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Category Archives: Economics

We’re Not Spending Too Much on Ukraine

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Republicans are pushing the ludicrous idea that returning Iran’s access to its frozen funds (which are now sitting in a bank account in Qatar) somehow led to the current fighting in Israel. It’s ludicrous, but baseless right-wing propaganda can have an effect: support for Ukraine appears to be weakening in the US. Paul Krugman explains why this is stupid:

Right-wing hard-liners, both in Congress and outside, claim to be upset about the amount we’re spending supporting Ukraine. But if they really cared about the financial burden of aid, they’d make the minimal effort required to get the numbers right. No, aid to Ukraine isn’t undermining the future of Social Security or making it impossible to secure our border or consuming 40 percent of America’s G.D.P.

How much are we actually spending supporting Ukraine? In the 18 months after the Russian invasion, U.S. aid totaled $77 billion. That may sound like a lot. It is a lot compared with the tiny sums we usually allocate to foreign aid. But total federal outlays are currently running at more than $6 trillion a year, or more than $9 trillion every 18 months, so Ukraine aid accounts for less than 1 percent of federal spending (and less than 0.3 percent of G.D.P.). The military portion of that spending is equal to less than 5 percent of America’s defense budget.

Incidentally, the United States is by no means bearing the burden of aiding Ukraine alone. In the past, [our maniacal former president] and others have complained that European nations aren’t spending enough on their own defense. But when it comes to Ukraine, European countries and institutions collectively have made substantially larger aid commitments than we have. Notably, most of Europe, including France, Germany and Britain, has promised aid that is higher as a percentage of G.D.P. than the U.S. commitment.

But back to the costs of aiding Ukraine: Given how small a budget item that aid is, claims that aid to Ukraine somehow makes it impossible to do other necessary things, such as securing the border, are nonsense. MAGA types aren’t known for getting their numbers right or, for that matter, caring whether they get their numbers right, but I doubt that even they really believe that the monetary costs of helping Ukraine are insupportable.

And the benefits of aiding a beleaguered democracy are huge. Remember, before the war, Russia was widely viewed as a major military power, which a majority of Americans saw as a critical threat (and whose nonwoke military some Republicans exalted). That power has now been humbled….

Finally, what even Republicans used to call the free world has clearly been strengthened. NATO has risen to the occasion, confounding the cynics, and is adding members. Western weapons have proved their effectiveness.

Those are big payoffs for outlays that are a small fraction of what we spent in Iraq and Afghanistan, and let’s not forget that Ukrainians are doing the fighting and dying. Why, then, do MAGA politicians want to cut Ukraine off?

The answer is, unfortunately, obvious. Whatever Republican hard-liners may say, they want Putin to win. They view the Putin regime’s cruelty and repression as admirable features that America should emulate. They support a wannabe dictator at home and are sympathetic to actual dictators abroad.

So pay no attention to all those complaints about how much we’re spending in Ukraine. They aren’t justified by the actual cost of aid, and the people claiming to be worried about the cost don’t really care about the money. What they are, basically, is enemies of democracy, both abroad and at home.

The Song of the South

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What is it that makes the American South so special? A journalist named Hamilton Nolan answers that and other questions at How Things Work, where he writes about labor, politics and power.

Since the Covid pandemic struck in 2020, more than two million people have migrated to the six fastest growing states in the South, bringing with them $100 billion in new income. This population shift is held up by Southern governors as proof of the success of their policies—and as a herald of an ongoing shift in the balance of economic power that is bound to continue due to the South’s inherent advantages. What spurred this grand relocation? Traditional wisdom will tell you that it was the more relaxed and open posture of Southern states like Florida during the Covid pandemic, along with the perpetual allures of warmer weather, lower taxes, and more affordable housing prices.

In reality, though, this current sloshing of America towards its drain is not the start of anything new at all. It is spurred not by any new economic paradigm, nor by any Texan or Floridian governor’s new ideas about unleashing the power of free enterprise under the nation’s sunniest skies. It is, instead, a normal reaction to a … rise in the appeal of something that the South has been offering for more than 200 years. Politicians will tell you that the South is attractive because it offers greater freedom. Actually, it offers cannibalism: it is willing to kill and eat its own to fuel a marginal improvement in your lifestyle. Don’t let this deal pass you by!

