By failing to appoint new members to the Federal Reserve, Obama has failed the economy
Behind every great president stands a great central banker. Ronald Reagan had Paul Volcker. Dwight Eisenhower had William McChesney Martin. And FDR had, well, FDR.
There's a corollary. Behind every great central banker stands a great central banking committee. Or at least a pliant one. It's this latter reality that President Obama still has not quite recognized. And this malign neglect of most matters monetary has added a wholly unnecessary degree-of-difficulty to the economic recovery.
Here's a depressing reminder: We're in a $1 trillion hole. That's how much income we have been losing every year since the onset of the Great Recession. Ben Bernanke and Co. have done a good job preventing a full-on replay of the Great Depression, but Ben Bernanke and Co. have not done a good job preventing a lost decade. The key phrase here is "and Co."
Bernanke doesn't set monetary policy by himself. That's what the Federal Open Market Committee (FOMC) votes on. Its structure is a bit Byzantine and not terribly important, but what is important is that the Fed Chairman usually gets his way without any dissent. That hasn't been true lately. The Fed's unconventional measures have unsurprisingly not been too popular with the FOMC's more conventional members. Unfortunately, that hasn't stopped Bernanke from trying to reach a consensus. He thinks he needs to. Bernanke recently told Roger Lowenstein that he thinks any policy that doesn't get at least a 7-3 majority simply won't be credible. This political calculation gives the hawks more policy influence than they would otherwise have.
And now it looks like there are more hawks. As Greg Ip of The Economist has pointed out, most of Bernanke's colleagues now want to raise rates before he does. He increasingly looks isolated. Even if Bernanke is inclined to ease a bit more -- and reading between the lines, he might be -- there's little chance of it happening. It's worth remembering that even the hawks project inflation to remain below target and unemployment to remain above target for the next few years. If the Fed believes its own forecasts, it should be doing more.
IT'S TIME TO CALL IN THE CAVALRY
I've left out a fairly important detail. There are two unfilled seats on the FOMC. President Obama's picks for those positions have been among the victims of the endless Republican obstruction in the world's greatest deliberative body. There's a simple solution. Obama could just bypass the Senate with recess appointments. That's what he did for the Consumer Financial Protection Bureau (CFPB) and National Labor Relations Board (NLRB). Why not do the same for the Federal Reserve (or the Federal Housing Finance Agency)?
There's no good reason not to. The administration's rationale is that Republican obstruction over the CFPB and NLRB was particularly pernicious -- that it amounted to de facto nullification. Hence, the extraordinary recess appointments for just those vacancies. But even if that's true, who cares? It's hard to run the government if it's not staffed. So staff it! More importantly, there's little Obama can do that might help the economy more than sending Bernanke a few more friendly faces on the FOMC.
Regrettably, the Obama administration has consistently underestimated the importance of the Fed. That there are still two empty FOMC seats proves as much. So do the administration's (blocked) nominees. Consider Peter Diamond. He's a phenomenal economist -- a Nobel-prize winner -- who's clearly qualified to serve on the FOMC. But he's said that he doesn't think there's much more the Fed can do now. Even if he's right -- and I clearly don't think he is -- wouldn't you rather appoint someone who thinks otherwise and find out if the Fed really is powerless? Someone like ... former Council of Economic Advisers Chair Christina Romer.
Let's try pushing some more before we declare that we're pushing on a string.
NECESSARY, BUT NOT SUFFICIENT
Sending Bernanke some reinforcements wouldn't be some economic panacea. Fed policy actually might not change all that much. But it could shift the FOMC's bias away from hiking and back towards easing, which its forecasts say it should be doing. That potential benefit is worth the cost -- which is approximately zero. (Remember the steep political price Obama paid for his previous recess appointments? Neither do I).
We tend to overlook monetary policy when we judge presidents. It's only natural that we think about presidential accomplishments in terms of things the president, you know, actually does. So we talk about how Reagan unleashed the supply side revolution, Eisenhower balanced the budget, and FDR's New Deal turned the tide against depression. But none of that would have been possible without good central banking. Reagan wouldn't have whipped inflation without Volcker. Eisenhower's postwar boom wouldn't have been quite so strong without Martin's fiercely independent Fed. And FDR might not have broken the psychology of deflation had ... FDR not devalued against gold. (Okay, FDR deserves heaps of credit).
It's hard to have a great presidency without great central banking. It's a necessary, but not sufficient condition. Just ask Herbert Hoover or Jimmy Carter. That's company Obama should be terrified of joining.
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?
1. Youngstown, U.S.A.
The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.
For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.
I spent a year in Tromsø, Norway, where the “Polar Night” lasts all winter—and where rates of seasonal depression are remarkably low. Here’s what I learned about happiness and the wintertime blues.
Located over 200 miles north of the Arctic Circle, Tromsø, Norway, is home to extreme light variation between seasons. During the Polar Night, which lasts from November to January, the sun doesn’t rise at all. Then the days get progressively longer until the Midnight Sun period, from May to July, when it never sets. After the midnight sun, the days get shorter and shorter again until the Polar Night, and the yearly cycle repeats.
So, perhaps understandably, many people had a hard time relating when I told them I was moving there.
“I could never live there,” was the most common response I heard. “That winter would make me so depressed,” many added, or “I just get so tired when it’s dark out.”
But the Polar Night was what drew me to Tromsø in the first place.
It wasn’t that bad. But it did help me understand why it made people so angry.
