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.
A Washington Post report suggests the president's son-in-law and adviser sought to give Moscow information he wanted to conceal from America's own intelligence agencies.
Why did Jared Kushner seemingly trust Russian officials more than he trusted the U.S. government?
Friday evening, The Washington Post broke the story that, according to an intercepted report by the Russian ambassador in Washington to his superiors in Moscow, Kushner sought to use secure communications facilities at the Russian Embassy to correspond directly with Russian officials. The Russian ambassador, Sergei Kislyak, reported that the proposal was made in December, after Trump won the election but before he had taken office. The conversations reportedly involved Michael Flynn, the former Trump national-security adviser who was fired after it was revealed that he lied to administration officials about the content of his conversations with Russian officials.
The permissiveness of Republican leaders who acquiesce to violence, collusion, and corruption is encouraging more of the same.
In the annals of the Trump era, May 25, 2017, will deserve a special mark. Four remarkable things happened on Thursday, each of which marks a way that this presidency is changing the nation.
The first remarkable thing was President Trump’s speech at the NATO summit in Brussels. Many European governments had hoped—which is a polite way to say that they had suggested and expected—that Trump would reaffirm the American commitment to defend NATO members if attacked. This is the point of the whole enterprise after all! Here’s how it was done by President Obama at the NATO summit after the Russian invasion of Crimea:
First and foremost, we have reaffirmed the central mission of the Alliance. Article 5 enshrines our solemn duty to each other—“an armed attack against one … shall be considered an attack against them all.” This is a binding, treaty obligation. It is non-negotiable. And here in Wales, we’ve left absolutely no doubt—we will defend every Ally.
She lived with us for 56 years. She raised me and my siblings without pay. I was 11, a typical American kid, before I realized who she was.
The ashes filled a black plastic box about the size of a toaster. It weighed three and a half pounds. I put it in a canvas tote bag and packed it in my suitcase this past July for the transpacific flight to Manila. From there I would travel by car to a rural village. When I arrived, I would hand over all that was left of the woman who had spent 56 years as a slave in my family’s household.
The condition has long been considered untreatable. Experts can spot it in a child as young as 3 or 4. But a new clinical approach offers hope.
This is a good day, Samantha tells me: 10 on a scale of 10. We’re sitting in a conference room at the San Marcos Treatment Center, just south of Austin, Texas, a space that has witnessed countless difficult conversations between troubled children, their worried parents, and clinical therapists. But today promises unalloyed joy. Samantha’s mother is visiting from Idaho, as she does every six weeks, which means lunch off campus and an excursion to Target. The girl needs supplies: new jeans, yoga pants, nail polish.
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At 11, Samantha is just over 5 feet tall and has wavy black hair and a steady gaze. She flashes a smile when I ask about her favorite subject (history), and grimaces when I ask about her least favorite (math). She seems poised and cheerful, a normal preteen. But when we steer into uncomfortable territory—the events that led her to this juvenile-treatment facility nearly 2,000 miles from her family—Samantha hesitates and looks down at her hands. “I wanted the whole world to myself,” she says. “So I made a whole entire book about how to hurt people.”
While he avoided major blunders in the Middle East on his first foreign trip, he may come to regret his failure to affirm U.S. support for the alliance.
Presidential trips are hard to assess. George H.W. Bush threw up on the Japanese prime minister; he was sick. Bill Clinton went to China without going to Japan, a big no-no. Someone threw a shoe at George W Bush; he ducked. President Barack Obama failed to meet with human-rights activists in China. His speech was censored on Chinese television.
These all passed for big problems. Then again, those were different times.
The bar for President Donald Trump on his foreign trips this past week was, by comparison, unusually low. Everyone expected problems. Trump famously knows very little about foreign policy. In his March 17 meeting with Angela Merkel, the chancellor of Germany, he confessed he had never heard of the Transatlantic Trade and Investment Partnership or the G-20. She made him a colorful map of the Soviet Union’s sphere of influence, which he apparently liked. So, when Trump embarked on a nine-day trip of five countries, it seemed particularly ambitious. Most new presidents go to Canada or Mexico.
The president’s business tells lawmakers it is too difficult to track all its foreign revenue in accordance with constitutional requirements, and it hasn’t asked Congress for a permission slip.
Days before taking office, Donald Trump said his company would donate all profits from foreign governments to the U.S. Treasury, part of an effort to avoid even the appearance of a conflict with the Constitution’s emoluments clause.
Now, however, the Trump Organization is telling Congress that determining exactly how much of its profits come from foreign governments is simply more trouble than it’s worth.
