Checking In With Krugman

Prof. Paul Krugman summarizes where things stand with the economy and Our Dear Leader.

[DT] marked the anniversary of 9/11 by repeating several lies about his own actions on that day [Note: the New York Times cowardly referred to them as “exaggerations”]. But that wasn’t his only concern. He also spent part of the day writing a series of tweets excoriating Federal Reserve officials as “Boneheads” and demanding that they immediately put into effect emergency measures to stimulate the economy — emergency measures that are normally only implemented in the face of a severe crisis.

Trump’s diatribe was revealing in two ways. First, it’s now clear that he’s in full-blown panic over the failure of his economic policies to deliver the promised results. Second, he’s clueless about why his policies aren’t working, or about anything else involving economic policy.

Before I get to the economics, let’s talk about one indicator of Trump’s cluelessness: his remarks about federal debt.

In addition to demanding that the Fed cut interest rates below zero, Trump declared that “we should then start to refinance our debt,” because “the USA should always be paying the lowest rate.” Observers were left scratching their heads, wondering what he was talking about.

Actually, however, it’s fairly obvious. Trump thinks that federal debt is like a business loan, which you can pay down early to take advantage of lower interest rates. He’s clearly unaware that federal debt actually consists of bonds, which can’t be prepaid (which is one reason interest rates on federal debt are always lower than, say, rates on home mortgages). That is, he imagines that the government’s finances can be managed as if the U.S. were a casino or a golf course, and it never occurred to him to ask anyone at Treasury whether that’s how it works.

But back to the economy. Why is Trump panicking?

After all, while the economy is slowing, we’re not in a recession, and it’s by no means clear that a recession is even on the horizon. There’s nothing in the data that would justify radical monetary stimulus — stimulus, by the way, that Republicans, including Trump, denounced during the Obama years, when the economy really needed it.

Furthermore, despite Trump’s claims that the Fed has somehow done something crazy, monetary policy has actually been looser than Trump’s own economic team expected when making their rosy forecasts.

In the summer of 2018 the White House’s economic projections envisioned that this year three-month interest rates would average 2.7 percent, while 10-year rates would be 3.2 percent. The actual rates as I write this are 1.9 and 1.7 percent, respectively.

But while there’s no economic emergency, Trump apparently feels that he’s facing a political emergency. He expected a booming economy to be his big winning issue next year. If, as now seems likely, economic performance is mediocre at best, he’s in deep trouble.

Remember, Trump’s two signature economic policies were his 2017 tax cut and his rapidly escalating trade war with China. The first was supposed to lead to a decade or more of rapid economic growth, while the second was supposed to revive U.S. manufacturing.

In reality, however, the tax cut delivered at most a couple of quarters of higher growth. More specifically, huge tax breaks for corporations haven’t delivered the promised surge in wages and business investment; instead, corporations used the windfall to buy back stocks and pay higher dividends.

At the same time, the trade war has turned out to be a major drag on the economy — bigger than many people, myself included, expected. Until last fall the general expectation was that Trump would deal with China the way he dealt with Mexico: make a few mainly cosmetic changes to existing arrangements, claim victory, and move on. Once it became clear that he was really serious about confrontation, however, business confidence began falling, dragging investment down with it.

And voters have noticed: Trump’s approval rating on the economy, while still higher than his overall approval, has started to decline. Hence the panicky demands that the Fed pull out all the stops.

But while Trump realizes that he’s in trouble, there’s no indication that he understands why [Note: Prof. Krugman is being unnecessarily polite]. He’s not the kind of person who ever admits, even to himself, that he made mistakes; his instinct is always to blame someone else while doubling down on his failed policies.

Even actions that look like a slight policy softening, like his announcement of a two-week delay in implementing some China tariffs, betray a deep incomprehension of the problem — which has as much to do with his capriciousness as with the tariffs per se. Policy zigzags, even if they involve delaying tariffs, just add to the will-he-or-won’t-he uncertainty that’s causing companies to put investment on hold.

So what happens next? Trump could reverse course, and do what most people expected a year ago, reaching a deal with China that more or less restores the status quo. But that would be a de facto admission of defeat — and at this point it’s not clear why the Chinese would trust him to honor any such deal past Election Day.

