Normative Narratives


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With Inflation Moderating in Most Sectors, the Fed Should Consider Pausing Rate Hikes

“All You Need Is Love”

Ask any kid what the necessities of life are, and they will come back with a short list including food, water, shelter, and love. As adults we also understand the importance of energy (gasoline and electricity) and money in attaining these needs, as well as the many “wants” of life.

These very necessities–food, energy, housing, and wages–are the current drivers of inflation. This stands in contrast to earlier in the pandemic recovery, when “supply chain issues” caused widespread inflation across consumer goods.

So why then, if these necessities are so important (in life and as current drivers of inflation), am I focusing on data excluding them when calling for a potential pause on rate hikes? Because their prices are less responsive to interest rates.

Most consumer prices are impacted by interest rates; as rates go up so do borrowing costs, putting downward pressure on demand and prices. Food and energy prices, however, are primarily determined on their global markets (which our interest rates have little impact on). Food and energy are also, as just noted, necessities, meaning demand is less responsive to price changes because people need them regardless of price (in economics-speak, their demand is “inelastic“). Interest rates are simply not a good mechanism for impacting food and energy prices.

Shelter is another necessity that has an interesting relationship with interest rates. As the Fed increases interest rates to combat inflation mortgage rates go up, pricing some people out of buying homes and into the rental market. Supply in the rental market is fixed in the short term (due to construction time), and slow to increase in the longer term (largely due to restrictive zoning laws). Increasing demand and fixed supply, combined with higher operating costs and the expiration of pandemic era renter protections, have recently led to large increases in rent. In other words, the Fed’s primary tool for combating inflation could actually be contributing to inflation in housing (peoples’ largest expense category regardless of income).

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[Paul Krugman recently cited Jason Furman’s analysis claiming that rental prices are already moderating more than official BLS measures suggest, due to the Bureau’s methodology of tracking lease renewals in addition to newly signed leases. Newly signed leases, which in theory are more reflective of current market conditions than renewals, have been falling more steeply of late. These are two very smart people and their analysis is sound, hopefully it proves true and starts bearing out in official BLS rental indexes in the coming months.]

One Month Doesn’t Make a Trend

“Several Fed officials sought to temper investors’ enthusiasm, warning that there would need to be more evidence of slowing inflation before the Fed will let up on its campaign of rate increases.

‘It could easily go the other way in the next report, and I just don’t want to put too much weight on one month’s data,’ James Bullard, the president of the Federal Reserve Bank of St. Louis, said on Thursday.”

That’s fair, one month’s data doesn’t make a trend. But prices for “core” goods, whose supply chain issues drove inflation earlier in the pandemic, have leveled off since June. Prices for services other than rent (the remainder of what could be considered the “core”, or interest rate responsive economy) were flat in October, but inflation in the services sector has been more persistent. The provision of services is more reliant on labor than goods production is, and labor costs were still rising as of the latest September data.

Source: Bureau of Labor Statistics, Total Factor Productivity

The Producer Price Index (PPI), which tracks prices received by producers and is considered a bellwether of future consumer price movements, has also shown inflation coalescing around food and energy for about four months.

Table B represents intermediate demand goods even further up the supply chain, suggesting continued disinflation / deflation ahead for goods.

There is an element of “reading the tea leaves” when trying to determine the future trajectory of inflation, so the Fed should make use of all the high quality “tea leaves” it has at its disposal. What they show are four months of producer price data reinforcing that the current slowdown in “core” consumer inflation is not an aberration and will likely continue. Four months does make a trend in our current fast-moving environment, and the Fed will have the benefit of two more months of data before the next interest rate setting (“FOMC”) meeting (as well December labor cost data). This will also give the Fed time to see if Furman is correct about moderation in rental markets.

In June 2021 I wrote that we should “Keep Calm and let the Fed Carry On”—asserting that the Fed is an independent, expert body that knows what it is doing. The Fed is still independent and full of experts, but these experts are human and therefore need to check their biases and not be overly risk averse. Every large-scale economic policy carries risks, but the risk of the Fed waiting on rate hikes seems negligible (inflation has moderated if not yet begun to reverse), while the downside of unnecessarily raising interest rates is very real–we could still be facing a recession, especially given uncertainties in the global economy. The higher the interest rate the greater the drag on the economy, so raising rates in the name of fighting inflation–if inflation continues to be driven by markets that are not responsive to interest rates–doesn’t make much sense.

The Fed must also avoid the common mistake of fighting the last war; after in hindsight not doing enough to combat inflation in 2021, it must resist the urge to overcorrect with unnecessarily aggressive rate hikes now. The “smooth landing” of disinflation without a painful recession we all hope for is within reach. I would argue we are currently on that path, and while factors outside America’s control could always derail us, hopefully an overly risk averse Fed does not.

Purposefully Misleading “Forward Guidance”?

My best explanation, or perhaps hope, for what I see as unnecessarily hawkish rhetoric from the Fed, is that it is using “forward guidance” in an unusual manner. “Forward guidance” is exactly what it sounds like: “a tool that central banks use to provide communication to the public about the likely future course of monetary policy.”

Forward guidance is usually meant to be as straightforward as possible, but these are unusual times. The Fed may be trying to manifest the future we all want–the “smooth landing” of disinflation without a recession–by purposefully giving stricter guidance than it hopes to have to follow through on.

In other words, the Fed could be trying to impact peoples’ “inflationary expectations”. If people believe the Fed will act aggressively to keep inflation down, they may be less likely to buy more things or demand higher wages in anticipation of even higher future prices, pushing back on those sources of inflation. (It is commonly accepted by economists that inflationary expectations can have a self-fulfilling affect on future inflation rates.) As mentioned earlier, labor costs seem to be the most persistent driver of inflation that is (somewhat) in the Feds control right now, so managing inflationary expectations is a top priority for the Fed.

The Fed can always say one thing now while ultimately making policy based on not yet available data. I hope it is engaging in this tactical (and forgivable) misdirection, because if inflation continues on its current path, actually carrying out the rate hikes the Fed has been signaling would be poor policy. I am not advocating for reducing rates yet, but if two more months of encouraging consumer, producer, and labor price data come in, the Fed should pause rate hikes during the next FOMC meeting Feb 1st.


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Inflation Reduction Act? How Can Spending Be Disinflationary?!

Well a couple of ways, but first, a quick primer on whats been going on with prices lately

Overall, inflation is a function of aggregate demand (henceforth referred to as “demand”) and aggregate supply (“supply”). Demand is the sum of Personal Consumption (C), Investment (I), Government Spending (G), and Net Int’l Trade (Exports – Imports). Supply is all the goods and service producers can supply, a function of the cost of labor (wages) and various inputs (materials, energy, etc.). Consumption accounts for by far the largest portion of the U.S. economy, roughly 70% of demand. Different markets, both in different areas and for different goods or services, realize different inflation rates (some markedly so). To keep things relatively simple, for now lets just consider overall price levels.

Early in the pandemic, savings increased (for many) due to a combination of stimulus money and restrictions on many things people typically spend disposable income on. Once vaccines came out and the economy reopened, people were flush with cash (demand increased), but supply chain issues, global events (Russia-Ukraine War, China’s Zero-Covid policy), and shortages of workers (as COVID reoriented people’s calculus on what they are willing to do and for how much), caused input shortages and increased costs for producers, some of which were passed on to customers in the form of higher prices.

Hindsight is 20/20 as to whether the government “spent too much” during COVID. In the decades preceding the pandemic, increases in demand had been absorbed by a private sector eager to increase supply in order to reap greater profits, with little impact on inflation; globalization created a seemingly endless supply of “stuff” in wealthy countries like America. It was reasonable, if ultimately wrong, to use the models of recent history to forecast what would happen going forward. Early in the pandemic the primary focus was on shoring up demand and reducing personal hardship, which is why the CARES act and subsequent extensions of enhanced unemployment insurance (UI) benefits passed with bipartisan support–inflation simply wasn’t on most lawmakers’ radars.

If the Democrats made a unilateral mistake, it was parts of their American Rescue Plan (ARP)–stimulus checks and extending enhanced UI benefits–that were no doubt politically popular at the time but may have fueled inflation by increasing demand at a time the economy couldn’t absorb it. Some parts of the ARP, particularly the expanded child tax credit and aid to state and local governments, were needed (the latter likely had little impact on inflation; more on that in a moment when we discuss the “multiplier”.) But it is fair to say that Democrats may have overreached with some aspects of the ARP.

