Late last year, I wrote to Dean Baker — the Pollyanna of economists — asking him about why Alan Greenspan didn’t change inflation thinking. I wrote, “Greenspan allowed inflation to get below 4%, yet there was no accelerating inflation. So why do I continue to hear that 5.5% unemployment is the NAIRU? Am I missing something?” Baker wrote back, “That history is conveniently ignored.” Indeed it is.

For those of you reasonable people who don’t follow this stuff, NAIRU stands for “Non-Accelerating Inflation Rate of Unemployment.” It is supposedly the rate of unemployment below which inflation will start to rise. It’s actually a nasty little concept. Beneath it is the idea that low inflation creates a workers’ market. And because of this, workers can demand higher wages and this in turn causes prices to rise — hence inflation.

I doubt this is even true. After four decades during which all economic growth has gone to the people at the very top of the economy, higher wages will not necessarily lead to higher prices. In fact, the pure economics of it indicates that it should simply cause a more equitable distribution of incomes. Basically: owners should make less and workers should make more. If you are skeptical of this, read my article, What Sets Prices? The idea that increased costs lead to higher prices is just wrong.

Right now, everywhere I turn, I hear that the NAIRU is between 5.0% and 5.5%. This is a problem, because the standard unemployment rate is 5.6%, and it may well be lower by the time this article gets published. So this has lots of people screaming for the Federal Reserve to increase interest rates to head off inflation. But the yearly inflation rate for last year was 1.66% — well below the Fed’s already too low 2% inflation target. And there is absolutely no trend. (Actually, there is a downward trend — but it isn’t significant.)

In the late 1990s, Alan Greenspan let unemployment get low. People warned him when it got to 5% but he let it go. And the inflation rate got down to 4.2% without any hint of inflation. He went further, but as it continued down to a low point of 3.8%, the inflation rate did go up a tad. The inflation rate maxed out at 3.7%. Bear in mind that this is not a bad rate. In general, I think the Fed’s inflation target ought to be in the 3.0% to 3.5% range. But it is now the consensus of really, really rich people that the Fed’s target should be 2%. Regardless, Greenspan managed to have inflation below 2% with unemployment around 4.3%.

Note the madness of this. The power elite claim that we must maintain a high unemployment rate with low worker bargaining power so that the rich don’t have to face even the risk of inflation. This is the kind of “conventional wisdom” that you get when you live in an oligarchy and not a democracy.

Recently, Paul Krugman wrote a good article on this subject, but from an entirely different perspective, Tough Fedding. In it, he suggested that the whole NAIRU may not be valid in the current environment of a Fed absolutely determined to keep inflation at 2% or less. And his calculations indicate that we shouldn’t even begin to worry about inflation until unemployment gets below 5%. He concluded the article by noting the options:

I see it from the workers’ standpoint, of course. It may be a little hard for Krugman to see what’s going on because he no longer lives in this world. But it is very simple: the people at the Fed are far more concerned about even the smallest threat to their rich friends than they are about the wholesale destruction of workers’ lives. And that’s why they do things that make Krugman scratch his head.

In the Dean Baker quote above, he was being being sarcastic. The people who want to puts the brakes on our small economic recovery haven’t forgotten the lessons of the late 1990s. And they don’t disagree with Krugman’s simple model. They just don’t care.

Michael Hiltzik published what is the best headline I’ve read in a long time, New “Productive” Congress Takes a Vote… to Repeal Obamacare. Thus far, only the House has voted. This is their 56th repeal vote. It’s shocking. It is impossible not to ask why the Republicans think they are in Congress. I’m not someone who thinks that Congress should get something — anything — done. But the people in Congress should be working on the same stuff that they would be working on if they did have control of Congress and White House. These endless repeal votes are nothing but messages sent to their base. And I understand that some of this is to be expected. But 56 votes?!

