t. Who can say?” As anyone who has watched politics knows, as soon as there is a Republican President, the Tea Party will lose all interest in deficits. Suddenly, all the real economic arguments for running deficits during recessions will make sense. Because it was never about deficits or any other policy; it was always simply that they hate President Obama.

What Kamen’s article is then, above all, is an example of Villager Thinking. Al Kamen is an upper class columnist. He’s not worried about the unemployed. He ended his article, “Well, we don’t miss the deficit.” Dean Baker explained the problem well:

Well, there was never any confusion. There are, after all, almost no “labor” reporters, but no big time newspaper is without a slew of “business” reporters. It doesn’t matter what is happening to the poorer classes. Low deficits mean when Republicans get power again, they can lower taxes on the rich even more. Hooray for the “objective” press!