Archive for November 2008
Amity Shlaes — writing with a chip on her shoulder apparently acquired because of criticisms made by a certain Nobel-winning economist who knows more about the dismal science than she’ll ever forget — makes a fool of herself with a piece she subtitles “Massive Government Spending is No Solution to Unemployment.”
Paul Krugman of the New York Times has been on the attack lately in regard to the New Deal. His new book “The Return of Depression Economics,” emphasizes the importance of New Deal-style spending. He has said the trouble with the New Deal was that it didn’t spend enough.
He’s also arguing that some writers and economists have been misrepresenting the 1930s to make the effect of FDR’s overall policy look worse than it was. I’m interested in part because Mr. Krugman has mentioned me by name. He recently said that I am the one “whose misleading statistics have been widely disseminated on the right.”
Mr. Krugman is a new Nobel Laureate, teaches at Princeton University and writes a column for a nationally prominent newspaper. So what he says is believed to be objective by many people, even when it isn’t. But the larger reason we should care about the 1930s employment record is that the cure Roosevelt offered, the New Deal, is on everyone else’s mind as well. In a recent “60 Minutes” interview, President-elect Barack Obama said, “keep in mind that 1932, 1933, the unemployment rate was 25%, inching up to 30%.”
The New Deal is Mr. Obama’s context for the giant infrastructure plan his new team is developing. If he proposes FDR-style recovery programs, then it is useful to establish whether those original programs actually brought recovery. The answer is, they didn’t. New Deal spending provided jobs but did not get the country back to where it was before.
The very subtitle of Ms. Shlaes’s piece gives away the inanity (or disingenuousness) of her piece, because “massive government spending” is exactly what finally enabled America to return to prosperity after the ravages of the 1930s. In fact, Franklin Roosevelt responded to the critics parroting the conventional wisdom of his day (sound familiar Ms. Shlaes?) by becoming a deficit hawk after his first term. Thus during FDR’s second term the federal deficit declined precipitously via tax hikes and budget curbs — in fiscal 1938 the government was very nearly in (PDF warning) surplus — and lo and behold the economic growth of his first term promptly evaporated and the depression entered a temporary period of intensification. It was not until after Pearl Harbor — when deficit spending by Washington skyrocketed (it reached over 30% of GDP in 1943) that the country finally made a permanent break with depression.
Now, I don’t think Mr. Obama or anybody else is suggesting borrowing on quite so massive a scale. I suspect deficit spending will likely peak somewhere north of 10% of GDP over the next year or two. But if we’re to heed the lessons of FDR’s day our course is clear: a massive stimulus plan along the lines of what Krugman and others are proposing is our best insurance against depression. An absurd emphasis on fiscal rectitude during times like these is surely a recipe for disaster. Fortunately, it appears the new team taking charge in Washington has read its history books.
I’ve pretty much come around to the idea that doing something with taxpayer money now is better than doing nothing when it comes to the Big Three. Again, if we weren’t coasting along (or headed toward) the bottom of a vicious recession at the present moment, I’d no doubt stick with my free market instincts. But letting them slip into Chapter 7 right now strikes me as very high stakes poker. Yglesias, needless to say, is having none of it:
Part of what makes the auto bailout conversation difficult to have realistically is that this $25 billion number is hanging out there. That’s a lot of money, yes, but it’s actually a relatively small amount of money relative to the scale of the Big Three’s operations. Under the circumstances, a bailout looks a bit like a good deal.
But by the same token, I don’t see any reason to think that $25 billion would actually turn these firms around or even forestall collapse for very long. The car industry in general is in a big slump, and these companies in particular have been on a downward trajectory for a long time.
So what if they money doesn’t stave off collapse “for very long?” If it buys us only ten months it may be worth it. If it ultimately costs $75 billion (probably something under 2% of what Keynesian measures are ultimately going to cost the government over the next few years) but buys us three years, I think it will definitely be worth it. Letting all of the big three go under precipitously at the present time is extremely risky. Sure, maybe the economy would make the adjustments to post-big three life smoothly, but I’d rather not tempt fate. Nobody’s arguing we shouldn’t structure the best deal possible — one that is optimal with respect to the national interest (and that unfortunately means a lot fewer automobile-related rust belt jobs).
Handing out a million and a half pink slips in gradual fashion over the next, say, four years (even if this costs the taxpayers a lot of money), is a safer course of action than handing out two million over the next twelve months. It may be a cheaper (for us taxpayers) course of action, too, although our lack of easily observable parallel universes will make it impossible to prove either way.
I think this is basically our choice.
…the Republican parts of the country form a largely contiguous bloc while Obamaland is an incredibly fragment archipelego…it’s an interesting dramatization of the Democrats’ base in cities and inner suburbs. I wonder if anyone’s familiar with any good work on what accounts for the anomalously progressive views of rural New England. What’s the matter with Maine?
