Conservatism: The God that Failed, Part 1

In 1949, a book called The God that Failed appeared. It is a collection of essays by ex-Marxists about their disillusionment with Communism, and signaled the beginning of the end of intellectual respect for Marxism-Leninism. The disillusionment was largely due to the economic and moral failures of the Soviet Union under Stalin. But it was also the result of intellectual critiques of Marx’s ideas. If the problem were only bad leadership, the ideology could have survived. The added intellectual critique was essential and in the long run fatal, because old leaders couldn’t convince bright young students that a more ‘pure’ Marxism could ever deliver on its original idealistic promises.

The Soviet Union didn’t fall for another forty years, but as an American graduate student at the London School of Economics in the late 1960’s I could see that, intellectually, the case for Communism was dead. I was working on my PhD in Philosophy under Sir Karl Popper, who had written The Open Society and Its Enemies, a book which exposed as bogus Marx’s claims to be “scientific”. The book was one of the nails in the coffin of intellectual respect for Marxism-Leninism.

In the 1968 I participated in the protests against the Vietnam war at Grosvenor Square (organized by Bill Clinton, as I later found out), discussed politics with some in the SocSoc—the student Socialist Society—and experienced the shutdown of the LSE in 1968 over student protests. The spirit and shallowness of the arguments of the young radical Left in England at that time was wonderfully captured by John Lennon, when he sang: “If you go carrying pictures of Chairman Mao, you ain’t goin’ to make it with anyone anyhow.”

In recent years, I have been seeing the same movie again, but this time the God that Failed is ‘conservatism’ of the Reagan variety: the idea that minimizing the size of government, the amount of government regulation, and the level of taxation, particularly on the wealthy, will make a country freer and more prosperous. Reagan’s philosophy was summed up in a famous phrase from his first Inaugural Address: “Government is not the solution to our problem; government is the problem.”

In cases of both Marxian Communism and Reaganite Conservatism there is a background of impressive intellectual work to give credibility to the ideology. But in the end it turns out that this intellectual superstructure is largely irrelevant to the actual question of the viability of the ideology as a practical program. The intellectual superstructure is fog and misdirection, and in the ‘Emperor's New Clothes’ moment it turns out that the ideology was based on nothing but faith, faith that turns out to be quite misplaced. It is a God that Failed.

Coming Next: Marxist and Reaganite Fantasies. 

Good and Bad Strategy in Education Reform, Part 3

Part 1
Part 2
 

The third doable objective is to create effective school-to-work transition for the vast majority of those who will not go on to complete a four year academic college degree. We know that this is a realistic objective, because Germany has done this for decades with dedicated technical schools and apprenticeships. And recently Singapore is also succeeding with such a program. As it is now, our students in the lower part of the class academically fall behind and by age 16 feel humiliated and demoralized by this situation. Many drop out, and the labor market, even in better times, does not take them seriously until they are well into their twenties. And this group has the greatest social dysfunction, including jail and bearing children they can’t support.

To help these students we must offer a clear path to an honored place in the labor market, and in adult life. The key to success in apprenticeship and intern programs lies in students actually seeing the benefits of greater academic and non-academic education, and to having mentors in the real world who can show them a credible pathway to success. In this situation, the motivation that comes from goals meaningful to the student. These will lead to hard work, instead of despair and dropping out, either mentally or actually. And then schooling that leads them step by step from where they are to where they need to be—following the mastery learning model—will keep them progressing. Today, though successes do exist, technical and vocational education is a neglected step-child of secondary education. But it is a proven success when designed and resourced properly. 

If early childhood education, mastery learning, and strong school-to-work programs can meet the problem of educating poor children, why aren’t they now adopted? One of the reasons is, of course money. But money reflects priorities. Instead of money going to buy another yacht for the super-rich, it could go into schools, including these programs. In the case of mastery learning, Mamary succeeded in implementing it without additional funds. But in order to do it he had to focus the entire school on carrying it through, arranging teacher’s schedules so that children could always find a tutor after school and on vacations to help them master material, or to give them enrichment material if they had moved ahead of the class. It seems that because of the challenge of implementing it without additional cost, it has not spread widely. Of course, hiring more teachers would make it much easier to succeed.

In the case of effective school-to-work programs, there is an additional barrier, which is the cry of discriminatory ‘tracking.’ This is a bitter irony because the system is now tracking the weaker students to jail and poverty. A strong program would, starting at age 16, have diverse options for students with different goals. Students shouldn’t be forced into such programs, but they should be offered them. What we do now is play ‘let’s pretend’ that everyone has equal gifts until they are 18, and then let society ‘track’ them ruthlessly. We need a better transition, in the last two years of high school, and for most an additional one to two years, that will prepare students to be adults in a highly competitive society.

