I read a very interesting Chris Dillow article, On Misunderstanding Economics. It is based upon research that shows that people are very confused about how economics work. The most obvious example of this is the idea that the macro-economy is like a household. This is where we get this nonsense from Obama in 2009 when we were still deeply in recession saying, “All across America, families are tightening their belts and making hard choices. Now, Washington must show that same sense of responsibility.” It sounds right, but it is totally wrong. It’s fine for me to tighten my belt when I’m trying to pay down my debt, but when everyone does it — when your spending is my income — it doesn’t work.

In addition to this, people make associations. For example: inflation and unemployment are both bad, so people put the two things together and think there is a correlation. That’s not true, of course; it is generally the opposite. Similarly, they associate government spending with unemployment. Again: exactly the opposite of the way things are. People are deeply confused about economics. And what I’ve noticed in my life is that those who think they understand economics the best are usually the most confused. It is a classic example of a little knowledge being a dangerous thing.

But it comes as no surprise to me that all of these misunderstandings lead to conservative policy. I think a large part of this is because conservatives run around saying that these things are correlated. For example, for decades, conservatives have claimed that tax cuts for the rich will cause economic growth because the rich will use the extra money to create jobs. They’ve been so successful at this propaganda that they no longer even have to explain why tax cuts for the rich will lead to more jobs. It is just “common sense” that tax cuts for the rich will create jobs.

The issue with government “belt tightening” is a great example. It isn’t hard to make people understand this. If everyone spends less money, everyone will see the amount of money they earn go done. As a result, everyone will have less money to pay their debts. But the debts themselves will not get smaller. Thus, everyone spending less will actually make the debt problem worse. Indeed, we have seen this in a number of EU countries, where they’ve cut their spending savagely, only to end up owning more money relative to their GDPs. This is not hard to understand.

The problem is that the our media infrastructure is totally vested in believing the “common sense” that “families are tightening their belts and making hard choices” so “Washington must show that same sense of responsibility.” No one goes around saying that billiard balls move according to Newton’s laws of classical mechanics so quarks must too. Everyone understands that reasonable sounding analogies don’t necessarily work. Indeed, I don’t know of any economist who claims that the macro-economy acts the way that a household economy does. But conservatives who have a vested interest in pushing bad economic policy are allowed to do so. And that’s the reason that people misunderstand economics.

Cecilia Hyunjung Mo wrote a good article over at The Washington Post, Why Asian Americans Don’t Vote Republican. Her idea is that Asian Americans still feel like foreigners in this country because they are still treated that way, even if they were born in Texas. That’s certainly part of it. And let us not forget that at least in the western United States, Chinese immigrants were the most hated group only a century ago.

But I have a different take on why Asian Americans aren’t keen on the Republican Party. While it is certainly true that Asian Americans are treated as outsiders in their own country, that’s true coming from both political parties. The problem with Asian Americans and the Republican Party is really a broader issue. Republicans have really bad policy ideas. They would not manage to have substantial support throughout the United States if it weren’t for the fact that they push the idea that whites are the “real” Americans and that all those “fake” Americans (Asians, Latinos, blacks) were taking away what was rightly theirs.

This allows the Republican Party to push ideas like tax cuts for the rich and privatizing Social Security. These are not even popular among Republican voters. Yet those voters still side with the Republicans. They vote for the Republicans not because of the explicit policies but because of the implicit message: we are the party that stands with you and against all those invalid Americans who are destroying what is the true nature of America. If you took away this implicit message, very few people would vote for the Republican Party — or at least the Republican Party would have to drastically change the policies that it is pushing.

Many Americans with Asian ancestors may well react against the clear white supremacist nature of the Republican Party. But I don’t think that’s the main thing. There are two things that the Republicans have to offer. First is the pro-white narrative about how they did everything for themselves and didn’t depend upon the abuse of Africans and native peoples and Chinese and Latinos and pretty much every other group you can think of. That clearly isn’t going to appeal to people who don’t see themselves as white. The second thing the Republicans have to offer is policy that further enriches the rich and goes to war whenever possible. That’s a very unpopular set of policies and people only go along with if they are blinded by the first thing the Republicans offer.

