Paul Krugman has written quite a laudatory article about a recent talk given by Larry Summers. I think part of this is just an attempt for Krugman to make nice after being fairly critical of Summers as a possible Federal Reserve chair. But there is no denying that what Summers has to say is interesting. You can read Krugman’s description of it, Secular Stagnation, Coalmines, Bubbles, and Larry Summers. But the basic idea is pretty simple. And troubling.

What Summers noted was that since Reagan, the only time that our economy has been at full employment has been when some kind of bubble is going on. Part of this goes along with our huge increase in private debt over that time. But it is has not caused inflation. Summers suggests that we have a new normal where the economy is depressed. The takeaway from all of this is what we already know: individual saving during bad economic times is bad for the economy generally. Given that individuals won’t spend, the government ought to be spending more. This is all very basic Keynesian theory.

But having read the article, one thought immediately occurred to me. The real problem here is not how the economy is working on average. The problem is how the economy is being divided up. You may remember a TED Talk by Nick Hanauer that I wrote about last year. In his lecture he talks about how if workers had the same share of the economy as they had in 1970, they would make almost twice as much as they do today. Just imagine what that kind of extra buying power would do for our economy! Instead, we have rich individuals and corporations sitting on huge piles of money—money that could be spent on salaries for the unemployed.

I didn’t come up with this idea all by myself. It came from reading Dean Baker for years. So I was interested to see what he had to say about Summers’ talk. He made four points, Bubbles Are Not Funny. First, when bubbles burst, they tend to cause wealth to trickle upwards—they make income inequality worse. Second, he talks about income inequality. Third, he mentions how our trade deficit harms us (and how it is partly the fault of Summers’ strong dollar policy). And finally, he talks about a very big issue for him: work sharing. The truth is that part of our problem is that Americans work too many hours and don’t take vacations. If they worked less, more people could have jobs.

To me, the biggest issue by far is what I originally spoke about: productivity gains over the last 35 years have not been equitably shared (in fact, to a large extent, they haven’t been shared at all). As Baker noted, “The upward redistribution in the last three decades, from middle and lower end wage earners to the high end wage earners in the 80s and 90s, and to corporate profits in the last decade, likely had an effect in depressing consumption.” Simply by increasing the total taxes paid by the rich, and providing better services at the bottom would greatly help the poor and middle classes. This actually gets to a point that Matt Yglesias makes a lot: if companies can’t think of anything creative to do with their piles of cash, then maybe they should just lower their prices. Well, if the rich can’t think of anything creative to do with their cash, I can think of a lot of creative things the government can do with it.

As Krugman hammers on all the time: economics is not a morality tale. All the Ayn Rand sycophants can talk all they want about “makers and takers.” But the fact is that the bad economy hurts the rich as well as the poor. The rich are not concerned, as Rand always claimed they needed to be, with their enlightened self-interest. The rich are as short sighted as anyone. We need to do what is best for the economy as a whole. And that works out well, because it also means that the economy works well for everyone inside it.

Update (17 November 2013 9:57 pm)

Krugman wrote a column based on the same stuff, A Permanent Slump?

I’m in the process of reading John Rawls’ Justice as Fairness. It is not easy reading. But still, I’m sure you’ll hear me talking more and more about Rawls as time goes on. That’s the way I am.

Reading this book got me thinking of another of his books, Political Liberalism where he tries to answer the question of political legitimacy. Basically: why should we even accept “justice as fairness” as the basis of our society? Why not just accept the idea that what it says in some holy book as the basis of our society? His answer is universality. Only people who accept the book as the word of God think, for example, that God cries whenever a sperm is wasted. But no one can reasonably argue that beating up innocent children is a good thing to do. (Actually, the Bible is pretty big on that too!)

As a society, we accept this. So in general, you don’t see people arguing against gay marriage because “God” is against it. Instead, you see arguments cloaked in a patina of universality when the actual point is simply a plea to a particular religious or cultural doctrine. So they argue (against all actual facts) that same sex couples are bad for children. Sure, their holy book is very clear that God hates fags, but that has nothing to do with their argument. It’s just about the children!

What this all comes down to is the fact that policy debates usually have a high percentage of content that is disingenuous. What’s more, those arguments come mostly from the conservative side. Consider abortion. The only argument against abortion rights is that the fetus should be considered a full citizen. But this isn’t a reasonable argument when you are talking about a zygote that has no brain. Again: it is a religious argument about souls masquerading as a universalist argument about protecting the innocent.