Ron Desantis is running (unsuccessfully) for president on the premise that he can do for America what he has done for Florida in the past three years. One way to look at his record during those crucial Covid years is: he kept stuff open and got rid of pandemic restrictions, which caused the Florida economy to flourish. Another, more accurate way to look at it is: he kept stuff open and got rid of pandemic restrictions because he fundamentally does not care whether his citizens live or die, as long as his state could get a temporary economic boost that he could use for self-promotional purposes. In this, Desantis was the perfect combination of the classic Southern socioeconomic strategy with a global pandemic.

Ever since being forced to give up formal slavery at gunpoint, the South has pursued a formula of attraction only one step removed from it. The region’s offer to businesses and wealthy people in the rest of America is, and has always been, this: “Come to the South. Do whatever you want. We won’t regulate you. We won’t tax you. We’ll crush any unions that dare to come here. We’ll provide a pool of dirt-cheap labor for you. Because we don’t tax you, our public services will be awful. Our public schools will be inadequate. But don’t worry, because we will build graceful private schools for the people with money, and we will build private country clubs and gated communities to shield you from the poverty, and racist cops to police the borders of the neighborhoods, and you can live here in a private island of bliss. The inadequacy of our public services and our outright racial oppression guarantee that that cheap labor force will continue forever. You can profit from that cheap labor force without ever having to interact with the people who compose it, except as various forms of servants. The oppression, sequestered away from you and walled off from impacting your life except to enhance it, is what makes the system work.”

That’s it. That’s the South’s sales pitch. It is the poorest and most backwards region of America by traditional socioeconomic measurements, but it’s great place to be when you exclude all of the poor people from your measurements. Which they do, because “not caring about all the poor people” is the key to the South’s ability to imagine itself as a place with a political system that works. This is the slavery mentality dragged cleanly into the present day, modified just enough to fit the letter of the law.

In the plantation era, the South was great, as long as you were a plantation owner. If you add all the slaves (and poor whites) into the calculation… ugh, you mess up the numbers. Despite the fact that the South’s failure to industrialize properly due to slavery was one of the things that lost it the Civil War, the region remains stubbornly addicted to cheap labor today. It is, at heart, an inferiority complex. The South’s leaders don’t really believe that they have anything to offer to lure people in other than a work force that will show up for rock bottom wages. If the South really believed in itself, it would be busily investing in public education and health care and a strong social safety net and all the other things that build a healthy and thriving society that ultimately attracts people and businesses. Instead, they do the opposite—because empowering the existing residents of the South would undermine its cheap labor pool.

When you see Southern governors doing seemingly irrational things like rejecting federal government Medicaid funding for their state’s residents, you must understand that the people who would be helped by that funding simply do not count in the minds of those states’ leaders. Their states are modern plantations, and they calculate the success of their governance based on the living standards of the plantation owners, not the workers. Even worse, doing things that help the workers live better could harm the project of maintaining a maximally desperate labor pool. The South doesn’t want their entire population to be healthy and well-educated. They want white people and business owners to be healthy, thanks to private doctors, and well-educated, due to private schools, and to have access to a limitless low-wage work force that, thanks to the failure of the state to invest in their welfare, has no choice but to acquiesce to being exploited. The more desperate they are, the better.

When you see Texas Republicans eliminate laws that grant workers water breaks, that is not some momentary outbreak of callousness; that is the point. …

Embracing the South’s toxic sales pitch pollutes the soul. “I am moving to Florida because the total lack of public health measures is nice and easy for me, as a rich person, even though I know it will cost a calculable number of Floridians their lives.” You are a bad person. “I am moving to Texas to save on my personal income taxes, even though I know that the cost of that is poor schools and oppression for vast swaths of this state’s neediest residents.” You are a bad person. “I am relocating my company’s factory to South Carolina because labor costs there are lower, even though I know that those low wages are a result of systematic oppression and union-busting designed to keep millions of poor people powerless over their own lives.” You are a bad person.

