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.
Trump is replacing his national-security adviser with John Bolton, a persistent advocate of military intervention.
On Thursday, Donald Trump replaced a man who built the case for war with North Korea as a last resort with a man who just made the case for war with North Korea as more of a first resort. Trump announced that National-Security Adviser H.R. McMaster will be succeeded by John Bolton, the George W. Bush-era United Nations ambassador who has advocated for U.S. military action to prevent Saddam Hussein, Ayatollah Khamenei, and most recently Kim Jong Un from amassing weapons of mass destruction.
North Korea is an “imminent threat” to America because it is only months away from achieving the capacity to deliver nuclear warheads to the U.S. mainland, Bolton wrote in late February in The Wall Street Journal. Therefore “it is perfectly legitimate” for the U.S. to defend itself “by striking [North Korea] first.”
John Dowd is the president’s second personal lawyer to leave the job and it’s the second major change to his legal team this week.
Updated on March 22 at 1:15 p.m.
John Dowd announced he will depart his position as President Trump’s lead personal lawyer in the Russia investigation, the second person to leave that job in less than a year.
Dowd announced his exit late Thursday morning. The specifics of the decision remain obscure—The Washington Post described it, somewhat paradoxically, as “a largely mutual decision”—but the departure comes amid rising frustration from the president with his legal team and frustration from the legal team over Trump’s refusal to follow advice. Dowd had been a particularly strong voice arguing against Trump testifying to Special Counsel Robert Mueller, and over the weekend Dowd called for Mueller’s firing, initially telling The Daily Beast he spoke for the president, then later insisting he spoke only for himself.
The Cambridge Analytica scandal is drawing attention to malicious data thieves and brokers. But every Facebook app—even the dumb, innocent ones—collected users’ personal data without even trying.
For a spell during 2010 and 2011, I was a virtual rancher of clickable cattle on Facebook.
It feels like a long time ago. Obama was serving his first term as president. Google+ hadn’t arrived, let alone vanished again. Steve Jobs was still alive, as was Kim Jong Il. Facebook’s IPO hadn’t yet taken place, and its service was still fun to use—although it was littered with requests and demands from social games, like FarmVille and Pet Society.
I’d had enough of it—the click-farming games, for one, but also Facebook itself. Already in 2010, it felt like a malicious attention market where people treated friends as latent resources to be optimized. Compulsion rather than choice devoured people’s time. Apps like FarmVille sold relief for the artificial inconveniences they themselves had imposed.
Party leadership is sending an unmistakable signal to voters: So long as Republicans hold the congressional majority, they will not act to meaningfully constrain, or even oversee, the president.
Every time Donald Trump breaks a window, congressional Republicans obediently sweep up the glass.
That’s become one of the most predictable patterns of his turbulent presidency—and a defining dynamic of the approaching midterm elections. Each time they overtly defend his behavior, or implicitly excuse him by failing to object, they bind themselves to him more tightly.
It happened again last weekend when Trump fired off a volley of tweets that, for the first time, attacked Special Counsel Robert Mueller by name. A handful of GOP senators responded with warnings against dismissing Mueller. More congressional Republicans said nothing. Party leaders, such as House Speaker Paul Ryan, tried to downplay the attacks by insisting that Trump would not act on them and fire Mueller, who is investigating Russian interference in the 2016 presidential election. Most important, and regardless of their rhetorical posture, Republicans almost universally locked arms to reject legislative action to protect the special counsel.
Gigantic piles of impounded, abandoned, and broken bicycles have become a familiar sight in many Chinese cities, after a rush to build up its new bike-sharing industry vastly overreached.
Last year, bike sharing took off in China, with dozens of bike-share companies quickly flooding city streets with millions of brightly colored rental bicycles. However, the rapid growth vastly outpaced immediate demand and overwhelmed Chinese cities, where infrastructure and regulations were not prepared to handle a sudden flood of millions of shared bicycles. Riders would park bikes anywhere, or just abandon them, resulting in bicycles piling up and blocking already-crowded streets and pathways. As cities impounded derelict bikes by the thousands, they moved quickly to cap growth and regulate the industry. Vast piles of impounded, abandoned, and broken bicycles have become a familiar sight in many big cities. As some of the companies who jumped in too big and too early have begun to fold, their huge surplus of bicycles can be found collecting dust in vast vacant lots. Bike sharing remains very popular in China, and will likely continue to grow, just probably at a more sustainable rate. Meanwhile, we are left with these images of speculation gone wild—the piles of debris left behind after the bubble bursts.