My own proposal has been to have a minimum academic skills standard that would be tested for at age 15, and those who don’t pass it will continue to be helped to master this level as they go through further education, with more diverse pathways. (This would be an exam based on criteria, as the driving test; these don’t have the dysfunctional effects of high-stakes normative tests.) The standard would be set at the level that is a minimum level of academic achievement to hold a career-track job in our economy. Once this is in place, it can also be used to inspire younger students.  Teachers can tell a 9 or 10 year old, "if you master the next step, you are on the road to a respected place in adult life. I’ve helped other children like you, and I can help you; you can do it.” Stronger early childhood education, mastery learning of skills, and diverse, good school-to-work programs are proven successes in meeting the challenge of educating poor children. We should adopt them, instead of fruitlessly chasing blue-sky goals.

Good and Bad Strategy in Education Reform, Part 2

Part 1.

The second doable objective to improve the schooling of poor children, in particular, is to get mastery learning implemented in all elementary and middle schools. The idea of mastery learning is simple and proven to work: to learn skills, break them down into steps, and regularly monitor progress to see whether students have mastered the basic skills before going on to more advanced ones. When a student has difficulties, then give him or her added help until mastery level is reached; then the student moves on to the next higher level of the skill.

The late Albert Mamary succeeded in implementing mastery learning in his school district in Johnson City, New York, in a relatively poor district near Bingham. He got the poor students to perform on the level of those in wealthy suburban schools, and his model was validated as effective, twice, by the U.S. Department of Education.

Mastery learning involves a lot of testing to monitor students’ advancement, but the tests are of a radically different kind than those used in the past decade’s school reform. They are formative, or diagnostic tests, relative to specific criteria of mastery, which the student has or hasn’t achieved so far. And they are used to determine what help and instruction the student is given next. The tests used in NCLB and RTTT are normative in that there are levels of achievement, and students and teachers are punished for failing to achieve the prescribed level.

When I visited Dr. Mamary’s school twenty years ago (my report on it is in Education Week, March 24, 1993), he said to me, “You can threaten and punish people into doing a lot of things, but learning is not one of them.” The punitive approach of current school reform is the most misguided and dysfunctional aspect of it. If punitive approaches worked to educate children, I would be all for them. The reality, though, is that they are a double disaster: 1. they suffer from a strategic disconnect, a disconnect between ends and means; and 2. they are very poor motivators compared with to positive goals that students believe are important to their lives.

The strategic design behind NCLB is to fire bad teachers and close bad schools, with the idea that this will magically improve the situation. The obvious question is, what are you going to replace those bad teachers and schools with? Have you changed the pool of those who want to teach for the better? Have you improved teacher training. Do you know what schools will be more effective, and make sure the new schools are that kind of school? In all cases there is not answer, no connection of the action to the underlying problem of poor children not succeeding academically.

The concept was that somehow by replacing “failing schools” with charter schools the magic of the free market would transform education for the better. Well, magic is not a strategy, and with the government paying and choosing whom to grant charters, it’s far from the ideal “competitive market” that is theorized to do the magic. It is open to all the kind of corrupting influence that conservatives have argued hurts government, and without immediate public oversight. In any event, the charter solution is not actually working—the charter schools have not proved, on average to be any better. After ten years, there is no ‘transformation.’ To improve schools, there is no substitute to changing what is actually going within them, and changing it for the better.

In addition to the disconnect between ends (helping poor students) and means (closing failing schools and replacing them with charters), in fact punitive approaches are counterproductive as motivation for either students or teachers. The research of psychologist Edward Deci has shown that by far the most powerful motivation for sustained efforts are goals that people have chosen for themselves, and are meaningful in their lives. For students, these goals are connected to what kind of person the student wants to be when he or she grows up. When a child is threatened with failure, particularly without adding a clear method of meeting the threat, it creates anxiety and even desperation, which are counterproductive for any person trying to carry out a complex task like learning—or teaching.

 The negative impact of threats is has recently been made clear especially in the case of principals and teachers. The recent Frontline show “The Education of Michelle Rhee” reports that when Rhee entered the DC schools as superintendent she made a list of the schools are doing better and worse on standardized exams. And she explicitly threatened those principals whose schools had been doing worst with firing unless their school improved by the end of the year. There was no analysis of the challenge faced by those particular schools, and a plan tailored to meet it. The idea seemed to be that being tough and punitive is what will make schools better, and the implication was that this punitive approach should cascade down: principals should threaten fire teachers if they didn’t measure up, and teachers should threaten to fail children if they didn’t pass exams. What happened, among other things, was the false raising of test scores through cheating.

