What Goes Up, Will Go Down (Eventually)

Someone on Twitter said news people are covering inflation — a global post-pandemic phenomenon, not a Biden one — as if it’s 6,000%, not 6%, and we’re all pushing wheelbarrows of cash to the grocery store. On economic matters, I appreciate the views of Paul Krugman (Ph.D. Massachusetts Institute of Technology; currently Distinguished Professor of Economics, Graduate Center of the City University of New York):

Back in July the White House’s Council of Economic Advisers posted a thoughtful article to its blog titled, “Historical Parallels to Today’s Inflationary Episode.” The article looked at six surges in inflation since World War II and argued persuasively that current events don’t look anything like the 1970s. Instead, the closest parallel to 2021’s inflation is the first of these surges, the price spike from 1946 to 1948.

Wednesday’s consumer price report was ugly; inflation is running considerably hotter than many people, myself included, expected. But nothing about it contradicted C.E.A.’s analysis — on the contrary, the similarity to early postwar inflation looks stronger than ever. What we’re experiencing now is a lot more like 1947 than like 1979.

And here’s what you need to know about that 1946-48 inflation spike: It was a one-time event, not the start of a protracted wage-price spiral. And the biggest mistake policymakers made in response to that inflation surge was failing to appreciate its transitory nature: They were still fighting inflation even as inflation was ceasing to be a problem, and in so doing helped bring on the recession of 1948-49.

About Wednesday’s price report: It looked very much like the classic story of inflation resulting from an overheated economy, in which too much money is chasing too few goods. Earlier this year the rise in prices had a narrow base, being driven largely by food, energy, used cars and services like air travel that were rebounding from the pandemic. That’s less true now: It looks as if demand is outstripping supply across much of the economy.

One caveat to this story is that overall demand in the United States actually doesn’t look all that high; real gross domestic product, which is equal to real spending on U.S.-produced goods and services, is still about 2 percent below what we would have expected the economy’s capacity to be if the pandemic hadn’t happened. But demand has been skewed, with consumers buying fewer services but more goods than before, putting a strain on ports, trucking, warehouses and more. These supply-chain issues have been exacerbated by the global shortage of semiconductor chips, together with the Great Resignation — the reluctance of many workers to return to their old jobs. So we’re having an inflation spurt.

On the plus side, jobs have rarely been this plentiful for those who want them. And contrary to the cliché, current inflation isn’t falling most heavily on the poor: Wage increases have been especially rapid for the lowest-paid workers.

So what can 1946-48 teach us about inflation in 2021? Then as now there was a surge in consumer spending, as families rushed to buy the goods that had been unavailable in wartime. Then as now it took time for the economy to adjust to a big shift in demand — in the 1940s, the shift from military to civilian needs. Then as now the result was inflation, which in 1947 topped out at almost 20 percent. Nor was this inflation restricted to food and energy; wage growth in manufacturing, which was much more representative of the economy as a whole in 1947 than it is now, peaked at 22 percent.

But the inflation didn’t last. It didn’t end immediately: Prices kept rising rapidly for well over a year. Over the course of 1948, however, inflation plunged, and by 1949 it had turned into brief deflation.

What, then, does history teach us about the current inflation spike? One lesson is that brief episodes of overheating don’t necessarily lead to 1970s-type stagflation — 1946-48 didn’t cause long-term inflation, and neither did the other episodes that most resemble where we are now, World War I and the Korean War. And we really should have some patience: Given what happened in the 1940s, pronouncements that inflation can’t be transitory because it has persisted for a number of months are just silly.

Oh, and for what it’s worth, the bond market is in effect predicting a temporary bump in inflation, not a permanent rise. Yields on inflation-protected bonds maturing over the next couple of years are strongly negative, implying that investors expect rapid price rises in the near term. But longer-term market expectations of inflation have remained stable.

Another lesson, which is extremely relevant right now (hello, Senator Manchin), is that an inflation spurt is no reason to cancel long-term investment plans. The inflation surge of the 1940s was followed by an epic period of public investment in America’s future, which included the construction of the Interstate Highway System. That investment didn’t reignite inflation — if anything, by improving America’s logistics, it probably helped keep inflation down. The same can be said of the Biden administration’s spending proposals, which would do little to boost short-term demand and would help long-term supply.

