Why a jobs program is taboo
I just posted this to Facebook in response to a query by Corey Robin about the dismal “debate” on jobs hosted by The Atlantic, and Matthew Yglesias’ side commentary on it. Corey’s question: why can’t the gov solve the unemployment problem by hiring people? My reaction:
Wow, what a collection of tiny little “ideas” that “debate” gathers. It’s up there in tininess with Obama’s jones for patent law reform.
Raising the inflation target implies that the Fed has been too tight, when in fact it’s been anything but. It’s been pumping like crazy since the financial crisis broke out. We’ve gone through two rounds of quantitative easing (which basically means the Fed bought gobs of long-term Treasury bonds, which it usually doesn’t do). This ease has set the loons aflame, leading them to fulminate about currency debasement and hyperinflation, when in fact it’s done little but encourage commodity speculation. So we’ve seen commodity prices rise, but with no effect on general inflation, which is still very low – as you might expect with the economy flat on its back and the labor market in a torpor.
Orthodox types usually prefer monetary to fiscal remedies, because they operate through the financial markets and don’t mess with labor or product markets or the class structure. A jobs program and other New Deal-ish stuff would mess with labor and product markets and the class structure, and so it’s mostly verboten to talk that way. I’m not sure that Yglesias understands that – I haven’t read a lot of him, but he seems like a bit of a hack – but it’s probably part of his unexamined “common sense” as a semi-mainstream pundit.
The multipliers on jobs programs and infrastructure investment are very high – meaning that for every $1.00 spent on such programs, GDP increases about about $1.60-1.70. (These numbers come from Mark Zandi of Economy.com, who advised John McCain during the 2008 campaign, so they’re not from some pinko source.) The multipliers on tax cuts are much lower – under $0.40 for extending the Bush tax cuts or giving corps tax breaks (meaning that they increase GDP by less than half what they cost). The multiplier on the payroll tax holiday is higher – around $1.20 – because the working class spends all it gets, but the upper brackets don’t.
So aside from putting the unemployed to work, jobs programs and infrastructure investment would boost broad economic growth dramatically. But we can’t do that, because the yahoos don’t like it (high-speed rail = Europe = fags) and because jobs programs might lead the working class to develop an attitude, and we can’t have that. Therefore, respectable people don’t suggest such things.
Cantor: sneering our way to default
So Eric Cantor, the House majority leader who’s short Treasury bonds, is leading the way to default. Via Politico’s Morning Money email:
CANTOR IS MASTER OF THE SNEER – WP’s Dana Milbank: “Eric Cantor has perfected the strategic sneer. It comes, frequently, when he answers a reporter’s question about something … Obama has said: The House majority leader’s lip curls up on the left side and a look of disgust washes over his face. … Cantor, who is establishing himself as the lead GOP negotiator with the White House as the Aug. 2 default deadline approaches, is answering calls for compromise with contempt. … What Cantor wants now is power – and he is prepared to risk the full faith and credit of the United States to get it. In a primacy struggle with … Boehner, he has done a deft job of aligning himself with Tea Party House members in opposition to any meaningful deal to resolve the debt. If the U.S. government defaults, it will have much to do with Cantor.” http://wapo.st/nQINYj
Bob Fitch memorial: Sept 18
If you’re a fan of Robert Fitch—and if you‘re not, you should ask yourself some very serious questions—the date for his public memorial has just been announced: September 18, 4 PM, at the Brecht Forum in NYC. More details to follow; this is just a “save the date” announcement.
See Christian Parenti in NYC, Thursday
If you’re anywhere New York City Thursday evening, you should go hear Christian Parenti talk about his new book, Tropic of Chaos: Climate Change and the New Geography of Violence.
Thursday, June 30, 2011, 7 pm
The New School
Theresa Lang Community and Student Center, Arnhold Hall
55 West 13th Street, 2nd floor
New York, NY 10011
The new era of climate war is upon us. Extreme weather brought on by global warming is unleashing cascades of unrest and violence across the globe, from Africa to Asia to the Americas. In Tropic of Chaos, award-winning writer Christian Parenti reports from the front lines of this gathering social and environmental catastrophe. Combining historical insight with on-the-ground reporting, Parenti shows how environmental crisis is colliding with the twin legacies of Cold War militarism and unbridled free market economics to cause fragile nations to disintegrate into failed states. Tropic of Chaos is a survey of a world in peril and an urgent call to action: Those living in the privileged Global North must recognize that our own future security is inextricably linked to the fate of the struggling nations of the Global South.
Details here: Tropic of Chaos: Christian Parenti and Laura Flanders at the New School.
Christian will be on my radio show on July 9.
Paulie cribs from me again
Krugman discovers rentier interests—finally. Only my version is better.
Me, in Wall Street, 1996:
[B]ehind the abstraction known as “the markets” lurks a set of institutions designed to maximize the wealth and power of the most privileged group of people in the world, the creditor–rentier class of the First World and their junior partners in the Third.