Part 3

Good and Bad Strategy in Education Reform, Part 1

In his powerful book Good Strategy, Bad Strategy (2011), strategy expert Richard Rumelt describes the most common patterns of bad strategy that organizations, both public and private, fall into. These are patterns which regularly cause organizations to fail in their efforts to advance their missions. One of the patterns Rumelt calls “blue sky objectives.” He explains:

"A good strategy defines a critical challenge. What is more, it builds a bridge between that challenge and action, between desire and immediate objectives that lie within grasp. Thus the objectives should stand a good chance of being accomplished, given existing resources and competence. By contrast a blue sky objective is usually a simple restatement of the desired state of affairs or of the challenge. It skips over the annoying fact that no one has a clue of how to get there."

Unfortunately, this describes all too accurately our national education reform efforts over the past decade. The telltale marks of ineffectual blue-sky strategy are right in the names of the programs. President George W. Bush’s program has been labeled “No Child Left Behind.” Left behind what? No goal is clearly defined (51 different ‘proficiency levels’ open to interpretation and change), and the implication is that every child will excel, every child will have top achievement. They will reach the blue sky.

President Barak Obama’s program is labeled “race to the to top.” The top of what? The goal is explained as “career or college ready,” which is still maddeningly vague. There are different academic levels in different colleges, and more importantly a huge variety of skills and skill levels needed for different careers. In any case the goal is still that every child will have “top” achievement. They will all reach the blue sky.

The key to good strategic design is, as Rumelt says, that it provides a bridge between a clearly defined challenge and doable objectives that will meet it. In fact, the current reform efforts have been sparked by two clear challenges. The first challenge has been the low academic achievement of children living in poverty, called the “achievement gap,” and the secondary challenge has been meeting the desire for more people with expertise in science and technology. Instead of focusing on these challenges, and what it would take to meet them, the national conversation has leaped over these real problems to the blue sky goals of NCLB and RTTT, and then has backfilled with a strategy actually unrelated to the original challenge, and based on unrealistic, refutable premises—a strategy that is not succeeding now in meeting the underlying challenges, and won’t succeed in the future.

Let me focus on three doable objectives that already we know will actually help meet the primary challenge of helping poor children, and compare with these three with the current national programs.

The first doable objective—if the political will is there—is to get quality early childhood education to all poor children. Research just keeps confirming that the pre-school years from toddler through kindergarten have a huge impact on children. Clichés such as that you can straighten the sapling but not the tree, or that the hand that rocks the cradle can rule the world are true. If we wanted to be serious about helping poor children, we would be putting much more money into early childhood education.


Part 2

The Republicon Mythology Continued

The Republicon Mythology Continued:

A fundamental tenet of Republicon ideology is the supply-side theory that if you just cut the marginal tax rates for the wealthy, they will be incentivized to consume more, to increase their business investments, and to provide major boosts to domestic economic growth. This has been the hidebound Republican assertion ever since Herbert Walker Bush blasphemed his party by raising marginal tax rates in November of 1990.  This “trickle down” economic theory has a long history and was better known as “Horse and Sparrow” theory in the late 1800s – since the basic notion here was that if you just fed the horse more oats (i.e. beneficial tax policies for the rich) those horses would “pass through” some undigested oats for the sparrows (i.e.. the 47 percenters).  Indeed, it’s really all B.S. isn’t it???

One of the important tests of this particular philosophy was portrayed in a recent CBO analysis of the effects of changes in the marginal tax rates upon a variety of economic outcomes. That report was presented on September 14, 2012, and then pulled at the request of Republican Senate leader Mitch McConnell.(http://www.nytimes.com/2012/11/02/business/questions-raised-on-withdrawal-of-congressional-research-services-report-on-tax-rates.html?_r=0)

There were two principal findings: a) analysis strongly suggested that reduction in top tax rates had virtually no association with saving, investment, or productivity growth; and b) reductions in top tax rates were however strongly associated with increases in the “shares” of the income pie held by the wealthiest (Apparently the horse “held on” to a lot of those oats).

Still, all of those findings occur in an economic maze, completely disconnected from a more serious examination of underlying Republican and Democratic policies that have contributed to these outcomes. A non-voting Reagan Republican and political scientist at Princeton, Larry Bartels insists that the political governance of the two parties is critical to the outcomes. He finds (http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061203779.html) in his outstanding analysis of partisan differences in income outcomes, that partisan differences have had major effects upon income inequality. Specifically, he concludes that the income gap increased under presidents Eisenhower, Nixon, Ford, Reagan, and the Bushes, while it declined under 4 of 5 Democratic presidents. Republicans worry about inflation (which has negligible effects on income growth at the bottom of the income distribution, but substantial effects at the top).

Must see interview of Krugman by Moyers

Here is a wonderful interview of Paul Krugman by Bill Moyers. What is great about this is that it is long enough for Krugman to make his case clearly.

