Government borrowing doesn't always crowd out private borrowing
Four years after the end of the presidency that must not be named, Republicans are no closer to figuring out what went wrong or what comes next.
Sure, the GOP has decided Bush spent too much, but there's been little other reckoning (outside of wonks like David Frum, Reihan Salam, and Ross Douthat). After all, it's hard to see what fiscal profligacy had to do with stagnant median incomes, rising healthcare and college costs, and a fragile financial system -- and harder still to see what remedies the Republicans have to offer. When it comes to policy, the GOP is stuck in 1980: lower taxes, less regulation, and more drilling for oil are always and everywhere the answer, no matter the question. (No, really).
Even Obama's reelection hasn't been enough to wake the Republicans from their Reagan von Winkle slumber. The GOP has chosen re-branding over rethinking. In other words, they think they have a messenger, not a message, problem -- and that's where Marco Rubio comes in. As Jonathan Chait of New York explains, Rubio offers the party an appealing, young salesman for its same, old policies, immigration aside. It was no accident his response to the State of the Union was so devoid of anything resembling new thinking. It was the point. Indeed, Rubio just rounded up the usual talking points, saying, among other things, that the government was a major cause of the housing bubble (it wasn't), and that Washington needs a balanced budget amendment (it very much does not). These are certainly cringe-worthy mistakes, but Rubio's biggest one is even more fundamental. He doesn't think the government can create jobs, except when it does.
Every dollar our government borrows is money that isn't being invested to create jobs. And the uncertainty created by the debt is one reason why many businesses aren't hiring.
Rubio has fallen victim to one of the classic economic blunders. It's called Say's Law, and it's not, in fact, a law. It's more like a guideline. The idea is that supply creates its own demand, which is true enough during booms, but not so during busts. The underlying logic here -- producing goods gives you the income to buy other goods -- makes sense, but only as long as you don't include money. Then everything falls apart. We'll return to why money is the root of all depressions in a second, but first, let's think about what it would mean if Say's Law were true. It would mean a world where demand can never lag supply; where unemployment is either voluntary or transient (when people switch jobs); and where government spending can never help the economy. After all, public borrowing has to come from somewhere, and a dollar the government borrows is a dollar the private sector doesn't. In other words, government borrowing "crowds out" private borrowing, pushing up interest rates as it competes for funds.
But this is terribly wrong. In the real world, people are out of work because they can't find work, not because they don't want it; the Great Recession has not been a Great Vacation. Supply doesn't always create its own demand, because demand for money might increase. In other words, people might hoard money. Now, "hoard" probably brings to mind people frantically stuffing money into mattresses, but it's a bit different than that today. It means households don't want to spend, and businesses don't want to invest, and banks don't want to lend. There's an excess of desired savings over desired investment -- or, as it's more commonly called, a recession. The Fed can make hoarding less appealing by cutting interest rates to inject money into the economy, but it can't do so now, at least not easily. Interest rates are already at zero, and unconventional money-printing hasn't been quite as effective. In short, the Fed hasn't been able to get us to stop hoarding right now.
That leaves two options: depression or deficits. In other words, either nobody borrows the unborrowed money, or the government does. If nobody does, the economy will contract by as much as isn't borrowed; if the government does, the economy will (at least) stabilize. As Matthew Yglesias of Slate points out, it's easy enough to tell the government is borrowing money that otherwise wouldn't be today, since interest rates have fallen despite big deficits. There has been no crowding out.
But it turns out we are actually all Keynesians now, even Marco Rubio. At least when it comes to military spending. (Though he's hardly alone with this cognitive dissonance). Here's what he told HispanicBusiness.com last September about the upcoming sequester cuts set to hit the Pentagon:
Thousands of jobs in defense-related enterprises have been lost already, with many more projected to go if the sequester crisis is not averted. These defense cuts hurt innovation, medical research and thousands of small businesses who subcontract for defense-related work.
Rubio is actually a pretty ambitious Keynesian! Not only does he think the government can create jobs, but he also thinks those jobs create other jobs -- that is, there's a multiplier on government spending.
How America’s best and brightest once again steered the country to failure
They were the best and the brightest. But, most of all, they believed they were right. Although the scale of disaster was considerably different, the same that was said of those who oversaw foreign policy under Presidents John F. Kennedy and Lyndon Johnson could be said of the Obama administration.
These were academics, intellectuals, and technocrats who were not only very smart; they took pride in being practical, grounded in reality, and wedded to facts. After the supposed anti-intellectualism and ideological rigidity of the George W. Bush administration, many of us welcomed the prospect of a president who was cerebral and professorial. Even those sympathetic to President Barack Obama’s foreign-policy instincts, however, will agree that it didn’t quite go as planned.
The president-elect’s lawyers have explained why they don’t think he’ll violate the Constitution’s foreign emoluments clause—but their arguments fall apart under closer scrutiny.