I have focused on fiscal policy (spending) because that is the primary story with respect to inflation right now. Yes, the Fed can also impact prices by increasing interest rates (lowering consumption and business spending.) But raising rates comes at a cost to the labor market, one which the Fed didn’t want to take in 2021 when full employment seemed like the more pressing of its dual mandates (and inflation was seen as being transitory.) Furthermore, real consumption has returned to be more-or-less in line with what it would have been if COVID never happened, meaning right now inflation is primarily due to the supply-side factors noted earlier, which the Fed has little power to affect regardless of how much it chokes off growth by raising interest rates.

Not all fiscal policy is equal, that’s on purpose

Not all government spending is equal in its intended goals (obviously, specific programs are sold to the public to address specific needs.) Less obviously, not all spending is equal in its impact on inflation. The extent to which government spending impacts demand (and therefore inflation) is known as the “multiplier”–how much each dollar of government spending increases economic output.

The exact multiplier for a policy is never truly known, there are too many variables to perfectly tease it out in the short run, let alone over time. Generally speaking the multiplier is a function of how much spending affects personal consumption, which as mentioned before makes up about 70% of U.S. GDP and is the surest route to short-term economic impact.

Fiscal policy can be predominantly “counter-cyclical”, directly targeting short-term consumption and business spending. Examples include COVID era spending policies like stimulus checks, enhanced UI benefits, and the Payroll Protection Program, or tax cuts (like the Bush era tax cuts, and a surprisingly large portion of Obama’s post-Great Recession stimulus package.)

These policies main goal is to have a high multiplier–they leverage government money to try to increase demand at a time when the private sector is pulling back (hence “counter-cyclical”.) Normally, as demand rises, businesses hire more people to meet that demand (increasing supply by adding jobs), starting a virtuous cycle of growth in the economy; it goes without saying that the past two and a half years have not been normal times in any sense, including economically.

Alternatively, fiscal policy can be predominantly structural–aimed at addressing the root causes of poverty or other structural inequalities or deficiencies in society. These policies also increase demand by increasing government spending, but their multiplier is lower than counter-cyclical “stimulus spending” because the money is going to longer-term investments in public goods and human capital, not to putting money in people’s pockets to consume more now.

So when is fiscal policy disinflationary?

Fiscal policies that increase demand typically aren’t disinflationary in the short run, but they can have essentially no impact on inflation depending on their multiplier. In the long run, some types fiscal policy can be quite disinflationary.

The Inflation Reduction Act is disinflationary for a straightforward reason–it actually lowers demand, with more tax revenue being raised than money spent. It will also help bring down the cost of prescription drugs by allowing Medicaid to negotiate directly with pharmaceutical companies.

The infrastructure bill is disinflationary in the long run because it will make us more productive. Investments in concrete infrastructure and ports will help people and products get where they’re going quickly and safely. Replacing lead waterpipes will lead to less stunted cognitive development in our youth. Investing in broadband will help bridge the “digital divide” that cuts many poorer and rural people out of the 21st century economy. The bill had a negligible impact on inflation in the short run (notice no large increase in real GDP from before it was passed in Q3 2021 till now) despite injecting a large amount of government money into the economy ($550 billion in new spending), because the money is being disbursed over a longer period of time and isn’t going directly into people’s pockets.

Even after passing the infrastructure bill, the Inflation Reduction Act, and the China-countering Chips and Science Act, many parts of “Build Back Better” (BBB) still need to be passed. 17 Nobel prize winning economists signed a letter saying that, in addition to its primary benefits, BBB would “ease longer-term inflationary pressures” despite its huge price tag. Specifically, investments in affordable childcare and universal pre-K would bring down the cost of childcare and bring caretakers back into the labor market, increasing the supply of labor and easing pressure on wages. More seats at community colleges and apprenticeships would create alternate paths to gainful employment, increasing productivity, reducing student loan debt, and driving down the cost of a four year degree. Allowing anyone to buy into a Medicaid “public option” would inject competition into the health insurance market, lowering prices. These are exactly the “kitchen table” economic policies that Democrats (and ideally some Republicans) should campaign on in 2022 and ’24.

Lawmakers should also embrace the concept of “supply-side progressivism”, another example of spending that can reduce inflation (note that it complements and synergizes with the more traditional approach of providing financial support to poorer people, it does not replace it.) Supply-side progressivism means the government actually creates the things the private sector does not supply enough of affordably. By taking ownership the government removes the need to make a profit, making the product more affordable (like Medicaid vs. private insurance.) Generally speaking profitability is of course desirable, but some markets supply things that are so important for society and the economy that affordable access is more important than profits. Removing the need to profit, and directly increasing supply, can greatly reduce price pressure in imperfect markets.

Most markets function well in the U.S. and require minimal intervention, but not all of them. Some markets, particularly those for necessities, deviate greatly from the textbook concept of “perfect competition”, and thus are prime candidates for supply-side progressivism. Housing, higher education, healthcare, and childcare–all areas where price increases have far outstripped overall inflation in recent history–are good places to start. Looking at how prices have increased for these things over the past four decades; consider the cost that has imposed on all Americans (particularly the poor), and the strain it has put on the federal budget. Clearly the status quo isn’t working.

(Value = % change since July 1982. For example, tuition, fees, and childcare have increased 926.94% over the last 40 years, compared to a 302.84% increase for all items)

Don’t get me wrong, college is still a good investment for those who graduate from a good school with a degree. But the ability to get into a good school–and then remain in until completion–has increasingly become a function of family wealth. Of course there will always be anecdotal examples of social mobility in a country as large and advanced as America, but on a macro level the “American Dream” is no longer attainable for most.

The Inflation Reduction Act, and any future spending proposed to address structural deficiencies in our society, will be attacked as reckless–“Spending?! With inflation as high as it is!” This is a gross oversimplification. For one, there are reasons to believe inflation has already peaked and will start to come down in the coming months. But more generally speaking, some types of spending–the types America has sorely needed for decades–would have little impact on inflation in the short run, and actually reduce it in the long run (in addition to all of its other primary benefits.)


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Entering the First Post-COVID Mental Health Awareness Month, a Timely Reminder: It’s (Still) OK Not to Be OK

“It’s OK not to be OK”

…was a common refrain at the beginning of the pandemic, with many people experiencing mental health issues for the first time. As the world ground to a halt, with more isolation and fewer distractions, people were forced to reconcile with negative feelings they may have otherwise been able to ignore. There was a sense of “we’re all in this together”, and I do believe a more understanding society with respect to mental health will be an enduring legacy of the pandemic.

But naturally, as vaccines have taken us out of the most dangerous phases of the pandemic for both physical and mental health, that sentiment has receded from the headlines a bit. Life has largely returned to normal for all but the highest-risk people, as COVID shifts from “pandemic” to “endemic”. Unfortunately, part of that normal has historically been a negative stigma surrounding mental health issues; the pandemic helped reduce the stigma, it did not erase it. For some people, that might have been a temporary reduction tied to the pandemic itself.

Unlike the relatively strong economic recovery, the mental health effects of the pandemic may prove more persistent. People who lost loved ones are still learning to live with those losses. People who have experienced depression once are much more likely to experience recurrences. Younger people, our future, experienced anxiety and depression at particularly high rates.

I am not trying to be pessimistic or alarmist, but a clear-eyed assessment of the situation (as well as self-reported survey results) suggests that our mental health crisis isn’t going away; if anything, it seems to have plateaued at an elevated level. So, as we enter May 2022, the first “post-COVID” Mental Health Awareness Month, a reminder—it’s still OK not to be OK; it always was, and it always will be.

There was no shortage of sources of distress before the pandemic, the pandemic introduced others, and there will be new ones in the future—that’s life even during “normal times”. Just reintegrating into society while dealing with the “social rust” of the pandemic could be a new source of self-criticism for people who tend to be too hard on themselves (as I have been, and can only assume is a common characteristic among those with a history of mental health issues.)

Shared Sources of Distress

In considering how larger shared experiences can impact our collective psyche, let’s first look inside America’s borders. The “blue wave” of 2020 appears to have been a mirage, as Biden’s agenda, which encompassed many long-sought progressive goals, has largely stalled. Structural inequalities in our electoral system, combined with a lack of progress on voting rights legislation (if anything, we’ve regressed on that front), make it seem unlikely this opportunity will present itself again anytime soon. Inflation is too high, and while as an economist I still don’t think it presents a long-term threat to the economy or American’s standard of living, it’s certainly a source of material hardship, uncertainty, and anxiety right now. Needless to say, the leadup to the midterm elections will not be a harmonious experience.