I was particularly gratified by his pointing out that journalists have forgotten how to ask "Why?" In this blog, from the first few posts, I have bemoaning two things. One is that journalists don't ask Republicans why they think that cutting taxes and government will grow the economy, given the massive evidence against this. The other is that Obama doesn't make the Keynesian case to the public in general. He would force the journalists to talk about it, and then for the Republi-cons to actually reply on point.

112th Congress: Proof that Republicans have been the Obstructionists

With at last an initial bipartisan deal on the budget, we now have definitive proof that both of the parties have *not* been equally responsible for the inability to get bipartisan agreement on any budget deals.

Of course there was overwhelming evidence before this: Mitch McConnell's statement that his top priority was to defeat Obama—and not to govern; the unprecedented and largely successful effort by the Republican minority in the Senate to block all legislation supported by the Democrats through the filibuster; and the repeated passing of bills by the Republican House that had no chance of passing the Senate.

But now we have definitive proof. Another key method of the obstructionism has been the Republican House leadership refusing to bring up votes without a majority of their own caucus in favor. It has been this deeply anti-majoritarian policy, along with the flagrant abuse of the filibuster in the Senate, which have been responsible for this being the least productive congress in history.

The definitive proof is that in the last hours of this congress, Boehner finally allowed a bipartisan vote, without a majority of his party. And we got a compromise bill. If the Republicans, with their hatred of government, had not been blocking majorities, against the explicit wishes of the American founding fathers, we wouldn't have had the blockage.

Update Jan 3: According to this story what occasioned Speaker of the House Boehner telling Senate Majority Leader in the White House to "go fuck yourself," and repeating it and being unrepentant in his rudeness was exactly that Reid had called him on his preventing majority votes, calling him a 'dictator.' In fact, Boehner had no civil reply because his previous policy—the so-called 'Hastert rule'—is anti-democratic and explicitly against the principles of the founding fathers. Hence the f-bomb. Further evidence that this incident has laid bare the anti-democratic obstructionism of the Republicans.

Mainstream television: Still Going to Pretend Republicons are Responsible?

Now with the Boehner plan "B" fiasco this evening, it has become completely clear that the Republican House has people who are not willing to compromise in any way. So NBC, CBS, ABC, CNN, are you still going to pretend that both sides are equally responsible for the artificial budget mess?

Stay tuned....

The Supply Side Myth Destroyed Once Again

For those who tenaciously persist in supporting supply-side economic tenets, here is another dagger in your heart. A senior Congressional Research Service staffer and Ph.D. economist (University of Michigan) – Thomas Hungerford - recently authored an economic analysis of reductions in the top marginal tax rates since 1945 and their relationship to economic growth and development.  A central tenet of the Republican “con” is of course that tax cuts for the wealthy will have dramatic trickle down benefits that will massively stimulate the economy.

Before describing the results, I should note that the report, while initially released on September 14 by the CRS - a non-partisan arm of the Library of Congress (http://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf),  it was pulled back by Senate Republicans and Senate minority leader Mitch McConnell.  According to the New York Times, McConnell and other senators “raised concerns about the [report’s methodology] and other flaws.” More temperate Republicans of course note that the report is accurate and is difficult to refute http://economix.blogs.nytimes.com/2012/11/06/republicans-censor-what-they-cant-refute/

As soon as I read the author’s appendix (which referred to a variety of very careful multivariate tests and corrections for heteroscedasticity as well as auto-correlation in a time series analysis), I was convinced that the Kentucky senator’s methodological concerns were shaped by the same band of Republican analysts that served Karl Rove so well in Ohio during the presidential election.

After a series of time series analyses Hungerford concluded two things:

a)    first, that changes in the top marginal tax rates over a 65 year study period had virtually no discernible effect upon economic growth (savings, investment, or productivity growth) – thus clobbering empirically a central tenet of supply siders;  we appreciate this intuitively since during the 1950s the top marginal tax rate was above 90% and the per capita GDP increased by 2.4% during this period. while in the 2000s the highest marginal tax rate was below 40% yet real per capital growth in GDP was less than 1%;

b)   however, top tax rate reduction does increase the concentration of income at the top of the distribution. Thus, as Hungerford observes, the share of income accruing to the top 1/10^th of 1 percent of U.S. families increased from 4.2% in 1945 to 12.3% by 2007.  In short, while marginal tax rate reductions for the wealthiest among us may have no discernible effect upon overall economic productivity, or the size of the entire economic pie, it certainly appears to have very direct effects upon the way in which that economic pie is sliced up – with larger and larger pie shares going to the wealthy.

President Obama: Invest in America and Bring on the Charts!

What should be the priorities of the Obama administration in Economic policy for the second term?

The FIRST priority is very simple: invest in America. As noted here repeatedly, the foundation of long-term economic growth in the private sector is government investment in public goods and services: infrastructure, education, research, and public health.