Unquote. “It’s not clear why the Chinese would trust him” is an understatement of cosmic proportions.

A Positive Step

It isn’t making much news, but the House Judiciary Committee finally announced their plan to hold the president accountable. They will vote on Wednesday to institute special procedures designed to investigate and publicize the president’s numerous impeachable offenses. The Washington Post has an analysis of this long-awaited development. Public hearings are supposed to begin next week. The committee chairman says they may be able to vote on articles of impeachment by the end of the year. Any articles approved by the committee will be sent to the full House of Representatives. Nobody knows what will happen after that, but this is a positive step.

Here is most of the press release the committee issued this morning:

Today, House Judiciary Committee Chairman Jerrold Nadler announced the House Judiciary Committee will consider procedures on Thursday for future hearings related to its investigation to determine whether to recommend articles of impeachment with respect to President Donald Trump….

The new procedures provide that:

  • Chairman Nadler will be able to designate full or subcommittee hearings as part of the investigation to determine whether to recommend articles of impeachment.
  • Committee counsel may question witnesses for an additional hour beyond the 5 minutes allotted to each Member of Congress on the Committee. The hour will be equally divided between the majority and the minority; thirty minutes for each side.
  • Evidence may be received in closed executive session.  This allows the Committee to protect the confidentiality of sensitive materials when necessary, such as with grand jury materials.
  • The President’s counsel may respond in writing to evidence and testimony presented to the Committee.

Chairman Nadler released the following statement:

“President Trump went to great lengths to obstruct Special Counsel Mueller’s investigation, including the President’s attempts to remove the Special Counsel and encourage witnesses to lie and to destroy or conceal evidence.  Anyone else who did this would face federal criminal prosecution.

“The Mueller report resulted in 37 criminal indictments, 7 guilty pleas, and revealed 10 possible instances where President Trump obstructed justice. At least five of which we now know to be clearly criminal. Trump’s crimes and corruption extend beyond what is detailed in the Mueller report. The President is in violation of the emoluments clauses of the Constitution as he works to enrich himself, putting the safety and security of our Nation at risk. He has dangled pardons, been involved in campaign finance violations and stonewalled Congress across the board, noting that he will defy all subpoenas.

“No one is above the law. The unprecedented corruption, coverup, and crimes by the President are under investigation by the Committee as we determine whether to recommend articles of impeachment or other Article 1 remedies.  The adoption of these additional procedures is the next step in that process and will help ensure our impeachment hearings are informative to Congress and the public, while providing the President with the ability to respond to evidence presented against him. We will not allow Trump’s continued obstruction to stop us from delivering the truth to the American people.”

The Professor Got Educated

I wish every voter in the country would read this article. Okay, relatively few will, but I’m convinced she’ll be our next president anyway. From “The Education of Elizabeth Warren” in the New York Times, here’s a much shorter version:

By 1981, Ms. Warren and her husband had secured temporary teaching posts at the University of Texas, where she agreed to teach bankruptcy law. She quickly earned a reputation for lively lectures, putting students on the spot and peppering them with questions and follow-up questions…

Even visitors to her class got the treatment. One of them was Stefan A. Riesenfeld, a renowned bankruptcy professor who had come to lecture on the Bankruptcy Reform Act of 1978. The law, which had expanded bankruptcy protection for consumers, was already under attack by the credit industry, which argued that it made personal bankruptcy too attractive.

Even so, Mr. Riesenfeld explained to Ms. Warren’s class, those who filed personal bankruptcy were “mostly day laborers and housemaids who had lived at the economic margins and always would,” she wrote in her 2014 memoir.

“I asked the obvious follow-up question: ‘How did he know?’” Ms. Warren wrote. After more questioning, it became clear that not only did Mr. Riesenfeld have no real answer, he was irritated by Ms. Warren’s probing.

The subject struck close to home. When she was growing up in Oklahoma, her father’s heart attack had thrown their household into precarious financial territory, forcing her mother to take a minimum-wage job answering telephones at Sears.

She remembers being fearful as she lay in bed at night listening to her mother cry. “She thought I had gone to sleep. I didn’t know for sure the details of why she was crying, but I knew it was bad and that we could lose everything,” Ms. Warren said.