To make matters worse, John Boehner provided the lamest excuse I have ever heard, “We have 47 new members of Congress on the Republican side who have never had a chance to cast their vote to repeal Obamacare.” What are they? Grammar school children? They have to go on yet another field trip to the zoo because some of the children have never had a chance to see a caged rhino? This is madness. What’s more, it’s silly. The idea seems to be that these Republicans need to prove that they are serious about repealing Obamacare to their bases. But everyone knows such a vote is meaningless as long as Obama is in the White House. Would all these Republicans really vote to repeal Obamacare if it actually would take healthcare away from their constituencies? I’m not sure. So the 56th repeal Obamacare vote is even pointless as a symbol.

Some — like Greg Sargent and Jamelle Bouie — are saying that this does not bode well for Obamacare if the Supreme Court decides to muck things up with King v Burwell. This is the case that uses one small contradictory passage in the new healthcare law to argue that people in the 36 states that don’t run their own exchanges. The argument then goes: if the Republicans are even now voting to repeal Obamacare, they certainly won’t be willing to make the trivial fix to it to overcome the Supreme Court challenge.

I don’t think it is as simple as this. For one thing, the Republicans may hate the poor, but they love big corporations. Hobbling Obamacare at this point would be very bad for business. Now I’m sure that there will be a lot of Republicans who will continue on with their foolish and dangerous behavior. But I don’t think the Republican Party as a whole will. It’s just like shutting down the government or breaching the Debt Ceiling. These are great issues to grandstand on. But they are not nearly as popular when the grandstanding actually means something.

Hiltzik noted an interesting situation that the Republicans find themselves in. If they do nothing to fix the problem that is before the court, the justices may decide that finding against the law is too harming and decide to uphold it. But approving this simple one-sentence fix would be seen by many as a vote in favor of Obamacare. Of course, we know what the Republicans are going to do: nothing. And if the Supreme Court finds against the law, we will see more support for doing something than we now do.

The bottom line is that the Republicans get lots that is positive and nothing that is negative for voting to repeal Obamacare at this time. We aren’t going to see what they really think until their votes actually mean something. So I don’t see the 56th repeal vote as any more significant than the 55th. Hiltzik is right that politically, it looks bad. But I don’t think the American people ever believed Boehner and McConnell when they claimed that they were going to start governing.

Did you get a 6.7% salary increase this year? Of course you didn’t! You’re a Frankly Curious reader. You work for a living. A 6.7% raise is more than the cost of living. And if there is one iron rule in the Land of Opportunity™, it is that the American worker should never see any gain from her increased productivity. She should feel grateful that she even has a job! Of course, the situation is quite different for the people at the top of our economy. In a bizarre kind of logic that I’ve never understood, if someone is rich, she must constantly see improvements in her salary. Otherwise, she might have her feeling hurt and not be a “job creator.” Or something.

Consider IBM Chairman and CEO Virginia Rometty. She got a 6.7% raise this year. But it hardly matters. Given all the other salary increases, I doubt she will notice it. As it is, it is only an extra $100,000 per year. That’s right: her base salary raise is not even quite double the median income of two American households. But I suppose that Rometty will struggle through this clear insult because of other compensation that she’s getting. For example, she’s getting a $3.6 million bonus for last year. She’s also getting a $13.3 million stock incentive. But she’s going to have to wait a whole three years to cash that out. I just hope her children can wait that long for new shoes.

According to the power elite in this country, such largess is the result of just how productive people like Rometty are. But Michael Hiltzik has provided the low down on this one, IBM Redefines Failure as “success,” Gives Underachieving CEO Enormous Raise. Rometty’s performance has been impressive in a certain way:

My take on the whole thing is that her performance doesn’t matter. When CEOs get bonuses because their companies were more profitable, it is rarely because of the CEO. It is much more likely to be the vagaries of the economy. Yet the CEOs and all the other high level executives get huge bonuses because of this. The workers, of course, do not. And that is the critical fact in all of this. Among the Skull and Bones crowd, there were girls you slept with, and girls you married. When those boys grew up, they understood just as well that there are people who get bonuses, and people who don’t. And we are the people who don’t.