But now we have conditions that promise huge short-term benefits for government investment. We have a very sluggish economy, high unemployment, and record low interest rates. This is a classic situation of a Keynesian 'liquidity trap' where government spending can bring us out of a downturn. The spending on public goods and services will directly hire both government workers and private contractors, and, through the multiplier or ripple effect this will gain still more jobs. Furthermore, we have a crying need for investment in infrastructure. Not only can we benefit from upgrading our transportation, power and communication infrastructure, but it is now in crying need due to deterioration from delayed maintenance.

The arguments for government spending on investment now are overwhelming. The only thing holding them back is the misguided belief that austerity—cutting back on government—and tax cutting are a better way to get the economy to grow. That these policies will help is contradicted by recent evidence all over the world. Austerity policies in England and the Euro zone have put both into recession, where we have stayed out of returning to it. And tax cuts during the Bush administration did not produce growth, whereas tax increases in the Clinton administration did. And therecent report by the Congressional Research Service, suppressed by the Republicans, confirms the failure of tax cutting as a stimulus to economic growth.

The other argument is that public debt is a short term economic crisis. As Paul Krugman and others have argued, it is not, and long term we can grow out of debt, as we did after WWII. That is providing we have growth, which public investment together with private initiative and investment will create.

Because of the dominance of these "zombie ideas"—refuted but still quoted as God's truth—a SECOND priority is critical. The President must publicly and openly discredit the zombie ideas of Reaganism: the the unholy trinity of cuts—cutting taxes, government and regulation cuts. President Obama has not used the "bully pulpit" to rebut these arguments, and they are the foundation of the opposition.

To let opposition arguments go unanswered is bad politics, and disastrous politics when dealing with Reaganism. The TV press will not go into policy issues, as a rule, and only the President making an issue of them publicly will force public discussion. Here Obama can turn his professorial background to good use. He should have a series of press conferences which he introduces by advocating his own policies, such as the American Jobs Act, and then refute the Reaganist zombie ideas with charts of recent economic facts. When Ross Perot used charts in his debates with Cllinton and Bush I, he changed the national conversation, It is time for Obama to do the same. BRING ON THE CHARTS!

Romney: Crushed by Science

It is a delicious irony that Romney and his campaign were, by all reports, truly shocked by their decisive, broad-based defeat by Obama.

If they were looking at those who average the polls, like Nate Silver and others, they shouldn't have been shocked at all. But they were ridiculing and insulting these, and insisting that they were completely confident that Democrats couldn't turn out the people which they claimed they could do.

They also ridiculed the Obama get-out-the-vote effort, in which I was an active soldier, as futile. This was in spite of the fact that research had shown the personal contact, such as takes place in door-to-door efforts, is by far the most effective.

In short, they "knew" that the results of research could be ignored in favor of their myths. This was a piece with the whole Republicon Party, and shows they are deeply flawed, not only in their policies, but also epistemologically: they don't believe in science, in learning from solid information and data. They can ignore reality—NOT, as Dana Carvey used say.

It is thus entirely just that they were ultimately defeated partly by their firm belief in their own counter-factual mythology.

Here are two great summaries of the Republicans being out of touch with reality. The first is by Rachel Maddow, from her show:

"Ohio really did go to President Obama last night. And he really did win. And he really was born in Hawaii. And he really is legitimately President of the United States. Again.

"And the Bureau of Labor Statistics did not make up a fake unemployment rate last month. And the Congressional Research Service really can find no evidence that cutting taxes on rich people grows the economy. And the polls were not skewed to oversample Democrats. And Nate Silver was not making up fake projections about the election to make conservatives feel bad. Nate Silver was doing math.

"And climate change is real. And rape really does cause pregnancy sometimes. And evolution is a thing. And Benghazi was an attack on us, it was not a scandal by us. And nobody’s taking away anyone’s guns. And taxes have not gone up. And the deficit is dropping, actually. And Saddam Hussein did not have weapons of mass destruction. And the moon landing was real. And FEMA is not building concentration camps. And UN election observers are not taking over Texas. And moderate reforms of the regulations on the insurance industry and the financial services industry in this country are not the same thing as Communism."

And Here Krugman hits the right's pertinacious ignoring of contrary information in its economic analysis:

"A lot of 1-percent Romney supporters believed that only the unwashed masses could actually believe that Obama was making more sense on economic policy. What’s so strange about this is that everything — everything — that has happened for the past decade has demonstrated the opposite. Modern Republicans are devotees of faith-based analysis on every front.

"On economics, in particular, they are devoted to supply-side fantasies that keep being refuted by evidence — and their reaction is to try to suppress the evidence. They’ve spent pretty much the whole past four years issuing dire warnings about inflation and soaring interest rates that keep not coming true; they cling to the belief that if only a Republican were in office we’d have a 1982-style recovery even though economists who actually studied past financial crises predicted the slow recovery in advance.

