Austerians have had their worst week since the last time GDP numbers came out for a country that's tried austerity.
But this time is, well, different. It's not "just" that southern Europe is stuck in a depression and Britain is stuck in a no-growth trap. It's that the very intellectual foundations of austerity are unraveling. In other words, economists are finding out that austerity doesn't work in practice or in theory.
What a difference an Excel coding error makes.
Austerity has been a policy in search of a justification ever since it began in 2010. Back then, policymakers decided it was time for policy to go back to "normal" even though the economy hadn't, because deficits just felt too big. The only thing they needed was a theory telling them why what they were doing made sense. Of course, this wasn't easy when unemployment was still high, and interest rates couldn't go any lower. Alberto Alesina and Silvia Ardagna took the first stab at it, arguing that reducing deficits would increase confidence and growth in the short-run. But this had the defect of being demonstrably untrue (in addition to being based off a naïve reading of the data). Countries that tried to aggressively cut their deficits amidst their slumps didn't recover; they fell into even deeper slumps.
Enter Carmen Reinhart and Ken Rogoff. They gave austerity a new raison d'être by shifting the debate from the short-to-the-long-run. Reinhart and Rogoff acknowledged austerity would hurt today, but said it would help tomorrow -- if it keeps governments from racking up debt of 90 percent of GDP, at which point growth supposedly slows dramatically. Now, this result was never more than just a correlation -- slow growth more likely causes high debt than the reverse -- but that didn't stop policymakers from imputing totemic significance to it. That is, it became a "fact" that everybody who mattered knew was true.
Except it wasn't. Reinhart and Rogoff goofed. They accidentally excluded some data in one case, and used some wrong data in another; the former because of an Excel snafu. If you correct for these very basic errors, their correlation gets even weaker, and the growth tipping point at 90 percent of GDP disappears. In other words, there's no there there anymore.
Austerity is back to being a policy without a justification. Not only that, but, as Paul Krugman points out, Reinhart and Rogoff's spreadsheet misadventure has been a kind of the-austerians-have-no-clothes moment. It's been enough that even some rather unusual suspects have turned against cutting deficits now. For one, Stanford professor John Taylor claims L'affaire Excel is why the G20, the birthplace of the global austerity movement in 2010, was more muted on fiscal targets recently.
The discovery of errors in the Reinhart-Rogoff paper on the growth-debt nexus is already impacting policy. A participant in last Friday's G20 meetings told me that the error was a factor in the decision to omit specific deficit or debt-to-GDP targets in the G20 communique.
The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You've got to spend money.Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out -- even if a country can print its own currency and write its own checks. In the long term it is important to be fiscal and austere. It is important to have a relatively average or low rate of debt to GDP. The question in terms of the long term and the short term is how quickly to do it.
Growth vigilantes are the new bond vigilantes. Gross thinks the boom, not the slump, is the time for austerity -- which sounds an awful lot like you-know-who.
The austerity fever has even broken in Europe. At least a bit. Now, eurocrats can't say that austerity has been anything other than the best of all economic policies, but they can loosen the fiscal noose. And that's what they might be doing, by giving countries more time and latitude to hit their deficit targets. Here's how European Commission president José Manuel Barroso framed the issue on Monday:
While [austerity] is fundamentally right, I think it has reached its limits in many aspects. A policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.
That's not much, but it's still much better than the growth-through-austerity plan Eurogroup president Jeroen Dijsselbloem was peddling on ... Saturday.
Now, Reinhart and Rogoff's Excel imbroglio hasn't exactly set off a new Keynesian moment. Governments aren't going to suddenly take advantage of zero interest rates to start spending more to put people back to work. Stimulus is still a four-letter word. Indeed, the euro zone, Britain, and, to a lesser extent, the United States, are still focussed on reducing deficits above all else. But there's a greater recognition that trying to cut deficits isn't enough to cut debt burdens. You need growth too. In other words, people are remembering that there's a denominator in the debt-to-GDP ratio.
But austerity doesn't just have a math problem. It has an image problem too. Just a week ago, Reinhart and Rogoff's work was the one commandment of austerity: Thou shall not run up debt in excess of 90 percent of GDP. Wisdom didn't get more conventional. What did this matter? Well, as Keynes famously observed, it's better for reputation to fail conventionally than to succeed unconventionally. In other words, elites were happy to pursue obviously failed policies as long as they were the right failed policies.