The bliss of ignorance is a critical part of this whole process. Move only between your air conditioned home on a golf course and your air conditioned office and your kids’ private school and the nice strip malls around your nice neighborhood and don’t ask any questions of the people who build the houses and serve the food and fill the factories and it is possible to cling to the illusion that this whole system works. But as soon as you begin to think about the aggregate welfare of everyone in the South—as soon as you place an equal value on the lives of the poor—it becomes devastatingly clear that all the nice enticements that tempted you down here require you to stand, at all times, on the necks of your fellow citizens. If you know that and continue to tolerate it, the South has poisoned you.

Unquote.

“The South has poisoned you”. It’s also how the South has poisoned American politics since the 18th century.

Bidenomics as Transformational

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Ronald Reagan gave us Reaganomics, for which he should never be forgiven. The next “n” president was responsible for Clintonomics, a set of policies somewhere to the left of Reaganomics. Now we have Bidenomics. Journalist and lecturer John Stoehr is very impressed:

Joe Biden ran for president as Mr. Normalcy. During the pandemic, with the body count rising and the economy teetering, he looked pretty good next to a lying, thieving, philandering sadist who refused to lead the nation or take responsibility for it. Compared to [that other guy], Biden was a no-brainer. All he had to do was brush his teeth and mind his posture.

But Biden is not Mr. Normalcy…. Last month, during a speech in Chicago, he embraced the fact that he is what his former boss (you remember center-left Obama) had always wanted to be: a transformational president. “Bidenomics is working,” he said….

This is a BFD, and not because he’s reclaiming an insult. “Bidenomics” is real, new and, most of all, believable. Its namesake is self-consciously embracing it, indeed he’s running for reelection on it. Biden is saying the old regime is dead, and if I win, I’ll make sure it stays that way.

That’s a BFD.

“Bidenomics” is real. The economy is adding jobs at rates unseen since the 1960s. Private firms hired nearly half a million people last month, doubling expectations. (Inflation has also been slowing, for months) [now at an annual rate of 3% according to the government’s latest estimate].

“Bidenomics” is new. The last time the government invested in the economy, in the way that it’s currently investing in it, was six decades ago, which is also the last time jobs were added at such rates.

“Government is no longer shying away from pushing investment toward specific goals and industries,” wrote EJ Dionne. “Spending on public works is back in fashion. New free-trade treaties are no longer at the heart of the nation’s international strategy. Challenging monopolies and providing support for unionization efforts are higher priorities.”

But the biggest reason “Bidenomics” is a BFD is that it’s believable.

Since I came of age in the 1980s, most people most of the time have been receptive to the claim that “government interference” in a free market society – taxing wealth progressively, regulating critical industries, expanding opportunities, investing in public works – is something akin to socialism. To be sure, no one really knew what socialism was, not even the so-called socialists. It just sounded right….

For one thing, the Great (Long) Recession showed us that a free market society can’t be free. If you’re too big to fail, you’re also too big to jail – full stop. For another, the pandemic showed us that “government interference” isn’t as bad as we thought, given that we’d have died without it. The lucky survivors among us would be much poorer, too.

So Biden is not arguing that the old political order is dead. He’s pointing his finger at its moldering cadaver and saying, look! It’s dead! In Chicago, he declared that the regime of the last 40 years, which included the policies of his Democratic predecessors, is no longer viable. New conditions, challenges and urgencies call for a new regime.

Normal presidents try to appear to break from the past.

Transformational presidents do not try to appear to break. They break.

But the past was already broken.

Biden is not leading us toward regime change as much as he is leading us toward a consensus that the old regime has already changed. The old regime (sometimes called “neoliberalism,” sometimes called “Reaganomics,” after Ronald Reagan) started OK. It privileged tax cuts, deregulation, privatization and free trade. But that was at the expense of normal people, their standards of living, and the democracies they inhabited. The old regime was good — for the very obscenely rich.