"The truth is that the modern GOP is deeply anti-intellectual, and has as its fundamental goal not just a rollback of the welfare state but a rollback of the Enlightenment."

'Confidence' is a confidence game

Dean Baker writes a brilliant debunking of the Republicon line that the problem with the economy is 'confidence'. In fact as he documents here consumer spending is back up to pre-bubble levels. Investment in commercial buildings, where there is still a backlog from the bubble, is down, but not likely to return until vacant buildings start filling up. However, other investment, as indicated by investment in equipment and software is also almost up to pre-recession levels.

So no, Romney is not 'the confidence fairy', as Krugman puts it derisively, but just a confidence man.

ps. See this earlier post, also referring to a strong argument of Dean Baker against the 'confidence' claim.

Conservative calls out Romney as greatest liar in Presidential campaign history

Here is Norm Ornstein of the conservative think tank, American Enterprise Institute:

“I think there’s nobody like Romney,” says Ornstein. “Romney is like the Michael Phelps of presidential candidates. If you’re looking for gold medals in terms of audacious lying, and adamant refusal to turn over personal information, nobody comes close. I’m sure others would’ve liked to have done it, but the culture in the past was one where lying attracted some level of approbation and shame.”

What is outstanding here is not the observation, but the source, a respected observer of politics at a conservative think tanks. For a catalog of Romney's lies see Steve Benen's series at Maddowblog, Chronicling Mitt's Mendacity, now up to installment forty!

Yes, government is an engine of job creation!

Of all the damaging myths about the economy, the top one is probably that the government is not an engine of job growth. The latest evidence of this myth is a Washington Post column by Robert Samuelson attacking a New York Times editorial supporting the idea that government creates jobs, accusing it of having a 'flat earth' view of the economy.

But the 'flat earther' here is Samuelson. As we have discussed earlier in this blog, former World Bank economist Isabelle Tsakok in her book Success in Agricultural Transformation has looked across countries and history to identify what was necessary to transform from a poor economy with subsistence agriculture to a rich, modern society. In 100% of cases sustained investment by the government in public goods was key. These investments include in infrastructure, education, and research.

Her cases include the USA. The first huge investment was in the Erie Canal, which Thomas Jefferson labeled as "a little short of madness" as a big government, big debt project. But New York Gov. Dewitt Clinton got it funded by New York State government, and when it was built it reduced the price of Midwest grain by 90%, broke the trade barriers in Europe, enabling midwest grain to go all over the world and making New York the biggest city in the world. In other words, government investment in infrastructure was the key to making the US a world economic power.

And it didn't end there. There was a fellow in the then frontier West who aspired to be the DeWitt Clinton of his state. And when he was elected President, Abraham Lincoln in fact became the 'great investor' in the USA, with the homestead act, initiating the transcontinental railroad, the land grant colleges, and many other projects.

And this critical role of government investment in public goods remains the foundation of job growth in the US. The Apollo funded the creation of the microchip, foundation of the US computer industry. And DARPA, the defense department investment program, funded the beginning of the internet.

Samuelson's key argument is that while the government creates government jobs, that money could be used to create a private sector job. He writes, "Government is not creating jobs. It’s substituting public-sector workers for private-sector workers."

The huge blunder and hole in this argument is the assumption that the government job does nothing to leverage private sector jobs. But in the USA from the Erie Canal to the Internet, and from worldwide evidence over all of history cited by Tsakok, this assumption is the opposite of the truth. Government investment is in fact a necessary, critical engine of progress. Samuelson here is the flat earther, not the New York Times.

Investing in America: What Romney and Obama got right and wrong in the debate

In the second Presidential debate yesterday, the heart of Romney's economic case was wrong, and Obama pointed it out—partly, but only partly. Simply cutting taxes on the rich is not going to create a boom in economic growth and jobs; it never has.

But Romney is now arguing that his lowering of rates on the rich he is going to make revenue neutral from each income level—or that's what I think he's arguing, it's hard to tell. But how is this supposed to suddenly create jobs? If it's revenue neutral, then there is no more money in the hands of the 'job creators,' so why under Romney's theory would there be any more job growth? In reality, when there was such a restructuring of the tax code, in 1986 there was no significant impact on job growth in the subsequent five years, as Bruce Bartlett, who was a Reagan advisor, points out. He also links to a report of Martin Feldstein, Romney defender, who says that the 1986 restructuring had no effect on employment.

Obama's attack on the failure of 'trickle down' is on target. But his failure to articulate the key role of government is extremely disappointing. Here is what he said in answer to a question from a 'Barry':

"Barry, I think a lot of this campaign, maybe over the last four years, has been devoted to this notion that I think government creates jobs, that that somehow is the answer. That’s not what I believe.