Hiltzik pointed out that the four IBM board members who approved Rometty’s raise are all former CEOs. So the move isn’t surprising, “Corporate CEOs are, as a species, known for a sense of entitlement that could make $17 million in raises, bonuses, and ‘incentive compensation’ seem like punishment.” That sentence is like a soothing bath: just to hear the word “entitlement” used to describe the rich! It is entirely correct, but also rarely unheard. According to most in the mainstream media, “entitlement” is something that poor people feel.

This is all part of what I wrote earlier, We Need to Embrace Class. The issue is not that the rich are different from the rest of us. The issue is that everyone thinks that they are different. And that’s why an unsuccessful CEO can be given $17 million in extra compensation for manning her company on its long trip into irrelevance. Because the rich can never be allowed to fail. Because the rich must be constantly pandered to. Because the rich are rich!

There has been a lot of discussion of vaccines these past few days. For some reason, all the potential 2016 presidential candidates have been asked if they think that measles vaccines cause autism. For the record, they don’t. If vaccines caused autism, someone would have noticed it a very long time ago and there would be no question. But whatever.

The Republicans have not done a good job in responding to these questions. There is Chris Christie who comes off as, I don’t know, a total hypocrite when he says that parents ought to be able to do anything they want, after he quarantined a nurse for clearly political purposes. But even worse was Doctor Rand Paul. He thinks generally that vaccines are a good thing. But parents shouldn’t be forced to give them to there kids because, you know, freedom. Or rather slavery:

The mind boggles. Paul, of course, is very much an anti-choice guy. So apparently, once a child is born, the parents own it. But before birth, the state owns it. Or it is a full citizen that must be protected. But not against measles.

But the smart people at The Washington Free Beacon thought it a good idea to protect their conservative heroes. So they launched a shot across the bow, When Hillary and Obama Gave Credence to Anti-Vaccine Theories. Back in 2008, it seems, both Clinton and Obama equivocated regarding vaccines. During his race for the White House, Obama said, “We’ve seen just a skyrocketing autism rate. Some people are suspicious that it’s connected to the vaccines. This person included. The science right now is inconclusive, but we have to research it.” At the same time, Clinton said the much less provocative, “I am committed to make investments to find the causes of autism, including possible environmental causes like vaccines.”

And now they are both claiming the opposite. Obama recently said, “The science is, you know, pretty indisputable.” And Clinton tweeted:

And the conservative crowd goes wild!

But wait. There’s something different about these claims. Oh, I know: they are separated by seven years! I wonder if anything happened during those seven years that would move the thinking of a thoughtful person from “suspicious” to “indisputable”? Perhaps science? The suspicion about vaccines came from a 1998 Lancet article that linked autism to the MMR vaccine. In 2004, a major conflict of interest was discovered and most of the co-authors on the paper repudiated it. But it wasn’t until 2010 that the journal itself fully retracted it, calling it “utterly false.”

This is the way that science works. Or at least, it is the way that science is supposed to work. Obama and Clinton were acting responsibly based upon the facts that they knew. That’s not true of Chris Christie and Rand Paul. Science my change but their their opinions never will because their opinions were never based on science in the first place.

But there is something more. Remember Free Beacon quoted Obama as saying, “We’ve seen just a skyrocketing autism rate. Some people are suspicious that it’s connected to the vaccines. This person included. The science right now is inconclusive, but we have to research it”? Well, that’s a selective quote. Via PolitiFact, here is the full quote:

Who would have guessed that Obama would actually have been making a nuanced point like that? It is so unlike him! Clearly, the charlatans at The Washington Free Beacon knew exactly what they were doing. It must be hard to be a conservative. You have to spend all that time apologizing for evil idiots and pretending that your enemies are different than they are.

