Secular stagnation is the idea that that the bad times are here by default — the only times we will get full employment is when we have bubbles like those in the housing and high tech markets. The idea is not new, but it has become quite popular for the past year are so since Larry Summers started pushing it. I don’t think there is any real doubt about it, but I haven’t heard anyone discuss what we are going to do about it. And on the right, most people don’t even accept that it is happening.

It’s interesting that Summers should become the man most associated with the concept. He was, after all, one the people in the Clinton administration who pushed the “strong dollar” policy. And a big part of the story of our economic troubles comes from the fact that we continue to pursue this policy. A strong dollar means that we are going to have a trade deficit. As Dean Baker explained, there are only three ways to offset this: business investment, consumer spending, or government spending. Nothing will make businesses invest when there isn’t demand. What we’ve depended on for the last three decades is giving consumers more credit to spend rather than increasing wages; this is morally wrong and unsustainable. And as for government spending, well, Baker put it well, “Unfortunately, our politicians are religiously opposed to budget deficits in the same way that many question evolution.”

What annoys me is that people automatically think that a strong dollar is a good thing. It sounds great, right? But we don’t want a strong dollar; we want a strong economy. A strong dollar allows us to buy a bunch of stuff from outside the country. That’s great if you already have all the money you need. But if, like 99.9% of all Americans, you need a job, then the strong dollar is a very bad thing. A strong dollar creates jobs outside America. Let me just say it: a strong dollar policy is unpatriotic.

Then why is it that all administrations are in favor of a strong dollar? Why was Larry Summers, the new Chicken Little of secular stagnation, so keen on a strong dollar? I don’t know. But I think the cinematic Deep Throat gives us a clue, “Follow the money.” Or as The Dude put it, “It’s like what Lenin said, you look for the person who will benefit, and…” The Dude never completes the thought, but, “You know what I’m trying to say…” So who benefits from the strong dollar policy? That’s pretty obvious: the rich.

What’s annoying about the phrase “strong dollar policy” is that it isn’t Orwellian. It isn’t like the “clear skies initiative,” which was a proposal to pollute more. The strong dollar policy really is what it claims to be. We would all like the dollars we have to be worth as much as possible. The problem is that along with that strong dollar goes a weak economy. It’s an opportunity cost. The people are asked, “Do you want a strong dollar?” And of course they say yes. But it would be different if they were asked, “Do you want a strong dollar and be unable to find a job?”

If you want the details of this, go read Dean Baker’s article or mine from last year, Larry Summers’ Last Chance. But the main thing is that as long as we continue to vote in small numbers, we will continue to be ruled by people like Clinton and Obama who don’t think twice about pushing a strong dollar policy. That’s because they fear the rich a lot more than they fear the people.

This week, I was at the ASI Tech Expo 2014. It was a vile little event filled with companies pushing their products and their brands. While this is true of all conferences, most have other things that make it all worth while. This one did not. In fact, the “keynote” speech was by some guy at Lenovo who gave what was basically a shareholders speech. I really didn’t care about what was going on with their market share, and I didn’t appreciate some obvious “lying with statistics.” But there was one interesting thing at the conference: AMD had its talk canceled. Apparently, the company is going through layoffs, and the guy who was supposed to give the talk was laid off. Great PR guys!

Now I understand: AMD has been struggling. It recently announced a “restructuring” to make itself more “competitive.” This is business-speak for, “We’re going to fire a bunch of people who actually work for us; the stock market will reward us with an increased valuation because nothing gets them as excited as firing people; then the bonuses of our top managers will be much higher!” But regardless of what a company needs, what management always does is the same thing. The health of the company doesn’t matter; what matters is just how much money the CEO is making.

Michael Hiltzik wrote about this issue on the very day I was at the conference, Wall Street Talks, Companies Respond — by Axing Thousands of Jobs. He provided two recent examples of companies doing long-term harm to themselves in the name of impressing (or simply appeasing) the stock market. The first is the Amgen. The biotech company has been doing really well, but it isn’t good enough. “[H]hedge fund magnate Danel Loeb wants Amgen to engage in the kind of financial engineering that throws off cash to investors such as himself — a company breakup, stock buybacks, cost cutting.” But this short-term thinking is only good for the people on the stock market. It is potentially catastrophic for the company, “If the pipeline begins to go dry in a few years because the Seattle R&D staff is no more, Loeb and his fellow hedgers probably won’t care; they will have moved on.”