It isn’t just social issues either. Almost every conservative economic argument I hear is based upon the aristocratic idea that the rich really are better than the rest of us. It is a belief of pure faith and is completely unsupported by the facts. But the argument is rarely put in this way. Instead of “the rich are better” we get the Job Creator myth. By this myth, the poor will only have jobs if we let the rich keep all their money. Again: a disingenuous argument intended to hide the real argument.

Related to this is the evolution debate. In the 19th century and through much of the 20th, the argument was purely religious: God said it was seven days, dontcha know! But over time, the creationists realized they were losing the battle with all this religious talk. So they got disingenuous. They started making scientific-like arguments against evolution. They developed Intelligent Design. But regardless of how much mumbo jumbo you pile on, it is still Genesis 1.

I love theoretical discussions and I think John Rawls is brilliant and adds a lot of insight into my thinking about these things. But such serious discussions don’t mean much in the practical world. The conservatives know how to play the game, even if they don’t really understand the game. And as a fairly practical guy, I want to know how to deal with all this disingenuousness. I wish the Christians would just go back to their old way of arguing: God said it; I believe it; that settles it. At least it’s truthful.

Afterword

I would never try to prove natural selection by offering Bible verses. I really do not understand why they think it is alright to pollute my science as they do. They think they have the whole truth. If it were me and I just knew that after I died God was going to take me to heaven for eternity, I wouldn’t care much about this life. I know there are Christians like that out in the world. But most American Christians seem awfully angry when they talk about anything but how much Jesus loves them. Why does it matter to them what I believe? By their way of thinking, the best that’s going to happen to me is that I’m going to cease to exist. Given I only get one go at this, why not at least let me have my science and politics unpolluted by their faith-based disingenuousness?

There has been a lot of excitement about the fact that Kshama Sawant seems to have won her race for the Seattle City Council. The reason is that she ran as a socialist. But here’s the thing: it doesn’t mean that much. The world “socialist” has lost most of its meaning both on the left and on the right. And it is mostly a very good thing.

The Republicans are mostly to blame. They are experts at vilifying words. But they tend to take it too far. As I found myself asking conservatives a lot during the first two years of his presidency, “If Obama is a socialist, what was Stalin?” If you listen carefully to conservatives, you will quickly notice that to them, any deviation from their current ideology is, “Socialism! Socialism, I tell you!”

Obama was called a socialist. Clinton was called a socialist before him. Is there any doubt that any Democratic president will be vilified as a socialist? This kind of name calling can only work for so long. After a while, the word becomes nothing more than “doodie pants.” Okay, we get it: you don’t like the Democrats so you call them socialists. But it doesn’t mean anything more than that.

Look, it would be one thing if Republicans actually did stand for some kind of libertarian utopia. But they don’t. They are among the biggest supporters for the three biggest socialist programs we have: Social Security, Medicare, and the military. That’s 80% of the federal budget, folks. So if the difference between “Socialist!” and “Patriotic American!” is that remaining 20%, I think we can say that the Republicans are being a mite hyperbolic. (And note: the Republicans are also for most of the remaining 20% too.)

Some time in the 1950s, it seemed that the definition of socialism got watered down. If you wanted to talk about central planning dictatorships, you talked of “communism.” If you wanted to talk about the theoretical worker utopia, you talked about “Marxism.” Socialism came to mean those nice European nations where people were free but the society wasn’t dog-eat-dog.

What this all means is that “socialism” became just a slightly more robust version of the system that we have. But the conservatives couldn’t scream “Communist!” at liberals because that was patently false. So they depended upon the historical connection between “socialism” and the Soviet Union to do their dirty work. But it doesn’t work anymore—at least not for people under 40 years old. To them, socialism is just another word for the kind of political system that they prefer. The truth is that most of what Sawant stands for is very much what they believe in.

But is Sawant an actual socialist? In a word, maybe. I’m not especially clear on all her positions, but when you get into the weeds of policy, she seems to have some ideas (or at least Socialist Alternative does) that I wouldn’t support. But from a practical standpoint, she’s just a real liberal and that’s why she has been elected. As I talk about all the time here, the United States has been pulled so far to the right that it would be years of leftist control before things got balanced and I started to disagree with anything the left wanted to do. Regardless, Sawant and her party seem pretty far removed from nationalizing the corporate world, which is what a real socialist would do.

If we start getting more aggressive liberal politicians running under the banner of socialism, you know who to blame: the conservatives. They distorted the usage of the word socialism for their own purposes for decades. And now the liberals are distorting it for their own. And I’ll be clear: I’m thrilled. I’ve always thought, “You think Obama’s a socialist?! I’ll show you a real socialist!” And it looks like that time may have come.