In response to a document request from the House Oversight Committee, Trump’s company sent a copy of an eight-page pamphlet detailing how it plans to track payments it receives from foreign governments at the firm’s many hotels, golf courses, and restaurants across the globe. But while the Trump Organization said it would set aside all money it collects from customers that identify themselves as representing a foreign government, it would not undertake a more intensive effort to determine if a payment would violate the Constitution’s prohibition on public office holders accepting an “emolument” from a foreign state.
Should you drink more coffee? Should you take melatonin? Can you train yourself to need less sleep? A physician’s guide to sleep in a stressful age.
During residency, Iworked hospital shifts that could last 36 hours, without sleep, often without breaks of more than a few minutes. Even writing this now, it sounds to me like I’m bragging or laying claim to some fortitude of character. I can’t think of another type of self-injury that might be similarly lauded, except maybe binge drinking. Technically the shifts were 30 hours, the mandatory limit imposed by the Accreditation Council for Graduate Medical Education, but we stayed longer because people kept getting sick. Being a doctor is supposed to be about putting other people’s needs before your own. Our job was to power through.
The shifts usually felt shorter than they were, because they were so hectic. There was always a new patient in the emergency room who needed to be admitted, or a staff member on the eighth floor (which was full of late-stage terminally ill people) who needed me to fill out a death certificate. Sleep deprivation manifested as bouts of anger and despair mixed in with some euphoria, along with other sensations I’ve not had before or since. I remember once sitting with the family of a patient in critical condition, discussing an advance directive—the terms defining what the patient would want done were his heart to stop, which seemed likely to happen at any minute. Would he want to have chest compressions, electrical shocks, a breathing tube? In the middle of this, I had to look straight down at the chart in my lap, because I was laughing. This was the least funny scenario possible. I was experiencing a physical reaction unrelated to anything I knew to be happening in my mind. There is a type of seizure, called a gelastic seizure, during which the seizing person appears to be laughing—but I don’t think that was it. I think it was plain old delirium. It was mortifying, though no one seemed to notice.
Preston Brooks, Greg Gianforte, and the American tradition of disguising cowardice as bravery
You wouldn’t say that Preston Brooks sucker-punched Charles Sumner in the Senate chamber in 1856—but only because he used a cane. Brooks, a South Carolina congressman, began bludgeoning Sumner, the anti-slavery Massachusetts senator, while Sumner wasn’t looking, and beat him unconscious as Sumner was still bent under his desk trying to stand up.
Brooks and his supporters in the South saw the incident as an act of great valor, as the historian Manisha Sinha writes. Brooks bragged that “for the first five or six licks he offered to make fight but I plied him so rapidly that he did not touch me. Towards the last he bellowed like a calf.” The pro-slavery Richmond Enquirer wrote that it considered the act “good in conception, better in execution, and best of all in consequence.” Other “southern defenders of Brooks,” Sinha writes, praised Brooks for his “manly spirit” and mocked Sumner for his “unmanly submission.” It would have been manlier for the unarmed Sumner not to have been ambushed.
I traveled around the country interviewing happy couples; this is what I learned.
I’m a single, 20-something woman, so I should note off the bat that I don’t know much about marriage. But most young singles go into what is meant to be a lifelong commitment relatively clueless. Our perceptions of marriage often stem from some mix of romantic comedies, mainstream media, and the example set by our parents, which can leave us with an unrealistic, decidedly negative, and, at best, incomplete picture of what it really means to build a committed, fulfilling relationship.
Coming from a single-parent household (which is increasingly common—the number of single-parent households has doubled since 1950), my feelings toward marriage are cautious, but hopeful. Many of my peers, after watching their parents get divorced or experiencing a divorce of their own, are more cynical about the institution of marriage. They say 50 percent of marriages end in divorce (though that is an inflated statistic). The Huffington Post has an entire section dedicated to divorce, with the despondent tagline, “Marriages come and go, but divorce is forever.”
The founding member of the Allman Brothers Band passed away in Savannah, Georgia.
Founding member of the Allman Brothers Band, Gregory LeNoir "Gregg" Allman, who with his Hammond B-3 organ, and soft but growling voice helped create a sound that was simultaneously jazz, rock, blues, and parts San Francisco jam band, and that became the defining tone of Southern rock music, died on Saturday. He was 69.
His death was announced on his website, and gave no official cause. Allman struggled much his life with health issues and drug addiction, and the statement on his death said, “During that time, Gregg considered being on the road playing music with his brothers and solo band for his beloved fans, essential medicine for his soul. Playing music lifted him up and kept him going during the toughest of times." It added that he “passed away peacefully at his home in Savannah, Georgia."