Paul Krugman, today:
I was originally going to end this post by saying something about stupidity, but that’s not right: the people at the BIS aren’t stupid. What’s going on here is something different and worse: we’re seeing the desire for conventional respectability outweighing the lessons of history; we’re seeing vague prejudice (prejudice that just so happens to serve the interests of rentiers) trumping analysis.
And from his own link, to something from earlier this month:
Still, thinking of what’s happening as the rule of rentiers, who are getting their interests served at the expense of the real economy, helps make sense of the situation.
Why wait 15 years for Paulie to catch up, eh?
Morgan vs. Cantor
Forgot to include that quote from J.P. Morgan, explaining why he didn’t short stock (who knows if he really did?): “Don’t sell short the United States of America.” Eric Cantor evidently disagrees.
Cantor short Treasuries
The Wall Street Journal reported the other day (here it is, but it’s behind a paywall) that as of his last disclosure form, House Republican leader Eric Cantor owned shares in a mutual fund that is short long-dated U.S. Treasury bonds. He is, in other words, betting that interest rates will rise, and hoping to make money off the fall in prices that would cause. (For my ancient primer on why bond prices fall when interest rates rise, see here.)
Cantor is in a position to help the U.S. default on its debts by blocking an increase in the debt ceiling. That would be very good for a short Treasury trade—rates would spike and prices would plummet. Even stoking the fear that that might happen could cause milder panics. Is this legal? Is anyone else doing this? Is the Republican flirtation with default a form of talking their and their donors’ book?
Note: following the WSJ story, I wrongly called Cantor the “whip” at first. He’s the majority leader.
Wisconsin: game over?
I wish sometime that I’d be proven wrong in my pessimism. But it looks like the great upsurge in Wisconsin has petered out. Listen to my interview with Abe Sauer in the June 25 radio show I just posted. Or read Progressive editor Matt Rothschild’s gloomy assessment from a week ago: Wisconsin Demoralized, Demobilized.
It’s the same damn story over and over. The state AFL-CIO chooses litigation and electoral politics over popular action, which dissolves everything into mush. Meanwhile, the right is vicious, crafty, and uncompromising. Guess who wins that sort of confrontation?
Please prove me wrong someday, you sad American “left.”
Fresh audio posted
Freshly posted to my radio archive:
June 25, 2011 Abe Sauer, writer for The Awl, on what’s been going on in Wisconsin since the great February upsurge • Abby Rapoport of The Texas Observer on Texas gov Rick Perry • Jon Bakija, co-author of this paper, on how and why the rich have gotten richer
June 18, 2011 Ken Morris, co-author of Blind Allegiance to Sarah Palin, on that overexposed curiosity • Julia Ott, author of When Wall Street Met Main Street, on big finance’s attempts to appear democratic
Krugman’s lazy apologia
Paul Krugman can’t stop attacking the McKinsey survey. His filed his latest apologia this morning (“McKinsey Pulls Back the Curtain”). It’s not his finest moment.
He dismisses the report as a mere “poll,” which is presumably a less reliable thing than the economic models that everyone else has been using. But why should a detailed survey—over 50 questions asked of over 1,300 respondents, mostly decision-makers—be less reliable than statistical extrapolations from not very comparable historical data?
Krugman quotes a stat from a Time reporter, Kate Pickert—not from the original document, curiously—with what he thinks is a clincher. The respondents didn’t know what they were talking about!
When asked how much their companies spend on medical and prescription drug benefits per full-time employee – something you might expect a health benefit pro to be intimately familiar with – 58.3% said they didn’t know.
Yes, that’s in the survey (question 15, for those scoring at home). The full question is actually more complicated, and might require a little spreadsheet work to figure out precisely:
Approximately what did your company spend on medical and prescription drug benefits last year per each active, full-time employee (averaged across both single employees and employees with spouses/families)?
I think it’s certain that the “don’t knows” know that they’re spending more than $2,000.
And the respondents weren’t just “health benefit pros.” Only about 10% were human resources execs; far more were owners and CEOs (question 2).
That aside, Krugman forgot to quote this observation from Pickert, from the same article:
Its poll of employers was not a GOP-funded shoddy survey meant to gin up criticism of Obamacare. Rather, the poll was long, complicated, conducted by a well-established polling firm and weighted to reflect the American business community as a whole. (This weighting helps compensate for the fact that the survey was conducted online, which can lead to problematic self-selection.) There are more than 50 questions in the survey, many of them multi-part questions, and the data collected is organized into easy to read cross tabs and breakdowns….That McKinsey initially seemed to release only the most headline-grabbing data subset is disappointing – the full results are full of all sorts of interesting nuggets like that, compared to very small businesses, about half as many large businesses would probably or definitely drop coverage post-reform. But its initial decision to keep its full data trove secret doesn’t mean the company’s motives were evil or partisan.