Looking abroad, while the bravery and commitment to democratic values exhibited by the Ukrainian people has been heartening, that is a small silver lining to what is an extremely traumatic manufactured crisis. Taking a broader view, universal values such as freedom, accountability, transparency and self-determination will continue to be attacked, as authoritarians wage their existential wars against them. The institutions tasked with preserving the “liberal world order” established after WWII simply don’t seem to be up to the challenge.

So, if you have a more liberal worldview, it has been a frustrating couple of years. Early in 2021, with vaccines on the way and the “blue wave” rolling into Washington, it felt like the tumultuous Trump era was about to come to an end with a New Deal-type inflection point in American history. That has failed to materialize, and instead the Democratic platform and democracy in general seem to be on the ropes.

If, on the other hand, you have a more conservative worldview, you’ve probably been either directly or indirectly exposed to the far right “rage machine”, where everyone who is different from you represents a threat to your way of life. This reality, fueled by anger, division, and an intentional blurring of fact and fiction, is also a very poor environment for one’s mental health.

Regardless of your worldview it has been a tough couple of years. But we should not despair, despair is self-fulfilling. Things may not look good now, but change often comes from unexpected places. Demographic trends and youth sentiments still point toward future interrelated victories in social, racial, environmental and economic justice. Remember, “the arc of history is long, but it bends toward justice.”

Nor should we be ignorant in the name of self-care. It is up to each person to find their own balance, one that allows them to be informed without being overwhelmed by the deluge of negative or false information out there. You can’t help others if you don’t first take care of yourself.

“Toxic Masculinity” and Mental Health

Men don’t experience anxiety and depression at lower rates than women, despite what the survey results above may suggest. Rather, men are generally less willing or able to communicate their needs and get help. The proof is in the most extreme manifestation of unaddressed distress— “deaths of despair”. Whether looking at suicides specifically, or the broader category including overdose deaths, men are about 3.5 to 4 times more likely to die this way than women are. You don’t just jump from being “OK” to a death of despair; in this case where there is fire (death), there is a lot of smoke (unaddressed mental health issues.)

Men being less likely to seek help is one of the negative manifestations of a very politically charged term, “toxic masculinity”. Before going any further I think it is important to define a term like this, which is so open to interpretation. In my opinion someone can be as stereotypically “manly” as you can imagine, and that isn’t necessarily “toxic” if they are living their truth and aren’t hurting anyone else. That toxic masculinity exists doesn’t mean masculinity is inherently toxic, or that men are inherently bad. Masculinity only becomes toxic either when someone either rejects parts of themselves to live up to gender norms, or dehumanizes others for not living up to them.

Toxic masculinity, almost by definition, precludes mental health treatment; it essentially acts as an additional, internal stigma against mental health issues. This is a shame because, in addition to all the personal benefits, talk therapy can also lead to greater tolerance towards others. The alternative, ignoring problems and letting them fester, typically results in people turning their anger towards themselves and/or other people.

For example, violent and sexual crimes are disproportionately carried out by men. I am not trying to excuse anything by pointing out one of the root causes, perpetrators of serious crimes should be held accountable. LGBTQ people deserve to live a life free of discrimination and full of dignity just like anyone else. To that end, the likes and proclivities of heterosexual people shouldn’t be defined by their genders either!

I chose to focus on the intersection of toxic masculinity and mental health because I have lived it. Even without many common impediments to care (I was lucky to have financial resources, supportive family and friends, and an employer I could be honest with), I still made things much harder on myself than they had to be. Not everyone is as lucky to have the, let’s call it “margin for error”, that I did when it came to mental health issues. Even so, it is still easy for me to imagine a world where I never made it to the point of acceptance so that I could start healing, or even one where I just didn’t make it at all.

So, as a man on his own mental health journey, a yogi and a “sports bro”, I feel compelled to state what should be obvious: even for men, it’s still OK not to be OK. There is room for toughness and vulnerability in everyone, people contain multitudes. Open yourself up to that, and to getting the care you need, and you will find the confidence to face your fears and stand up for what you believe in even when it’s unpopular—real courage. Not only will you be better for it in the long run, but you also won’t need to hide behind the shield of toxic masculinity that harms both its adherents and their victims alike.


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Inflation: Keep Calm and Let the Fed Carry On

Anticipating concern over recent inflation numbers, the White House Council of Economic Advisors (CEA) put out a useful historic primer on recent periods of higher inflation:

“Supply chain disruptions are having a substantial impact on current economic conditions. Economy-wide and retail-sector inventory-to-sales ratios have hit record lows; homebuilders are reporting shortages of key materials; and automakers do not have enough semiconductors. Elevated consumer demand is adding fuel to the fire. Travel demand, for example, has returned much more sharply than expected, which is straining airline operations. Similarly, total vehicle sales in April more than doubled from a year prior, which is leading to empty dealer lots. The combination of a spike in consumer demand and a supply chain that is not fully operational has contributed to rising prices.

If actual inflation is affected by inflation expectations—and if expectations are in part formed by recent experiences (what economists call “adaptive” expectations)—then one risk is that transitory supply constraints and pent-up demand could have more persistent effects by raising longer-run expectations of inflation. On the other hand, businesses and consumers may “see through” supply disruptions and not change their longer-run expectations significantly.

In this blog post, we examine previous periods of heightened inflation and see what they can teach us about inflation in 2021…No single historical episode is a perfect template for current events. But when looking for historical parallels, it is useful to concentrate on inflationary episodes that contained supply chain disruptions and a spike in consumer demand after a period of temporary suppression. The inflationary period after World War II is likely a better comparison for the current economic situation than the 1970s and suggests that inflation could quickly decline once supply chains are fully online and pent-up demand levels off. The CEA will continue to carefully gauge the trajectory of inflation.”

How people expect prices to behave can actually affect price levels. If people think prices will continue to rise, and increase their purchases beyond what they normally would to hedge against expected future increases, that itself can lead to greater inflation. If you (as I) believe the forces of supply and demand will eventually even out any market mismatches, then expectations are arguably the “most variable” of the variables affecting inflation right now (at least in an advanced economy like America’s.)

One important difference today compared to earlier periods examined by the CEA is the hyper-partisan nature of all policy debates, and how that plays out in the news and ultimately affects peoples’ beliefs. When people are subjected to continuous fear-mongering about inflation it is likely to impact their expectations, leading to greater inflation than the underlying economics alone would have yielded. In our world of social-media fueled “echo chambers” and the confirmation bias it enables, psychological forces could play an outsized role in the levels of inflation we ultimately realize.

For what its worth–hopefully a lot–most economists believe current high inflation figures are partially due to the “base effect” (lower inflation in 2020 due to pandemic related shutdowns making over-the-year increases look larger than they otherwise would be) and will be “transitory” (shorter-term, subsiding once the effects of supply chain bottle necks and pent-up demand work themselves out.)

Monetary policy is one area where we should trust the experts; it is inherently complex, and there is good reason to think ideology won’t dominate. Why? Because inflation has the ability to hit peoples’ wealth and sense of financial security in ways that taxes cannot; regardless of your political affiliation, you probably have no interest in seeing your lifetime of hard earned savings inflated away due to mismanagement. So we have Fed Chief Jerome Powell (a Trump appointee) working closely with former Fed Chief Secretary Yellen (who was appointed to her various roles by Obama and Biden.) The two have historically had very different views on appropriate monetary policy, but as dedicated public servants with “skin in the game”, they both want to get monetary policy right.

There is also little reason to think the types of spending Biden is proposing would be particularly inflationary. The administration is actually framing its proposals as inflation reducing in the middle-to-long run. They argue that by investing in our infrastructure, human capital, and the burgeoning green economy, gains in productivity will allow businesses to pay higher wages and stay profitable without needing to drastically increases prices.

The spending in Democratic proposals would also be spread out over time, meaning any inflationary aspects (should they be felt before productivity boosts are realized), mainly occur after the transitory post-COVID pressures subsided. It would not be inflation on-top of what we are currently experiencing.

The Federal Reserve has the “dual mandate” of promoting price stability and full employment. In determining appropriate monetary policy, context matters—despite a growing economy and low interest rates, America has experienced lower-that-desired inflation (below the 2% annual target) for much of the past decade. This is another reason the historically hawkish Powell is comfortable letting inflation “run hot” for a little while in order to help return the labor market to full employment. This strategy, championed by the unsung hero of the Great Recession Ben Bernanke, is known as “temporary price level targeting“.