As Americans, we are not supposed to talk about class. I’m sure you’ve heard feel good nonsense like, “There are no poor Americans — only soon to be rich Americans!” The idea is that anyone can grow up to be rich in America — if only they try. But the truth is that among peer countries, the United States is the most class based. If your father was poor, you’ll be poor. If your father was rich, you’ll be rich. It doesn’t matter that some poor children will become rich. As a statistical matter, people are locked into their classes in America.

Consider Shakespeare. Through his financial wisdom and his abilities as a writer, he was able to move out of the middle class and into the aristocracy. Does that mean that Elizabethan England wasn’t a class based society? According to the modern conventional wisdom in the United States it wasn’t. But that is very clearly wrong. Similarly, Daymond John doesn’t prove that we aren’t a rigidly class based society. George W Bush proves that we are. Because if we actually lived in a meritocracy, Bush wouldn’t have president; he would be living in a halfway house somewhere.

It is important that we Americans put away childish things. And the most childish thing is our delusion that we live in the land of opportunity. We don’t. The last four decades have seen the power elite manipulate how resources are distributed. And like the spoiled the children that they are, the power elite have seen fit not to share anything with the rest of us. Rats are far more humane than our human “betters.” (For the record, I’m very fond of rats.)

In the following lecture by Richard Wolff, he goes over the reasons why we need to embrace class. Basically: we need to do it because it is the only way out of this trap. Accepting the framing that there is no class is exactly what the power elite want. It stops us from even questioning the morality of people having more money than they could ever spend while other people live without sanitation. It also allows the middle class to live their whole lives in fear that they will lose their jobs. It makes for an extremely compliant workforce as well as electorate.

I know the conservative response to this. It involves how the capitalist makes everyone richer and that the capitalist is doing all this important work by moving capital around to where it is most useful. This is all fine. But there are a number of problems. The biggest one is simply what Wolff shows: the capitalists have been making themselves richer over the last four decades, but none of this has gone to the worker. So why should the worker continue on with this system? We still have a democracy, right?

Another issue not brought up in the lecture is the fact that modern institutions and technologies allow the few to benefit in ways that they never could before. For example, without the interstate highway system and container ships, Sam Walton would not have been one-tenth as rich as he was. How is it moral to allow someone to make far more money simply because of other factors that he had no part in creating? Similarly, why should an actor make millions today with movies when the same actor would have made far less in the theater of a century and a half ago, when she would have had to work far more? There is nothing “natural” about this state of things.

The point of all of this is that we need to see the class structure that we have in this country. It doesn’t matter that some people manage to move from one class to another. That doesn’t mean the classes don’t exist. If we can see the classes clearly, we can make explicit decisions about the morality of our class based system. And I believe a close look will show that we’ve long ago abandoned any semblance of morality.

Nancy LeTourneau brought my attention to a short quote by Dennis Baxley, who was in the Florida state House while Jeb Bush was governor. Commenting on Bush’s unconscionable behavior in the Terri Schiavo case, Baxley said, “If you want to understand Jeb Bush, he’s guided by principle over convenience. He may be wrong about something, but he knows what he believes.” An act of extreme demagoguery aimed at Christian conservatives is an act of principle? It was what he really thought? That’s not believable. He was pandering and he knew that he was pandering. Like all the other conservatives who got caught up in that, he thought it would please the conservatives, and the rest just wouldn’t care. He was as wrong politically as he was morally.

LeTourneau sees it as a sign of Bush’s fundamentalism. She especially takes him to task for being a typical conservative Christian: all conservative, no Christian. In this regard, she refers to Mark 2.23-27 about Jesus’ belief that proscription of work on the Sabbath should not be used as an excuse to allow suffering:

But I don’t think that our man Jeb is a fundamentalist. In fact, what Baxley said sounds very familiar, “He may be wrong about something, but he knows what he believes.” This was always the argument for George W Bush: he might be stupid and wrong about everything, but at least he knew what he believed in! As Stephen Colbert said at the 2006 White House Correspondents’ Association Dinner, “The greatest thing about this man is he’s steady. You know where he stands. He believes the same thing Wednesday that he believed on Monday, no matter what happened Tuesday. Events can change; this man’s beliefs never will.”