How sugar daddies and vaginal microbes created the world’s largest HIV epidemic
VULINDLELA, South Africa—Mbali N. was just 17 when a well-dressed man in his 30s spotted her. She was at a mall in a nearby town, alone, when he called out. He might have been captivated by her almond eyes and soaring cheekbones. Or he might have just seen her for what she was: young and poor.
She tried to ignore him, she told me, but he followed her. They exchanged numbers. By the time she got home, he had called her. He said he wasn’t married, and she doesn’t know if that was true. They met at a house in a different township; she doesn’t know if it belonged to him. Mbali, who is now 24, also doesn’t know if he had HIV.
She enjoyed spending time with the man during the day, when they would talk and go to the movies. But she didn’t like it when he called at night and demanded to have sex, which happened about six times a month. When she refused him, he beat her. For her trouble, he gave her a cellphone, sweets, and chocolates.
They’re both blamed for predisposing their members to violent acts, but they’ve sparked radically different public-policy responses.
When I thought about locking up with a crew in 1996, I wanted to see a full initiation first, not parts I stumbled upon over the years. My friend Cliff and I arrived at a park not close from my home in Jamaica, Queens. Leaves danced with the wind around our feet, wafting an eerie feeling in my 14-year-old black body. The grounds of the initiation beckoned: a high-rise chain link fence, enclosing two basketball courts.
Through the daylighted chain, I watched scowls and punches and stomps engulf the uninitiated teen—a stoppage, then an awkward transition into hugs, handshakes, and smiles. The striking contrast shot at my core of authenticity, the insincerity of the punch-hug, of the stomp-smile, murdering my thoughts of joining a crew.
How evangelicals, once culturally confident, became an anxious minority seeking political protection from the least traditionally religious president in living memory
One of the most extraordinary things about our current politics—really, one of the most extraordinary developments of recent political history—is the loyal adherence of religious conservatives to Donald Trump. The president won four-fifths of the votes of white evangelical Christians. This was a higher level of support than either Ronald Reagan or George W. Bush, an outspoken evangelical himself, ever received.
Trump’s background and beliefs could hardly be more incompatible with traditional Christian models of life and leadership. Trump’s past political stances (he once supported the right to partial-birth abortion), his character (he has bragged about sexually assaulting women), and even his language (he introduced the words pussy and shithole into presidential discourse) would more naturally lead religious conservatives toward exorcism than alliance. This is a man who has cruelly publicized his infidelities, made disturbing sexual comments about his elder daughter, and boasted about the size of his penis on the debate stage. His lawyer reportedly arranged a $130,000 payment to a porn star to dissuade her from disclosing an alleged affair. Yet religious conservatives who once blanched at PG-13 public standards now yawn at such NC-17 maneuvers. We are a long way from The Book of Virtues.
Facebook’s chief executive flailed in his first public interviews since the Cambridge Analytica story broke. Will it matter?
On Wednesday, Mark Zuckerberg, the founder and chief executive of Facebook, gave his first public interviews since the Cambridge Analytica story broke.
He spoke with outlets that form an outline, in a way, of the modern shape of American media. So there was The New York Timesand CNN, of course; as well as Wired, the Bay Area’s cultural organ; and Recode, the tech industry’s paper of record.
All four publications have published unedited transcripts of their interviews with him. No one comes off very well in such a format, but I was struck by how poorly Zuckerberg fares. His company is facing its worst trading days since it went public, and users are fleeing its flagship product in large enough numbers to generate trend stories. The company’s long-simmering crisis of public trust has finally come to a head.
Schools are moving toward a model of continuous, lifelong learning in order to meet the needs of today’s economy.
When the giant Indian technology-services firm Infosys announced last November that it would open a design and innovation hub in Providence, the company’s president said one of the key reasons he chose Rhode Island was its strong network of higher-education institutions: Brown University, the Rhode Island School of Design, and the Community College of Rhode Island.
In a higher-education system that is often divided between two- and four-year colleges and further segregated between elite and nonelite institutions, it’s not often that a community college is mentioned in the same breath as an Ivy League campus. Nor is a two-year college seen as a training ground for jobs in the so-called creative economy, which include industries such as design, fashion, and computer gaming that typically require bachelor’s degrees.