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.
Why Nixon's former lawyer John Dean worries Trump could be one of the most corrupt presidents ever—and get away with it
Sometime early last fall, John Dean began having nightmares about a Trump presidency. He would wake in the middle of the night, agitated and alarmed, struggling to calm his nerves. “I’m not somebody who remembers the details of dreams,” he told me in a recent phone call from his home in Los Angeles. “I just know that they were so bad that I’d force myself awake and out of bed just to get away from them.”
Few people are more intimately acquainted than Dean with the consequences of an American presidency gone awry. As White House counsel under President Richard Nixon from 1970 to 1973, he was a key figure in the Watergate saga—participating in, and then helping to expose, the most iconic political scandal in modern U.S. history. In the decades since then, Dean has parlayed that resume line into something of a franchise, penning several books and countless columns on the theme of presidential abuses of power.
The president-elect described NATO as “obsolete,” called the EU “basically a vehicle for Germany,” and said other countries would follow the UK's lead and leave the bloc.
President-elect Donald Trump hasn’t been shy about sharing his views about the world, in general, and Europe, in particular. He was criticized during the presidential campaign for questioning the value of NATO, praising the U.K.’s decision to leave the EU, and linking terrorist attacks to the million or so asylum-seekers who have arrived in Europe since 2015. Trump’s supporters and political analysts attributed those comments to campaign-season rhetoric, and said he would pivot on these and other issues before the general election. But with less than a week before the inauguration at which he’ll be sworn in as the 45th president of the United States, Trump gave a joint interview to The Times (of London) and Bild, the mass-circulation German tabloid, during which he described NATO as “obsolete,” called the EU “basically a vehicle for Germany,” and said other countries would follow the U.K.’s lead and leave the bloc.
Is there room in the movement for people who morally object to abortion?
Updated on Monday, January 16 at 4:05 p.m.
Pro-life women are headed to D.C. Yes, they’ll turn out for the annual March for Life, which is coming up on January 27. But one week earlier, as many as a few hundred pro-lifers are planning to attend the Women’s March on Washington, which has been billed as feminist counterprogramming to the inauguration.
With organizations like Planned Parenthood and NARAL Pro-Choice America co-sponsoring the event, pro-life marchers have found themselves in a somewhat awkward position. What’s their place at an event that claims to speak for all women, but has aligned itself with pro-choice groups? With roughly a week to go before the march, organizers also released a set of “unity principles,” and one of them is “open access to safe, legal, affordable abortion and birth control for all people.”
Billy Barr moved to the Rocky Mountains four decades ago, got bored one winter, and decided to keep a notebook that has become the stuff of legend.
It was a year into his life alone in Colorado’s Rocky Mountains when Billy Barr began his recordings. It started as a curiosity, a task to busy his mind during the winter. By no means, Barr told me, having skied down from his cabin to use the nearest phone, did he set out to make a vital database for climate change scientists. “Hell no!” he said. “I didn’t know anything about climate change at the time.”
In 1973 Barr had dropped out of college and made his home an abandoned mining shack at the base of Gothic Mountain, a 12,600-foot stone buttress. The cold winds blew through the shack’s wood slat walls as if they didn’t exist; he shared the bare dirt floor with a skunk and pine marten, his only regular company for much of the year. Barr had moved from the East Coast to the Rocky Mountains precisely because of the solitude, but he couldn’t escape boredom. Especially that first winter. So he measured snow levels, animal tracks, and in spring the first jubilant calls of birds returning. He filled a notebook with these observations; then another notebook. This has continued now for 44 years.
King's famous "Letter from Birmingham Jail," published in The Atlantic as "The Negro Is Your Brother" and excerpted below, was written in response to a public statement of concern and caution issued by eight white religious leaders of the South. It stands as one of the classic documents of the civil-rights movement.
While confined here in the Birmingham city jail, I came across your recent statement calling our present activities "unwise and untimely." Seldom, if ever, do I pause to answer criticism of my work and ideas. If I sought to answer all of the criticisms that cross my desk, my secretaries would be engaged in little else in the course of the day, and I would have no time for constructive work. But since I feel that you are men of genuine good will and your criticisms are sincerely set forth, I would like to answer your statement in what I hope will be patient and reasonable terms.
I think I should give the reason for my being in Birmingham, since you have been influenced by the argument of "outsiders coming in"
A history of the first African American White House—and of what came next
In the waning days of President Barack Obama’s administration, he and his wife, Michelle, hosted a farewell party, the full import of which no one could then grasp. It was late October, Friday the 21st, and the president had spent many of the previous weeks, as he would spend the two subsequent weeks, campaigning for the Democratic presidential nominee, Hillary Clinton. Things were looking up. Polls in the crucial states of Virginia and Pennsylvania showed Clinton with solid advantages. The formidable GOP strongholds of Georgia and Texas were said to be under threat. The moment seemed to buoy Obama. He had been light on his feet in these last few weeks, cracking jokes at the expense of Republican opponents and laughing off hecklers. At a rally in Orlando on October 28, he greeted a student who would be introducing him by dancing toward her and then noting that the song playing over the loudspeakers—the Gap Band’s “Outstanding”—was older than she was.