In other words, keep calm and let the Fed (and CEA) carry on. It knows what it is doing. It proved that during the Great Recession when it ignored these same disingenuous warnings and saved our economy, while conservatives fear-mongered about inflation and obstructed an adequate fiscal response in Congress. Sound familiar?

Fools, Fanatics, and Wiser People

“The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts.” — Bertrand Russel

I cannot tell you with certainty how long higher inflation will last–no one can. Uncertainty about how COVID variants will disrupt operations in countries with lower vaccination rates makes it difficult to predict exactly when global supply chains will normalize. The possibility that different components of the basket of goods that make up the topside inflation number may experience price increases at different points in time could also draw out this transitory period.

Even with those uncertainties, I can say with confidence that I think any higher-than-desired inflation will be transitory, and that the Fed has the tools to bring inflation down if need be. I can tell you there are real costs to people and our economy from unnecessarily tightening monetary policy too soon. I can also tell you that those who are saying with certainty that a sustained period of high inflation will (or already has) taken off–so called “Bidenflation”–have ulterior motives for doing so. They also have a terrible track record of predicting these sort of things; remember “Obamaflation“? Probably not, because it never actually materialized.

Most importantly, forgoing this historic opportunity to pass the biggest investment in America and its people since The New Deal in the name of sustained higher inflation that will likely never materialize, and if it does can be managed, would be the height of stupidity–the type of stupidity that would reverberate through history. Can you imagine America without The New Deal or Great Society (or the world for that matter, considering what their absence likely would have meant to the the Cold War effort?) No, you cannot–it is inconceivable. America again finds itself needing to prove democracy can work not only for its own people, but as part of a new “Cold War” against the forces of authoritarianism—the stakes for getting these things done could not be higher.

Senator Joe Manchin, the man who above anyone else needs to be convinced of this so these plans can be passed via reconciliation, recently said he is “going to talk to some economists” about the possible inflationary effects of these proposals. Look, if he wants to find economists to tell him to moderate due to inflationary concerns, he will find them. However those views would not represent the beliefs of most economists, and run counter to the lessons of recent history and the demands of the moment.

Most economists (like most subject matter experts), due to some combination of integrity and ego, actually care about being right. They agree the benefits of expansionary fiscal and monetary policy right now far outweigh the unlikely costs of runaway inflation. Recent history tells us we should not believe the people who fear-mongered about inflation during The Great Recession for the same regressive reasons they are today. Those opposed to Biden’s proposals believe if they can delay them long enough, they can kill them by flipping the balance of power in Congress back to the GOP. They are right, and that cannot be allowed to happen.

Ultimately the need to act now and adjust later comes down to how fiscal and monetary policy are passed. There is a small window to act on fiscal policy; when is the next time America will emerge from a such a crisis, with people demanding these sort of large scale investments, and with the party that is willing to pursue them controlling all the levers of federal policy-making? In the context of our grossly and increasingly uneven electoral playing field, probably not again in the foreseeable future. Monetary policy on the other hand, by virtue of being passed relatively smoothly by the independent Fed, is much more nimble and can be adjusted to meet any inflationary consequences of this spending should they ever come to pass.


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Human Rights, “Enabling Rights”, and Biden’s Plans

During my internship with the United Nations Development Program in 2013, I had the pleasure of working on the “post-2015 development agenda”. This was the consultative process which eventually yielded the “Sustainable Development Goals” (SDGs), the successor to the Millennium Development Goals (MDGs) and guiding principles for achieving “sustainable human development” through a “human rights based approach to development“.

The “human” in “sustainable human development” is often left out, but it is an important component. Sustainable human development is not just about basic infrastructure, healthcare, education and environmental protection, it is also about how you get there. To be truly sustainable, development cannot be due to an autocrats benevolence, which can be taken away at a moments notice. It must also make space for civil and political rights so disputes to be resolved peacefully, not brutally suppressed and whitewashed by a propaganda machine.

In the developing world, civil and political rights are considered “participatory” or “enabling” rights, in that they enable people to claim other rights (economic, social, cultural) and peacefully resolve disputes through representative government. The absence of this priority explains why well intended and reasonably well funded development efforts in the past, such as the MDGs, have failed to live up to their promise–simply put, due to poor governance and corruption. SDG #16, promoting “peace, justice and strong [accountable and inclusive] institutions” represents the biggest shift from the MDGs to the SDGs.

American democracy, as flawed as it is, is still democracy; American’s, by and large, already enjoy the civil and political enabling rights missing in much of the developing world. America is the type of place people around the world would, and do, risk their lives to live in. Part of this is due to our relative wealth, yes, but the value of our freedoms (and their supporting institutions, such as an independent media and judicial system) are not lost on those who have experienced the alternative. Sadly, that affliction only seems to affect people blessed to have known nothing else.

In America more people don’t vote due to apathy, misinformation, or being too busy scraping by in our flawed economic system than due to disenfranchisement. This is not to say that our electoral system is not also in need of reform–more on that in a moment–but those issues can be overcome with concerted effort. Indeed they were in 2020; voter turnout increased dramatically, delivering a small window to push through many long needed reforms. Will this increase in turnout be an aberration or trend? Much of that depends on how well Biden and the Democratic Party deliver right now.

Because of our extreme worship of money in America, economic rights have become our enabling rights. I am not saying that this is right or good, but when going into battle it is always good to know the lay of the land. Expanding economic opportunity will naturally lead to more equitable economic outcomes and, by extension, help secure other non-economic justices and freedoms. Wealth buys better treatment in our legal system and better healthcare, it enables people to invest enough in themselves to build fulfilling careers, to take risks, to be entrepreneurial, and to live in good neighborhoods and otherwise invest in their children’s futures.

Biden’s plans, by jump-starting the process of wealth accumulation as the government did for white Americans in the mid 20th century, would act not just as a floor beneath which our most vulnerable could not fall, but also as a trampoline for them and their children to reach even higher. In other words these plans would enable people to claim other rights through our market economy, just as political and civil rights in the developing world do through democratic governance. This is not wishful thinking, it is how America already works for its wealthier residents.

Biden’s proposals operate under the framework of “targeted universalism“. By considering how historic disparities and systemic racism still impact outcomes today, and providing more support to historically marginalized groups to help them catch up as we invest in all Americans, Biden’s plans have the ability to make sure future American growth is broad-based and inclusive, reaching groups who often fail to see politicians’ promises materialize. The most obvious example is closing the racial wealth gap by correcting for historic discrimination in housing policy (as home ownership is the largest source of wealth in America), but there are many other examples in Biden’s proposals, such as investing in HBCUs alongside community colleges.

With the fairer economic system that would result from passing Biden’s proposals, cultural divisions would ultimately take on less importance because they would seem less existential, aiding in the fights for civil rights legislation to empower marginalized communities. By proving democracy can still deliver for the American people, Biden’s plans would help sustain higher voter turnout, helping to offset any regressive electoral laws the GOP may pass. On the global stage, nothing better promotes democratic governance than an American system that works.

Of course voting rights are still an issue, and our electoral system as it currently stands is an impediment to a more sustainably progressive America. Geographic realities have enabled gerrymandering and the structure of the Senate to completely bastardize the central democratic concept of “one person, one vote”. Hopefully the Democrats can carve out a filibuster-proof process for voting rights laws, in which case they would immediately become a top policy priority, but up to this point it has not been able to do so.

I hate to be fatalistic, but we simply will not get to the 60 Senate votes needed right now to meaningfully address priority areas that cannot be addressed through reconciliation (anything that isn’t budgetary or spending related in nature, mainly voting rights, immigration reform, or criminal justice reform.) To the contrary the GOP is doubling down on Trumpism, relying on misinformation to drum up fear about these issues as its economic platform becomes increasingly less popular. While Democrats at the national level should voice their support for such reforms, and put GOP lawmakers on the record for their regressive stances, these are fights that will need to be fought mainly at the state and local level and in the courts for now.

So while Biden tries to work with the GOP, which will assuredly come back with inadequate counter-proposals, he should not scale back his plans in the name of bipartisanship or waste too much of this precious window to act before the 2022 midterm elections. Nowadays infrastructure goes beyond pouring concrete, and creating a system that works for working-class Americans is long overdue. Moderate Democratic Senators like Joe Manchin (WV), Krysten Sinema (AZ) and Jon Tester (MT) should know this–their constituents sure do! As Democratic Senators they should also know that since the Great Recession, the field of economics has moved decidedly to the left on how much can be financed responsibly through deficit spending.