So yes, that was an ugly inflation report, and we hope that future reports will look better. But people making knee-jerk comparisons with the 1970s and screaming about stagflation are looking at the wrong history. When you look at the right history, it tells you not to panic.

Unquote.

What news people should be extremely worried about is the Republican Party’s attack on democracy and majority rule (but that wouldn’t be “balanced”).

They Should Be Talking About the Coup Memo

Stephen Colbert, Jimmy Kimmel and Seth Meyers had something in common this week. They mentioned a memo given to our former president showing how he could try to stay in office after losing the election. The news divisions of ABC, CBS, NBC and of course Fox didn’t mention it at all. Reporters for The New York Times only got around to mentioning it yesterday in the final paragraphs of a story about the Arizona “audit” fiasco.

From Tim Murphy of Mother Jones:

There was big news this week on what is known ominously and euphemistically as “the democracy beat,” and like all such news, it was bad.

On Tuesday, CNN published a two-page memo written by a lawyer for then-President D____ T____’s re-election campaign during the run-up to the January 6 certification of the Electoral College results. In six concise bullet-points, the memo outlined a process by which Vice President Mike Pence could use his powers on January 6 to throw out the electors from seven states that President Joe Biden won in the 2020 election. The plan counted on Republicans in those states to submit competing sets of electors, based on the false and fabricated premise that T____ had somehow won those states.

The memo’s author, John Eastman, is a lawyer—at the time, he was even a tenured professor at Chapman University School of Law—but what he created is not a legal document. It is by its nature extra-legal: It is a blueprint for a coup.

Eastman anticipated the possibility that some people would be mad. “Howls, of course, from the Democrats,” he predicted in bullet-point four, immediately following the line, “Pence then gavels President T____ as re-elected.” Yeah, man, no kidding.

It is a little weird to read all these months later about something that was also plain as day at the time. Thursday marked the one-year anniversary of a Barton Gellman article in The Atlantic that laid out the strategy that T____, with Eastman and others’ help, would pursue. Mother Jones and others covered closely the efforts from the T____ campaign to throw out votes in courts and disenfranchise entire states. . . .  January 6 happened on live TV. But what was described on those couple of pages is what all the stunts and subterfuge were building up to—notes, as it were, on a criminal fucking conspiracy.

There have not been a lot of attempts to depose elected American presidents in my lifetime, though I’m only 34. Not knowing for sure what happens when you dissociate “peaceful transfer of power” from “a society entirely predicated on it,” I sort of think this is a pretty big deal. This is a break-the-glass moment, as some have said, only someone else already broke the glass and took the axe and is running around with it.

But it is not such a big deal, apparently, if you watch network TV news. On Wednesday, Media Matters’ Matt Gertz reported that the total number of minutes devoted to the story on either the morning or evening editions of ABC, NBC, or CBS News in the first two days after the memo was published was zero. “In fact,” Gertz wrote, “the only national network broadcasts to mention T____’s coup memo were the late-night variety shows hosted by Jimmy Kimmel, Stephen Colbert, and Seth Meyers.”

Americans get their news from lots of places, including from Late Night shows. And the networks are, broadly, still covering the aftermath of the January 6 insurrection, including the latest moves by the House Select Committee to subpoena former top T____ aides. But the network TV news shutout on the Eastman memo does speak to a reluctance to directly engage with this new political reality.

. . . There is something about the specific pitch of the threat that perhaps strains the capacity of some institutions to process. They’re not programmed to take on problems like this—it disturbs the comfortable equilibrium that defines a lot of political media. Republicans come on to speak to one side of things, and Democrats come on (slightly less often) to speak to the other side of things, and there are arguments, and sometimes people win and sometimes people lose. But there is always, basically, a sense that everyone is sort of acting within the constraints of the same known universe. There are scandals, too. (In fact, that universe thrives on scandal!) But those scandals never really veer into the realm of the existential. 

