Long-term debt isn't a short-term crisis, no matter what Beltway insiders say
Joe Scarborough, a man comically ill at ease with numbers, Powerpoint, or any analysis that doesn't involve polling Beltway insiders, thinks Paul Krugman is crazy for worrying more about unemployment than the long-term debt right now.
In other words, Scarborough can't believe Krugman says we can wait until Medicare spending is a problem before doing more about it. Of course, the arithmophobic Scarborough can't explain why Krugman is wrong -- aside from saying everybody he talks to thinks so too -- which is why Scarborough outsourced the job to the senior economist at the RAND corporation. But, unfortunately for Scarborough, he seems to have found an economist who doesn't know much about the subject -- at least judging from the freshman-level errors throughout. Here are the lowlights from this piece, ostensibly arguing that long-term debt is our gravest short-term economic problem. (Note: Excerpts are italicized).
1) From the beginning of 2002, when U.S. government debt was at its most recent minimum as a share of GDP, to the end of 2012, the dollar lost 25 percent of its value, in price-adjusted terms, against a basket of the currencies of major trading partners. This may have been because investors fear that the only way out of the current debt problems will be future inflation.
It wasn't. Inflation was low, and investors didn't expect that to change, over the last decade. Core PCE inflation averaged 1.9 percent over this period, while 10-year breakevens, which tell us market expectations of future inflation (going back to 2003), averaged 2.18 percent. Now, the financial crisis depressed both inflation and inflation expectations, but, as you can see in the chart below, the latter mostly leveled off around a healthy 2.5 percent for most of the last 10 years. If markets feared future inflation in the face of mounting debt, they sure had a funny way of showing it.
This persistently low inflation, and expectations thereof, meant the Fed could, and did, keep interest rates low -- and lower rates tend to cause a lower dollar. In other words, this wasn't a story about debt. Indeed, as you can see in the chart below, the big decline in the dollar happened between 2002 and 2007, when debt levels were relatively low, while the dollar is actually higher today than it was in 2008, despite the big debt run-up.
2) More troubling for the future is that private domestic investment--the fuel for future economic growth--shows a strong negative correlation with government debt levels over several business cycles dating back to the late 1950s. Continuing high debt does not bode well in this regard.
This is a correlation masquerading as a legitimate point. Recessions happen when private investment falls, and recessions increase deficits and debt due to lower revenues and higher safety net spending. In other words, deficits and debt rise because investment has fallen, not vice versa. Now, it's true that too-big deficits can crowd out private investment during a boom -- that's the legitimate point -- but we know that's not a problem now since interest rates are still so low.
3) But the economics profession is beginning to understand that high levels of public debt can slow economic growth, especially when gross general government debt rises above 85 or 90 percent of GDP.
As Mike Konczal of the Roosevelt Institute points out, the idea that growth slows down when debt hits 90 percent of GDP has not been proven. It's just a correlation. And, again, it probably gets the causation backwards -- low growth causes high deficits and debt, not vice versa.
4) The U.S. share of global economic output has been falling since 1999--by nearly 5 percentage points as of 2011. As America's GDP share declined, so did its share of world trade, which may reduce U.S. influence in setting the rules for international trade.
It's not clear what cutting Medicare would do about China's rapid rise. Poorer countries tend to grow faster than richer ones -- that is, they converge -- and that won't change regardless of whether we raise the eligibility age for Medicare or not. And besides, a richer China (and India, and Brazil, and ...) is good for us, if not our power, since it means more markets for our goods. It's odd that the same people who argue against progressive taxation because growth isn't zero-sum take a decidedly different view when it comes to international growth.
This entire debate is a bit surreal. Nobody disputes that healthcare spending, including Medicare, is on an unsustainable trajectory. It's a matter of what to do to "bend the curve" and when to do it. Scarborough wants to increase the eligibility age, and he doesn't think it can wait, because ... well, it's not clear why. He's not saying anything bond investors don't already know, and yet the inflation-adjusted yield on the 30-year bond is only 0.61 percent. If Scarborough is right and bond investors are wrong, then there's a tremendous money-making opportunity in shorting long-term bonds. I wonder if he has the courage of this particular conviction.
But there's another reason, quiescent bond vigilantes aside, for waiting to deal with our long-term debt. We need more time to figure out how to do it. If we knew how to slow healthcare inflation, we would have slowed healthcare inflation. But we don't. Now, Obamacare introduced payment reforms and death panels IPAB to try to restrain spending, but we don't know if or how much they'll work, though there are some hopeful signs. The CBO just reported that healthcare spending has slowed so much the past few years that it's revised down projected federal healthcare spending by $200 billion over the rest of the decade -- or $50 billion more than raising the eligibility age from 65 to 67 would save. In other words, the things we know how to do won't save that much, and the things we don't know how to do might save much more. That's why we should play for more time.