But now austerity doesn't look so conventional. It looks like the punchline of a bad joke about Excel destroying the global economy. Maybe, just maybe, that will be enough to free us from some defunct economics.
Why the ingrained expectation that women should desire to become parents is unhealthy
In 2008, Nebraska decriminalized child abandonment. The move was part of a "safe haven" law designed to address increased rates of infanticide in the state. Like other safe-haven laws, parents in Nebraska who felt unprepared to care for their babies could drop them off in a designated location without fear of arrest and prosecution. But legislators made a major logistical error: They failed to implement an age limitation for dropped-off children.
Within just weeks of the law passing, parents started dropping off their kids. But here's the rub: None of them were infants. A couple of months in, 36 children had been left in state hospitals and police stations. Twenty-two of the children were over 13 years old. A 51-year-old grandmother dropped off a 12-year-old boy. One father dropped off his entire family -- nine children from ages one to 17. Others drove from neighboring states to drop off their children once they heard that they could abandon them without repercussion.
Americans are optimistic about the communities they live in—but not their nation. Why?
I have been alive for a long time. I remember the assassination of John F. Kennedy, when I was a 10th-grader, and then watching with my family through the grim following days as newscasters said that something had changed forever. The next dozen years were nearly nonstop trauma for the country. More assassinations. Riots in most major cities. All the pain and waste and tragedy of the Vietnam War, and then the public sense of heading into the utterly unknown as, for the first time ever, a president was forced to resign. Americans of my children’s generation can remember the modern wave of shocks and dislocations that started but did not end with the 9/11 attacks.
Through all this time, I have been personally and professionally, and increasingly, an American optimist. The long years I have spent living and working outside the United States have not simply made me more aware of my own strong identity as an American. They have also sharpened my appreciation for the practical ramifications of the American idea. For me this is the belief that through its cycle of struggle and renewal, the United States is in a continual process of becoming a better version of itself. What I have seen directly over the past decade, roughly half in China and much of the rest in reporting trips around the United States, has reinforced my sense that our current era has been another one of painful but remarkable reinvention, in which the United States is doing more than most other societies to position itself, despite technological and economic challenges, for a new era of prosperity, opportunity, and hope.
The same part of the brain that allows us to step into the shoes of others also helps us restrain ourselves.
You’ve likely seen the video before: a stream of kids, confronted with a single, alluring marshmallow. If they can resist eating it for 15 minutes, they’ll get two. Some do. Others cave almost immediately.
This “Marshmallow Test,” first conducted in the 1960s, perfectly illustrates the ongoing war between impulsivity and self-control. The kids have to tamp down their immediate desires and focus on long-term goals—an ability that correlates with their later health, wealth, and academic success, and that is supposedly controlled by the front part of the brain. But a new study by Alexander Soutschek at the University of Zurich suggests that self-control is also influenced by another brain region—and one that casts this ability in a different light.
Strangling public-sector unions in Wisconsin has shrunk teachers’ pay and benefits. Who’s next?
Back in 2009, Rick Erickson was happy with his job as a teacher in one of the state’s northernmost school districts on the shores of Lake Superior. He made $35,770 a year teaching chemistry and physics, which wasn’t a lot of money, but then again, he received stellar healthcare and pension benefits, and could talk honestly with administrators about what he needed as a teacher every two years when his union sat down with the school district in collective bargaining sessions.
Then, five years ago, Wisconsin passed Act 10, also known as the Wisconsin Budget Repair Bill, which dramatically limited the ability of teachers and other public employees to bargain with employers on wages, benefits, and working conditions. After Act 10,Erickson saw his take-home pay drop dramatically: He now makes $30,650. His wife is a teacher, too, and together they make 11 percent less than they did before Act 10. The local union he once led no longer exists, and so he can’t bargain with the school district for things like prep time and sick days. He pays more for health care and his pension, and he says both he and his wife may now not be able to retire until they are much older than they had planned.
Trump’s nominee for attorney general claims to have “filed 20 or 30” desegregation cases as U.S. attorney in Alabama, but there’s little evidence to support that.