Lawmakers and people making up the progressive, liberal, and the centrist wings of the Democratic party must acknowledge exactly what Biden’s plans would mean for America if passed, and remain united in seeing them through. Splintering the party’s focus to pursue reconciliation-proof “woke” legislation is exactly what the GOP wants; as a general rule, it is a good idea not to do what your opposition wants you to.

Failure to pass Biden’s proposals would not only forgo important enabling economic rights, it would put other noble pursuits further out of reach. Ultimately it risks the further erosion of American Democracy by naturally lowering voter turnout through disillusionment and apathy. Nothing is more important right now than passing Biden’s plans. If, as a progressive, you think something else is, think of them as an attainable means to your more preferred ends.

In a perfect world all human rights–economic, political, civil, social, and cultural–would be promoted at all times. This is not a perfect world, and America is not a perfect democracy. Securing economic rights is foundational and feasible right now through reconciliation, and doing so would change the political and cultural landscape in ways that would help secure other rights going forward.


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In Support of a Jobs Program (working title)

Fed Chief Jerome Powell, most of his life a fiscal conservative, has lately sounded like anything but:

“Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy,” Powell said in remarks to the Economic Club of New York. “It will require a society-wide commitment, with contributions from across government and the private sector.”

Recovery, Powell said, would require both “near-term policy and longer-run investments” to ensure anyone who wants a job can get one.

Powell on Wednesday cemented that stance, noting that after World War Two, as the economy transitioned from wartime and needed to absorb millions of returning soldiers into the labor force, the Employment Act of 1946 committed the government “to use all practicable means” to see that anyone willing and able to work can find “useful employment.”

Fed Chiefs typically stay out of fiscal policy debates; in being vocal, Powell is going against both tradition and his long held personal beliefs. But as a true expert he understands that appropriate economic policy is context sensitive, and as a dedicated public servant he understands what his priorities should be.

Powell is probably advocating for something temporary in nature, however I see the need for a more permanent expansion of the civil service. Whether such a program should be guaranteed to everyone, or just very large in scale, is open to debate (I would argue a guarantee is worth the higher price tag). What is not open to debate is the need to do something—the private sector is no longer up to the task of productively employing as many Americans as we ask it to:

“The labor market continues to work pretty well as an economic institution, matching labor to capital, for production. But it is no longer working so well as a social institution for distribution. Structural changes in the economy, in particular skills-based technological change, mean that the wages of less-productive workers are dropping. At the same time, the share of national income going to labor rather than capital is dropping.

This decoupling of the economic and social functions of the labor market poses a stark policy challenge. Well-intentioned attempts to improve the social performance of the labor market – through higher minimum wages, profit-sharing schemes, training and education – may not be enough; a series of sticking leaky band-aids over a growing gaping wound.

As Michael Howard, coordinator of the U.S. Basic Income Guarantee Network, told Newsweek magazine: “We may find ourselves going into the future with fewer jobs for everybody. So as a society, we need to think about partially decoupling income from employment.”

This decoupling of the economic and social functions of the labor market is most pronounced after recessions. It wasn’t until 5 years after the Great Recession “ended“ that employment reached its pre-recession level. This time around the CBO projects employment won’t hit its pre-pandemic peak until 2024, even though GDP is expected to recover midway through this year.

But workers getting a smaller piece of the pie is not just an issue during and after recessions—declining labor force participation and stagnant wages have persisted for decades. Even during the period before the pandemic—the longest economic expansion on record—labor force participation never really recovered from the Great Recession (which itself was lower than before the dotcom bubble burst). This gives reason to believe the COVID Recession might lead to permanent labor market scarring even with continued fiscal support.

Recessions aren’t just economic downturns, they also accelerate existing economic trends like automation. Cost reduction measures necessitated by the COVID Recession, combined with long overdue calls for a livable minimum wage, will likely accelerate the trend of less Americans (particularly the less educated) being employed through the private sector. If this is the case, the public sector will need to pick up the slack.

Universal Basic Income is an idea that gained mainstream attention in America during Andrew Yang’s 2020 Presidential bid. But giving everyone some money doesn’t really solve the financial problems of people whose jobs are displaced by automation and globalization, nor does it address the mental health impact of being disconnected from the labor force. A jobs program addresses both issues, and the jobs themselves can be used to address other social issues.

There is the question of what types of work we should prioritize, and there is a good argument for having some flexibility at the local level. But generally speaking there are needs which, while not profitable for the private sector to provide affordably, would nonetheless make us a more productive and cohesive society. The government already provides many of these things in some capacity, but they tend to be chronically underfunded. Notably they all address issues that were present before the pandemic, but have since been brought to light and exacerbated.

Lets start with infrastructure, historically a less contentious area for public investment and one where there is obvious need. America’s roads and bridges are in need of repair. Flint, Michigan didn’t have clean drinking water for years, and many other areas are at risk of similar crises. The “digital divide” (broadband internet availability and affordability) has been exposed as we scramble to educate children remotely, but is a problem that preceded and will outlast the pandemic. Climate change demands investments in clean energy infrastructure, and if we want to shift to electric vehicles we’ll need a reliable network of charging stations installed around the country.

For some types of infrastructure public-private partnerships could leverage taxpayer money to tease out private sector contributions, but not all of them. Recent history has made it pretty clear the government will have to do most of the heavy lifting if we want these investments made at scale.

Other areas of need exist in the education, healthcare, and social assistance sectors. Affordable childcare and universal pre-K help women enter the labor force, and have a strong positive impact on the development of young minds (increasing their future contributions to society). Mental healthcare is another area to invest in; improving mental health outcomes not only reduces human suffering, it also leads to an overall healthier and more productive society. Jobs in these sectors rely on a human touch, making them more difficult to automate.

America already had a lack-of-employment-induced mental health crisis before COVID—the “Opioid Crisis”. We need to try to address mental health issues preventatively by educating a more resilient and understanding youth through social and emotional learning (SEL) in K-12 schools. For adults we must address the difficulty of finding affordable mental healthcare by creating an corp of licensed mental health professionals. Police officers need more mental health professionals to effectively serve and protect their communities.

An Associates degree type program, developed in consultation with leaders in the field and focused on treating the most common mental health issues like anxiety and depression, could be administered at Community Colleges across the country. This corp of social workers is not intended to replace psychologists or psychiatrists, but rather operates under the belief that less-credentialed care is better than no care at all (which is what too many Americans are currently receiving).

There should be broad based support for such a jobs program. Progressive politicians need to make the case that these are the coal mining jobs, or the manufacturing jobs, of 21st century America; they won’t make you rich, but it’s meaningful work that provides a decent standard of living. We need to invest more in public higher education and apprenticeships, as President Biden is proposing, so new and existing jobs can be obtained without risking financial ruin by way of student loan debt (another drag on the economy and people’s mental health).

That is the promise America once provided, at least for some people—stable, meaningful employment you won’t go broke chasing the skills for. It is within our fiscal ability to provide these jobs, fulfills major societal needs, and complements the private sector by making it more productive in various ways. These are not just a scattershot of “progressive priorities”, taken together they synergize to form a visionary mosaic which would provide hope, direction, security and a sense of unity to the American people.

Yes, a jobs program would lead to some savings on welfare programs and the criminal justice system. Yes, health outcomes should generally improve as mental health issues are better addressed, resulting in increased tax revenues from a healthier, more productive society. But lets be honest–such a jobs program may or may not “pay for itself” in fiscal terms; forecasting a program of this scale, with all its unanticipated impacts, would ultimately be inaccurate. But factoring in what it would mean for America—by addressing the worsening and interrelated economic, social, emotional, and [literal] environmental storms the status quo has left brewing—how could it not be worthwhile? The question is not “can we afford to make these investments?”, but rather “can we afford not to?”

Social unrest this past year has proven people will not sit idly by while lawmakers figure out some elusive, deficit-neutral “grand compromise” to address the nation’s problems (as if they are even trying to). We will eventually have to pay for a jobs programs and other programs needed to promote economic opportunity, but low interest rates give us time to figure out that side of the equation. The Biden Administration is committed to international cooperation on taxation, a necessary precondition to building a global financial system that ensures the wealthiest and big corporations pay their fare share of taxes.

The levers of power and public opinion are aligned in a way our tilted electoral system doesn’t often allow for–the time for bold action is now.


