Rubio's call for a single mandate for the Federal Reserve is a dangerous, and potentially disastrous, idea. Unless that single mandate is targeting nominal GDP instead of inflation.
Marco Rubio wants to be president, and unfortunately for him that means he's supposed to have an opinion about everything. I say unfortunately because Rubio has had a hard enough time figuring out the age of the earth, let alone one of the great mysteries like what the Fed should be doing now. The latter came up during Rubio's acceptance speech at the Jack Kemp foundation, and, as Dave Weigel of Slate reports, it did not go well. Hey, he's not a central banker, man.
A long time ago in an administration far, far away, the Republicans were the party of Milton Friedman. It was 2004. As Paul Krugman points out, then-chairman of the Council of Economic Advisers Greg Mankiw advocated aggressive monetary policy as a way to mitigate recessions. This was economic boilerplate, but it was only boilerplate because of Friedman. After the Great Depression, economists didn't think central banks could do much to revive the economy if interest rates fell to zero -- the so-called liquidity trap -- and monetary policy consequently took a backseat to fiscal policy when it came to demand management. Friedman reversed this. He and Anna Schwarz argued the Great Depression was only so great because the Fed's inaction made it so. In other words, central banks were only powerless if they thought they were. They could do plenty, even in a liquidity trap, if they just printed money and promised to keep printing money -- what we rather prosaically call "quantitative easing" nowadays. It was a message conservatives could, and did, love. The government didn't need to spend more to stabilize the economy during a downturn as long as the Fed did its job.
And then the Great Recession happened.
With interest rates stuck at zero and the economy stuck in a growth slump, we're very much back in Friedman's world. But now conservatives aren't so sure about that "aggressive monetary policy" thing anymore. Zero interest rates just seem wrong, and quantitative easing must be a big government bailout on the road to Zimbabwe -- at least that's what they've told themselves, despite stubbornly low inflation. Of course, some conservatives claim inflation is "really" much higher than the government says, but, as Ramesh Ponnuru of National Review points out, this conspiracy theory doesn't withstand much more than two seconds of scrutiny.
This paranoid style in monetary policy has inspired a rather odd political crusade -- the crusade against the Fed's dual mandate. Most central banks are only tasked with worrying about inflation, but the Fed is tasked with worrying about inflation and unemployment. (Or, in Fed-speak, fostering the maximum level of employment consistent with price stability). This has become a bête noire for conservatives, because they think that were it not for the Fed caring about unemployment -- the horror! -- then it wouldn't have expanded its balance sheet so much, and that this expanded balance sheet will inevitably mean higher inflation down the road. Apparently Marco Rubio is one of these conservatives who sees the stagflationary 1970s around every corner. Here's what he said to say about the Fed.
Sound monetary policy would also encourage middle class job creation. The arbitrary way in which interest rates and our currency are treated is yet another cause of unpredictability injected into our economy. The Federal Reserve Board should publish and follow a clear monetary rule -- to provide greater stability about prices and what the value of a dollar will be over time.
Translation: Repeal the dual mandate and replace it with a single mandate for inflation only. This is all kinds of uninformed. As we have pointed out before, inflation has been lower with over four times less variance since Congress gave the Fed its dual mandate in 1978. And with inflation mostly undershooting its 2 percent target since Lehman failed, it's not as if the Fed even needed the dual mandate to justify easing -- a sole inflation mandate would have been enough.
But Rubio is right that the Fed needs a better, clearer monetary rule nowadays. That's not to say that Fed policy has been arbitrary, but just that its rule needs some modernizing. For most of the so-called Great Moderation, the Fed followed something close to a Taylor rule, setting policy based on inflation and unemployment, and it served the Fed well. Greg Mankiw has his own simple version of a Taylor rule, which Paul Krugman tweaked slightly, that gives us a good idea of how the Fed thought then, as you can see below.
You can see why the Great Moderation gave way to the Great Recession. Our Taylor rule says the Fed should have made interest rates negative in late 2008, but the Fed can't make interest rates negative. Well, at least not nominal rates. The Fed can increase inflation, which reduces real rates, to get borrowing costs to where they "should" be -- which is what Ben Bernanke has done, in fits and starts, the past four years. You can see all these fits and starts in the chart below that compares our same Taylor rule to Fed policy since 2006. It's not easy to get real rates down to -7 percent.
