Monday, January 30, 2012

Austerity refuted, again, and again, and again...

Paul Krugman's latest column is another marshaling of evidence that austerity doesn't make economies grow. He repeats arguments he's been making in his blog, but it's good to have them in one place. Yet the TV news goes on as if all of this disastrous consequences of government cutbacks was not happening now, in Europe, and here. The imperviousness of public discourse to evidence is depressing.

Friday, January 27, 2012

Beinart's critique of Obama's State of the Union Address

Been traveling, and no time to post lately. Just wanted to note Peter Beinart's critique of Obama's state of the Union speech. Finally someone with a public presence is saying what I've been arguing here for over a year: the main point that Obama needs to argue, and that the media need to take heed of, is that strong government and strong capitalist economy are not opposites. On the contrary government investment in infrastructure, health, education, and research are the keys, along with regulation that keeps competition fair and the public safe. I hope more voices join in.

Thursday, January 12, 2012

Romney's Vulture Capitalist Envy

In recent days, there has been considerable discussion about Mitt Romney's reaction to those who criticize "wall street"- criticism he conveniently chooses to regard as "class warfare" and sheer "envy of the wealthy". As Romney said, these are certainly topics to be discussed, but not publically, only "in quiet rooms." So, surrounded by the detritus of an enormous deficit - created in large part by an elective war, and a decision to simultaneously reduce the marginal tax rates on the wealthiest among us to the lowest rate ever ( twin decisions that no president in the history of this country was ever ignorant enough to make), we hear from Romney that it is really class envy that drives these critiques!! Left unsaid is the implied view (which I have heard directly from conservative friends) that these critics have no political standing - they must be socialists, anticapitalists, diversity- or Europe lovers !! (No doubt they eat French Fries too !!).

Just bear in mind, however, that like Spiro Agnew, many Republicans - including my neighbors down the street - are arrogantly and studiously anti-empirical, and thinly veiled racists as well. Following Mitt's nostrums, if you are unemployed, it must be because you are lazy, or unmotivated, or lack character ( the fact that a lot more people suddenly got lazy and unmotivated is not a hypothesis that they want to explain). If a ton of Occupy Wall street folks are banging on the door, the last thing that you want to do is to openly, publically, address the issue of wealth inequality. Why?? Because there is overwhelming evidence of great wealth inequality in this country. More importantly, as the PEW Economic Mobility Project has clearly revealed, intergenerational mobility in this country ( a key element of the exceptionalist American Dream) is stalled. Other - typically European democracies, do a far better job of this.

Parenthetically, I would note that the iconic writers who contributed to the American exceptionalist trope - like Horatio Alger - did so with their writings about young men who rose from the most abject poverty on the basis of their motivation, effort, and virtue. The paramount assumption in these writings was that intergenerational mobility was possible to all. And, envy of the wealthy was NOT a part of this credo !!! Romney's unwillingness to discuss these matters in public space is a clear sign of its dangerousness politically. The country has become a highly stratified plutocratic society. And, as Princeton social scientist Jim Bartells has made clear in his insightful book, Unequal Democracy, under Republican regimes, wealth inequality had increased, under Democratic regimes, it has diminished. These are not just "economic issues" - they are political governance issues. American citizens need to wake up and recognize this.

Tuesday, January 10, 2012

Why the government shouldn't make decisions like a business

Krugman has weighed in with some more on the distinctive challenge of macro-economics, of running an economy. In the previous post I linked his arguments on why family debt and national debt are different.

This time, I think his argument is even more telling, where he distinguished between the considerations of a running a business, and an economy. He says: "The key point about macroeconomics is the pervasiveness of feedback loops due to the fact that workers are also consumers. This makes a huge difference.

"A businessman can slash his workforce in half, produce about the same as before, and be considered a big success; an economy that does the same plunges into depression, and ends up not being able to sell its goods. Nothing in business experience prepares one for the paradox of thrift, or even the inflationary impact of increases in the money supply (which is real when the economy isn’t in a liquidity trap.)"

The key point, which I feel he doesn't make totally clear is that in an economy you are responsible not only for your business, but for workers and consumers throughout the country. Most relevant here, if a business person fires workers he may be being a good businessman, as Romney in fact did at Bain Capital. But if you have big unemployment, then you have failed as a manager of the economy. If you approach the government with a private business sensibility only, you don't understand unemployment, and don't do the right things to prevent it. That's why the "expansionary austerity" approach of the Republicans makes sense to small business people, but makes no sense as policy for the whole country.

The whole country's economy doesn't operate like a small business. And this doesn't even take into account that the government prints the money and has a central bank.

Obama should really be talking about this stuff, because if he doesn't educate the public, he may get defeated.

Monday, January 2, 2012

Why the family economy = country economy analogy is wrong

Krugman has a valuable note debunking the family economy = country economy analogy. This is probably the most common and persuasive argument used by the right in favor of country-destroying austerity to reduce debt, instead of increasing investment in public goods and taxes on the rich to make the country grow. Thanks, Paul. As a side note, it is pretty striking to see Krugman, with his Nobel Prize and perch at the New York Times, express the same kind of frustration at his words not having an impact, like an obscure blogger, such as er this one.