The second example is Time Warner, “There, the cost cutting appears to reflect an effort by CEO Jeff Bewkes to show he made the right decision in fending off an $80-billion takeover bid by Rupert Murdoch.” So people get fired to goose the stock so that Bewkes can claim victory. This is not responsible management:

What this all strikes me as is these companies eating their seed corn. But the term doesn’t fully capture the insanity of the situation. First, people normally eat their seed corn because they are starving and wouldn’t live to the next harvest if they don’t eat their seed corn. This situation might apply to AMD, but it doesn’t apply to either Amgen or Time Warner. They are both just trying to take money out of the companies in the short-term with no thought to what it means to the companies in the long-term.

The bigger issue is that the companies are not deciding to put short-term profits above the long-term health of themselves. The issue is that the CEOs are a poor analogy for the companies they run. They are doing what is in their own best short- and long-term interests. This is the same thing that went on during the housing bubble of the aughts. The fed has not been willing to prosecute the people who ran the banks because the sub-prime mortgages weren’t in their interests. Why would they do it? Very simple: those running the banks had different interests than the banks themselves. It is like I’ve written about before: the rich show no impulse control. They want to be rewarded now now now! And they don’t care about the long-term, because they know they are set to life.

This is how a great economy is destroyed in just a couple of generations.

This morning, Jonathan Chait explained, There’s Only One Thing at Stake in the Senate Race. It’s a good article. He started by explaining why it is that the Republicans are not going to start making deals. Right now, the problem is that the House Republicans will not make any deals with Obama. Any deal that they would make would be acceptable to the Senate — be it in Republican or Democratic control.

I think he was a too dismissive of the possibility of Obama caving on a Grand Bargain. If the Republicans offered Obama cuts to Social Security in exchange for just about anything, he would take it. The only reason this doesn’t terrify me is that the Republicans have a long history of being unwilling to offer any compromises at all. So just as it has been the last four years, what will save us for the next two years will be that the Republicans are unwilling to do anything. And that takes us back to Chait’s original point: it doesn’t matter what’s going on in the Senate.

Where Senate control matters is on the appointment of federal judges. It is very likely that a Republican controlled Senate will not approve a single judge in the following two years. And why is that? Because the Republicans have long ago given up any ideas about respecting norms. They will see having no judges appointed as being better than having a liberal (or more likely a moderate) judge appointed. And in as much as the media will even notice this, Mitch McConnell’s response is almost certain to be to point to the elimination of the filibuster on appointments and claim, “They started it!”

What bugs me about this is that during Obama’s first term, he was incredibly lackadaisical about about judicial and executive appointments. I know that Obama cares about his legacy, and there is no greater one than the judges that are put on the bench — especially in an era in which Republicans nominate almost nothing but ideologues. Obama seems to have always thought that he had plenty of time. And clearly he didn’t. Since the removal of the filibuster for these appointments, there has been a much bigger push by the administration. But it’s still been slow going, because the Republicans have done literally everything they can to slow progress.

Some people have claimed that Obama couldn’t have focused on judges early in his term because there was so much other stuff that he was doing. But the president has almost unlimited resources for hiring people. If it was an important issue for him, it would have gotten done. Part of the problem, I think, is that during the first four years, Obama still harbored the delusion that he was going to be a bipartisan president (whatever that might mean). And appointing lots of judges would have been seen as rubbing the Republicans’ noses in Obama’s power. Of course, the truth of the matter is that Obama can’t walk down the street without the Republicans feeling offended. Remember when Obama gave a speech about the importance of education to school children and the Republican freak out that ensued?

So the real question that we have to ask is, “How does control of the Senate allow the Republicans to harm Obama?” That’s it. They aren’t interested in anything else. And Chait is right, the one place where they will gain power is in rejecting Obama’s nominations. And that’s why I think they will not allow any for the next two years, if they get control of the Senate. And that is a very big deal.

Yesterday over at Washington Post, Matt O’Brien explained, Why the Fed Is Giving Up Too Soon on the Economy. This is in reference to the Federal Reserve ending the third round of “quantitative easing” or QE3. He noted that in 2013, because of all the federal government cutbacks, the economy should have slowed down a lot. But it didn’t. And the reason for that is because of QE3. I’m not sure if I agree with that, but it is a reasonable contention. I will at least go this far: quantitative easing provides at least some stimulus to the economy and it is just crazy to think that it is a bad thing to do given our current economic situation.