There have been far too many fits and not nearly enough starts since 2008. Yes, the Fed tried unconventional easing in late 2008, early 2009, late 2010, late 2011 and late 2012, but it should have been easing this whole time. The Taylor rule has been negative this whole time, which means that the Fed should have been cutting interest rates, and cutting them a lot, this whole time. Instead, we got zero rates. Because inflation hasn't been that far off target, Bernanke has had a hard time convincing the rest of the FOMC to go along with quantitative easing -- so easing has been far less quantitative than the situation calls for. In other words, policy hasn't quite been arbitrary as much as ad hoc, with the unhappy result being an era of tight money.
Imagine the Fed had a single mandate, but not for inflation. Imagine instead the Fed had a single mandate for the total size of the economy, which goes by the unwieldy name of nominal GDP (NGDP). During the Great Moderation, NGDP grew about 5 percent a year, but it's only grown about 2.85 percent a year since 2008. If the Fed had an NGDP target of 5 percent a year, and was supposed to make up for any over-or-undershooting, it would have been aggressively easing the entire time since 2008. It's a dual mandate that doesn't get confused by low inflation and low growth.
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.
Without the financial support that many white families can provide, minority young people have to continually make sacrifices that set them back.
The year after my father died, I graduated from grad school, got a new job, and looked forward to saving for a down payment on my first home, a dream I had always had, but found lofty. I pulled up a blank spreadsheet and made a line item called “House Fund.”
That same week I got a call from my mom—she was struggling to pay off my dad’s funeral expenses. I looked at my “House Fund” and sighed. Then I deleted it and typed the words “Funeral Fund” instead.
My father’s passing was unexpected. And so was the financial burden that came with it.
For many Millennials of color, these sorts of trade-offs aren’t an anomaly. During key times in their lives when they should be building assets, they’re spending money on basic necessities and often helping out family. Their financial future is a rocky one, and much of it comes down to how much—or how little—assistance they receive.
Maya Arulpragasam is a famous rapper, singer, designer, producer, and refugee. When she was 9, her mother and siblings fled violence in Sri Lanka and came to London, and the experience was formative for her art. As she explained to The Guardian in 2005 after the release of her debut Arular, “I was a refugee because of war and now I have a voice in a time when war is the most invested thing on the planet. What I thought I should do with this record is make every refugee kid that came over after me have something to feel good about. Take everybody’s bad bits and say, ‘Actually, they’re good bits. Now whatcha gonna do?’”
That goal—to glorify people and practices that the developed world marginalizes—has been a constant in her career. Her new music video tackles it in a particularly literal and urgent way, not only by showing solidarity with refugees at a moment when they’re extremely controversial in the West, but also by posing a simple question to listeners: Whose lives do you value?
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
Jeb Bush, John Kasich, and other presidential contenders appease Donald Trump at their own peril.
Give Donald Trump this: He has taught Americans something about the candidates he’s running against. He has exposed many of them as political cowards.
In August, after Trump called undocumented Mexican immigrants “rapists” and vowed to build a wall along America’s southern border, Jeb Bush traveled to South Texas to respond. Bush’s wife is Mexican American; he has said he’s “immersed in the immigrant experience”; he has even claimed to be Hispanic himself. Yet he didn’t call Trump’s proposals immoral or bigoted, since that might offend Trump’s nativist base. Instead, Bush declared: “Mr. Trump’s plans are not grounded in conservative principles. His proposal is unrealistic. It would cost hundreds of billions of dollars.” In other words, demonizing and rounding up undocumented Mexican immigrants is fine, so long as it’s done cheap.
Why are so many kids with bright prospects killing themselves in Palo Alto?
The air shrieks, and life stops. First, from far away, comes a high whine like angry insects swarming, and then a trampling, like a herd moving through. The kids on their bikes who pass by the Caltrain crossing are eager to get home from school, but they know the drill. Brake. Wait for the train to pass. Five cars, double-decker, tearing past at 50 miles an hour. Too fast to see the faces of the Silicon Valley commuters on board, only a long silver thing with black teeth. A Caltrain coming into a station slows, invites you in. But a Caltrain at a crossing registers more like an ambulance, warning you fiercely out of its way.