It’s not surprising that Jeb Bush would want this kind of narrative floated about him. For one thing, it acts as an apologia for everything he ever did wrong. But it is strange that this tactic works. Beneath it is this: you may hate things he’s done before, but at least you can depend upon him to do the exact same things again. Really?! That’s a strange kind of logic that Americans really are prone to.

But even more than this, it says to Americans that he is a strong leader. He may lead us in the wrong direction, but he will be in front of us and he really will believe. The problem is that this is all part of the not so secret American desire for authoritarian leaders. What’s more, a lot of people seem to think that a president heartily doing what they don’t like is a better choice than a president meekly doing what they do like.

It reminds me of a segment of the This American Life episode Swing Set. It involves multiple interviews with James Hackett, a Cincinnati doctor who was a lifelong Republican, but who didn’t want to vote for George Bush in 2004. He did eventually vote for Bush — but it was despite the fact that he hated everything about the man and his policies. Hackett — like pretty much all Republicans — was just thrilled with Bill Clinton in retrospect. And we all know that one of the biggest concerns that conservatives brought up while he was president was that he wasn’t authentic — Slick Willy. So at one point in the segment, Ira Glass countered Hackett on his nonsense about how inauthentic Kerry was by referencing Clinton.

Ira Glass summed up that segment, “In the end, he thinks the president will keep us safer, despite the debacle in Iraq, and despite the fact that he disagrees with them on almost every other issue.” We don’t need no stinking issues. We just need a candidate who will lead in the wrong direction just as boldly as he does the right direction. This is what Jeb Bush is hoping for. It’s a good thing the president has to have been born here. Otherwise, Vladimir Putin might be our next president.

See Also

Jeb Bush Is an Extremist Like All in GOP
Bush 2016: the Terri Schiavo Choice!
Jeb Bush Is No Moderate

We liberals have got to find a better way to point out the nonsense of Republican economic policy. Last night, Jonathan Weisman at The New York Times wrote, Obama’s Plans for Deficit and Taxes Are Detailed on Eve of Budget Proposal. In it, he quoted Paul Ryan repeating what is the most annoying Republican talking point in a decade, “The Obamanomics that we’re practicing now have exacerbated inequality. They’ve exacerbated stagnation. They’re made things worse.”

This is the same argument that Republicans have been making for decades, although in different words. Since the Democrats — just thirty years late — have decided to talk about income inequality, the Republicans have decided to grab the issue themselves. Certainly, this is at its base just more, “I’m rubber and you’re glue.” But at a minimum, it muddies the water. It now seems to be the case that everyone “cares” about economic inequality. At Davos this year, even the billionaires were stroking their chins in its direction.

Of course, the folks at Davos were not talking about food stamps and low income housing. Those kinds of programs would require that the rich sacrifice something — at least temporarily. That’s unacceptable. The Republicans are exactly the same way. For example, Ryan said, “It’s hard to imagine the president is going to want to work with Congress on entitlement reform.” Entitlement reform?! That’s the great idea to mitigate economic inequality?

This shows that the Republicans don’t care about income inequality. Just as with healthcare reform, their answer for income inequality is a collection of policies they always want. It’s like that old cartoon: income inequality will be fixed by some special feature of the free market, even though all the free market “reforms” enacted over the last four decades are what have made inequality so much worse.

So how should liberals counter these claims by the Republicans? What we can’t do is what Jonathan Chait did, Paul Ryan’s Most Shameless Lie Ever. He argued that Obama’s policies have reduced inequality — they just haven’t reduced it enough to overcome the structural forces that are causing more inequality. He’s right. But I wouldn’t give Obama too much credit there. Like the whole New Democratic movement, Obama is very much in favor of those very same structural forces. Just look at his continued support of TTIP and TPP. But even if we do give Obama credit, Chait’s argument is still incredibly weak.