Civil-rights organizations balked when Alabama Senator Jeff Sessions, who was rejected for a federal judgeship in 1986 over allegations he made racist remarks, was chosen to succeed Loretta Lynch as attorney general. Sessions’s allies have sought to portray those criticisms as unfair, in part by pointing to his record of filing desegregation lawsuits as U.S. attorney in Alabama.
Sessions himself claims to have been a champion of desegregation. “I filed 20 or 30 civil-rights cases to desegregate schools and political organizations and county commissions when I was a United States attorney,” Sessions told National Review in 2009. Trump spokesman Jason Miller offered a similar claim in November, telling reporters on a conference call that “when Senator Sessions was U.S. attorney, he filed a number of desegregation lawsuits in Alabama.” Miller’s claim about his record has been reported by outlets including Politico, Wired, and The Washington Times. Conservative outlets have dismissed the questioning of his civil-rights record as "another in a long line of liberal smears" against a principled conservative, in part by citing his record on school desegregation.
Unless he divests himself of his business holdings, the president-elect could violate constitutional rules meant to guard against corruption.
With the recent news that two Republican electors are refusing to vote for Donald Trump, we have been inundated with inquiries asking whether other electors should decline to select Trump because of a particular constitutional issue. It’s one we worked on when we were advising Presidents Bush and Obama, respectively: the Emoluments Clause.
Every elector must search his or her own conscience, but after a blizzard of reporting on the president-elect’s foreign business relations in recent days, it appears that Trump will be in violation of this clause of the Constitution from the moment he takes office—and the plan for his business that he hinted at on Twitter last week does not solve the problem.
A professor of cognitive science argues that the world is nothing like the one we experience through our senses.
As we go about our daily lives, we tend to assume that our perceptions—sights, sounds, textures, tastes—are an accurate portrayal of the real world. Sure, when we stop and think about it—or when we find ourselves fooled by a perceptual illusion—we realize with a jolt that what we perceive is never the world directly, but rather our brain’s best guess at what that world is like, a kind of internal simulation of an external reality. Still, we bank on the fact that our simulation is a reasonably decent one. If it wasn’t, wouldn’t evolution have weeded us out by now? The true reality might be forever beyond our reach, but surely our senses give us at least an inkling of what it’s really like.
To many white Trump voters, the problem wasn’t her economic stance, but the larger vision—a multi-ethnic social democracy—that it was a part of.
Perhaps the clearest takeaway from the November election for many liberals is that Hillary Clinton lost because she ignored the working class.
In the days after her shocking loss, Democrats complained that Clinton had no jobs agenda. A widely shared essay in The Nationblamed Clinton's "neoliberalism" for abandoning the voters who swung the election. “I come from the white working class,” Bernie Sanders said on CBS This Morning, “and I am deeply humiliated that the Democratic Party cannot talk to where I came from.”
But here is the troubling reality for civically minded liberals looking to justify their preferred strategies: Hillary Clinton talked about the working class, middle class jobs, and the dignity of work constantly. And she still lost.
Long-shot efforts to stop Donald Trump or change the election system risk taking up time and energy with little to show at the end.
As Donald Trump’s inauguration draws near, Democrats are channeling time and energy into long-shot political fights focused on the Electoral College. But while their efforts have generated media attention, they ultimately seem unlikely to win back the power liberals lost in the presidential election.
A group of Democratic electors areleading the charge for an Electoral College revolt by attempting to convince electors to deny Trump the White House when they vote for president later this month. At least one Republican elector has also publicly advocated for his colleagues to reject Trump: “I believe electors should unify behind a Republican alternative,” he wrote in a New York Times op-ed on Monday.
Areas of the country Trump won by large margins are particularly vulnerable to the environmental devastation wrought by climate change.
On the heels of President-elect Donald Trump’s meeting this Monday with environmentalist and former vice president Al Gore, 97 percent of the world’s scientists might have breathed (just a little) easier. Here was a signal—however tentative—that the incoming president was at least interested in hearing the views of those who consider climate change to be a looming threat, and who would prefer the United States do something about it. The meeting, as my colleague Robinson Meyer writes, was arranged by the first daughter, Ivanka Trump. Presumably, it is part of a reported effort to make climate change “one of her signature issues” in a bid to win over “liberals disgusted and depressed with the tone and tenor of the new leader of the free world.”