"I believe that the free enterprise system is the greatest engine of prosperity the world’s ever known. I believe in self-reliance and individual initiative and risk-takers being rewarded. But I also believe that everybody should have a fair shot and everybody should do their fair share and everybody should play by the same rules, because that’s how our economy is grown. That’s how we built the world’s greatest middle class."

First of all, the government does create jobs. Every government job is a job with real pay. This isn't to say that every single government program is a good idea and every single federal employee is productive, but they are real jobs. As someone pointed out, the sight of a bunch of congressmen, who all have real federal jobs, saying that the government doesn't create jobs is on its face self-refuting and ridiculous.

One way these government jobs are important is that they contribute to consumer demand, the 'multiplier' or 'ripple effect', where the spending of employed people boosts the economy. This is why the Republicans blocking the American Jobs Act, which would have reversed the contraction of 700,000 state and local workers—teachers, firefighters, and police—has contributed to the stagnation of the economy.

But aside from creating demand, which is a cyclical issue, there is a critical role of government in creating jobs in the private sector. This is not simply a matter of "fairness," as Obama has it, but of government investment in public goods, which creates the conditions for economics growth and jobs in the private sector. This includes investment in infrastructure, education, and research.

As mentioned before in this blog, the book Success in Agricultural Transformation looked all around the world and throughout history to see what was necessary to change from a poor, subsistence agricultural economy to a modern prosperous one. And in every case sustained investment in public goods was necessary, and key. And in recent times, we have seen this continue in the US. The microchip was invented as part of the moon landing program, a public program. And the internet began as part of DARPA, a defence department research organization.

The point is that investment in education—and Romney has poo-pooed investment in teachers—infrastructure, research, and—yes—keeping the population healthy all are critical government functions that are necessary for economic growth. Such government investment was historically around 15%, but the Romney austerity goals would reduce it to 5%. This is a policy of eating our seed corn. So it is harmful in the short term, because we still need counter-cyclical stimulus, and disastrous in the the long term.

Obama's motto should be "Invest in America"; he needs to get with the program. And yes government both creates jobs directly, and is plays an essential role in enabling private sector growth to happen. Admittedly, Obama has at times emphasized that these are investments. But he doesn't seem to 'get' that this is a core, essential role of government. Romney's basic argument is that a dollar in the hands of the rich is always better than a dollar taxed and then invested by the government in teachers, researchers, infrastructure, and health. But all of history refutes this. Obama needs to counter Romney's magical 'Believe in America' by saying that if you really believe in America you have to invest in America. Romney doesn't believe in America, he believes in the wealthy.

Exposing the Romney Shell Game

One of the difficulties that Obama had in dealing with Romney is that at their core, Romney's proposals are a shell game. On most issues he has different positions or promises that are inconsistent, either blatantly or subtly. When attacked on one, he asserts an inconsistent or incompatible one—the one his current audience wants to hear, he thinks.

Make no mistake, Romney is a clever deceiver. That is because he creates so much confusion that he is hard to get a handle on. The best approach is what the late Ted Kennedy did, to start by calling him 'multiple choice,' by revealing the game that he is playing.

For example Romney made very clear that he has contempt for the 47%. He has also said that he cares for the 100%. Which one is the real Romney? We don't know, but we do know that at least one of them is lying.

Will Obama expose the game tomorrow night? I'm afraid the presidency may hang on it.

Obama fails to call 'liar' on Romney

Romney tonight, in the first debate lied his head off about his own policies. And Obama looked down, refusing to call 'liar'. Can he win like this? As I've said earlier in this blog, I've advocated the necessity of calling liar on Romney. Others have done it. I think Obama could have done a lot better, by putting Romney on the spot by asking for specifics, instead of just complaining about the vagueness of Romney. He'd better figure out the formula for the next two debates.

Myth of the Free Market II: Milton Friedman Bamboozles the US

In a previous post, I noted that Milton Friedman re-labeled laissez faire economics, which advocates permitting big business monopolies, as "Free Market Economics." He thus somehow turned a defense of big business into a claim of protecting individual liberty.

His basic ploy was to slide between two views: 1.) the idea of an ideally competitive market, which has never existed, but can serve individuals efficiently in classical theory, and 2.) the view that any efforts by government that affect the market do more harm than good.

Paul Krugman, in a fascinating in-depth evaluation of Friedman's legacy, describes, so to speak, three Friedmans. The first was an innovative thinker who predicted the possibility of stagflation, and deserved his Nobel Prize.