The question that the Republicans need to ask of themselves is why it is that all groups who aren’t vested in white resentment avoid them. Perhaps their biggest problem is that over the decades, they’ve created an insular culture that they really think that everyone agrees with them. (“Everyone at my country club is a Republican!”) This leads to their conspiracy theories about how ACORN stole not only the 2008 election, but also the 2012 election, long after the group even existed. Or more generally why there must be wide scale voter fraud because obviously America wanted John McCain and Mitt Romney to be president.

It’s not a secret that the Republican Party is in a bind. If it reaches out to other groups, it is going to lose its base voters. These voters, after all, don’t vote Republican because they really think that the capital gains tax or the estate tax need to be reduced. So how do they signal to Asian Americans that the Republican Party likes them while making white people feel that they are aggrieved by everyone else? I’m not saying they can’t do it. That’s the one thing that Republicans are very good at. But at this point, they don’t even seem to be interested in it.

On Monday, Paul Krugman wrote, Partisan Growth Gaps. It seems that Carly Fiorina claimed that Hillary Clinton flunked economics. Clinton claimed that the economy does better under Democratic presidents than they do under Republicans. Except, as we know from the great Mark Thoma, not only is this true, there are reasons for it. Krugman is much more cautious. But there is no doubt that the economy does do better. The only question is why.

The standard answer that conservatives give is to credit Republicans regardless. Clinton shouldn’t get credit for the economic boom during his presidency. No, it was Ronald Reagan’s policies from 15 years earlier. Ronald Reagan is for conservatives what God is for Christians. If something went wrong under Reagan, it wasn’t his fault. If something went right after he was out of office, then it was thanks to him. Whatever. Conservatives are by and large crazy.

Thoma’s main argument was that Democrats do better with the economy because they care about helping it. Republicans just want to do certain things for ideological reasons. They are going to do them whether it helps or hurts the economy. If the economy is good, they want to cut taxes on the rich. If the economy is bad, they want to cut taxes on the rich. In the end, Republicans always end up costing more money. If the electorate were rational, the Republicans would never win a national election. But you know how it goes.

I want to propose something slightly different. Republicans are committed to policies that increase income inequality. Now when inequality was fairly low, that wasn’t necessarily the worst thing in the world. It wasn’t great under Reagan, but it wasn’t terrible. But since that time, more and more money has gone to the rich and it has just sat around. So policies that reduce income inequality will generally be good for economic growth. Poor people spend the money they get. Rich people go looking for places to invest. But given that there aren’t enough poor people buying stuff, that money looking to invest finds few opportunities.

So I think it is as simple as that: Republicans move money to where it does the least amount of good. Imagine that you have two people at a kitchen table and you are serving food. But you only give food to one of the people. Eventually, she is full. The other diner is not, because he hasn’t gotten any food. But the server just keeps giving food to her, even though she isn’t eating. That’s Republican economic policy. Democrats make sure that the starving guy gets at least some food.

But I’m not surprised that Carly Fiorina would think that she has things to teach Hillary Clinton. For one thing, business people always think they understand macro-economics, even though there is literally no crossover. Running a business is nothing at all like running a country. Add to that that Fiorina was terrible at running her own company. And then add her conservative ideology that claims that the best thing is always to give millionaires like herself ever more money, and you have a recipe for failure. Fiorina is the kind of person who could destroy our economy over four years and walk away still thinking she had done a great job. Just like she did at HP.

Martin Longman wrote a very interesting article, The Racist and Spineless GOP. In the Republicans’ effort to never be asked a difficult question, they’ve canceled their upcoming debates. Ted Cruz wants “real journalists” like Rush Limbaugh to moderate the debates. You can see how the establishment Republicans would hate this. There is already a big tendency for these clowns to push far to the right. What is a series of debates pandering to Sean Hannity going to do?

But one of the debates that the Republicans have canceled is with Telemundo. Not just that. It was the first debate that they canceled. It’s so impressive. After the 2012 defeat, the Republican Party was united in thinking that it had to reach out to Latino voters. What’s more, since that time, the conventional wisdom is that the only way to win the White House now is to win the Latino vote. But the Republicans are turning in on themselves. They want to talk only to themselves — only to other old white people. It’s quite amazing to think about, because clearly the Republicans already have the angry old white person vote wrapped up.

