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.
Lip service to the crucial function of the Fourth Estate is not enough to sustain it.
It’s not that Mark Zuckerberg set out to dismantle the news business when he founded Facebook 13 years ago. Yet news organizations are perhaps the biggest casualty of the world Zuckerberg built.
There’s reason to believe things are going to get worse.
A sprawling new manifesto by Zuckerberg, published to Facebook on Thursday, should set off new alarm bells for journalists, and heighten news organizations’ sense of urgency about how they—and their industry—can survive in a Facebook-dominated world.
Facebook’s existing threat to journalism is well established. It is, at its core, about the flow of the advertising dollars that news organizations once counted on. In this way, Facebook’s role is a continuation of what began in 1995, when Craigslist was founded. Its founder, Craig Newmark, didn’t actively aim to decimate newspapers, but Craigslist still eviscerated a crucial revenue stream for print when people stopped buying newspaper classifieds ads.
When my wife was struck by mysterious, debilitating symptoms, our trip to the ER revealed the sexism inherent in emergency treatment.
Early on a Wednesday morning, I heard an anguished cry—then silence.
I rushed into the bedroom and watched my wife, Rachel, stumble from the bathroom, doubled over, hugging herself in pain.
“Something’s wrong,” she gasped.
This scared me. Rachel’s not the type to sound the alarm over every pinch or twinge. She cut her finger badly once, when we lived in Iowa City, and joked all the way to Mercy Hospital as the rag wrapped around the wound reddened with her blood. Once, hobbled by a training injury in the days before a marathon, she limped across the finish line anyway.
So when I saw Rachel collapse on our bed, her hands grasping and ungrasping like an infant’s, I called the ambulance. I gave the dispatcher our address, then helped my wife to the bathroom to vomit.
The preconditions are present in the U.S. today. Here’s the playbook Donald Trump could use to set the country down a path toward illiberalism.
It’s 2021, and President Donald Trump will shortly be sworn in for his second term. The 45th president has visibly aged over the past four years. He rests heavily on his daughter Ivanka’s arm during his infrequent public appearances.
Fortunately for him, he did not need to campaign hard for reelection. His has been a popular presidency: Big tax cuts, big spending, and big deficits have worked their familiar expansive magic. Wages have grown strongly in the Trump years, especially for men without a college degree, even if rising inflation is beginning to bite into the gains. The president’s supporters credit his restrictive immigration policies and his TrumpWorks infrastructure program.
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Radical longevity may change the way we live—and not necessarily for the better.
“So, you don’t want to die?” I asked Zoltan Istvan, then the Transhumanist candidate for president, as we sat in the lobby of the University of Baltimore one day last fall.
“No,” he said, assuredly. “Never.”
Istvan, an atheist who physically resembles the pure-hearted hero of a Soviet children’s book, explained that his life is awesome. In the future, it will grow awesomer still, and he wants to be the one to decide when it ends. Defying aging was the point of his presidential campaign, the slogan of which could have been “Make Death Optional for Once.” To (literally) drive the point home, he circled the nation in the “Immortality Bus,” a brown bus spray-painted to look like a coffin.
He knew he’d lose, of course, but he wanted his candidacy to promote the cause of transhumanism—the idea that technology will allow humans to break free of their physical and mental limitations. His platform included, in part, declaring aging a disease. He implanted a chip in his hand so he could wave himself through his front door, and he wants to get his kids chipped, too. He’d be surprised, he told me, if soon “we don’t start merging our children with machines.” He’d like to replace his limbs with bionics so he can throw perfectly in water polo. Most of all, he wants to stick around for a couple centuries to see it all happen, perhaps joining a band or becoming a professional surfer, a long white beard trailing in his wake.
On Saturday, the president slipped away from the doubters in Washington to address a Florida crowd filled with loyal supporters.
MELBOURNE, Fla.—After four miserable weeks of being locked up in presidential prison—starved of affection, suffocated by bureaucracy, tormented by the press—Donald Trump made a break for it Saturday.
Touching down just before sunset here in the heart of Trump Country, the president was greeted as he emerged from Air Force One by an adoring crowd of 9,000 super-fans, many of whom had stood in line for hours to see him speak. Trump made no effort at masking his gratitude. “I’m here because I want to be among my friends,” he told them, adding, “I also want to speak to you without the filter of the fake news.”’