I think one way to answer that question is to look into who really is “rural” in New England and who isn’t. Maine certainly seems a pretty rural place when you’re driving through it, but Portland, Augusta, Lewiston, Bangor etc are perhaps more accurately described as urban — even though individually they’re pretty small urban areas. Heck, I suspect something like half of Maine’s population is within plausible commuting distance to greater Boston (not downtown Boston, mind you, but an office park in Andover, MA is a feasible commute for someone living near Kittery or York). This is doubly true for New Hampshire, whose southern portion — where nearly everybody lives — really is a bonafide extension of the Boston suburbs.
My point is, northern New England appears rural, but its genuinely rural parts are home to vanishingly small numbers of voters. The vast majority of voters in the region actually reside in small cities, or liberal college towns, or in the exurban spillover of Boston.
Even highly dense Massachusetts is a good example. The portion of the state west of Worcester makes up something like half the land area, but something like 10-15% of the population. If you remove Pittsfield, Northampton, Springfield and Amherst, you’re down to what, two or three percent of the state’s population? You’ll no doubt find a decent number of Limbaugh fans from amongst this small cohort, but they’re not sufficiently numerous to nudge Western Massachusetts’s political culture rightwards.
I know the image of the reasonable, centrist/liberal, libertarian Yankee living in the wilds of New England is a comforting one to us liberals, but as a life long New Englander, I doubt it’s a very real image.
I haven’t spent much time in t he nuclear power cheering section of late — mostly because it creates a lot of stuff that might be useful to terrorists — but this sounds undeniably cool:
Nuclear power plants smaller than a garden shed and able to power 20,000 homes will be on sale within five years, say scientists at Los Alamos, the US government laboratory which developed the first atomic bomb.
The miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground.
The US government has licensed the technology to Hyperion, a New Mexico-based company which said last week that it has taken its first firm orders and plans to start mass production within five years. ‘Our goal is to generate electricity for 10 cents a watt anywhere in the world,’ said John Deal, chief executive of Hyperion. ‘They will cost approximately $25m [£13m] each. For a community with 10,000 households, that is a very affordable $250 per home.’
Deal claims to have more than 100 firm orders, largely from the oil and electricity industries, but says the company is also targeting developing countries and isolated communities. ‘It’s leapfrog technology,’ he said.
The company plans to set up three factories to produce 4,000 plants between 2013 and 2023. ‘We already have a pipeline for 100 reactors, and we are taking our time to tool up to mass-produce this reactor.’
I’m officially changing my position on expanding nuclear power from “opposed” to “open-minded.”
Matt Yglesias ponders the conservative obsession with the Fairness Doctrine:
Am I the only one who’s confused by all this conservative organizing against the re-imposition of the “fairness doctrine” on talk radio? I understand why they oppose that move, but why are they putting so much energy into blocking something that nobody is trying to do. A Fairness Act bill was submitted in the House in 2005, but it only 16 cosponsors. No such bill was submitted in the last conference. Barack Obama opposes reintroducing the Fairness Act. And speaking as a paid-up member of the vast left-wing conspiracy, nobody on our side is getting any marching orders about this.
I guess they need something to talk about on the radio shows, but I’d just focus in on Obama’s plan to turn the United States into a socialist dystopia.
Well, I’ve heard that senators Schumer, Durbin and Feinstein have all been making noises about reintroducing the Fairness Doctrine, so perhaps there is a bit of there there. Frankly it was news to me to learn that President-elect Obama is not a fan of this first amendment restriction.
Anyway, needless to say, I’m not a big fan of this kind of thing, and with respect to talk radio, I’m not overly eager to hear a reduction in radio wingnuttery — mainly because of its genuinely robust entertainment value. There’s nothing to keep you company — and keep you chuckling — when you’re heading up I95 through the wilds of Maine to the Canadian border — like Rush Limbaugh.
And, in fairness to the wingnuts, it’s not like their side would be setting the rules, so I think this time their usual paranoia might be somewhat justified.
In other news, it appears talk radio might not need persecution from Stalinist liberals, given its shitty demographics and declining listenership.
Megan McArldle doubts the political viability of battling climate change with carbon taxation:
The Democrats right now are divided into deficit hawks, who think that the nearly $1 trillion deficit headed down the pike means they can’t afford any big programs, and the big spenders, who say to hell with the deficit, let’s spend as much as we can to make it look like we’re really doing something. More on this later. But one wrinkle that hadn’t seemed as important as it now does is that the Democrats do not have the luxury of proposing unpassable legislation in order to look like they’re doing something. They can’t make good on Obama’s electoral promises about global warming by putting up a program the Republicans hate enough to take down, because there aren’t enough Republicans to credibly blame for the bill’s destruction. So they either have to actually pass a carbon bill that will be massively unpopular when it raises energy prices, or explain why Obama didn’t really mean it.
If the Democrats are smart, they’ll pass a carbon bill that will only gradually raise energy prices, and that won’t really kick in in a serious way for another 5-7 years. Modest rises in energy prices in the short term will not prove to be “massively unpopular” and more substantive increases — while no doubt not exactly something the public will love — will be tolerated if the economy as a whole is once again growing briskly, and median income is once again increasing, and people see real progress in developing the kind of infrastructure that helps them deal with said higher energy prices.