From the Gray Lady, a Modest Dip Proposal. On Microblogging Platform, a Furor. For Peas, a New Use. There are times when The Times out-Timeses itself, and then there was Wednesday. The country's largest newspaper smugly tweeted a link to a recipe for guacamole. One made with peas. "Trust us," it read.
Former Senator Jim Webb is the fifth Democrat to enter the race—and by far the most conservative one.
In a different era’s Democratic Party, Jim Webb might be a serious contender for the presidential nomination. He’s a war hero and former Navy secretary, but he has been an outspoken opponent of recent military interventions. He’s a former senator from Virginia, a purple state. He has a strong populist streak, could appeal to working-class white voters, and might even have crossover appeal from his days as a member of the Reagan administration.
In today’s leftward drifting Democratic Party, however, it’s hard to see Webb—who declared his candidacy Thursday—getting very far. As surprising as Bernie Sanders’s rise in the polls has been, he looks more like the Democratic base than Webb does. The Virginian is progressive on a few major issues, including the military and campaign spending, but he’s far to the center or even right on others: He's against affirmative action, supports gun rights, and is a defender of coal. During the George W. Bush administration, Democrats loved to have him as a foil to the White House. It’s hard to imagine the national electorate will cotton to him in the same way. Webb’s statement essentially saying he had no problem with the Confederate battle flag flying in places like the grounds of the South Carolina capitol may have been the final straw. (At 69, he’s also older than Hillary Clinton, whose age has been a topic of debate, though still younger than Bernie Sanders or Joe Biden.)
On Wednesday, the United States and Cuba announced that they would reopen embassies in each other’s capitals, thus restoring diplomatic relations for the first time since 1961. The agreement doesn’t mean that Washington-Havana ties will go back to where they were before Fidel Castro’s revolution: Congress still maintains an economic embargo on the island, a policy that’s unlikely to change anytime soon. But the re-establishment of embassies, scheduled to occur on July 20, is nonetheless a major breakthrough in the long-acrimonious relationship between the two countries.
According to The New York Times, the overture to Cuba leaves just three countries with which the United States has no diplomatic relations. Two of these are easy enough to guess: Iran and North Korea. Washington severed ties with Tehran in 1980, months after Iranian students seized the U.S. embassy there and took 52 Americans hostage. U.S. ties with North Korea, meanwhile, have been fraught throughout the latter country’s existence, and have only grown worse since Kim Jong Un assumed control of the country in 2011.
The social network learns more about its users than they might realize.
Facebook, you may have noticed, turned into a rainbow-drenched spectacle following the Supreme Court’s decision Friday that same-sex marriage is a Constitutional right.
By overlaying their profile photos with a rainbow filter, Facebook users began celebrating in a way we haven't seen since March 2013, when 3 million peoplechanged their profile images to a red equals sign—the logo of the Human Rights Campaign—as a way to support marriage equality. This time, Facebook provided a simple way to turn profile photos rainbow-colored. More than 1 million people changed their profile in the first few hours, according to the Facebook spokesperson William Nevius, and the number continues to grow.
“This is probably a Facebook experiment!” joked the MIT network scientist Cesar Hidalgo on Facebook yesterday. “This is one Facebook study I want to be included in!” wrote Stacy Blasiola, a communications Ph.D. candidate at the University of Illinois, when she changed her profile.
The Republican hopeful’s comments about Hispanics have been disastrous for his brand and reputation, which he values at an outlandish $3.3 billion.
Donald Trump’s run for the presidency is premised on one fact above all: He’s a fabulously successful businessman. And yet, paradoxically, running for president may be the most disastrous business decision he’s made—or, at the very least, his worst in a while.
The trouble started with Trump’s rambling announcement speech on June 16. “When Mexico sends its people, they’re not sending the best,” Trump said of immigrants to the United States. “They’re sending people that have lots of problems and they’re bringing those problems. They’re bringing drugs, they’re bringing crime. They’re rapists and some, I assume, are good people, but I speak to border guards and they’re telling us what we’re getting.”
The untold story of the improbable campaign that finally tipped the U.S. Supreme Court.
On May 18, 1970, Jack Baker and Michael McConnell walked into a courthouse in Minneapolis, paid $10, and applied for a marriage license. The county clerk, Gerald Nelson, refused to give it to them. Obviously, he told them, marriage was for people of the opposite sex; it was silly to think otherwise.
Baker, a law student, didn’t agree. He and McConnell, a librarian, had met at a Halloween party in Oklahoma in 1966, shortly after Baker was pushed out of the Air Force for his sexuality. From the beginning, the men were committed to one another. In 1967, Baker proposed that they move in together. McConnell replied that he wanted to get married—really, legally married. The idea struck even Baker as odd at first, but he promised to find a way and decided to go to law school to figure it out.
Reader requested images, including playful raccoons, Soviet armies leaving Lithuania in the 1990s, Donald Trump’s hair, a Fennec fox, and much more.
Continuing an ongoing experiment, I solicited reader requests for news photos, asking people on Twitter, Facebook and email, "Would you like to see a good photo of a particular subject? A high-res version of a photo you've already seen somewhere else? A photo from a particular photographer or event? If I have access and can find it, I'll try to post it." The subject matter this time was just as varied as before, and the task of finding the images and composing the entry was great fun. Requests this time ranged from a grumpy Judge Scalia to the Soviet army leaving Lithuania in 1990s, guacamole recipes to Donald trump’s hair, and from urban farms in Detroit to playful raccoons. Be sure to see previous Reader Request entries.