Our elites are good at manufacturing crises, if nothing else, but Scarborough can't manufacture a debt crisis today. Markets won't cooperate -- and with good reason. They're more concerned about growth than debt, because they've done the math and realize the former is the only solution to the latter.
Don't tell anyone, but Powerpoint might have been involved.
As Trump considers military options, he’s drawing unenforceable red lines.
Speaking before the UN General Assembly today, President Donald Trump announced that, unless North Korea gives up its nuclear weapons and ballistic missile programs, “the United States will have no choice but to totally destroy” the country. He sounded almost excited as he threatened, “Rocket Man is on a suicide mission for himself and for his regime.”
North Korea is a serious problem, and not one of Trump’s making—the last four American presidents failed to impede North Korea’s progress towards a nuclear weapon. President George H.W. Bush took unilateral action, removing U.S. nuclear weapons and reducing America’s troop levels in the region, hoping to incentivize good behavior; Presidents Bill Clinton and George W. Bush tried to negotiate restrictions; President Barack Obama mostly averted his eyes. North Korea defied them all.
The foundation of Donald Trump’s presidency is the negation of Barack Obama’s legacy.
It is insufficient to statethe obvious of Donald Trump: that he is a white man who would not be president were it not for this fact. With one immediate exception, Trump’s predecessors made their way to high office through the passive power of whiteness—that bloody heirloom which cannot ensure mastery of all events but can conjure a tailwind for most of them. Land theft and human plunder cleared the grounds for Trump’s forefathers and barred others from it. Once upon the field, these men became soldiers, statesmen, and scholars; held court in Paris; presided at Princeton; advanced into the Wilderness and then into the White House. Their individual triumphs made this exclusive party seem above America’s founding sins, and it was forgotten that the former was in fact bound to the latter, that all their victories had transpired on cleared grounds. No such elegant detachment can be attributed to Donald Trump—a president who, more than any other, has made the awful inheritance explicit.
More comfortable online than out partying, post-Millennials are safer, physically, than adolescents have ever been. But they’re on the brink of a mental-health crisis.
One day last summer, around noon, I called Athena, a 13-year-old who lives in Houston, Texas. She answered her phone—she’s had an iPhone since she was 11—sounding as if she’d just woken up. We chatted about her favorite songs and TV shows, and I asked her what she likes to do with her friends. “We go to the mall,” she said. “Do your parents drop you off?,” I asked, recalling my own middle-school days, in the 1980s, when I’d enjoy a few parent-free hours shopping with my friends. “No—I go with my family,” she replied. “We’ll go with my mom and brothers and walk a little behind them. I just have to tell my mom where we’re going. I have to check in every hour or every 30 minutes.”
Those mall trips are infrequent—about once a month. More often, Athena and her friends spend time together on their phones, unchaperoned. Unlike the teens of my generation, who might have spent an evening tying up the family landline with gossip, they talk on Snapchat, the smartphone app that allows users to send pictures and videos that quickly disappear. They make sure to keep up their Snapstreaks, which show how many days in a row they have Snapchatted with each other. Sometimes they save screenshots of particularly ridiculous pictures of friends. “It’s good blackmail,” Athena said. (Because she’s a minor, I’m not using her real name.) She told me she’d spent most of the summer hanging out alone in her room with her phone. That’s just the way her generation is, she said. “We didn’t have a choice to know any life without iPads or iPhones. I think we like our phones more than we like actual people.”
Its faith-based 12-step program dominates treatment in the United States. But researchers have debunked central tenets of AA doctrine and found dozens of other treatments more effective.
J.G. is a lawyer in his early 30s. He’s a fast talker and has the lean, sinewy build of a distance runner. His choice of profession seems preordained, as he speaks in fully formed paragraphs, his thoughts organized by topic sentences. He’s also a worrier—a big one—who for years used alcohol to soothe his anxiety.
J.G. started drinking at 15, when he and a friend experimented in his parents’ liquor cabinet. He favored gin and whiskey but drank whatever he thought his parents would miss the least. He discovered beer, too, and loved the earthy, bitter taste on his tongue when he took his first cold sip.