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Condemning Trump Isn’t Enough, Impeaching Him Isn’t Enough, Only Addressing the Roots of Trumpism Is Enough

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As his term comes to an end, and we can finally see in totality what “President Donald Trump” has meant, it is pretty clear we cannot afford another President like him. This is true in every possible way–fiscally, psychologically, environmentally–you name it. But President Trump was [ah, that feels great to say in the past tense] a symptom of long term failures in governance the GOP has cynically perpetuated in the name of greed. If it really wants to make amends for how bad things have gotten it is not enough to just condemn or impeach Trump, it must also become a constructive partner in governing for the benefit of the American people.

Ultimately Trumpism can’t come to power in a place like America, which despite it’s problems has a long history of pluralistic democratic governance, unless legitimate grievances go unaddressed. The cavalier lying we saw from Trump is not widely accepted unless its target audience has been desensitized over time by less drastic lies. Americans would not believe an election has been “stolen” unless they have long been led to believe unsubstantiated claims about widespread voter fraud. People who may otherwise just “stick to their own” will fight tooth and nail if they are led to believe illegal immigrants and movements by historically marginalized groups demanding a more just society are the reasons they are falling behind. We saw this in the rise of the Tea Party in the US and the far-right in Europe following The Great Recession.

Economic distress exacerbates tribalism, and long-sewn smaller lies make the ground fertile for bigger ones. The GOP has cyclically governed this way for decades because it is the only way it could convince enough people to support a broken ideology that does little for anyone but the wealthiest.

The GOP have been behaving like addicts, wealth addicts. Like a drug addict, there can never be enough. Like a drug addict, it started with smaller lies that had to get bigger to explain the continued failures; scapegoats were needed (illegal immigrants, “welfare queens”, “socialists”, etc.), and anyone telling you otherwise was lying (“experts“, “liberal media”). Like an addict, the lies led to a deteriorating situation with ever increasing collateral damage. And like an addiction, the situation will not get better until it is met head-on–THIS IS AN INTERVENTION!

It is the height of this cynicism, not to mention sadly ironic, that the “solutions” peddled by the GOP–trickle-down economics, deregulation, and fear-mongering about “socialism”–actually exacerbate the legitimate grievances their supporters have. We should not excuse (but may ultimately need to work with) those who knew better but pushed a regressive ideology for their own benefit. Nor should we excuse those who gleefully followed a political party because it’s divisive message dovetailed nicely with their existing prejudices.

But there are many reasonable people who have been left behind by the global economy, and are simply unable to critically consider macroeconomics and other large-scale social phenomena. Their social circles parrot lies from media outlets and Super PACs financed by the wealthy (who actually do benefit from the status quo), forming an echo chamber. They don’t recognize the straw-man arguments and false equivalencies the GOP has come to rely on.

These people must know they still have a home in the Democratic party, particularly the ones that already support much of it’s policy platform. Being “progressive” isn’t just about the policies you advocate for, it’s also about being understanding, respectful, and able to put yourself in someone else’s shoes. History ultimately vindicates and condemns pretty well, but rubbing peoples’ noses in their past mistakes right now jeopardizes a better future. If decent people want off the Trump train, even now, they should be welcomed with open arms.

Part of confronting the truly deplorable elements of the far-right is calling them out—directly, unequivocally, and with a unified voice–whenever necessary. But another part is isolating them from the decent people who understandably feel left behind and believe the GOP, however imperfect, is their only means to a life of dignity. These people need education, not condemnation.

Lets briefly examine how we got here:

  1. An incomplete globalization strategy that doesn’t affordably provide the tools needed to succeed in the global economy increases inequality and reduces economic opportunity for poorer Americans. This hits historically marginalized groups, which have had less time to build wealth, harder, but also hurts poorer white people.
  2. The GOP stonewalls efforts to correct for these errors under the guise of fiscal responsibility and warnings about “socialism”. It says trickle-down economics will solve everything, trust the “invisible hand” of the market.
  3. With legitimate grievances unaddressed, and actual avenues for doing so blocked by the GOP, scapegoats are needed (illegal immigrants, “welfare queens”, changing racial demographics, decline of religion / nuclear family / “traditional values”, you name it). But you can’t fool all the people all the time…
  4. The Great Recession hits and people are sick of trickle down economics. Obama becomes a two-term President, beating weak GOP opponents in 2008 and 2012, and the party’s 2016 field looks weak as well. It seems like the GOP will finally have to reinvent itself as an actual working center-right party if it wants to remain politically viable. Moderate conservatism is on the ropes, but the Tea Party gains political influence.
  5. Enter Donald Trump, who energizes this new base of the GOP. Not enough to win the popular vote but because of voter suppression, gerrymandering, and population distribution, enough to control the levers of power following the 2016 election. The GOP sweeps Congress riding Trump’s coattails.
  6. President Trump continues the old GOP game-plan, just in cruder terms. He “shows trickle-down economics works” by inheriting a strong economy and supercharging it by slashing taxes to a level where we could never introduce the social programs needed to actually address structural issues in our society, and by cutting regulations that protect the working class. It’s all smoke and mirrors but the average person is not an economist, partially explaining why so many people believed in his “economic miracle” and voted for him in the 2020 election.
  7. As soon as he is elected, Trump starts using the bully pulpit to normalize the idea of “fake news” (an expansion of earlier GOP-lying about the economy and voter fraud, now including anything that paints him negatively). In the run-up to the 2018 mid-terms he irresponsibly starts calling anyone who disagrees with him a “socialist” and anti-American. The GOP, sensing maybe it doesn’t have to reform after all, has become the party of Trump. And it probably would’ve worked, at least through the 2020 election, except…
  8. Trump botches COVID-19 preparation, lockdowns, and reopenings, and doesn’t support a second stimulus bill until months after he should have. But there is an election coming up and the GOP is too invested in him, so it continues to embrace his increasingly dangerous rhetoric. Trump calls into question the legitimacy of an election hadn’t even happened yet, and suggests he will not leave office peacefully should he lose.
  9. Trump loses the election in epic fashion, bringing the GOP down with him. Unsurprisingly he acts like a baby. The GOP continues to let Trump do as he pleases, in part because it is morally and ideologically bankrupt, but also because it sees supporting him as important in winning the Senate runoff in Georgia.
  10. The GOP loses both seats in the Senate runoff. Trump incites a mob of his supporters, who storm the Capitol building.

Look, maybe initially there were true believers in trickle-down economics’ ability to deliver social progress, but over time that has proven not to be the case. This is when good governance demands you try something different. As FDR famously said during the Great Depression: “The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something.”

Instead, when their platform didn’t work, the GOP doubled-down. They lied, and scapegoated, and then lied some more, because their platform did work for some people–the wealthy. Until we treat the root causes of Trumpism (1-3 above), it will keep coming back. People have long warned the GOPs cynical game may lead to the beginning of the end of American democracy, but until January 6th it was possible for them to deny this—not anymore.

I understand what I am calling for, the wholesale revamp of the GOPs policy platform and governing philosophy, is no small ask. But as recent history has proven further delaying the inevitable doesn’t really help them in the long run, but can be incredibly costly. The GOP can now redefine itself or solidify itself as the party of Trump. Disgusted Americans should not let it off the hook merely condemning an already-enfeebled Trump, while going back to the “business-as-usual” that paved the way for his rise in the first place.

It will never be easier for the GOP to rebrand itself. No grand admissions of guilty are needed, it can be done in a completely face-saving, politically-friendly way. All that it needs to say is that the current context demands a different approach, not blindly obstruct Biden and the Democratic party, and going forward embrace a platform that isn’t so unpopular it relies on misinformation for support.


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Now is the Time For Unapologetic, Pragmatic Progressivism

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Elections Have Consequences

After the 2016 election there was introspection on the losing side. The Democratic party had supposedly abandoned the blue-collar Americans that had once defined it. So what did it do? It moderated; “Blue Dogs” helped it flip the House in 2018, and it ultimately picked a moderate in Joe Biden as its next Presidential candidate. It risked upsetting the more vocal future of its party in order to “build a bigger tent”, which at the time–the longest economic expansion in American history–made sense.

How were these overtures received by the right? Since his 2016 campaign, anything that challenges Trump has been labeled “fake” (which amazingly now includes Fox News). Since campaigning for the 2018 midterm elections started, anyone that disagrees with Trump is part of the “radical left” and a “socialist”. This messaging has had a dramatic effect on many of Trump’s supporters; they have embraced alternate realities and conspiracy theories, dismissing anything that challenges their biases. This isn’t just the far-right fringe–about half of Republicans don’t believe Joe Biden legitimately won the election. Trump’s scorched earth Presidency has made it very difficult to move forward as a nation at the worst possible time.