(Later, the oil glut of the 1980s would destroy her brother David’s once-thriving business delivering supplies to oil rigs. Her brother John, a construction worker, would also struggle after the oil market collapsed….)

She wanted answers, more than Professor Riesenfeld could provide….

Dozens of people would eventually be involved in the … analysis of a quarter million pieces of data gathered from bankruptcy cases filed from 1981 through 1985.

Among the researchers was Kimberly S. Winick, then a University of Texas law student … While Ms. Warren didn’t talk a lot about her views, Ms. Winick said she believed that the project’s initial theory was that, “If you filed bankruptcy, you must be cheating.”

“Liz was from a more conservative place,” Ms. Winick said. “And she was somebody who had worked very, very, very hard all her life. And she had never walked away from a debt. And I think she kind of started with the view — let’s see what people are doing and how they’re cadging on their debts and screwing their creditors.”

That was the conventional thinking of the day….

While the [bankruptcy files] did not tell the whole story, they provided enough evidence for Mr. Warren and her co-authors to write, “Repeatedly, we have been surprised by the data and forced to rethink our own understanding of bankruptcy”.

… Over the years, the research elevated Ms. Warren’s status, from little-known Texas professor to sought-after lecturer, writer and consultant in bankruptcy law. It also set the stage for her career in politics.

In 1995, Mike Synar, a former Democratic congressman from her home state, asked Ms. Warren, by then a Harvard professor, to advise a special commission reviewing the bankruptcy system….

It was during that period, in 1996, that she switched her party affiliation from Republican to Democrat, though she insists that her essential conversion was from “not political” to “political”.

“I didn’t come from a political family,” she said. “I hadn’t been political as an adult. I was raising a family, teaching school and doing my research,” she said.

Then she went to Capitol Hill.

“I quickly discovered that every single Republican was on the side of the banks and half the Democrats were,” she said. “But whenever there was someone who would stand up for working families, it was a Democrat.”

She added, “I picked sides, got in the fight, and I’ve been in the fight ever since”.

merlin_159494604_bb8319a0-292c-4940-9d65-d3e2c6834404-jumboUniversity of Texas, 1985.

An appropriate addendum.

Destroyed By Madness?

Tom Sullivan of the Hullabaloo blog summarizes. Quote:

… The trend lines were there — from the Birchers and Goldwater to Nixon and the Southern Strategy, from the parallel rise of the Christian right and movement conservatism, to Reagan, to “Rush Rooms” and the Gingrich revolution, and from birtherism to climate denialism to Trumpish authoritarianism.

It is quaint to think George W. Bush’s tax cuts, malapropisms, and war cabinet once seemed the apotheosis of the conservative project. The momentum of that project would carry the right’s explosive-laden artillery shell beyond its intended liberal targets. Plutocrats would get their tax cuts and regulatory rollbacks, but at risk of bringing the shining city on the hill’s walls down around them and us…

The movement conservative leaders thought they had built upon a philosophy of lower taxes and small government was simply a facade. Their own internal polling told them their voters had no interest in it. The culture wars the party fueled as a useful tool in advancing their donors’ objectives was their base voters’ true philosophy:

This would seem to confirm the conclusions that liberals have long harbored. The Republican Party’s political elite is obsessed with cutting taxes for the wealthy, but it recognizes the lack of popular support for its objectives and is forced to divert attention away from its main agenda by emphasizing cultural-war themes. The disconnect between the Republican Party’s plutocratic agenda and the desires of the electorate is a tension it has never been able to resolve, and as it has moved steadily rightward, it has been evolving into an authoritarian party.

The party’s embrace of Trump is a natural, if not inevitable, step in this evolution. This is why the conservatives who presented Trump as an enemy of conservative-movement ideals have so badly misdiagnosed the party’s response to Trump. The most fervently ideological conservatives in the party have also been the most sycophantic: Ryan, Mike Pence, Ted Cruz, Mick Mulvaney, the entire House Freedom Caucus. They embraced Trump because Trumpism is their avenue to carry out their unpopular agenda.