Chait claimed that Obama has pushed against income inequality by raising taxes on the rich. But Ryan is still a supply-sider. He would simply counter that raising taxes on the rich just slows economic growth. And that’s true in the current situation where those higher taxes were simply used to pay down the debt in a depressed economy. And let’s fact it: Obama barely raised taxes. Chait provided a table that showed that even for the top 1%, Obama’s policy lowered taxes. It was only for the top 0.1% that taxes actually went up — and only by six percentage points.

What’s more, he presented a graph that shows that Obamacare is going to substantially increase the incomes of the bottom 20% of the country. That’s great! But it also shows that the lower-middle, middle, and upper-middle classes are all paying more than the upper class is. In addition, the lower one’s income (other than for the bottom 20%), the more one is negatively affected. In terms of economic inequality, harming the middle 60% of the nation is counterproductive.

At this point, I think that most people understand that supply side economics — trickle down — is hogwash. If Republicans want to claim that they care about economic inequality, let them. But don’t counter it with talk of transfer programs — especially when those transfers are usually very small. Talk about what Republicans want to do. And what they want to do is to give more money to the rich because even after 34 years of failure, they think it will trickle down to the rest of us.

See also: Why Conservatives Think Government Doesn’t Create Jobs.

I’ve been feeling reasonably good about the economy. A big part of this is just theoretical. The government — partly because of the Democrats, but mostly because of the Republicans — has done an enormous amount of harm to the economy. But that’s now baked into the economic cake. It would seem that the economy ought to be improving simply because the government isn’t actively harming it through spending cuts. And on the empirical side, the last few jobs reports have looked pretty good. But on Friday, the Department of Commerce (pdf) put out its estimate of GDP growth in the fourth quarter of last year. And the news ain’t good.

The growth rate for the year was 2.5% with the annualized fourth quarter growth rate of 2.6%. To give you some idea of just how unimpressive this is, during the recovery after the far smaller dot-com recession, we got a growth rate of roughly 3.5%. And you may remember: that was an anemic recovery. Earlier, more robust recoveries saw far higher GDP growth. But those were in the days when he didn’t live under an oligarchy. (But note: poor economic growth hurts the poor and rich; the rich really are short sighted.)

Dean Baker — the Pollyanna of economists — noted something to make even these poor headline numbers worse. In the first quarter of last year, due in part to the bad weather, the economy actually shrank by 0.52% (2.1% annualized). That means that the economy had some catching up to do. And so the growth during the following three quarters should have been really strong. And indeed, the second and third quarter growth rates were good: 4.6% and 5.0% annualized rates. That makes the 2.6% rate for the last quarter all the more troubling. We’ll have to see what happens next quarter. But this really has been the “next quarter” recovery: it has constantly been crummy but hopeful. As Herbert Hoover never actually said, “Prosperity is just around the corner!” Or, as Annie said, “The sun ‘ll come out tomorrow!” Or as the actual Pollyanna said, “There is something about everything that you can be glad about, if you keep hunting long enough to find it.”

But if you want to think the last quarter growth rate was only bad through a combination of bad weather and a very strong third quarter rate, feel free. But Dean Baker had even more bad news. It turns out that of the one-third of the GDP growth rate in the last quarter is due to increases in inventory, “This will be a drag on growth in future quarters since inventories will almost certainly not continue to accumulate at the same pace, which was extraordinarily rapid.” In other words, much of the growth is effectively siphoning off growth that would have happened later.

Let us not be too down in the dumps about this, however. There are are things we have to keep in mind. First, of course, this is just one quarter. Maybe everything will be back up in the first quarter of this year. Second, poor economic growth should lessen some of the pressure on the Fed to raise interest rates. In this regard, I don’t know why the Fed is so keen to act anyway, with inflation and the employment to population so low. Time will tell. “Tomorrow! Tomorrow! I love ya, tomorrow! You’re always a day away!”