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.
Some of Charles Schulz’s fans blame the cartoon dog for ruining Peanuts. Here’s why they’re wrong.
It really was a dark and stormy night. On February 12, 2000, Charles Schulz—who had single-handedly drawn some 18,000 Peanuts comic strips, who refused to use assistants to ink or letter his comics, who vowed that after he quit, no new Peanuts strips would be made—died, taking to the grave, it seemed, any further adventures of the gang.
Hours later, his last Sunday strip came out with a farewell: “Charlie Brown, Snoopy, Linus, Lucy … How can I ever forget them.” By then, Peanuts was carried by more than 2,600 newspapers in 75 countries and read by some 300 million people. It had been going for five decades. Robert Thompson, a scholar of popular culture, called it “arguably the longest story told by a single artist in human history.”
A new tally of the those killed last month makes it the deadliest-ever disaster at the annual pilgrimage.
The death toll in last month’s Hajj stampede in Saudi Arabia is roughly double the number that the country first reported, the Associated Press is reporting.
The Saudi estimate of the disaster was 769, but the new estimate, based on an AP count, suggests that 1,453 people died in the stampede. This new number would make it the deadliest catastrophe in the history of the event.
The Hajj draws roughly 2 million pilgrims to Mecca each year, an observance that lends its host, Saudi Arabia, unrivaled prestige across the Muslim world. It also saddles the kingdom with billions of dollars of costs and logistical considerations. Over the course of the past 40 years, several of the pilgrimages have been marred by deaths caused from stampedes, the collapse of infrastructure, violence, and fires.
“Wanting and not wanting the same thing at the same time is a baseline condition of human consciousness.”
Gary Noesner is a former FBI hostage negotiator. For part of the 51-day standoff outside the Branch Davidian religious compound in Waco, Texas, in 1993, he was the strategic coordinator for negotiations with the compound’s leader, David Koresh. This siege ended in infamous tragedy: The FBI launched a tear-gas attack on the compound, which burned to the ground, killing 76 people inside. But before Noesner was rotated out of his position as the siege’s head negotiator, he and his team secured the release of 35 people.
Jamie Holmes, a Future Tense Fellow at New America, spoke to Noesner for his new book Nonsense: The Power of Not Knowing. “My experience suggests,” Noesner told Holmes, “that in the overwhelming majority of these cases, people are confused and ambivalent. Part of them wants to die, part of them wants to live. Part of them wants to surrender, part of them doesn’t want to surrender.” And good negotiators, Noesner says, are “people who can dwell fairly effectively in the areas of gray, in the uncertainties and ambiguities of life.”
In a new book, the former Middle East peace negotiator Dennis Ross explores just how close Israel came to attacking Iran, and why Susan Rice accused Benjamin Netanyahu of throwing “everything but the n-word” at Barack Obama.
Updated on October 9, 2015 at 12:40 p.m.
When Israeli Prime Minister Benjamin Netanyahu arrives in Washington early next month for a meeting with President Obama, he should at least know that he is more popular in the White House than Vladimir Putin. But not by much.
This meeting will not reset the relationship between the two men in any significant way, and not only because Netanyahu has decided to troll Obama by accepting the Irving Kristol Award from the American Enterprise Institute on this same short trip. The meeting between the two leaders will most likely be businesslike and correct, but the gap between the two is essentially unbridgeable. From Netanyahu’s perspective, the hopelessly naive Obama broke a solemn promise to never allow Iran to cross the nuclear threshold. From Obama’s perspective, Netanyahu violated crucial norms of U.S.-Israel relations by publicly and bitterly criticizing an Iran deal that—from Obama’s perspective—protects Israel, and then by taking the nearly unprecedented step of organizing a partisan (and, by the way, losing and self-destructive) lobbying campaign against the deal on Capitol Hill.
Kids who are adopted have richer, more involved parents. They also have more behavior and attention problems. Why?
Being adopted can be one of the best things to happen to a kid. People who adopt tend to be wealthier than other parents, both because of self-selection and because of the adoption screening process. Adoptive parents tend to be better-educated and put more effort into raising their kids, as measured by things like eating family meals together, providing the child with books, and getting involved in their schools.
And yet, as rated by their teachers and tests, adopted children tend to have worse behavioral and academic outcomes in kindergarten and first grade than birth children do, according to a new research brief from the Institute for Family Studies written by psychologist Nicholas Zill.
Forget the Common Core, Finland’s youngsters are in charge of determining what happens in the classroom.