It’s kind of like all they care about is winning the Fox News primary. It’s parochial. And there really is nothing wrong with that. You are, after all, reading a liberal blog. And you are probably a liberal. There is a lot to be said for creating safe spaces where like minded people can work out what they think. But it is strange to see this happening with professional politicians who we would think would have that sorted out. And it is downright bizarre coming from people who are running for president. That is about as grand a scale that you can run on.

It seems that they aren’t interested in winning the general election. Marco Rubio, for one, has a lot of skeletons in his closet. But the Republicans seem to think that they can just ignore this and that the Democrats will not mention it in the general election. I was writing about this last month, Democrats Would Get Rid of Hillary Clinton If They Thought There Was a Scandal. But that is something I wonder about. Republicans seem to think that the Democrats are protecting Hillary Clinton. Could it be that they are just that clueless? That they don’t understand how elections work and that getting the nomination means nothing if you nominate a candidate who will be destroyed in the general election?

Of course, what’s happening is that the Republican Party has lost control of the nominating contest. Certainly someone like Reince Priebus understands how this is supposed to work. But the candidates don’t seem to understand it. And they are the result of the steady dumbing down of the Republican base. And that is the result of the very Republican elites who Priebus represents as they’ve made decisions over the years to just keep the party going one more election cycle. Now they have voters who want the impossible. And candidates who don’t understand how to win a national election. I’m glad to see it. Maybe the Republican Party can’t even win the White House in a year where the economic fundamentals are in their favor. The Republicans really are self-destructing before our eyes.

Michael Hiltzik reported, Drug Pricing: That Pill That Went From $13.50 to $750 Can Now Be Had for $1. The pill in question is Daraprim. Hedge fund manager and all around libertarian idiot Martin Shkreli bought the only company making the generic drug and raised the price 5,556%. But it seems there was a special circumstance regarding this drug so that “compounding business” could make it an sell it without going through a big process with the FDA.

What’s remarkable is that the company, Imprimis, says that it is going to make a tidy profit selling the drug for one dollar. That is in contrast to Shkreli who was going around telling the world that they were losing money selling it for $13.50. I don’t think that anyone really bought that, but no reporter ever countered it. Who can say in the specific case because companies can do accounting in an endless number of ways. But the Imprimis CEO, Mark Baum, said, “We’re not going to make hundreds of millions of dollars, but we’ll make a beautiful profit.”

What is happening with Daraprim could not be done with all drugs. So there are lots of other generic drugs that the FDA still must approve, allowing psychopaths like Shkreli to gouge customers — just in a less public way. And in most of those cases, the drugs (which are also generic) can’t be reproduced from compounding businesses. That’s the thing: we don’t have a free market. The bigger companies control the political system and therefore what we call a “free market.” That’s why I bristle at the conservative claims about how “natural” capitalism is.

The other thing that Shkreli went around telling people was that the extra money that he was charging for Daraprim would allow his company to create new drugs. This would have been nonsense if it had been a real drug company like Roche, which actually does research. But the fact that Shkreli uses this line when all he does is collect rents shows that it is all a con. If it weren’t for government funded research, all we’d be getting is longer and longer acting ED drugs.

But there’s no doubt: it is really nice to see Martin Shkreli get screwed in this way. But it also shows that these super rich business types really don’t know much. He was very public with this move — confident in the knowledge that there was nothing that anyone could do. He showed a shocking lack of sophistication when it came to PR. But in the end, he didn’t seem to know that this was a drug that a compounding business could put on the market — not only undercutting him in price but showing him to be a fraud.

We live in the worst of all worlds from an economic standpoint. Where it is to the benefit of the rich, we live in a free market. So there is supposedly nothing we can do about the price gouging of Shkreli. But when a free market would be to the benefit of the poor — as in allowing unlimited immigration of doctors and lawyers — then we live in a very controlled market, because God forbid that the rich would have to compete with others.

So what Imprimis has done is really great. But under most circumstances, it is not possible to do. And the Martin Shkrelis of the world continue to prey upon the weakest people in our society.

The biggest moment in last week’s CNBC Republican presidential debate came when Carl Quintanilla asked Ted Cruz a very serious and valid question, “Congressional Republicans, Democrats, and the White House are about to strike a compromise that would raise the debt limit, prevent a government shutdown, and calm financial markets that fear of another Washington-created crisis is on the way. Does your opposition to it show that you’re not the kind of problem-solver American voters want?” It’s a question that a lot of Republicans would like an answer to. But not surprisingly, Cruz did not answer the question. Instead, he attacked the media.