But what happened at the close of T____’s presidency, and seems likely to happen again if we continue mostly ignoring it, is an existential problem. There’s no equilibrium here. A majority of Republican members of Congress supported an effort to overturn the election. They’re almost all still in office. A majority of the country’s Republican attorneys general backed that same plan. . . . They’re all still in power as well. . . . The people who thought that the biggest problem with January 6 was that the game wasn’t fixed sooner are strengthening their grip on the GOP and on institutions of state and local government, and everyone else with a future in the party is getting out of their way.

The day of the insurrection at the Capitol, I remember thinking—naively but in my defense very angrily—that there might even be expulsions from Congress as a result, that those complicit would have to pay. I might feel better now if anyone had. But while there were howls, of course, from Democrats, such chatter quickly died down on Capitol Hill. The only people who have suffered any recriminations are the Republicans in Congress who, however belatedly, stood up to all this. Last week, Indiana Rep. Anthony Gonzalez, one of just 10 House Republicans to support impeaching the president for inciting the insurrection, announced his retirement, citing the “toxic dynamics” within his party. Gonzalez’s personal security budget had gone up since the vote, and he was being challenged by a former T____ aide, Max Miller. The ex-president had already come to the district to campaign against him.

This is all an enormous crisis of legitimacy for a large swath of government at many different levels, which means it’s an enormous challenge for political media and everyone else. I don’t really know how we get out of it. But I guess I’d start with acknowledging the fact that the axe is missing.

Responding with Cool Reason to the Negativity About Biden’s Summer

David Rothkopf of The Daily Beast uses Twitter to inject some cool, refreshing oxygen into this summer’s frequently stifling political analysis (with a few comments from me):

And now, the latest Biden report from the Conventional News Network…

It’s been a rough summer for the president folks because

–Job growth slowing slightly (although yes, Biden has created more jobs in his first six months than any president in history) [I’d rephrase this to say that coming out of last year’s lockdown, we’ve had the fastest job growth since such things have been measured, which is at least partly the result of Biden’s recovery and stimulus programs]

–COVID spiking (although yes, the administration performed a miracle getting the vaccine out & the Republican Party has systematically undermined admin efforts to save lives)

–Afghanistan exit chat (although yes, the president ended a futile 20 year war and the administration managed to evacuate 125,000 people so far in one of the biggest humanitarian airlifts every, and ending wars is chaotic by nature)

–Infrastructure plans face opposition (although yes, that’s the way Congress works, the infrastructure bill represents a bipartisan breakthrough and much of the opposition is posturing)

–Fires, floods and storms! (although yes, Biden has put together an aggressive plan to combat the climate crisis, undone the huge damage done by his predecessor, gotten the US back into the Paris Accords, and made this a priority in the way no prior president has) [plus, you know it’s the weather, which presidents don’t control]

–Biden draws on his own personal experience while expressing compassion (although yes, the previous president was a sociopath and the story that being a genuine human made people uncomfortable was a cynical political spin job by the opposition…like much of the above)

Record economic growth, record job creation, record appointments to the court, the most diverse administration in history, massive effort to undo the damage done by predecessors, ushering in a new future oriented foreign policy and ending the disastrous post 9/11 era…

Restoring compassion, competence, a respect for the rule of law and a commitment to governance…although yes, we get it, he’s not perfect, not every goal is achieved, sometime his opponents succeed in blocking him, sometimes mistakes are made but he’s actually having a great year.

But let’s be honest, a slight dip in public opinion polls is inevitable when there’s so much misinformation and false bothsidesism in media coverage and what’s really important–support for his core policies remains high and bi-partisan.

Oh..and one more thing..the opposition does not offer any kind of credible alternative policies, focuses on obstruction, remains loyal to the most corrupt, incompetent, malevolent demagogue in US history, are systematically carving away the rights of American women and voters and are conducting an assault on democracy in the United States that may yet succeed. Biden is hugely successful if imperfect and much remains to be done. His opponents represent a threat to everything we have cherished about America’s values and our institutions.

But sure…let’s go with that old conventional wisdom, that easy if entirely inaccurate set of takes that are so popular these days. Who cares if it makes terrible outcomes in our country’s future more likely? Who cares if it is deeply misleading?

(P.S. This is not directed at any one media organization. There are many great journalists at work at almost everywhere you’d watch or read, if you don’t watch Fox or OANN. But among them, there are others who are helping to create the problem flagged here.)