Even so, every president since 1980, including Biden’s former boss, protected that political order, even as it immiserated the middle class over time. (Wages were higher in the 1960s, adjusted for inflation, than today, though, thanks to “Bidenomics,” they are finally catching up.)

Joe Biden is the first president in my lifetime, going back to Richard Nixon, to self-consciously take the side of people who work for a living while also self-consciously making enemies of people who own so much they don’t have to work. That’s a transformational president.

That’s regime change.

That’s a BFD.

“Bidenomics” Could Be a Very Big Deal

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It seems to me that there were articles saying Democrats needed an “industrial policy” back in the 70s. It looks like they’ve finally got one. From E. J. Dionne for The Washington Post:

President Biden might not seem like a revolutionary, but he is presiding over a fundamental change in the nation’s approach to economics. Not only is he proposing a major break from the “trickle-down” policies of Ronald Reagan, as Biden highlighted in a speech in Chicago on Wednesday. He is also departing from many orthodoxies that shaped the presidencies of Democrats Bill Clinton and Barack Obama.

Government is no longer shying away from pushing investment toward specific goals and industries. Spending on public works is back in fashion. New free-trade treaties are no longer at the heart of the nation’s international strategy. Challenging monopolies and providing support for unionization efforts are higher priorities.

You can trace the break in part to new circumstances and challenges, as national security adviser Jake Sullivan argued in an important speech of his own in April.

Heightened competition with China and the urgency of dealing with climate change are part of the story. So is the long rise of wealth and income inequality accompanied by the collapse of many of the country’s industrial communities. The breakdown of supply chains during the pandemic put an accent on resiliency and an emphasis on bringing home manufacturing, for semiconductors especially but for other products, too.

The shift also has to do with [with Biden’s] unease with the Reagan-era economic consensus that hovered over Democratic administrations….

The confidence Biden and his lieutenants have in the new path is reflected in their eagerness to tout the word “Bidenomics,” a label the president now embraces after initially being abashed about paternity for a school of economic thinking….

As a political matter, Biden wants to show that his signature policies on technology, climate action and infrastructure are working. On Wednesday, he stressed they are producing well-paying jobs for those who have been on the short end of economic growth: Americans without college degrees and those living in places with “hollowed out” economies….

[In his speech, Sullivan proposed] a “new consensus” to replace “a set of ideas that championed tax cutting and deregulation, privatization over public action and trade liberalization as an end in itself.” The old formulas, Sullivan argued, not only failed to address new problems; they didn’t work on their own terms.

“In the name of oversimplified market efficiency,” he said, “entire supply chains of strategic goods, along with the industries and jobs that made them, moved overseas.” The idea that freer trade “would help America export goods, not jobs and capacity, was a promise made but not kept.” He stressed the need for “a modern American industrial strategy” and the benefits of “moving beyond traditional trade deals to innovative new international economic partnerships”….

The Post’s Jennifer Rubin expands on the topic:

The economy has created 13 million jobs, inflation has been more than cut in half, huge investments are being made in infrastructure and green energy, wage growth has begun to outpace inflation, the first drug price controls are going into effect and the biggest corporations will finally be forced to pay something in federal taxes. Yet polls show voters incorrectly think we are in a recession and remain negative about the economy [note: although the polls could be wrong].

Beginning this week, the White House is making a focused push to narrow the gap between performance and perception. On Monday, senior Biden advisers … released a four-page memo explaining the president’s vision, which they call “Bidenomics”:

Bidenomics is rooted in the simple idea that we need to grow the economy from the middle out and the bottom up — not the top down. … Implementing that economic vision and plan — and decisively turning the page on the era of trickle-down economics — has been the defining project of the Biden presidency.

They then ticked off a list of accomplishments: an economic recovery five years earlier than expected, … nearly 800,000 manufacturing jobs, a higher job-participation rate for working-age Americans than at anytime in the past 20 years….

[The strategy has three parts:] “targeted investment” that encourages private investment (comparing it to Franklin D. Roosevelt’s rural electrification and Dwight D. Eisenhower’s interstate highway program); empowering workers (made-in-America provisions, increasing Pell grants…); and promoting competition (enforcing antitrust rules, cracking down on noncompete clauses, Medicare negotiation for lower drug prices)….