O’Brien imagines what it would have been like if the federal government had done its job and not enacted policies to harm the economy. We might have seen 300,000 jobs added per month for the last two years. Except: no. This is something that economists just don’t appreciate enough. If the federal government had done its job and stimulated the economy — as everyone knew was the right thing to do since World War II — then the Federal Reserve would not have done any quantitative easing.

It is true that the unemployment rate has fallen from 7.9% at the start of 2013 to 5.9% now. But is this real? We haven’t seen wages going up. And then there is the employment rate. The following graph shows the percentage of people age 25-54 who were employed before the financial crisis and after. Given the ages, this can’t have anything to do with people retiring. And what we see is that we are maybe 20% of the way back to full employment. So that 5.9% unemployment level isn’t anywhere near full employment.

So why is the Federal Reserve ending QE3? Well, if you want the official — “Let’s play nice!” — answer, you can read O’Brien’s article. I would say, however, that in ending QE3, the Fed is doing what it always does: the absolute minimum it can get away with. As long as inflation stays low, the power elite will be happy. The Fed only needs to look like it cares about employment. It doesn’t really have to care about it. After all, employment is just an issue that affects the little people. The Fed is not interested in it and they certainly aren’t afraid of it. Janet Yellen won’t lose her job because millions of people unnecessarily go without work.

So what this all comes down to is that the Fed sees its job as the backstop: something that will stop things from going too far gone. But if the elected government were doing its job, the Fed would be focused on the one thing it really cares about: keeping inflation low. And they care about that, because that is what the plutocrats care about. What matters is that people with lots and lots of money continue to enjoy their rents on it. It is a joke that the Fed has a dual mandate to keep inflation low and employment high. As Matt Yglesias said a couple of years ago, “If the unemployment and inflation rates were reversed, would the Fed do something about it?” The answer is: a lot. But what was it doing about the high unemployment at that time: as little as possible.

It seems as though people are grabbing onto a factoid and making a big deal out of it. Or at least Cass Sunstein and David Brooks are. It is based on a 2010 poll that found that 33% of Democrats and 49% of Republicans would be displeased if their child married someone of the opposite party. This is up from 1960 when pretty much no one thought that. I think it is worth noting that 1960 was kind of a transitional period when the Republicans were turning into freaks and Democrats were finally starting to shed their historic racism. Of course, this was also a time when the political parties simply didn’t mean that much in an ideological sense. The liberal Republicans were more liberal than the conservative Democrats.

For all the problems I may sometimes have with Jonathan Chait, there are few writers who so easily obliterate this kind of nonsense, Confessions of a “Partyist”: Yes, I Judge Your Politics. But let me lay it out very simply. The problem with racism is, to rip off Martin Luther King, judging people on the color of their skin instead of the content of the character. It isn’t wrong to dislike someone because they hold vile opinions. Political parties are now highly ideological, so “Republican” or “Democrat” is shorthand for certain beliefs. Why is it wrong to say you wouldn’t want someone of the other party marrying your son or daughter?

I talk as much as I can to conservatives. And on economic issues, we usually have a lot of common ground — at least until an issue starts to be propagandized on the right. But the fact remains that on social issues, these people tend to hold positions that I find troubling. They tend to have very unsophisticated notions of sociology that, in their extremes, lead to blatant racism. And, as John Dean documented in Conservatives without Conscience, most conservatives have strong authoritarian tendencies. Does all this apply to all Republicans? Certain not. But as Chait observed:

And I can understand it from the other side, although I think it is weird that Republicans feel more strongly about this than Democrats. Liberals tend to be naive, always wanting to find good in people, even when it isn’t there. Liberals aren’t patriotic in the way that conservatives tend to define the word. We are very often embarrassed by ostentatious expressions of nationalism whereas conservatives see this as what patriotism is. Liberals are trying to destroy America by tearing down the most successful and elevating the weak. Again, I don’t see it this way. Conservatives actually show a shocking lack of understanding about sociology and psychology, but I get that they look at me and see an America-hating wimp.

What the numbers most likely mean is that the really ideological people (roughly 20% on the left and 20% on the right) have a problem with their children marrying people of the opposite ideology. And to be honest, I don’t see any problem with that. It makes as much sense as religious parents having problems with heretical in-laws. It’s all about ideas. I think the vast majority of Americans would not want to have to spend every Thanksgiving with a neo-Nazi in-law. It wouldn’t be the label that was the problem — it would be what the label says about what they think. No one wants to have that argument about Aryan skull shape and the inferiority of Jews. Just the same, we Democrats are not interested in hearing how right what Rush Limbaugh said about catcalls was.