… As dead as irony is in the Age of Trump, the irony remaining is how a movement in reaction to the social transformations of the 1960s now mirrors, and in many ways exceeds, the worst excesses of which it accused civil rights “communists” and long-haired hippies with their drugs and godless “moral relativism.”

Now it is the Republican base addicted to drugs, looking for an angry fix, and making obeisance to a false prophet as the party’s elite grovel for a seat at his right hand. What conservatives need now is not pundits or preachers, but poets.

“I saw the best minds of my generation destroyed by madness …”

End quote. 

Or psychiatrists. Anyway, he’s being poetic. He knows they weren’t the best minds to begin with.

The Happy Warrior

As you may recall, very few people were excited about the presidential candidacies of Michael Dukakis (1988), Al Gore (2000) and John Kerry (2004). That partially explains why Presidents Dukakis, Gore and Kerry only exist in alternate (and probably better) timelines. The Clinton campaigns (1992, 1996 and 2016) got many people excited. Without the intervention of Russia and the FBI, there would have been two Presidents Clinton by now. Then there is Barack Obama (2008 and 2012). Even more people were excited about him.

One of the presidential candidates getting people excited this time is Senator Elizabeth Warren. Here’s Charles Pierce of Esquire writing about her appearance at the Iowa State Fair on August 10th:

“Elizabeth Warren Is the Teacher All the Students Hope to Get in the Fall”

DES MOINES, IOWA—It is the little moments, the 40-second videos that pop up on the electric Twitter machine accounts of activists and campaign reporters, that give you a sense of the large, humming machine with which Senator Professor Warren thoroughly has wired her campaign into the state of Iowa, at least in the high summer of 2019.

Here she is at the state fair, talking to a crowd along one of the wide boulevards, the people who couldn’t find spots in the huge crowd that waited in stifling heat to hear her at the Des Moines Register‘s candidate soapbox out front, the way Bruce Springsteen turns around to play to the crowd sitting behind the stage. Here she is backstage at some event or another, greeting Senator Kamala Harris like an old college pal, a signifying moment between two powerful women who already share one of the iconic pictures of this campaign. She spends as much time talking to kids as she does to their parents, and she works the crowd like someone born to work the crowds at state fairs.

These are the outward manifestations of what her campaign has put together out here…. She draws enormous crowds and enormous ovations from those crowds. People see her and holler, unbidden, “Big Structural Change!”—the tagline for all her now-famous syllabus of plans. They chant, “Two cents!”, the amount of each dollar over $50 million she proposes to tax to finance the implementation of those plans. (This is reminiscent of the night at the 2012 Democratic National Convention in Charlotte, when the crowd chanted, “Consumer Finance Protection Bureau,” at her, which was not an easy thing to chant.) And, in the polls, she can’t be said to have had a “moment” yet, but her rise has been steady, easing fears that she might be peaking too soon. She is now a solid second to Joe Biden, and it is still only August of 2019.

But the thing that’s sold Elizabeth Warren to Iowa is primarily Elizabeth Warren. None of the candidates seems to be having as much fun as she is. The endless selfies after speeches. The pinky-swears with young girls about how what girls do is run for president. Her willingness to hold town halls anywhere. That loose-limbed, almost goofy wave with which she steps onto every stage. In a gloomy political time, with a humorless sociopathic bully in the White House, and with all the worst impulses of the national Id come out to play, Senator Professor Warren is the campaign’s happy warrior, the teacher everybody hopes they get when school starts up again in the fall. People respond to the good feeling around her campaign as much as they respond to the blizzard of policy proposals that campaign has loosed upon the electorate.

She is a liberal academic who lives in Massachusetts, but she is not a Massachusetts Liberal in the easy caricature that has been so useful to the Republicans over the last 40 years. She is neither a quiet technocrat like Michael Dukakis nor a chilly WASPish icon like John Kerry. She is Oklahoma, born and bred, and it shows in the easy way she connects with audiences here. She is not Harvard. She is someone who went to two public universities before she ever got there. There is none of the distance, none of the archness, common to Ivy League academics.