Unquote.

Adding my two cents, I’m not sure if the Democrats should have bothered negotiating infrastructure with the Republicans, or just put everything into one big reconciliation bill that could pass with no Republican support. My big problem with what Biden has done so far, or hasn’t done, is that he hasn’t been able to get Senate Democrats to create an exception to the filibuster to protect voting rights. I’m also not sure Merrick Garland was a good choice for Attorney General, since Garland doesn’t seem very interested in what went on in the previous administration.

Understanding Their Perspective, and Thus Their Agenda

Jay Rosen of New York University recently listed the things he spends “most time puzzling about these days”. Here are his top two, although I’ve reversed the order, because one of them describes the world as most Republicans see it, a perspective that helps generate their warped political agenda:

        1) The Republican Party is both counter-majoritarian and counter-factual.

By “counter-majoritarian” I mean the Republicans see themselves as an embattled . . . minority who will lose any hope of holding power, and suffer a catastrophic loss of status, unless extraordinary measures are taken to defeat a sprawling threat to their way of life. This threat comes from almost all major institutions, with the exception of church and military. 

It includes — they believe — an activist government opening the borders to immigrants, Black Lives Matter militants destroying property and intimidating police, a secretive deep state that undermines conservative candidacies, “woke” corporations practicing political correctness, big tech companies tilting the platform against them, a hostile education system with its alien-to-us universities, an entertainment culture at odds with traditional values, and the master villain in the scheme, the mainstream media, holding it all together with its vastly unequal treatment of liberals and conservatives. 

These are dark forces that cannot be overcome by running good candidates, turning out voters, and winning the battle of ideas. Which, again, is what I mean by counter-majoritarian. Something stronger is required. Like the attack on the Capitol, January 6, 2021. 

Stronger measures include making stuff up about election fraud, about responsibility for the attack on the Capitol, about the safety of vaccines— to name just three. A counter-majoritarian [political party] thus implies and requires a counter-factual party discourse, committed to pushing conspiracy theories and other strategic falsehoods that portray the minority as justified in taking extreme measures. 

The conflict with journalism and its imperative of verification is structural, meaning: what holds the party together requires a permanent state of war with the press, because what holds the party together can never pass a simple fact check. This is a stage beyond working the refs and calling out liberal bias. 

Basic to what the Republican Party stands for is freedom from fact. For it to prevail, journalism must fail. There is nothing in the [journalistic] playbook about that.

        2) We have a two-party system and one of the two is [against democracy].

The Republican Party tried to overturn the results of a free and fair election. When that failed it did not purge the insurrectionists and begin to reform itself; rather, it continued the attack by other means, such as state laws making it harder to vote, or a continuation of the Big Lie that [somebody else] actually won

By “anti-democratic” I mean willing to destroy key institutions to prevail in the contest for power. This is true, not only of individual politicians, but of the party as a whole. As (Republican) and Washington Post columnist Michael Gerson writes, “For the activist base of the Republican Party, affirming that [the loser] won the 2020 presidential contest has become a qualification for membership in good standing.” A qualification for membership. 

Journalists had adapted to the old system by developing a “both sides” model of news coverage. It locates the duties of a non-partisan press in the middle between roughly similar parties with competing philosophies. That mental model still undergirds almost all activity in political journalism. But it is falling apart. As I wrote five years ago, asymmetry between the major parties fries the circuits of the mainstream press. 

We are well beyond that point now. Now we live in a two-party world where one of the two is anti-democratic. Circuits fried, the press has to figure out what to do . . . 

Unquote.

A thought occurred to me after reading Prof. Rosen’s post, so I left a comment:

It seems that the two biggest purveyors of right-wing propaganda and disinformation in the US are Fox News (the Murdochs) and Facebook (Zuckerberg). Do we have to accept the present behavior of these two institutions — actually, the behavior of these individuals — as facts of nature or are there practical ways to reduce their negative influence? Ways to address the problem have been suggested, but maybe there needs to be a more organized, targeted approach.

What do you do to sociopathic billionaires in order to get them to cease and desist? I don’t know, but that’s why people tried to assassinate Hitler.