Afterword

It is interesting to think about Elizabeth Warren becoming president. She is not at all a socialist, but you know the kind of freak out we would see from the right! Suddenly they would talk about how reasonable Obama was but this Warren chick is a… Socialist! Communist! Doodie pants!

This image is cropped from a picture in an article by photojournalist Nina Berman, Gun Rally Fashion Then and Now. She went to the Come and Take it Rally in San Antonio last month. It’s one of these relatively common rallies where people walk around with loaded guns. The article is really interesting because she’s able to put it into perspective having photographed similar events in the early 1990s. And things really have changed, although I can’t make up my mind if it was obvious or not.

She notes that in the 1990s, there was the occasional person dressed up as Uncle Sam or a confederate soldier. But now that kind of stuff is completely overshadowed by the “happy consumers flaunting their bling.” And in describing it that way, she isn’t just talking about the “red bustier” and “matching lipstick” of the young woman in the picture here. She’s also talking about the “black rifle across her chest.” She even writes, “At the Alamo that day, I saw a whole new generation of gun owners who wore their weapons like Madison Avenue socialites wear their Hermes bags.”

Guns can be surprisingly cheap. But most of the guns you see on display are pretty expensive. And all the gun aficionados (you might call them “nuts”) are very eager to tell you how much they spent on this or that gun. As is well reported, fewer and fewer Americans own guns even while the total number of guns goes up. Of the people I’ve know, they either own no guns or they own a lot. And here I’m not even talking about the five or six that a hunter might reasonably have. People often have twenty, third, forty or more guns—collections worth tens of thousands of dollars.

So I think Berman is definitely onto something. Men have their reasons for stockpiling guns. And I understand them. I’m as much aware of the dangers of governments as they are. (However, they are mostly clueless about so many other threats to their life and liberty.) But after a while, the gun collection stops being about any concerns for one’s safety. If you have forty guns in a box in your closet, you’re a consumer—no more or less than a grammar school kid collecting Garbage Pail Kids.

But when you dress up like a Captain America ripoff and strap your assault rifle on with its “Don’t Tread on Me” bumper sticker, you aren’t protesting. You are strutting your stuff. You are showing off. And that’s great! Just keep that bolt blocked by that colorful plastic straw. Safety first!

The days of the Senate filibuster may be numbered—at least nomination filibusters. I say this because Jonathan Bernstein seems to have given up on saving the filibuster. He knows more about the filibuster than anyone I read. And for the last couple of years, he’s always claimed that not only is the filibuster a good thing, but that it wasn’t going anywhere. He always thought that the two sides would work out their differences. But he concluded his article today, “I’m not as optimistic as I was last time that they’re going to strike a deal.”

More than predictions, however, Bernstein doesn’t seem to think that the Democrats have any choice but to destroy the filibuster. The whole article is a response to those who are wondering what the Democrats are thinking in all of this. According to him that’s clear, “It seems to me that Democrats will have little choice but to threaten majority-imposed rules change and, if necessary, carry out that threat.” Given this, why are the Republicans acting in such a way as to force a response?

He offers four theories, but I don’t find them particularly compelling. For example, he claims that some Republicans may actually want the filibuster destroyed but they don’t want to have to take the political hit by doing it later themselves. I don’t see that. For one thing, “What political hit?!” In 2005, even though filibuster use was actually down from where the Republicans had driven it, they claimed that the filibuster was “unprecedented.” What’s more, I don’t see the Republicans particularly concerned about what people say when they are in power. You see: I lived through the Bush Jr years.

The one theory I most believe is that the Republicans just don’t think the Democrats will do anything. And it isn’t at all clear that they are wrong. There are still Democrats in the Senate who somehow think they that they can maintain this antiquated and anti-democratic institution. My Senator Diane Feinstein continues to be appalled by the behavior of the Republicans, remarking two weeks ago, “The judiciary is too important to play partisan games with. And that’s exactly what’s going on here.” But when it comes down to it, she demurs.

But above all, I don’t think the Republicans are thinking anything at all. They are just playing with the power that they have, figuring that they can always work out a last minute deal with the Democrats. But Bernstein may be right that it is different this time. I saw Harry Reid as angry as I have ever seen him during the last battle. And this time it is so much worse. The Republican use of the filibuster reminds me very much of high school jocks picking on nerds. They do it because they can and because it is in their natures to be dicks. Why are the Republicans filibustering? Because that’s what they do. And if it brings an end to the terrible practice, that’s just great.

Afterword

Bernstein is a hardheaded political scientist, but on this issue, he has been something of a Pollyanna. Rather than saying the filibuster is just flawed, he’s hoped that the Republicans would come to behave properly. But as I showed in January, over the past 50 years, Republicans Caused All Filibuster Abuse. Their nature is to push whatever political advantage they have. The Democrats seem to behave in accordance with norms. Republicans always try to expand them. That isn’t going to change.