And the people who come expecting a Dukakis or a Kerry come away happily surprised. And the people who come away expecting an ivory-tower Harvard lecturer leave feeling smarter, and experiencing the conquest of learning in a way they haven’t felt it since elementary school. None of this is to say what may happen when the guns really open up on her, but it is to say, for now, that Elizabeth Warren is running a campaign of hope and optimism and enthusiasm as surely as did Ronald Reagan, that ol’ Iowa radio guy, in 1980, and as surely as Barack Obama did in 2008.

Just on Saturday, she rolled out a plan to address gun violence that included an excise tax on ammunition, an idea the time for which clearly has come, as a number of the candidates have signed onto it. (Thus did a policy proposed by Chris Rock in 1999 become a mainstream Democratic position a decade later.) She talked it up during a forum on gun violence and then went to the fair, where she leaned off the back porch and asked people what they liked best about the fair.

“The food!” someone hollered.

“You!” someone else replied.

She hand-waved both of these until someone mentioned the pigs in competition across the grounds. She spent five minutes talking about them and then walked into the crowd. It took her the better part of an hour to get out of the place.

[End Quote]

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The C-SPAN video below includes 10 minutes of her stump speech, 5 minutes of her answering reporters’ questions (that are hard to hear) and then another 5 minutes of her being mobbed by the crowd. Watching and listening to her, I’m convinced she will do very well in November 2020, even among millions of voters who mistakenly believed You Know Who would work for them instead of the “economic royalists”. But that’s only if we Democrats are smart enough to nominate her.

Elizabeth Warren at the Iowa State Fair

Our Next President

12,000 people showed up on a Monday night in Minneapolis to see Sen. Elizabeth Warren, seven months before the Minnesota primary election. After she spoke, she spent three hours taking selfies with anyone who wanted one. I think it’s time to put the “Nevertheless She Persisted” bumper stickers on the cars.

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Correction:  It was at Macalester College in St. Paul, the other Twin City. Still very impressive, of course.

Eviction vs. Conviction

We hear a lot about criminal justice in America and how it adversely affects the lives of black men in particular. A similar story should be told about housing in America and how it adversely affects the lives of black women. Lots of black men get convicted. Lots of black women get evicted.

Katha Pollitt’s 2016 review of “Evicted”, by Matthew Desmond, in The Guardian:

What if the dominant discourse on poverty is just wrong? What if the problem isn’t that poor people have bad morals – that they’re lazy and impulsive and irresponsible and have no family values – or that they lack the skills and smarts to fit in with our shiny 21st-century economy? What if the problem is that poverty is profitable? These are the questions at the heart of Evicted, Matthew Desmond’s extraordinary ethnographic study of tenants in low-income housing in the deindustrialised middle-sized city of Milwaukee, Wisconsin.

You might not think that there is a lot of money to be extracted from a dilapidated trailer park or a black neighbourhood of “sagging duplexes, fading murals, 24-hour daycares”. But you would be wrong. Tobin Charney makes $400,000 a year out of his 131 trailers, some of which are little better than hovels. Sherrena Tarver, a former schoolteacher who is one of the only black female landlords in the city, makes enough in rents on her numerous properties – some presentable, others squalid – to holiday in Jamaica and attend conferences on real estate.

Desmond follows the intertwined fortunes of eight families and a host of minor characters. Arleen Belle and Doreen Hinkston are black mothers clinging to the edge of low-wage employment; Crystal and Trisha are fragile young black women whose upbringing was violent and chaotic; Lamar is a genial black father of two who lost both his legs to frostbite when he passed out on crack in an abandoned house; Scott is a white male nurse who lost his licence when he stole opioids from his patients; Larraine, also white, is a slightly brain-damaged sweet soul. It is sometimes a little hard to keep up with the storylines as they weave in and out of the text, but no matter. What is important is that Desmond takes people who are usually seen as worthless – there is even a trailer-dweller nicknamed Heroin Susie – and shows us their full humanity, how hard they struggle to retain their dignity, humour and kindness in conditions that continually drag them down.