The situation now demands bold policy measures, both massive stimulus spending to help the economy and people in the short-run, and massive investments in the American people and green economy to build a better future. The pandemic has exposed fault lines in our society which never should have been ignored and now cannot be. Just as the progressive wing of the Democratic party took a backseat from 2017-March 2020 because that’s what the situation dictated then, now the Blue Dogs need to get onboard with the more progressive direction currently required. Recent comments by moderate Democratic Senator Joe Manchin show this is not a foregone conclusion. The Democratic majority in the House shrunk in this election, making it even more important the party projects a united front in pushing Biden’s progressive platform.

I expect the GOP to do all it can over the next four years to obstruct the Biden administration in a cynical attempt to show that “government can’t get anything done”. I hope I am wrong, but at this point it needs to earn it’s seat back at the table; it has not been a good faith partner in making America a better place since well before Trump. Rather it has governed by way of misinformation, hypocrisy, and subversion of popular will. The 2016 election prompted soul searching within the Democratic party, hopefully the 2020 election has the same affect on the GOP.

“Show Me” Time

“The Great Society”, the last major progressive changes to our welfare system, were back in the 1960s. Think about how much the world has changed since then! Think about how globalization and technological improvements have impacted the economy, without any additional support for those most displaced by, and least financially able to adapt to, these forces.

It would be nice if we could have a national dialogue about why globalization hasn’t worked out well for a lot of people, and how we are going to learn from past mistakes as we reform the system. It would be nice if we could talk about what “socialism“, “systemic racism“, and “defund the police” actually mean, and not some straw man version of them drummed up by Trump and his enablers. It would be nice if we could even talk about something completely objective, like how marginal income tax rates work! But it really doesn’t seem like many on the political right are interested in having those sort of conversations.

Now is not the time to try to moderate in hopes of grand compromises, we simply aren’t there as a country. It’s “show me” time for the Democratic party. Show the naysayers that raising taxes on the wealthiest and raising the minimum wage for the poorest will improve, not harm, the economy. Show them a “bigger government” which promotes economic opportunity and justice for all is not the same as an authoritarian socialist state that threatens their way of life. People in “red states” already saw this after they expanded Medicaid under the ACA, and it is what a public health insurance option, higher minimum wage, free community college, student loan debt relief, investing in green jobs and apprenticeship programs, and more generous childcare and development policies would accomplish as well. These policies are all very progressive, but despite what Trump, the right-wing media, and GOP congresspeople may say, none of them are “radical”.

Even if it were politically possible, which it doesn’t look like it will be, there is risk in doing too much too fast. Any short-term adjustment pains would be seized upon and twisted by the very same forces that have lied about trickle-down economics and fear-mongered about “socialism” for decades. It would bail Republicans out from having to actually devise a workable platform by giving them something to run against instead. Progressing in a way that is less disruptive than further-left policies, by legislating meaningful building blocks that will lead us towards the same goals while smoothing out the short-term shocks, will help keep the Democratic party competitive into the future. Nudging the GOP towards becoming a working center-right party could lead to improvements in American political economy and governance that currently seem impossible.

We can have a stronger, fairer, cleaner and more innovative economy if we unabashedly stand up for the little guy and don’t allow wealthy interests to bully us around. It is time to call the bluffs and call out the bullshit, that needs to be the left’s version of being “political incorrect”–not being needlessly divisive, but also not pussyfooting around when it comes to calling out the disinformation that has long defined the political right. Big businesses produce based on the demand for their products (which increases as lower-end incomes rise), not the tax rate on their profits; they hire people so they can produce enough to maximize their pre-tax profits, not as a public service. Yes we have to look out for the legitimate needs of smaller businesses, especially right now as they struggle with the effects of the pandemic, but we must also demand corporate America and the wealthy pay their fair share. The idea that “job creators” must be appeased no matter the costs to society has long been a core GOP belief.

It is still unclear which party will control the Senate, which obviously impacts how progressive a Biden administration ultimately can be. One thing is clear though, it should be as progressive as possible. Show people the government actually can improve things, don’t worry about alienating the right or the deficit. Challenge the lies people have long been told through policy and let the results do the talking. Maybe Joe’s version of pragmatic progressivism can even siphon off the support of a few moderate GOP lawmakers, fed up with their party’s apparent disinterest in anything other than making the wealthy wealthier.

Joe Biden is diplomatic by nature, and Democrats should engage with anyone willing to listen with an open mind, but as the saying goes “it takes two to tango”. The Democratic party can afford to moderate on tone, but not on substance or policy. I don’t think anyone is better positioned to try to extend a hand whenever possible, while understanding the true nature of GOP obstructionism and what it now requires from the Democratic party, than President-elect Joe Biden.


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Debunking the “Trump is Better Suited to Lead the Economic Recovery” Myth

Donald Trump or Joe Biden, Who's Best for Dollar vs. Euro? - Bloomberg

There are a few worrying trends I see heading into the Presidential election. One is the lukewarm enthusiasm “progressives” seem to have for Joe Biden, which has subtext for undecided voters. But even more worrying is the idea that Donald Trump is somehow better suited than Biden to lead America’s economic recovery (although his lead on this issue does seem to be evaporating).

Look, I get it, long held conventional wisdom says Republicans are better at growing the economy, and that’s hard to overcome. But that conventional wisdom, if it was once true, has not held over the past few decades. There has been no Trump economic miracle. Trump inherited a strong economic recovery and supercharged it with a trillion dollar tax break to the wealthy and by rolling back environmental and labor protections, exacerbating inequalities that have long existed but the pandemic has brought to the forefront.

Only at the end of the longest economic expansion in American history did wages finally rise and minority unemployment and poverty rates fall. Historically “last hired, first fired” minority groups, and people of all races whose wages have stagnated while the costs of succeeding in the 21st century have grown, should not be celebrating that gains were finally starting to trickle down. Nor should they be content to wait till the end of the next economic expansion years from now for that to occur again. But ultimately that is all Trump is offering.

You’d think someone who botched the months of COVID prep time we had, and then botched the months of shutdowns we had, would at this point have some sort of plan figured out they could tout during their reelection bid. Even if Trump never planned on following through with that plan, and just wanted something to blame other people for, at least come up with SOMETHING.

But nope, there’s nothing. We all heard Trump during the debate, there was no substance, nothing other than division, lies, bullying and scapegoating. Nothing but blaming Clinton, Obama, Biden, China, “the radical left”, “socialism”, and whatever other boogeymen he could come up with.

Trump has no stimulus plan and no virus containment plan. Biden, on the other hand, has plans for days–I guess he’s been hanging out with Elizabeth Warren. These plans are projected to produce big economic benefits:

“When Moody’s ran this program [Biden’s] through their model, it concluded that by the end of 2024, real gross domestic product would be 4.5 percent higher than under a continuation of Trump’s policies, translating into an additional 7 million jobs. Goldman Sach’s estimates are similar: a 3.7 percent gain in G.D.P.”

Now Moody’s and Goldman are certainly not darlings of the left, but that’s all the more reason to take their projections of what has shaped up to be a very progressive platform seriously. They are not likely to overestimate the impacts of Biden’s spending policies or discount any growth lost by increasing taxes on the wealthy.

We are 10.7 million jobs below the pre-pandemic peak with a slowing recovery, we cannot afford to leave 7 million jobs on the table. You can tax cut and deregulate your way to more growth when the economy is already strong, as Trump did the first three years of his presidency, but that doesn’t work in the depths of a recession.

Then there are the other issues facing America, namely social immobility, racial injustice, and environmental degradation / climate change (the effects of which are borne most heavily on minority communities). Biden’s plans would not only deliver greater short-term growth, they would set us up for long-term growth that is more environmentally sustainable and socially cohesive.

Trump, on the other hand, can’t even explain what he wants to do in his second term. He repeatedly says the virus will simply “go away”, so no plan needed there. Months after his own Fed chief dismissed the idea, Trump still insists we are in a “V shaped recovery”, suggesting it will continue on it’s own. He says economic growth alone will heal racial divides, even as he fear-mongers about more diverse suburbs (something that actually would help the issue). Trump regularly questions climate science and the role people play in climate change, and panders to the fossil fuel industry for political reasons; a second Trump term would lock in increasing emissions and and all but ensure America plays second fiddle to Europe in the emerging green economy.