The rally was widely trumpeted in the press as a return to the campaign trail, and it’s easy to see why. The event had all the trappings of Trump-style electioneering—he deployed the same slogans, recycled the same stump-speech rhetoric, and walked out on stage to the same soundtrack. What’s more, the White House made clear earlier this week that the rally was being funded not by the federal government but by his campaign, making this perhaps the earliest launch to a reelection bid in history.
The Scandinavian country is an education superpower because it values equality more than excellence.
The Scandinavian country is an education superpower because it values equality more than excellence.
Everyone agrees the United States needs to improve its education system
dramatically, but how? One of the hottest trends in education reform lately
is looking at the stunning success of the West's reigning education
Trouble is, when it comes to the lessons that Finnish schools have to offer,
most of the discussion seems to be missing the point.
The small Nordic country of Finland used to be known -- if it was known for
anything at all -- as the home of Nokia, the mobile phone giant. But lately
Finland has been attracting attention on global surveys of quality of
life -- Newsweek ranked it number one last year -- and Finland's national
education system has been receiving particular praise, because in recent
years Finnish students have been turning in some of the highest test scores
in the world.
Humans have been living and working with horses for more than 5,000 years, since the first domesticated equines had their teeth worn down by primitive bridles in northern Kazakhstan. Hands could not have built modern civilization without the help of hooves—to haul ploughs, pull carriages, march soldiers into battle, and carry messages of love and war across hundreds of otherwise-insurmountable miles.
An unlikely pairing of wily predator and one-ton prey, humans and horses have managed to successfully communicate across the species barrier because we share a language: emotion. Experienced riders and trainers can learn to read the subtle moods of individual horses according to wisdom passed down from one horseman to the next, but also from years of trial-and-error. I suffered many bruised toes and nipped fingers before I could detect a curious swivel of the ears, irritated flick of the tail, or concerned crinkle above a long-lashed eye.
During the late 19th century, blacks and whites in the South lived closer together than they do today.
CHARLOTTE, N.C.—Growing up here in the 1940s and 1950s, Sevone Rhynes experienced segregation every day. He couldn’t visit the public library near his house, but instead had to travel to the “colored” library in the historically black area of Brooklyn, a neighborhood that used to be in the center of Charlotte. He attended a school for black children, where he received second-hand books, and where the school day was half the length of that of white schools, because the black school had too many children and not enough funds. Sixty years later, he says, Charlotte is still a segregated city. “People who are white want as little to do with black people as they can get away with,” he told me.
This is, unfortunately, not a surprising account of North Carolina, or of the South more generally. The South of the 1950s was the land of fire hoses aimed at black people who dared protest Jim Crow laws. Today, schools in the South are almost as segregated as they were when Sevone Rhymes was a child. Southern cities including Charlotte are facing racial tensions over the shootings of black men by white policemen, which, in Charlotte’s case, led to massive protests and riots.
Narcissism, disagreeableness, grandiosity—a psychologist investigates how Trump’s extraordinary personality might shape his possible presidency.
In 2006, Donald Trump made plans to purchase the Menie Estate, near Aberdeen, Scotland, aiming to convert the dunes and grassland into a luxury golf resort. He and the estate’s owner, Tom Griffin, sat down to discuss the transaction at the Cock & Bull restaurant. Griffin recalls that Trump was a hard-nosed negotiator, reluctant to give in on even the tiniest details. But, as Michael D’Antonio writes in his recent biography of Trump, Never Enough, Griffin’s most vivid recollection of the evening pertains to the theatrics. It was as if the golden-haired guest sitting across the table were an actor playing a part on the London stage.
“It was Donald Trump playing Donald Trump,” Griffin observed. There was something unreal about it.
Was abortion a crime in previous centuries? The answer has shaped recent Supreme Court rulings—and might do so again.
The Supreme Court will weigh just how easy it should be to obtain an abortion on Wednesday when they hear Whole Woman’s Health v. Hellerstedt, the most significant abortion case since 1992.
The question at the center of the case is not whether abortion is morally right or wrong, per se. It’s whether Texas has the right to place certain restrictions on abortion—specifically whether it can require abortion clinics to meet the same standards as a surgical centers and to only employ doctors who have hospital admitting privileges within 30 miles of the clinic. If these rules are allowed to go into effect, there would only be 10 abortion clinics left in Texas, a state that’s larger than the country of France. Already, about half the state’s 40 abortion providers have closed their doors.