“The changes to kindergarten make me sick,” a veteran teacher in Arkansas recently admitted to me. “Think about what you did in first grade—that’s what my 5-year-old babies are expected to do.”
The difference between first grade and kindergarten may not seem like much, but what I remember about my first-grade experience in the mid-90s doesn’t match the kindergarten she described in her email: three and a half hours of daily literacy instruction, an hour and a half of daily math instruction, 20 minutes of daily “physical activity time” (officially banned from being called “recess”) and two 56-question standardized tests in literacy and math—on the fourth week of school.
That American friend—who teaches 20 students without an aide—has fought to integrate 30 minutes of “station time” into the literacy block, which includes “blocks, science, magnetic letters, play dough with letter stamps to practice words, books, and storytelling.” But the most controversial area of her classroom isn’t the blocks nor the stamps: Rather, it’s the “house station with dolls and toy food”—items her district tried to remove last year. The implication was clear: There’s no time for play in kindergarten anymore.
A new report details a black market in nuclear materials.
On Wednesday, the Associated Press published a horrifying report about criminal networks in the former Soviet Union trying to sell “radioactive material to Middle Eastern extremists.” At the center of these cases, of which the AP learned of four in the past five years, was a “thriving black market in nuclear materials” in a “tiny and impoverished Eastern European country”: Moldova.
It’s a new iteration of an old problem with a familiar geography. The breakup of the Soviet Union left a superpower’s worth of nuclear weapons scattered across several countries without a superpower’s capacity to keep track of them. When Harvard’s Graham Allison flagged this problem in 1996, he wrote that the collapse of Russia’s “command-and-control society” left nothing secure. To wit:
What’s the balance between preparing students for college and ensuring they aren’t killing themselves in the process?
Kids who go to elite private high schools enjoy lots of advantages. They have access to the most challenging academic classes at reputable institutions, with staffs that are well-equipped to help them prepare for college. Parents pay an average of $10,000 per year to ensure their kids this privilege.
And yet the rigor that these opportunities demand can come with an extra cost for the students themselves. A recent study surveyed and interviewed students at a handful of these high schools and found that about half of them are chronically stressed. The results aren’t surprising—between the homework required for Advanced Placement classes, sports practices, extracurricular activities like music and student government, and SAT prep, the fortunate kids who have access to these opportunities don’t have much downtime these days. These experiences can cause kids to burn out by the time they get to college, or to feel the psychological and physical effects of stress for much of their adult lives, says Marya Gwadz, a senior research scientist at the New York University College of Nursing.
Commander Hossein Hamedani died at Islamic State hands as Iran steps up its involvement in the Syrian civil war.
In May 2014, Hossein Hamedani, a top general in Iran’s Islamic Revolutionary Guards Corps, made a statement at a council meeting in Hamedan, the western Iranian province.
“Today we fight in Syria for interests such as the Islamic Revolution,” he said, adding, “Our defense is to the extent of the Sacred Defense”— a reference to Iran’s eight-year war with Iraq in the 1980s.
FARS, Iran’s state-run news agency, later struck his remarks from their account of the meeting because it contradicted Tehran’s official line—Iran is not militarily involved in the five-year-old Syrian civil war. As Radio Free Europe/Radio Liberty noted, Hamedani’s boasts that Iran had created “a second Hezbollah” and that Iran’s efforts meant the Assad regime in Syria was no longer “at the risk of collapse” were also removed.
The leaderless GOP begins its search for a speaker anew, starting with a campaign to draft Paul Ryan.
First Eric Cantor. Then John Boehner. Now Kevin McCarthy.
Conservatives in and out of Congress have, within a span of 15 months, tossed aside three of the four men most instrumental in the 2010 victory that gave Republicans their majority in the House. When the leaderless and divided party gathers on Friday to begin anew its search for a speaker, the biggest question will be whether that fourth man, Paul Ryan, will take a job that for the moment, only he can win.
Ryan, the 2012 vice presidential nominee and chairman of the powerful Ways and Means Committee, has for years resisted entreaties to run for speaker, citing the demands of the job on his young family and his desire to run the tax-writing panel, which he has called his “dream job.” And he did so again on Thursday, within minutes of McCarthy’s abrupt decision to abandon a race he had been favored to win. “I will not be a candidate for speaker,” Ryan tweeted. Yet the pressure kept coming. Lawmakers brought up his name throughout the day, and there were reports that Boehner himself had personally implored him to change his mind.