Last week, President-elect Donald Trump’s lawyers issued a brief, largely unnoticed memo defending Trump’s plan to “separate” himself from his businesses. We believe that memo arbitrarily limits itself to a small portion of the conflicts it purports to address, and even there, presents claims that depart from precedent and common sense. Trump can convince a lot of people of a lot of things—but neither he nor his lawyers can explain away the ethics train wreck that will soon crash into the Oval Office.
It’sbeenwidelyacknowledgedthat, when Trump swears the Oath of Office, he will stand in violation of the Constitution’s foreign-emoluments clause. The emoluments clause forbids any “Person holding any Office of Profit or Trust under [the United States]” from accepting any “any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State” (unless Congress explicitly consents).
The Michigan billionaire’s confirmation hearing was heavy on partisanship and light on substance.
Donald Trump advocated on the campaign trail for a $20 billion federal school-voucher program. But during her confirmation hearing on Tuesday evening, Betsy DeVos, the president-elect’s choice to lead the U.S. Education Department, said school choice should be a state decision. She framed school choice as a right for students and families. And she said during the hearing that she was committed to strengthening public education for all students.
While the Michigan billionaire has backed charter schools and vouchers, which let families use public money to pay for private schools, DeVos would not, she said, try to force states to embrace school choice. But a number of organizations, largely Democratic, that had raised questions about DeVos’s commitment to expanding charters and vouchers and about her family’s financial holdings and religious causes were unlikely to find much more of the hearing reassuring.
The Russian leader tries to claim the role of senior partner in relationship with the U.S.
You have to feel bad for the Moldovan president. The newly elected Igor Dodon had traveled to Moscow to meet Russian president Vladimir Putin for the first Russian-Moldovan bilateral meeting in nine years. Yet here he was, standing side by side with Putin, his hero and model for emulation, at a regal-looking press conference and some reporter has to go and ask about the prostitutes.
“You haven’t yet commented on the report that, allegedly, we or in Russia have been collecting kompromat on Donald Trump, including during his visit to Moscow, as if he were having fun with prostitutes in a Moscow hotel,” said the reporter with the pro-Kremlin LifeNews. “Is that true? Have you seen these files, these videos, these tapes?”
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 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 says he 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.
Many both mainstream and alternative doctors help patients avoid or delay vaccines. Trump’s rhetoric might empower them further.
When Andrew Brandeis encounters patients who are skeptical about vaccines at his family-practice clinic in San Francisco, he doesn’t toe the typical pediatrician party line—that the standard vaccine schedule is a must-do. Instead, he might help the patient delay or space out their child’s shots beyond the recommendations of public-health agencies, if they so desire.
“The earlier you introduce a vaccine to a kid, there is evidence suggesting various adverse reactions,” he said. He believes early administration of the Hepatitis B vaccine is linked to allergies, asthma, and multiple sclerosis—something doctors and health agencies vehemently deny. “The parents might say, ‘I’m just going to wait on that one,’ I’d say that’s okay.”
Why some people are withdrawing from mainstream society into “intentional communities”—and what the rest of the country can learn from them
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.
Surfing the app on a trip back home can be a way of regressing, or imagining what life would be like if you never left.
My parents moved out of my hometown almost as soon as I left for college, and therefore I am obsessed with the idea of other people’s hometowns. Over any major holiday or break from a work schedule, hometowns become a sort of time travel, a way for people who have made adult lives elsewhere to return to their origin story.
Going home for the holidays can act as a kind of regression. Most of us know people, whether our friends, our partner, even our own parents, who suddenly turn into their teen or pre-teen self once they step foot in the house where they grew up. My mom used to say that whenever my dad got within 50 miles of his mom’s house, he suddenly became a teenage boy. Our hometowns become a kind of permission and hideaway, a place where we don’t have to be ourselves, where our actions don’t count and we get to be briefly less visible than we are in the adult homes we’ve made for ourselves elsewhere, the places where we expect ourselves to take action and achieve things and move upward through each day. For many of us, hometowns allow the luxury of a brief period of stasis, a rare few days of doing nothing.
“Trump’s wall is already under construction,” Wole Soyinka says. “Walls are built in the mind.”
Wole Soyinka, the first African writer to be awarded the Nobel Prize in Literature, once fled to the United States from Nigeria. Now the fickle winds of politics are pushing him in the opposite direction.
Back in the 1960s, jailed for alleged associations with rebels amid the outbreak of the Nigerian Civil War, Soyinka composed protest poems on toilet paper in solitary confinement. “The man dies in all who keep silent in the face of tyranny,” Soyinka wrote in the collection of prison notes he later published. In the 1990s, the Nigerian strongman Sani Abacha confiscated Soyinka’s passport after the playwright urged Nigerians to stop paying taxes in defiance of military rule in the country. Soyinka managed to sneak out of his homeland and take refuge in the United States—a period he described to me as his “political sabbatical, because I never accepted, really, that I was in exile.”Abacha sentenced Soyinka to death in absentia. Soyinka’s crime was said to be treason.