The main condition holding them back, Desmond argues, is rent. The standard measure is that your rent should be no more than 30% of your income, but for poor people it can be 70% or more. After he paid Sherrena his $550 rent out of his welfare cheque, Lamar had only $2.19 a day for the month. When he is forced to repay a welfare cheque he has been sent in error and falls behind on rent, he sells his food stamps for half their face value and volunteers to paint an upstairs apartment, but it is not enough. People such as Lamar live in chronic debt to their landlord, who can therefore oust them easily whenever it is convenient – if they demand repairs, for example, like Doreen, or if a better tenant comes along. Sherrena liked renting to the clients of a for-profit agency that handles – for a fee – the finances of people on disability payments who can’t manage on their own. Money from government programmes intended to help the poor – welfare, disability benefits, the earned-income tax credit – go straight into the landlord’s pocket and, ironically, fuel rising housing costs. Public housing and housing vouchers are scarce. Three in four who qualify for housing assistance get nothing.

Even in the Great Depression, evictions used to be rare. Now, each year, hundreds of thousands, perhaps millions, of renters are put out on the street. Even a paid-up tenant can be easily evicted. Arleen loses one apartment when her son Jori throws a snowball at a passing car and the enraged driver kicks in the front door, and another when the police come after Jori when he kicks a teacher and runs home. Any kind of trouble that brings the police can lead to eviction, which means women can lose their homes if they call 911 when their man beats them up. Think about that the next time someone asks why women don’t call the cops on violent partners.

As Desmond shows, the main victims of eviction are women. Why? They are paid less than men for doing the same job. They are less able to make deals with their landlord, who is almost always a man, to work off part of their rent with manual labour. The main reason, though, is that women are raising children as single mothers. They not only have all the costs and burdens of childrearing, they need bigger apartments – which, since landlords dislike renting to families with young children, are harder to find and a lot harder to keep. Other sociologists – Kathryn Edin, for example – have found that single mothers often get help under the table from their children’s fathers, but Arleen, Doreen and Doreen’s adult daughter Patrice get mostly trouble from men, who are variously abusive, addicted, vanished or in prison. In one of the book’s many small sad moments, Arleen claims she receives child support in order to seem more stable and respectable to a prospective landlord. In fact, she gets nothing.

Desmond lays out the crucial role housing plays in creating and reinforcing white privilege. In Milwaukee, one of the most segregated cities in the US, all black people suffer from housing discrimination and all white people benefit at least a little from the racial dividend – a landlord who will rent to them but not to black people, for instance, or offer them a nicer apartment. Black people have the worst housing in the worst neighbourhoods – the great fear of the trailer-park people, who are all white, is that they will end up on the black side of town. Eviction hits black women hardest of all, and the bleak benches of housing courts, which deal with disputes between landlords and tenants, are full of black women and their children: “If incarceration had come to define the lives of men from impoverished black neighbourhoods, eviction was shaping the lives of women. Poor black men were locked up. Poor black women were locked out.”

An evicted woman watches as a removal company moves her property out of her rented apartment on to the pavement.
An evicted woman watches as employees of a storage company remove her belongings to place them on the pavement in front of her rented apartment. Photograph: Sally Ryan/Zuma Press/Corbis

What are the social costs of eviction? It puts incredible stress on families. It prevents people from saving the comparatively small sums that would let them stabilise their situation. They are always starting over from scratch, losing their possessions in the chaos of removal, or putting them in storage and losing them when they can’t pay the fees. An eviction on your record makes the next apartment harder to get. Eviction damages children, who are always changing schools, giving up friends and toys and pets – and living with the exhaustion and depression of their parents. We watch Jori go from a sweet, protective older brother to an angry, sullen boy subject to violent outbursts who is falling way behind in school.

Eviction makes it hard to keep up with the many appointments required by the courts and the byzantine welfare system: several characters have their benefits cut because notices are sent to the wrong address. Eviction destroys communities: when people move frequently, they don’t form the social bonds and pride in place that encourage them to care for their block and look out for their neighbours. “With Doreen’s eviction, Thirty-Second Street lost a steadying presence – someone who loved and invested in the neighbourhood, who contributed to making the block safer – but Wright Street didn’t gain one.”

“There is an enormous amount of pain and poverty in this rich land,” Desmond writes in his conclusion. That is easy to say, and many books by journalists and academics have done so. By examining one city through the microscopic lens of housing, however, he shows us how the system that produces that pain and poverty was created and is maintained. I can’t remember when an ethnographic study so deepened my understanding of American life.to all and safeguarding our independence.