According to a White House fact sheet, the bipartisan infrastructure law has already created 35,000 projects across the country. Its green energy push has spurred more than 150 battery plants and 50 solar plants. “In all, we’ve seen $490 billion in private investment commitments in 21st century industries since the President took office, and inflation-adjusted manufacturing construction spending has grown by nearly 100% in just two years,” the fact sheet announced. “New data … shows the clean energy workforce added nearly 300,000 jobs in 2022 and clean energy jobs grew in every state in America. … Inflation-adjusted income is up 3.5% since the President took office, and low-wage workers have seen the largest wage gains over the last year.”

A recent Treasury Department report emphasized the volume of that investment and the quality of jobs created. “Real manufacturing construction spending has doubled since the end of 2021.” It found: “Within real construction spending on manufacturing, most of the growth has been driven by computer, electronics, and electrical manufacturing. Since the beginning of 2022, real spending on construction for that specific type of manufacturing has nearly quadrupled.” Because such investments increase productivity, the result should be both increased growth and downward pressure on inflation.

Biden’s [and the Democrats’ electoral] success will depend on continued growth, job creation and inflation reduction. But it’s hard to deny the results so far have been impressive. Economists may look back on this time as an inflection point when historic investments ushered in a new era of domestic manufacturing, gave a new lease on life to the Rust Belt and improved the balance sheet of middle–class Americans.

This Former Republican Is Disgusted with the Media

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Jennifer Rubin writes for The Washington Post. She was known as a conservative years ago but gave up on the Republican Party. She’s not happy with negative coverage of the economy:

“U.S. Economy Shows Surprising Vigor in First Half of 2023” a Wall Street Journal headline proclaimed this past week. On Axios, one read: “The economy’s latest upside surprise.” Yahoo Finance intoned, “Surprisingly Strong US Economic Data Keeps Recession Fears at Bay.”

You might find it remarkable that outlets touting their economic foresightedness and keen analysis could be continually surprised about the economy’s strength after 29 consecutive months of job growth, inflation steadily declining, durable goods having been up for three consecutive months, 35,000 new infrastructure projects, an extended period in which real wages exceeded inflation and outsize gains for lower wage-earners. It’s as though outlets are so invested in the narrative of failure and imminent recession that reams of positive data have had little impact on their “narrative.”

The most sanguine headline came from Fortune: “Economists scrambling to justify their recession predictions … but maybe they were just wrong.” Conversely, maybe the administration was right in its approach to building the economy “from the bottom up and the middle out” despite the histrionics from Republicans, hand-wringing from the media and negative opinion polling.

Part of the problem might be the media’s preference for political horse-race coverage over events on the ground. “What do voters think?” (about what? about the media’s own negative spin on the economy?) replaces “What is going on?”

We have seen far too little coverage of the economic transformation in little towns, rural areas and aging metro centers brought about by new investment in plants, infrastructure projects and green energy related to the Chips Act. It sure would be nice to know what’s happening in the heartland when a new chip manufacturing plant creates thousands of jobs or when a new bridge creates scores of construction jobs and then cuts commute times. So intent on hyping the politics of what the administration is doing, the mainstream media too frequently neglects coverage of what President Biden’s initiative are accomplishing.

When the media consistently gets the big stories wrong or fails to cover major economic changes, one would hope they’d look back to explain why their coverage diverged from reality and do a better job of covering actual developments rather than GOP talking points, process stories (how Biden is “selling” his plan) and polling. Unfortunately, waiting for the mainstream media to engage in self-reflection (e.g., maybe it overdid the “But her emails” in 2016; maybe there was no red wave in 2022), let alone self-correction, might be a waste of time.

If outlets are concerned about low trust in the media, explaining a historic economic transformation might help inform voters and leave the media less “surprised” when the data comes back. Instead, they are invariably on to the next groupthink exercise, the next round of gloom-and-doom and the next batch of credulous coverage of Republican talking points.