The second Friedman was the inventor of 'monetarism,' the idea that a steady increase in the money by the Fed was much better than Fed responding to events. Krugman thinks that the economic analysis behind monetarism was in fact flawed and even dishonest. But in any case, the idea was tried from 1979 for three years and resulted in so much unemployment that it was officially abandoned, and not tried since.

The third Friedman was the promoter of laissez faire ideas, under the 'free market' brand he invented. For Friedman, every government intervention should be replaced by a market solution. In some cases Friedman had clever ideas like buying and selling pollution rights. But in all cases the market was better than the government. Krugman points out that "Friedman's laissez-faire absolutism contributed of an intellectual climate in which faith in markets and disdain for government often trumps the evidence."

It is the 'trumping of evidence' that is the core of the intellectual dishonesty on the right. Two of the examples that Krugman gives are particularly telling. One is "Conservatives continue to insist that the free market is the answer to the health care crisis in the teeth of overwhelming evidence to the contrary." The other is the great benefits of deregulation. Krugman, writing in 2007, cites the disasters involving California and Enron that came out of deregulation of the energy market. Of course, in another year he could point to the financial collapse.

What is particularly devastating against Friedman's free-market absolutism is Joseph Stiglitz's work. Stiglitz won the Nobel Prize in Economics by showing that when imperfect information is present, which it always is, markets are not efficient as Friedman claimed. Stiglitz explains: "The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith's invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency."

Stiglitz writes in his brilliant book The Price of Inequality, "I remember long discussions with [Friedman] on the consequences of imperfect information or incomplete risk markets; my own work and that of numerous colleagues had shown that in these conditions, markets typically didn't work well. Friedman simply couldn't or wouldn't grasp these results. He couldn't refute them. He simply knew that they had to be wrong. He, and other free-market economists, had two other replies: even if the theoretical results were true, they were 'curiosities,' exceptions that proved the rule; and even if the problems were pervasive, one couldn't rely on government to fix them."

To sum up, the myth of superiority of the superiority of 'free market' solutions is now contradicted by both evidence and uncontroverted theory. The superiority of solutions that avoid a government role is simply a myth, an emperor with no clothes. The question now is whether the emperor will be elected on Nov. 6.

Republican misconceptions about private and public debt

Here is a 27 minute video on why Romney is dangerously misguided in his thinking about debt and deficits, from Economist Isabelle Tsakok, Harvard PhD, 30 years at the World Bank. (And, full disclosure, my wife.)

Disappointment in American Electorate

Any straight-up comparison of the two major political conventions should convince even the tepidly interested potential voter that Republicans are in serious trouble. However, after weeks of canvassing for Senate Democratic candidate Elizabeth Warren in Massachussetts and  carefully attending to the words of "Blue Dog" working class folks in Fall River Massachussetts (a single-industry textile town for many years which, unlike Detroit, could not rebound after the collapse of that particular single-industry),  I am convinced that  many people are convinced by "fluff" and not "policy" and are strongly anti-intellectual to boot.

Elizabeth Warren's opponent, Scott Brown, won the so-called Kennedy seat after the last lion passed away and a special election was held. His Democratic opponent at that time, Martha Coakley, was and has been a superb attorney general for the state of Massachussetts - but her campaign was feckless  (reflecting the complete arrogance of the Democratic party who assumed that all she had to do was breathe and then glide into office); her Achilles-moment was when she referred to Curt Schilling as a "Yankees fan" (when he was the winning pitcher in the Red Sox route to the World Series championship - against the Yankees no less). Her ignorance was unforgiveable even though it had nothing to do with policy. 

Warren's campaign has focused very heavily upon policy esp. the notion that the tax structure in this country favors the very wealthy and that the hedge fund boys have gotten away with murder.  His has focused entirely upon his canvas workingman's coat and his small GMC truck. She has addressed issues of  substantive importance while he has studiously avoided identifiying himself as a a Republican, or talking about the Republican national platform, or focusing on specific policy issues. 

He runs away from his own party..but features a winsome smile and six-pack abs while signing Grover Norquist's "no tax" pledge and voting for Republicans most of the time. It seems clear to me that two factors are involved in his success to date: a) a clear pandering to a strong strand of anti-intellectualism (you know, the traditional "effete liberal" Spiro Agnew type of criticism which plays well among many white male Irish Catholics disposed to vote against a Harvard University white female professor); and, "localism" (rather than nationalism) in his discussion of key issues. Brown will happily talk about protecting the fishing industry in New Bedford while acting as if the depletion of fishing stocks is not a real problem. 

So..what do we learn about electoral politics from this case study??  In my view, you must relate local problems to the national condition (see C.Wright Mills The Sociological Imagination). Bill Clinton did this superbly in his speech. So did Tip O'Neill who made Reagan's presidency successful. You must also figure out ways of relating  "character issues" to policy. Clinton is eminently successful in doing that; most Dems. are not.