I guess if you think everything is fine or will fix itself, you don’t need any plans. I think the vast majority of the American people would disagree with that view of the state of our union, and want a leader who will level with them and take action to fix things.


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“The Beast” Has Been Starved, Long Live The Beast!

Starving the Beast

What is “The Beast”, and How to Starve It

Starve the beast is the long running small government belief of the GOP that if you deprive the government of tax revenue, it will be forced to cut spending. 

This theory has generally been disproven–despite concerns about “socialism”, social programs tend to be popular once enacted. Instead of starving the beast, when taxes are cut the deficit and national debt get larger as “the beast” continues to grow.

So what is a small government ideologue to do? How can one starve the beast in such a world?

Unlike the Federal government (the main “beast”), most state and local governments cannot run deficits. They are designed to have balanced budgets, which can be a problem when projected tax revenues fall short and expenses unexpectedly rise (like, say, during a once in a lifetime pandemic).

Congress must pass some sort of meaningful state and local government aid package. These governments employ about 13% of all payroll workers in the country. Many of the public servants they employ work jobs providing a broad array social services to the least well off, and their budgets fund non-profits that do the same. They pay for first responders, teachers and schooling, not to mention all the extra costs associated with safely getting kids back in the classroom whenever that happens. 

Don’t give me that tired line about “bailing out” mismanaged states. With careful wording Congress can address legitimate needs without bailing out states from any pre-COVID budgetary issues; it is ideology and partisan saber rattling holding back this aid, not any concern for economic justice or moral hazard. The economic recovery will lag, and poverty will be exacerbated, if state and local governments slash their payrolls and services at a time when both are needed more than ever. 

Another way to “starve the beast” is to go after programs that are funded through specific “trust funds”, like Social Security and Medicare. These programs are funded through payroll taxes, so cutting the payroll tax could effectively starve that portion of the beast. Even though it likely wouldn’t lead to cuts to these popular programs, the legislative fight to reallocate money for them would present the GOP with an opportunity to push for cuts to other important programs.   

So where do we find ourselves now? In the middle of a manufactured fiscal crisis on top of a terrible recession and pandemic. The Democrats passed a bill 3 months ago in preparation for this, but the GOP has neither passed a bill nor negotiated from the Democrats starting point.

So what was the GOPs response? First, to wait until the last second to even try to start developing out a solution. Then to balk at providing state and local governments the aid they need, despite decades of empty rhetoric about how state governments are best positioned to meet the needs of their people. From the Trump administration the plan is to suspend the payroll tax that funds Social Security and Medicare (an idea he’s been floating since March that no one in his own party even wants), and further strain state budgets by asking them to foot part of enhanced UI benefits.

Taken together the GOPs plan was to cynically try to blame the Democrats for not having a deal in place, while starving whatever “beasts” they could.  

The COVID Spotlight

The corona virus has brought the structural inequalities of America to the forefront. Poorer people and persons of color were more likely to lose their jobs and be exposed to and die from the disease due to interrelated factors such as occupation, income, wealth, underlying health conditions and access to medical care.

People have rightfully been critical of the Trump administration’s response to the corona virus, but these issues are different in that they all predate the pandemic. In order to address them, two things are needed:

  1. An economic system that does a better job of promoting equality of opportunity by providing or making affordable the bare minimum needed for people to reach their cognitive potential (early childhood development programs, universal pre-K), care for themselves when they are sick, and receive the education and job training needed to live a life of dignity and meaning.

    We also need a plan to address structural racism, as history and current systems have left persons of color at a disadvantage relative to their white counterparts (perhaps most simply visualized by racial wealth inequality, even when controlling for income). Call this the “Thurgood Marshall plan”.

    Despite what Trump says, racism will not fix itself with economic growth. For too long that lie has been told, as people of color have been “last hired, first fired” recession after recession. If only the expansion had lasted just a bit longer, Trump says, we would’ve achieved economic and racial justice. Don’t point to relatively low black unemployment and poverty rates pre-COVID as proof Trump is right, those metrics obscure the inequality of opportunity and often times insurmountable headwinds facing America’s least well off.

    Being employed and not in poverty are bare minimums, not high-water marks to be celebrated when finally achieved for a brief moment at tail end of the longest economic expansion in American history. The idea that we may get back to that point 10 years from now should not excite anyone–structural changes are needed.

  2. A stronger social safety net, for those who need temporary support when they are down on their luck (or when something completely outside their control, like a global pandemic, uproots their life).

    On a macro level such programs temper economic downturns and prevent poverty from spiking during them. The recent expiration of enhanced UI benefits without any plan in place with have a negative impact on both these fronts. 

As the past few months have laid bare, a lot of work remains to be done. As comedian John Oliver put it:

“There is no better argument for a permanent welfare state then watching the government desperately trying to build one when it’s already too late. Because make no mistake, the real test here isn’t whether or not our country will get through this, it will. The question is how we get through this, and what kind of country we want to be on the other side…”

Trying to build an adequate safety net from scratch has led to some truly remarkable inefficiencies in our response, from unemployment claim backlogs to small business and hospital aid flowing to undeserving wealthy interests, to outright fraud. In other words, America paid a premium for slapping things together at the last second.

Creating a more just economic system is a more difficult undertaking, but ultimately even more important. In addition to creating a fairer society, getting that right would lead to more long term economic growth as a larger pool of innovators and entrepreneurs reach their potential. It would also lead to savings in our criminal justice system, poverty reduction efforts, mental healthcare, and other “safety net” programs, as fewer people would be reliant on them. To quote Fredrick Douglass, “it is easier to build strong children than to repair broken men”.

In other words America has long been paying the price for our structural inequalities. These costs have just been unfairly ascribed to the very people weighed down by the systems that have failed them, in the largest scale example of victim blaming you will ever see.

Feeding The Beast

Both of these undertakings–building a more just society and a stronger safety net–require not only political will but also large sums of money. America was already heavily indebted before it devoted almost $3 trillion to “managing” the COVID outbreak (if you want to call what the Trump administration has done “managing”). Then there is the stalled stimulus bill that will ultimately need to be passed in some form or another, which will probably settle around $2 trillion. 

Believe it or not, none of this spending is actually an economic recovery plan (think jobs programs, infrastructure spending), which itself will also likely be in the trillions. All this spending needed to address a bungled COVID-19 response, combined with the GOPs tax reform bill that is projected to reduce tax revenue by over $1 trillion over the next decade and unresolved long-term structural issues funding Social Security and Medicaid, and America’s fiscal outlook is bleak. 

But there is hope. We can pay for the many demands Americans have on their governments. After all our governments are not beasts to be starved, but rather the most important institutions we have in promoting the twin goals of justice and economic dynamism. 

The good news is that the GOPs unpopular tax reforms can be undone, and “tax justice”–raising enough revenue to pay for the programs society needs–can be achieved. But it will take an administration that believes in both the ability of government programs to improve people’s lives and in international coordination on tax dodging (because of how easily money can be moved around the world these days). These are two things the Trump Administration is diametrically opposed to.

Because this is a global pandemic, governments around the world find themselves in the same boat–with the demands of their people far outstripping their current abilities to bring in tax revenue. Debt levels have exploded as spending increases and tax revenues shrink. This presents a unique opportunity to engage in truly meaningful action against “base erosion and tax avoidance” (BEDS), one that must not be wasted. Outliers must be treated like pariahs; the global community needs to sanction them until it is proven that white collar crime doesn’t pay.

It may be odd to hear me say it, but generally speaking now is not the time to be raising taxes. At any given moment appropriate fiscal policy is context sensitive and “counter-cyclical“. This is exactly what all this stimulus spending now is for (to prop up the economy during a deep recession), and another reason why the GOPs tax bill was not only regressive but unnecessary (stimulus mostly for the rich during an economic boom). 

But if we try to raise taxes now, when we are beginning what is likely to be a prolonged global recession, it could choke off any recovery we might otherwise realize. This is less true of tax reforms that target the wealthy, or just funding the IRS enough to effectively audit wealthy dodgers, but generally speaking this is not the time to be raising taxes, particularly on small and medium sized businesses. 

This absolutely does not mean there aren’t meaningful steps to take on taxation. Now is when America must do the heavy lifting of leading the global effort to setup a tax framework that works for the 21st Century by plugging up all the holes. If we can accomplish this difficult task it will be relatively easy to raise not just the statutory tax rate (what the tax code says), but more importantly the effective tax rate (what is actually paid), when the time is right.