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July 30, 2010

Latest Posts from Economist's View

Latest Posts from Economist's View

Paul Krugman: Curbing Your Enthusiasm

Posted: 30 Jul 2010 12:42 AM PDT

The president's "snubbing of those who made him what he is" may be costly:

Curbing Your Enthusiasm, by Paul Krugman, Commentary, NY Times: Why does the Obama administration keep looking for love in all the wrong places? Why does it go out of its way to alienate its friends, while wooing people who will never waver in their hatred?
These questions were inspired by the ongoing suspense over whether President Obama will do the obviously right thing and nominate Elizabeth Warren to lead the new consumer financial protection agency. But the Warren affair is only the latest chapter in an ongoing saga.
Mr. Obama rode into office on a vast wave of progressive enthusiasm. This enthusiasm was bound to be followed by disappointment, and not just because the president was always more centrist ... than his fervent supporters imagined. Given the facts of politics, and above all ... lock step Republican opposition, he wasn't going to be the transformational figure some envisioned.
And Mr. Obama has delivered in important ways. Above all, he managed (with a lot of help from Nancy Pelosi) to enact a health reform... But progressive disillusionment isn't just a matter of sky-high expectations meeting prosaic reality. Threatened filibusters didn't force Mr. Obama to waffle on torture; to escalate in Afghanistan; to choose, with exquisitely bad timing, to loosen the rules on offshore drilling...
Then there are the appointments. Yes, the administration needed experienced hands. But did all the senior members of the economics team have to be protégés of Robert Rubin, the apostle of financial deregulation? Was it necessary to install Ken Salazar at the Interior Department over the objections of environmentalists who feared, rightly, that his ties to extractive industries would make him slow to clean up a corrupt agency? ...
What explains Mr. Obama's consistent snubbing of those who made him what he is? Does he fear that his enemies would use any support for progressive ... ideas ... to denounce him as a left-wing extremist? Well, as you may have noticed, they don't need such excuses...
Mr. Obama's attempts to avoid confrontation have been counterproductive. His opponents remain filled with a passionate intensity, while his supporters, having received no respect, lack all conviction. And in a midterm election, where turnout is crucial, the "enthusiasm gap" between Republicans and Democrats could spell catastrophe for the Obama agenda.
Which brings me back to Ms. Warren.
The debate over financial reform, in which the G.O.P. has taken the side of the bad guys, should be a political winner for Democrats. Much of the reform, however, is deeply technical...
But protecting consumers, ensuring that they aren't the victims of predatory financial practices, is something voters can relate to. And choosing a high-profile consumer advocate to lead the agency providing that protection ... is the natural move, both substantively and politically. Meanwhile, the alternative — disappointing supporters yet again by choosing some little-known technocrat — seems like an obvious error.
So why is this issue still up in the air? Yes, Republicans might ... filibuster..., but that's a fight the administration should welcome.
O.K., I don't really know what's going on. But I worry that Mr. Obama is still wrapped up in his dream of transcending partisanship, while his aides dislike the idea of having to deal with strong, independent voices. And the end result of this game-playing is an administration that seems determined to alienate its friends.
Just to be clear, progressives would be foolish to sit out this election: Mr. Obama may not be the politician of their dreams, but his enemies are definitely the stuff of their nightmares. But Mr. Obama has a responsibility, too. He can't expect strong support from people his administration keeps ignoring and insulting.

What Would Republicans Do for the Economy?

Posted: 30 Jul 2010 12:33 AM PDT

What's the Republican's strategy for getting rid of the uncertainty they (as opposed to businesses) are so worried about? This is from an interview of Paul Ryan on what the Republicans would do to help the economy:

What would Republicans do for the economy? An interview with Rep. Paul Ryan., by Ezra Klein: ...Paul Ryan: I know uncertainty is a new economic buzzword, but for good reason: If we can reduce it, we'll unlock capital. I'd revisit some of the major issues over the last year. Health care, energy, taxes, financial regulation. I'm not saying these aren't important issues. We need to reform the health-care system. But these are the wrong solutions. I would advance different solutions with an eye toward international competitiveness and encouraging saving and investing and encouraging certainty.

Ah, so his solution to uncertainty is to create even more uncertainty about the policies that will be in effect next year? Later in the interview he tries to get out of this box:

... let me clarify one thing:... You can say I'm offering more uncertainty by redoing these laws. I'm saying it's the quality of these laws that's the problem. ...

But this assertion has no substance to back it up. When he does reach for examples, he reverts to:

People are just too nervous, they don't know what the economy will be, what the regulations will be, what the taxes will be...