The kids wait until the passing train forces a gust you can feel on your skin. The alarms ring and the red lights flash for a few seconds more, just in case. Then the gate lifts up, signaling that it’s safe to cross. All at once life revives: a rush of bikes, skateboards, helmets, backpacks, basketball shorts, boisterous conversation. “Ew, how old is that gum?” “The quiz is next week, dipshit.” On the road, a minivan makes a left a little too fast—nothing ominous, just a mom late for pickup. The air is again still, like it usually is in spring in Palo Alto. A woodpecker does its work nearby. A bee goes in search of jasmine, stinging no one.
To solve climate change, we need to reimagine our entire relationship to the nonhuman world.
Humans were once a fairly average species of large mammals, living off the land with little effect on it. But in recent millennia, our relationship with the natural world has changed as dramatically as our perception of it.
There are now more than 7 billion people on this planet, drinking its water, eating its plants and animals, and mining its raw materials to build and power our tools. These everyday activities might seem trivial from the perspective of any one individual, but aggregated together they promise to leave lasting imprints on the Earth. Human power is now geological in scope—and if we are to avoid making a mess of this, our only home, our politics must catch up.
Making this shift will require a radical change in how we think about our relationship to the natural world. That may sound like cause for despair. After all, many people refuse to admit that environmental crises like climate change exist at all. But as Jedediah Purdy reminds us in his dazzling new book, After Nature, our relationship with the nonhuman world has proved flexible over time. People have imagined nature in a great many ways across history.
The generation has been called lazy, entitled, and narcissistic. Their bosses beg to differ.
Yes, many Millennials are still crashing on their parent’s couches. And there’s data to support the claim that they generally want more perks but less face time, and that they hope to rise quickly but don’t stick around for very long. Millennials have also been pretty vocal about their desire to have more flexible jobs and more leave time.
But does all of this mean that all Millennials are actually worse workers?
Laura Olin, a digital campaigner who ran social-media strategy for President Obama’s 2012 campaign, says that’s not been her experience. “You always hear about Millennials supposedly being entitled and needing coddling, but the ones I’ve encountered have been incredibly hard-working and recognize that they need to pay their dues.”
Places like St. Louis and New York City were once similarly prosperous. Then, 30 years ago, the United States turned its back on the policies that had been encouraging parity.
Despite all the attention focused these days on the fortunes of the “1 percent,” debates over inequality still tend to ignore one of its most politically destabilizing and economically destructive forms. This is the growing, and historically unprecedented, economic divide that has emerged in recent decades among the different regions of the United States.
Until the early 1980s, a long-running feature of American history was the gradual convergence of income across regions. The trend goes back to at least the 1840s, but grew particularly strong during the middle decades of the 20th century. This was, in part, a result of the South catching up with the North in its economic development. As late as 1940, per-capita income in Mississippi, for example, was still less than one-quarter that of Connecticut. Over the next 40 years, Mississippians saw their incomes rise much faster than did residents of Connecticut, until by 1980 the gap in income had shrunk to 58 percent.
What I learned from attending a town-hall meeting and listening to students’ concerns
Sometimes it takes a group of young people to set you straight.
For months now, I’ve been reading about college students who’ve been seeking “safe spaces.” They’ve often been met by derision—even the highest ranked Urban Dictionary definition is mired in sarcasm, describing them as having “pillows” and “soothing music” that “allows them to recover from the trauma... of exposure to ideas that conflict with their leftist professors.”
I also had some mid-life skepticism about teenage hyperbole, that is, until I attended a town hall meeting at Duke University (my alma mater) earlier this month. The “community conversation,” as it was called, had been hastily convened to discuss the rash of racist and homophobic incidents on campus. Listening to those students—and watching their expressions—I realized that what’s been happening at Duke is serious, and no amount of sarcasm can disguise the pain and anger on campus, or cover up the real dangers lurking there.