Why some people are withdrawing from mainstream society into “intentional communities”—and what the rest of the country can learn from them
VIRGINIA— For the last eight years, Nicolas and Rachel Sarah have been slowly weaning themselves off fossil fuels. They don’t own a refrigerator or a car; their year-old baby and four-year-old toddler play by candlelight rather than electricity at night. They identify as Christian anarchists, and have given an official name to their search for an alternative to consumption-heavy American life: the Downstream Project, with the motto to “do unto those downstream as you would have those upstream do unto you.”
As it turns out, exiting the system is a challenging, time-consuming, and surprisingly technical process. Here in the Shenandoahs and central Virginia, a handful of tiny communities are experimenting with what it means to reject the norms of contemporary life and exist in a radically different way. They seem to share Americans’ pervasive sense of political alienation, which arguably reached an apotheosis with the election of Donald Trump: a sense of division from their peers, a distrust of government. The challenges of modern politics—dealing with issues like climate change, poverty, mass migration, and war on a global scale—are so vast and abstract that it’s difficult not to find them overwhelming. But instead of continuing in passive despair, as many Americans seem to do, the people in these communities decided to overhaul their lives.
Narcissism, disagreeableness, grandiosity—a psychologist investigates how Trump’s extraordinary personality might shape his possible presidency.
In 2006, Donald Trump made plans to purchase the Menie Estate, near Aberdeen, Scotland, aiming to convert the dunes and grassland into a luxury golf resort. He and the estate’s owner, Tom Griffin, sat down to discuss the transaction at the Cock & Bull restaurant. Griffin recalls that Trump was a hard-nosed negotiator, reluctant to give in on even the tiniest details. But, as Michael D’Antonio writes in his recent biography of Trump, Never Enough, Griffin’s most vivid recollection of the evening pertains to the theatrics. It was as if the golden-haired guest sitting across the table were an actor playing a part on the London stage.
“It was Donald Trump playing Donald Trump,” Griffin observed. There was something unreal about it.
Here is one matter, at least, in which the Swiss refuse to be neutral.
Nancy Holten, 42, was born in the Netherlands. At the age of 8, however, she moved with her family to Switzerland, which Holten has called home for the past 34 years. Holten currently resides, with her three daughters, in the small village of Gipf-Oberfrick, in the far north of the country, within the canton of Aargau. She speaks fluent Swiss-German. Her daughters are Swiss citizens. She has been a member of the parents’ committee of their school.
And yet Holten was recently rejected for a Swiss passport—which is also to say, effectively, for naturalized Swiss citizenship. For the second time.
The reason? In Switzerland, applications for naturalization are decided not at the federal level, but rather by the country’s cantons and municipalities—and the applicants’ peers have a say in whether naturalization gets granted. And, unfortunately for Nancy Holten, her peers are not inclined to give her the “gift” of a passport. Because, despite all the ways she is Swiss, Holten—a vegan who is extremely vocal about that life choice—has also stridently opposed one of the most beloved cultural traditions of Gipf-Oberfrick, and of Aargau, and of Switzerland itself: the practice of putting large bells around the necks of cows, for reasons both practical and ceremonial. Insert your preferred “more cowbell” joke here.
A new study shows that the disproportionate imprisonment rates faced by people of color contribute to race-based inequalities in educational attainment.
In the summer of 1963, Martin Luther King Jr. delivered the closing remarks at the March on Washington. More than 200,000 people gathered to cast a national spotlight on and mobilize resistance to Jim Crow, racist laws and policies that disenfranchised black Americans and mandated segregated housing, schools, and employment. Today, more than 50 years later, remnants of Jim Crow segregation persist in the form of mass incarceration—the imprisonment of millions of Americans, overwhelmingly and disproportionately black adults, in local, state, and federal prisons.
The U.S. incarceration rate is more than five times higher than that in most of the world’s nations, despite a crime rate that’s comparable to other politically stable, industrialized countries. And among the swelling number of incarcerated men and women is a vast number of parents. In 2015, The Atlantic’s Alia Wong highlighted a study from Child Trends that found that one in nine black children has had a parent in jail or prison, about twice as high as that for white children. For black adolescents ages 12 through 17, it’s nearly one in seven. Predictably, this has implications for America’s classrooms.