So the "quality of these laws" argument it pretty hollow, especially since one of the issues we are dealing with is Republican legislation that was rigged to avoid hard choices about the deficit. That is, the low quality of the Republican legislation is causing quite a bit of uncertainty right now about whether the Bush tax cuts will be extended.

Moving along to another part of the interview discussing the tax cuts, again from Paul Ryan:

If the Obama guys said there'll be no tax increases for two years, it would make a big difference fast. Look at the original [Christina] Romer-[Paul] Romer paper. She'd agree this is not the time to raise taxes.

Not all of the Obama people are "guys," but more to the point, what does Romer actually say? This is from a White House blog post by Christina Romer:

President Obama has made it clear that he favors extending the 2001 and 2003 tax cuts for middle-income families, but letting those for high-income earners expire as called for in current law. Recently, some have argued that extending the high-income cuts is necessary for the economy. This is simply wrong.

People have been trying to use the Romer-Romer paper incorrectly to rebut the policies she supports since the idea of stimulus was first raised by the administration. She has protested, but that doesn't stop the message machine from making the assertion anyway. On this point, back to Romer:

The view that tax cuts focused on the middle class can be important to the recovery is consistent with a wide range of research, including a paper that I wrote with David Romer before coming to government

Another gem from Paul Ryan:

These short-term stimulative things ... pump up some money in the quarter where they occur. ... These short-term stimuli ... don't change aggregate demand
There's more, but you get the idea. Read it if you want, but the rest of the interview isn't any better. It's mostly the standard austerity line that doesn't make a whole lot of sense in our present circumstances. But it does advance the conservative ideological agenda.

Forty Years after the Grape Boycott

Posted: 30 Jul 2010 12:24 AM PDT

Forty years later, how much has changed?:

Forty years later, grape boycott still a huge accomplishment, by Alvaro Huerta, The Berkeley Blog: Forty years ago, workers in the United States won a great victory.
On July 29, 1970, the United Farm Workers of America (UFW) ended its successful grape boycott when the growers agreed to sign the first contract with the union.
It seemed like an improbable outcome, as the battle pitted a mostly Mexican as well as Filipino immigrant workforce against powerful agricultural growers in California.
Led by the late Cesar Chavez and tireless Dolores Huerta, the UFW was founded in the early 1960s in response to the inhumane working conditions for farmworkers in California and other states...
In an effort to seek justice, dignity and respect in the rural fields of America, UFW leaders, its members and sympathizers organized and joined picket lines and marches, signed petitions, supported labor laws, lobbied elected officials, distributed educational flyers, produced documentaries, penned songs, performed plays, held teach-ins and generally supported the nationwide boycott.
The charismatic Chavez ... engaged in numerous and lengthy hunger strikes to draw attention to the cause.
As was the case with the civil rights movement, many UFW activists were beaten up and a few were killed for the simple act of supporting the right of farmworkers to organize a union and negotiate for fair labor contracts. But the rightness of their cause prevailed.
So inspirational was it that Barack Obama, when he was a candidate for president, adopted the group's slogan: "Si, Se Puede" ("Yes, We Can").
Now, 40 years later, farmworkers continue to toil under harsh working conditions. ...
The best way to honor this 40th anniversary of the UFW's landmark success would be to support humane labor law reform for farmworkers and to strengthen the right to organize.
Si, Se Puede!

links for 2010-07-29

Posted: 29 Jul 2010 11:04 PM PDT

"John Stewart Mill vs. the European Central Bank"

Posted: 29 Jul 2010 10:10 AM PDT

Brad DeLong:

John Stewart Mill vs. the European Central Bank, by J. Bradford DeLong, Commentary, Project Syndicate: One of the dirty secrets of economics is that there is no such thing as "economic theory." There is simply no set of bedrock principles on which one can base calculations that illuminate real-world economic outcomes. We should bear in mind this constraint on economic knowledge as the global drive for fiscal austerity shifts into top gear.
Unlike economists, biologists, for example, know that every cell functions according to instructions for protein synthesis encoded in its DNA. Chemists begin with what the Heisenberg and Pauli principles, plus the three-dimensionality of space, tell us about stable electron configurations. Physicists start with the four fundamental forces of nature.
Economists have none of that. The "economic principles" underpinning their theories are a fraud – not fundamental truths but mere knobs that are twiddled and tuned so that the "right" conclusions come out of the analysis.
The "right" conclusions depend on which of two types of economist you are. One type chooses, for non-economic and non-scientific reasons, a political stance and a set of political allies, and twiddles and tunes his or her assumptions until they yield conclusions that fit their stance and please their allies. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones will yield lessons and suggest principles to guide our civilization's voters, bureaucrats, and politicians as they slouch toward utopia. ...[continue reading]...

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