Paul Krugman offered the graph above that I think is really important. What it shows is the economic recovery in Europe following the beginning of the 2008 crisis and the beginning of the Great Depression. The results are stark: even though the downturn isn’t nearly as bad, Europe is only doing as well now as then. Even more important, the trend was great then and terrible now.

It isn’t a completely valid comparison. But it is something that conservatives everywhere should be ashamed of. What’s so dangerous about it is that more and more we hear conservatives making the most specious of arguments to explain it. According to this line of thought, the new economy ain’t like the old economy. There is a new normal and it sucks, so there’s just nothing we can do. This is brought up most of the time to explain why unemployment is so high. It isn’t that we are in a prolonged depression; it is that companies aren’t hiring because there aren’t enough mechanical engineers who are willing to work for $12 and no benefits.

No one has done better work on the “structural unemployment” canard than Dean Baker. But it just takes a bit of thought to show how wrong the idea is. If I had a business and I knew that I could make a killing if only I had more mechanical engineers, then I would hire them. To do that, I would offer more money to people who came to work with me. This would cause a pay spike in people who have the right skills—in this case, good mechanical engineering skills.

We don’t see this in the data at all. There is no area of employment where wages are going way up. Instead, we get anecdotal evidence that this or that employer just can’t find qualified people. And in every case, what find is the “$12 mechanical engineer” problem. As at any time, employers are desperate to hire employees who will work for far below the going rate. So there is no structural unemployment—just employers who are trying to cut costs so they can make more money.

Let me address one other side of this issue. I can hear libertarians complaining that the mechanical engineers are clearly not worth more than $12 to this employer. I agree! But clearly mechanical engineers are worth a lot more than that to most employers. So the problem here is that this employer either doesn’t have good enough ideas to justify hiring mechanical engineers or is too inefficient to afford to hire them to implement his good ideas. Regardless, libertarians shouldn’t turn him into a hero. He’s just one of those whinny takers they hate so much.

What is behind what’s going on in Europe (and to a lesser extent here) is that the economy lacks demand. It is entirely understandable that people in the 1930s didn’t understand what was going on and so responded to the depression in many bad ways. But before the crisis of 2008, it was unthinkable that our response to such a crisis would be even as bad as it was in the 1930s. I remember sitting in economics class in college and thinking, “I’m glad that we won’t have to live through that again!” I was assuming that we would use the combination of fiscal and monetary policy that easily fixes such problems. What I wasn’t prepared for was that the actual science of economics wouldn’t matter in the least. The depression goes on because there are many rich and powerful people who want it to go on.

Update (15 November 2015 3:01 pm)

Krugman wrote a followup to his piece:

I run into this all the time, “Roosevelt only got us out of the Depression by getting us into World War II.” These people just aren’t thinking; they’re grasping at straws to justify what they just “know.”

This morning Capt Fogg brought my attention to yet another faux right wing scandal, Liberterrorism? The whole story is very simple: JPMorgan Chase is putting a limit of overseas money transfers for their small business account transfers—$50,000 per month. But this isn’t an actual limit on “small businesses”; it is a limit on “small business accounts.” It’s like a bank that says you can only make 5 account transfers on your economy personal checking account. If you want to do more, you pay for a more expensive checking account. You can get more details on the kerfuffle at Forbes, No, JPM Isn’t Banning International Wire Transfers, No Limits on Withdrawals Either.

I’m not sure that Capt Fogg is quite right to blame this right wing freak out on libertarians, however. It’s true that most of the conspiracy nuts do think of themselves as libertarians. There’s a natural link that runs the other way too (libertarians tend to gravitate toward conspiracies). Most libertarian thought is built on a misguided use of the slippery slope. If the government can demand taxes from people, what can’t they demand? Murder?! But in cases like JPMorgan Chase, most libertarians are especially not concerned.

One of my biggest complaints about libertarians is that they don’t actually care about liberty. They define it in such a way that one can end up a slave as long as one is not a slave to the government. I can’t tell you how many times libertarians have told me that corporate power over individuals doesn’t matter because the corporations don’t have armies. They can’t force you to do as they want. This is a bizarre claim. It assumes that threatened murder is the only kind of coercion that matters. (For more on this, see my article, Property Rights.)

So the idea that JPMorgan Chase might be abusing their customers is no problem at all. The standard libertarian argument goes like this: if the customers don’t like it, they can go with a different bank; if there is no other bank offering it, a great market opportunity will open up and it will become available; and even if not, they don’t have a gun to your head! I actually accept that argument in this case. The problems start when they talk about healthcare or a living wage.