Ezra Klein addressed the issue last week, Ted Cruz’s Best Moment of the Republican Debate Was Also Completely Wrong. He went through part of it, and I thought I would go through each of Cruz’s points because it is important to note just what big liars the Republicans are. After slamming the media in a general way, Cruz presented five specific complaints about the questions in the debate:

1. Donald Trump, are you a comic-book villain?
2. Ben Carson, can you do math?
3. John Kasich, will you insult two people over here?
4. Marco Rubio, why don’t you resign?
5. Jeb Bush, why have your numbers fallen?

Donald Trump, are you a comic-book villain?

John Harwood did not ask that question. He instead said:

It says a lot about Ted Cruz that he heard “comic-book villain.” Everything that Harwood mentioned is true of Trump, as well as the other candidates to one extent or another. Cruz must know that asking questions about the candidates’ policies does make them look like comic-book villains. Regardless, Harwood didn’t say what Cruz claimed.

Ben Carson, can you do math?

Certainly Carson was not asked if he could do math. In fact, Becky Quick was very nice to him. She asked:

There was then a back-and-forth during which Carson simply reiterated that his tax plan made sense and that some day, when he comes out with the full plan, everyone will see that it all fits together. Certainly Ben Carson showed that he can’t do math. But he was never asked about that.

John Kasich, will you insult two people over here?

Cruz is more correct on this one. But this wasn’t out of the blue. And it wasn’t anything like what we got at the CNN debate. Kasich had already been railing against the other candidates; he just had refused to say their names. Harwood was right to ask:

That hardly seems inappropriate — especially given that the Republicans think it is wrong to even point out when they are wrong. Remember the 2012 debate when Candy Crowley said that Mitt Romney was wrong about what President Obama had called the Benghazi attack? So apparently, Republicans want debate moderators to mention no facts and to not ask the candidates to mention any facts. But that doesn’t mean that media establishment should follow along.

Marco Rubio, why don’t you resign?

This one is just an outrageous statement. The issue of resignation didn’t even come up until Rubio didn’t answer the initial question. Carl Quintanilla’s question was fundamentally about the issue that Rubio is basing his whole campaign on: his youth. It’s a perfectly reasonable question:

The critical thing here is that he worked on the immigration bill. But when it got push back from the crazies in the party, he dumped it. He’s also made claims that he doesn’t like being a Senator. In a way, his approach is that of the party: unless he has all the power, it isn’t worth doing anything at all. I think the American people have a right to know that about him.

Jeb Bush, why have your numbers fallen?

John Harwood’s question for Bush is harder to summarize because there was so much cross talk. But it came down to this:

It’s a horse race question. It’s also a gimme for Bush. It was a way for Bush to talk about what he offers that someone like Trump or Carson do not. And he used it for that purpose, but like with every other opportunity, he used it highly ineffectively.

Substantive Questions

All five of the questions that Ted Cruz complained about were perfectly acceptable. Ted Cruz brought up his complaints because he didn’t want to discuss the biggest issue with his campaign: his inability to work with his own party. So he used the tried and true tactic of lashing out at the questioners. All the questions asked were substantial — most especially his own. But the audience roared with approval when he provided the lack of substance that he was complaining about.

At last week’s Republican presidential debate, I was struck by the repeated mention of the Tax Foundation and how it had found that all their highly regressive tax plans were totally great: they would balance the budget, give jobs to everyone, and gift ponies to all good boys and girls. And it is no surprise. Although it has a similar sounding name to the Tax Policy Center, the Tax Foundation is a Koch Industries backed grouped. Back in 2008, Paul Krugman wrote, The Tax Foundation Is Not a Reliable Source. (Of course, sleazy Greg Mankiw is for it, so that’s about all you need to know.) But here’s the kicker: even the Tax Foundation wasn’t that sanguine on the Republican plans — at least in terms of how regressive they were.

This is indicative of a major problem in American politics and the way that the media cover it. It would never fly for a politician to say, I ran the tax plan by my brother-in-law George (he took an accounting course in high school), and he thinks this plan will be dynamite. But you give George a million bucks and the title of President of the Tax Institute for Very Serious Accountability, and suddenly George’s opinions are golden. There’s no way that a journalist could ever distinguish between George’s Tax Institute for Very Serious Accountability and the Tax Policy Center. And the politicians will just say, “They have their experts and we have ours.”