I have only ever had one real complaint against Dean Baker, because he is, you know, brilliant — perhaps the best practical macroeconomist in the world. (And yes, I do know what a remarkable claim that is.) But where I differ with him is that sometimes he sticks to the economics too tight without admitting political realities. For example, he dismisses the concern about decreasing numbers of workers for each retiree. He argues that it doesn’t matter because wages should go up at a faster rate that will dwarf this effect. This is true. The problem is that middle class wages have been pretty stagnant the last 35 years as almost all productivity gains have gone to the rich. Baker’s implicit point is that this problem has nothing to do with Social Security and so shouldn’t be phrased as though it did.

In an article today, I think Baker did a much better job of explaining the whole situation, Washington Post Offers Lesson in Bad Public Opinion Polling. He explained that the problem is that we have other (non-Social-Security) policies that affect the distribution of incomes:

Yes, yes, yes! Of course, that really is the point of the people who are now and forever wringing their hands about Social Security: they take it is a given that the rich should be taking all the gains from the economy. They take it as such a given that they never even think it is open to discussion. The way things are is the way that things must be.

It reminds me of all the upper-middle class urban journalists who just love Uber. I don’t personally have against companies like that. But these same journalists never seem to get excited about things like strong unions that would give workers more power. No, it is always some “free market” solution that ends up with workers doing worse and just so happens to provide marginal gains for upper-middle class urban journalists.

So we get the same kind of thing from the Washington Post. I know it doesn’t work this way, but it seems like there is an explicit decision making process: we must only consider solutions that the power elite will go along with. What is probably more the case is that the rich are the ones who fund think tanks and so there are reports that come out that talk about the necessity of chained-CPI (Social Security cuts). There are not nearly as many reports about raising the payroll tax cap, because that would cost the rich more money. And there is virtually no talk about the policies that have destroyed unions and which funnel money from the poor to the rich.

So the Washington Post can shed crocodile tears about raising the payroll taxes of the poor by 3 percentage points in 2033. But there is no talk of the fact that for almost four decades the poor have not participated in our economic growth and there is no reason to think this will change in the next two decades. In fact, those writing for mainstream media outlets don’t even seem to be aware of these problems. So they continue to claim fealty to the well-being of the poor, when their only concern is the continued bleeding of the poor to enrich the power elite.

Michael Hiltzik reads the Kaiser Family Foundation reports so we don’t have to, A New Sign That Opting Out of Medicaid Expansion Will Cost States Money. And as the title indicates this one is a doozy. But it ain’t surprising. It turns out that those states who have not accepted the Medicaid expansion are seeing their total state expenditures go up much faster next year than this year. But in states that did expand Medicaid, the rate of increase will go down.

Let me unpack this. Medicaid exists in every state in the union. Just under normal circumstances, there are more people born and so total enrollment expands. What’s more, medical inflation is still higher than overall inflation. (Obamacare is helping to slow that.) So these two factors cause state Medicaid costs to increase each year. But there is also an increase in the number of eligible people who are participating in the program. This has caused the overall increase of state spending from year to year to go down from 6.6% in 2014 to 4.4% in 2015. So the state expenditures in the states that expanded Medicaid are still growing, but the rate is decreasing.

In the states that did not expand Medicaid, the situation is much worse. The state spending from year to year has gone up from 6.1% in 2014 to 6.8% in 2015. And this is despite the fact that these states are not, you know, expanding Medicaid to the working poor. They are putting increasing pressure on their state budgets and all they get for it is that warm feeling that that they are sticking it to Obama.

Here are Figures 2 and 3 from the report combined by me to make for clearer viewing:

In addition to this, states will be saving money on things like providing care in prisons and in programs to reimburse hospitals for unpaid care. Hiltzik lays it out:

One thing Hiltzik doesn’t go into is the pure economics of this (although he has in the past). This is just a question of the federal government giving the states free money. To a first approximation, the states are just getting back money that their people have already paid in taxes. So this whole Republican hissy fit makes no sense. In addition to reducing the costs of the government, it is also a stimulus program for the state economy. The extra money going into the state will create jobs.

The truth is, what the Republicans are doing is totally bizarre. It is something that goes against any idea of rational actors. These Republican state legislators and governors are directly hurting themselves, the people they represent, and their state. And it is all done for what? To send a message to the federal government? As Hiltzik noted, “The last holdouts look increasingly foolish.” And that’s saying something, given how foolish they already looked.