His drinking increased through college and into law school. He could, and occasionally did, pull back, going cold turkey for weeks at a time. But nothing quieted his anxious mind like booze, and when he didn’t drink, he didn’t sleep. After four or six weeks dry, he’d be back at the liquor store.
The gynecological device may have an ethically fraught history, but it's hard to improve on the design.
Few women enjoy pelvic exams: the crinkly paper dress, the awkward questions, the stirrups, the vague fear that can comes with doctors’s visits of any kind (what if they find something abnormal, something bad, something cancerous?). But perhaps no piece of the pelvic exam is as reviled as the vaginal speculum—the cold, clicking, duck-billed apparatus that lifts and separates the vaginal walls so a near-stranger can peer inside.
The speculum’s history is, like many medical histories, full of dubious ethics. Versions of the speculum have been found in medical texts dating back to the Greek physician Galen in 130 A.D. and shown up in archaeological digs as far back as 79 A.D. amidst the dust of Pompeii. (The artifact from Pompeii is a bit of a nightmare: two blades that open and close via a corkscrew-like mechanism.)
Old French Canadian genealogy records reveal how a harmful mutation can hide from natural selection in a mother's DNA.
The first King’s Daughters—or filles du roi—arrived in New France in 1663, and 800 more would follow over the next decade. Given their numbers, they were not literally the king’s daughters of course.
They were poor and usually of common birth, but their passage and dowry were indeed paid by King Louis XIV for the purpose of empire building: These women were to marry male colonists and have many children, thus strengthening France’s hold on North America.
And so they did. The filles du roi became the founding mothers of French Canadians, for whom these women are a source of historical pride. A grand old restaurant in Montreal was named after the filles du roi. So is a roller-derby team. French Canadians can usually trace their ancestry back to one or more of these women. “French Canadian genealogy is so well documented, it’s just a piece of cake to trace any line you have,” says Susan Colby, a retired archaeologist who comes from a French Canadian family and has done some of that tracing herself.
What was it like inside the brain of an ancient prophet?
James Kugel has been spent his entire scholarly career studying the Bible, but some very basic questions about it still obsess him. What was it about the minds of ancient Israelites that allowed them to hear and see God directly—or at least, to believe that they did? Were the biblical prophets literally hearing voices and seeing visions, understanding themselves to be transmitting God’s own exact words? If so, why did such direct encounters with God become rarer over time?
In his new and final book, The Great Shift, Kugel investigates these questions through the lens of neuroscientific findings. (The approach is reminiscent of other recent books, like Kabbalah: A Neurocognitive Approach to Mystical Experiences, co-written by a neurologist and a mysticism scholar.) First, Kugel uses biblical research to show that ancient people had a “sense of self” that was fundamentally different from the one modern Westerners have—and that this enabled them to experience and interpret prophecy differently than we do. Then he uses scientific research to show that we shouldn’t assume their view was wrong. If anything, our modern Western notion of the bounded, individual self is the anomaly; most human beings throughout history conceived of the self as a porous entity open to intrusions. In fact, much of the rest of the world today still does.
Doctors at the University of Mississippi dissected two chicken nuggets, looked at them under a microscope, and were "astounded."
The chicken nugget can conjure purity. No buns, pickles, or bones. Not many carbs, apart from the breading. This is simplicity delivered economically, flightless birds, protein for the protein-hungry America of today—or, to followers of Michael Pollan, the corn-fed-meat-wrapped-in-corn-preserved-breading-dipped-in-corn-sweetened-goo kind of purity.
Richard D. deShazo, MD, is a distinguished professor of medicine and pediatrics at University of Mississippi Medical Center. He does not see purity. At least, not anymore.
“I was floored. I was astounded,” deShazo said of the moment he looked at a chicken nugget under a microscope.
Millennials may have loved the big-box chain as kids, but as parents, they’d rather shop online.
In a year of constant bad news across the retail sector, Toys “R” Us has become a little engine that couldn’t, filing for bankruptcy in a federal court in Virginia Monday night. As part of its bankruptcy plan, the company will continue to operate most of its stores through the holiday season, when the company has traditionally pulled in the most revenue.
The bankruptcy marks a new phase for a chain that has struggled to find its way online, a vulnerability for a company whose primary customers are parents. While the convenience of online shopping is a boon to most consumers, for parents it may be even more of a draw. According to the Bureau of Labor Statistics, the vast majority of households do not have a stay-at-home parent. After a full day of work, there’s dinner to be served, baths to be drawn, and bedtime rituals to be undertaken at length. Squeezing in a trip to the store is often impossible.