Now you would think that after all these years, the voters would wake up. Last year I wrote an article I’m rather proud of, Reagan’s Legacy: Tax Cuts for Rich, Tax Hikes for the Rest. People think of Reagan and all the Republicans as lowering their taxes. This is no doubt due to the fact that this is the narrative that the media pushes. But the history of the last 40 years has been one where progressive taxes like the federal income tax has gone down, and regressive taxes like sales and usage, and payroll taxes have gone up. Net result: the lower and middle classes pay more in taxes and the rich pay less.

What continues to amaze me is the laser focus on the federal income tax. I understand the argument. Conservatives claim that everyone should pay the same percentage in taxes. Of course, they aren’t concerned about that when it comes to capital gains taxes. Marco Rubio wants to get rid of that all together. He would argue that there is a social purpose for that: it will help create jobs. But there is an even better argument for cutting the taxes of the poor: it will create jobs. But usually the conversation doesn’t get even that far. The media just allow Republicans to make these claims without putting it in context. The situation is even worse with the payroll taxes, of course.

You need to think about it in terms of opportunity costs. Imagine that the government wanted to spend $100 billion. It could do so by cutting taxes on the rich or giving benefits to the poor. In an economy that is not at full employment (which is pretty much all the time — and certainly now), much if not most of the $100 billion in tax cuts would sit unused. All of the money given to the poor would be used, thus stimulate the economy. This means that the conversation can’t be about whether tax cuts help the economy but rather if they help the economy more than alternative uses. It’s like the difference between using money to fight a war or to build infrastructure.

But we can’t talk about any of this because our media is postmodern. According to them, there is no truth — just opinions. So if Marco Rubio says that his tax plan is totally awesome, who’s to say it isn’t? And when even a right wing outfit like the Tax Foundation is skeptical, you know it has to be bad. But don’t worry! George’s Tax Institute for Very Serious Accountability will back him up.

It seems that Republican presidential candidates are very unhappy with the debate questions. It’s indicative of the insular nature of the conservative movement in this country that they think any non-laudatory questions from the press are a clear example of the bias of the “liberal media.” I was especially struck by Ted Cruz’s question during the debate, “How about talking about the substantive issues the people care about?” And what would those substantive issues be? As Brian Beutler made clear, the moderators at CNBC asked very substantive questions. By and large, the Republicans dodged them.

Let’s think about this for a moment. CNBC is a conservative network. During the whole debate, the only question about inequality was given to Mike Huckabee, because he claims to want to do something about it. Trump, Bush, and Rubio were never asked about the huge increase in inequality that their budget proposals would increase. There were no hard or “gotcha” questions for these candidates. What’s more, they were allowed to not answer the questions they were asked. So if they wanted more “substantive issues” to talk about, they could have talked about them and no one would have minded.

Well, one group would have been unhappy: the people who Cruz claimed wanted to hear about the substantive issues. The main things that got the audience excited were attacks on the media. They weren’t interested in hearing about economics or foreign affairs or much of anything. And that’s nothing new. They love Trump and Carson because they are bigots. And they love it when the media is attacked. But that’s the extent of it. It comes back to Corey Robin’s idea that conservatism isn’t so much a positive movement as a negative movement: it is defined by what it is against, not what it is for.

Being aggrieved is the primary motivator for conservative voters. This is why it is so frustrating to argue with conservatives. I’ve talked a lot about this, and I have come to think that this aggrieve mentality is the basis of it. I can usually convince a conservative of anything about economics — and most things regarding social issues. (Exceptions: death penalty, Islam.) But when it comes to voting, they always run back to the Republican Party because they know that it represents their anger at the world. The GOP may push policy that they don’t like, but they know that it will do everything to hurt the right people.

So all this business of pretending to be hurt by elites is just pandering to the base. The Republican Party has a dual constituency. They have the angry base that must be pandered to — but not in a substantive way. So they need to complain that the media are not asking about “substantive issues” even though no one involved is interested in that. And then they have the rich base that must be pandered to in a very substantive way: with policy meant to line the pockets of the rich. So now we have to listen to the Republicans whining about how badly they are treated and how well the Democrats are treated. If I hadn’t been raised on American politics, I would consider it unbelievable.