By contrast, Krugman’s motives, though not evil, sure look partisan.
McKinsey: more right than wrong
Administration apologists, from the White House official blog to Paul Krugman (“McKinseyGate”), have all lined up to denounce the McKinsey survey I wrote up here the other day (“Bye-bye employer health insurance”). McKinsey found that a large share of employers who now offer health insurance benefits will drop them once ObamaCare comes into effect in 2014. At first, McKinsey didn’t release the questions or the methodology, prompting reactions like Krugman’s:
It’s hard to escape the conclusion that the study was embarrassingly bad — maybe it was a skewed sample, maybe the questions were leading, maybe there was no real data at all. Whatever [sic].
A few days of criticism of this sort was more than the consulting firm could take, so it released the full survey and the underlying data. Turns out the sample was not skewed, the questions were entirely reasonable and factual, and there’s plenty of data.
At the core of it is this: McKinsey gave the surveyed employers details on what would happen if they dropped coverage—how much it would cost their employees, after government subsidies, to buy insurance on the new exchanges (e.g., $4,437 for a family of four with an income of $55,125), and what it would cost them in penalties for not insuring employees ($2,000 per worker after the first 30 workers). McKinsey presumably did not have to tell employers what their present coverage cost them, but the numbers are stunning. According to the Kaiser Family Foundation, typical coverage costs almost $14,000 a year, with employers paying about $10,000 and employees about $4,000. No wonder a third to half of employers would seriously contemplate dropping coverage—their cost savings would be enormous. And their workers might not have to spend all that much more than they’re contributing today. But their coverage is likely to be a lot crummier than what they’ve got now.
Forbes blogger Avit Roy—who appears to be rather conservative, but also smart and serious—has written some convincing defenses of the McKinsey survey (like“The McKinsey Health Insurance Survey Was Rigorous, After All”). One of his commenters, Heritage Foundation economist Paul Winfree, notes that studies like the Congressional Budget Office’s, which show many fewer employers likely to drop coverage than McKinsey does, are based on extrapolations from minor, year-to-year changes in the cost of health insurance that may not be relevant to an enormous transformation of the sort that ObamaCare represents. This seems like a sound point: a massive institutional change like this is more likely to produce a major rethink than minor twiddling.
Single-payer advocates should be embracing the McKinsey results, not jumping on the Democrats’ apologetics bandwagon.
Courts: the popular angle
My pal Elise Hendrick posted this excellent comment on the “robed ghouls act in character” post to Facebook:
I’d say that part of the obsession, outside of élite circles, is due to a combination of : a) An educational system that hammers into people’s heads the notion that The Constitution and the Supreme Court are the representatives and defenders, respectively, of all that is good and right in society; b) A general lack of understanding of the history of the Warren (and early Burger) courts. People look at the decisions of the day – Brown v. Bd. of Ed., Brandenburg v. Ohio, etc. etc. etc. – and not at the social context. The Warren court was operating in an atmosphere of mass popular upheaval, and followed – not led – the public’s demands for change. The difference between Plessy and Brown is not so much the court’s composition as the public mood – segregation was already highly unpopular, particularly in the north, by the time the Brown decision was issued. The free speech cases that actually created the free speech rights that people now falsely believe have been applied since 1776 were handed down in the face of an insurgent public that was going well beyond the long-established limits of its accepted sphere (spectators, not protagonists).
Breaking news: robed ghouls act in character
So the Supreme Court handed down its decision on the Walmart (né Wal-Mart) sex discrimination case. It can be summarized in three words of Brooklyn dialect: “get outta here.” I will defer to my wife, Liza Featherstone, who wrote the book on the case, for detailed analysis. But I am overcome with the need to denounce, so please indulge me.
Liberals will anguish endlessly over this decision, parsing it in that tediously fetishistic way that has become all too familiar. But really, the Supreme Court is a fundamentally reactionary tool of bourgeois power. Liberal opinion still seems to think that the Warren court was something other than a 15-year anomaly in its mostly awful history.
Why this boring and annoying obsession with The Court? Is it because liberals think that the people are fundamentally dolts, and turn to unelected judges to accomplish what democratic agitation can’t? This seems to be the strategy of the reproductive rights movement, which does little but litigate and lobby while access to abortion dwindles, and popular opinion moves in unpleasant directions. And the labor movement looks to have been doing similar things: when you can’t organize, file suits. But for most of American history, judges have done the work of elites—which isn’t surprising, given their social origins and professional training.
Give up on the courts. They’re hopeless.
LBO News from Doug Henwood 
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Posted on June 17, 2011 by Doug Henwood
Latest on Social Security
Following on the NYT quote, I thought it’d be good to post LBO’s most recent take on Social Security:
Is the real problem Social Security?
Also, this is from my radio commentary for tomorrow:
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