Where this story really impacts with the libertarians is with the Federal Reserve. I’ll admit, what the Fed does is kind of mysterious. But for libertarians, it turns into a kind of Dan Brown novel. For these people, rather than trying to keep the economic system working efficiently, the people at the Fed are just trying to cause inflation to destroy the wealth of the “makers.” (Insert evil laugh here.) The fact that if anything, the Fed too much looks out for the interests of the rich, doesn’t seem to occur to them. As Matt Yglesias said, “If the unemployment and inflation rates were reversed, would the Fed do something about it?” Yes it would! Because it cares a whole lot more about those with money than those without it.

Forbes noted, “The fear is that banks, and indirectly, the federal government have too much control over individuals’ money which sits in the form of deposits.” Of course, this has nothing whatsoever to do with this change at JPMorgan Chase. But it feeds into what is overwhelming ignorance on the part of libertarians about how our monetary system works. Regardless of what conspiracies libertarians may believe in, all their thinking is distorted by focusing on imaginary or at least marginal problems and ignoring huge liberty-killing problems that we face right now.

Here’s the thing and I think it is probably clear if you’ve read this site with any regularity over the past couple of years. I like Anthony Weiner. He’s a good and unapologetic advocate for liberal policies. I’m very sorry about all his personal problems but they don’t mean much to me. I think, as has been clear with my reaction to Rob Ford who I hate politically, I’m always going to be forgiving about people’s personal foibles, whether they be public crack smoking, sexting, or something else.

Last week, Weiner was on Real Time and he was great. Of course he was! Where better to be? That’s where he’s in his element. He’s always been more of a performer than a politician and I hope he goes in that direction. Up against him is Sean Hannity clone David Avella who does nothing but spout conservative talking points and spread as much misinformation as he can. (I especially like when he claims that Republicans do have ideas for fixing our broken system. They do not.) Weiner destroys him.

Weiner also destroys Victoria DeFrancesco Soto, who appears to be one of those self-styled moderates—someone who never fought for single payer before Obamacare but now wants it after it isn’t an option. (This is a standard conservative ploy: why does Obamacare have to be so complex?!) She doesn’t seem unreasonable, however. But she did go off on the usual bullshit about how Obama should have apologized earlier, as though that has any relevance. Weiner and even Maher dispatch her quickly.

Regardless, I’m glad to see Weiner back doing what he does best.

Afterword

Here is a bit more where Weiner and Maher discuss the “elephant in the room.” (Not Chris Christie; He’s just fat.) Needless to say, I agree: about the scandal and about healthcare.

Over at Crooked Timber, John Holbo has written a really interesting article, Overton Straitjacket. In it, he makes the observation that while liberalism in America is spread out fairly evenly over its ideological range, conservatism is bunched at its right extreme. If liberalism were like that, Obama really would be the socialist of Republicans’ frenzied imaginings. So why is liberal ideology something like a normal distribution but conservative ideology is like the distribution of wages, with lots all pressed up again the minimum wage below which it cannot go by law?

Holbo notes that if a large number of people in the Republican Party became so extreme, that ought to open up acceptable conservative ideology (the “Overton Window”) so that there would be some people even further to the right. For example, if all the Republicans are now for war with Iran, why aren’t there some pushing for a region wide war? He has no compelling answers. I’m not sure that anyone does. I do, however, have a few thoughts.

Primarily, I think this perception is wrong. Just like the conservatives who claim that Obama is a socialist, we tend to conflate different conservative positions. For example, there is a very big difference between people who believe abortions should be illegal in all cases and those that believe in exceptions. So I think it is wrong to assume that conservatives are all rushing to the edge of ideological spectrum. They really are distributed.

But what we clearly do see is that modern conservative ideology is very narrow. And on that question, I am writing a whole book. But very briefly: it’s the New Democrats’ fault. Conservatives are, after all and despite what I say from time to time, not fascists. The existing boundary on the right is the same boundary that has long been there. But on economic issues especially, the New Democrats have taken over vast amounts of Republican ideological territory. This leaves Republicans with two possible actions. They can stay in the Republican Party and complain about how radical it is even though they now fit better in the Democratic Party. That is what’s going on with people like Josh Barro and David Frum. Or they can move to the right, which is more or less the only option if you are a politician.

I think that explains what we see. Of course, from the inside it looks different. This is why Republicans seem to go to intra-party war over what appear to us as minor issues. They aren’t minor issues to them. They are issues that span the entirety of the conservative ideological terrain. It might not be much, but it is all that they have.