A few thoughts about the political economy of the midterms and an announcement re “On the Economy.”

November 2nd, 2014 at 11:43 am

It’s a chilly, gray, November Sunday, an apt backdrop for a bit of navel gazing. Assuming the midterm elections turn out as predicted, why is it that the arguments you read here and in other similar venues are failing to persuade? Why does it seem like the OTE world view is getting crushed in the midterms?

That is, the premise of this blog from the beginning has been to present fact-based arguments designed to expand what I viewed in 2011, at OTE’s inception, to be a uniquely cramped and poorly informed economic policy debate. As I said back then, “not meaning to be at all grandiose, I’m going to try to do my part to improve the debate from the outside [I’d just left the White House], to make sense out of the arguments, to go for truth over truthiness, to elevate the facts of the case in a way that’s respectful to all sides of the case…And while I have only one voice, I’m joining a choir that already makes some very powerful music…”

Yet, while it goes too far to say our music has fallen on deaf ears, the current state of the political economy debate and the politics it generates sound just as unharmonious as they did back then. Why so little intellectual progress?

Here’s what I’ve come up with:

It’s not about “the arguments.” You have to be stuck in an awfully tight box to think this election is about the policy debate as carried on in places like OTE. Paul Krugman, myself, and others are surely right about, say, the negative impact of austere fiscal policy on still weak economies or the need for patience at the Federal Reserve. But this election is anything but a referendum on those debates.

It’s a midterm in the middle of a second term of an incumbent president with a low approval rating. The math in such cases is just plain unforgiving: under such circumstances, the president’s party loses seats. It’s thus wrong to conclude that “we”—purveyors of fact-based arguments—are “getting crushed.”

At the same time, it does beg the question: so what are we in the analysis business up to? What’s our value-added? Entertaining like-minded readers? I’ve actually never shied from preaching to the choir…the choir should have the best hymnal to sing from. But really, it’s worth engaging in a bit of self-evaluation in terms of penetration and effectiveness. If a key evaluative criteria is improving the quality, accuracy, and factual content of the policy debate, I fear we would not score very high.

In at least one place where it is about the arguments, the case for fact-based-analysis is looking pretty good. On the other hand, one place where it looks like factual policy analysis may be playing a determinant role is in the Kansas gubernatorial election. As economic history predicted, aggressive, supply-side tax cuts there that were supposed to lead to all sorts of great trickle-down growth there have in fact just led to reduced revenues, a credit downgrade, and cuts to local education. And partisans on both sides of the aisle have noticed.

When politics are broken, you disengage or vote against the status quo. Though I noted the unforgiving historical statistics above, I do not want to leave the impression that the outcomes of the midterms is preordained and there’s no point in analyzing any of it. Probably “throw-the-bums-out” is as good as any shorthand for capturing the mood of the electorate, many of whom are understandably fed up with gridlock in the face of the persistent problems of narrowly shared growth, slack job markets, and stagnant economic mobility that’s increasingly threatened by high and rising inequality.

Here at OTE, I write a lot about such market failures. But government failure is just as serious. Moreover, the failure of government to enact and implement useful economic policies in recent years is by no means a sole function of administrative incompetence or feckless bureaucrats. It is a strategy.

When the electorate is convinced that government doesn’t work, whether it’s a website that actually didn’t work (at first) or a Recovery Act that despite stiff opposition, worked well, it strengthens the narrative of the YOYOs. They’re the “you’re-on-your-owners”—a group I’ve written about over the years.

The YOYOs are the folks calling for less government without regard for the challenges we face, like climate, an aging demographic, explosive financial markets, all of which require government solutions. They’re the privatizers, the always-cut-never-increase tax advocates, the “we can’t afford social insurance” crowd. Their extreme wing would default on the public debt. They stand against “Obamacare”—very much a government solution to a market failure—as it distinctly embodies the “we’re-in-this-together” (WITT) ethic they diametrically oppose.

[Progressive economist Dean Baker adds an important nuance to this construct. It’s not that many in the YOYO political class disdain economic policy. It’s that they use such policy to enrich themselves and their donors as opposed to the broader public, including patent, trade, and anti-union policies. In other words, they’re not really enamored of market outcomes either.]

So while I readily admit government failure—you’d have to swimming in de’Nile not to see that in contemporary politics—it’s essential to recognize that such failure is neither an accident nor an immutable act of nature. It’s a tactic that can be reversed.

In fact, it must be reversed if we’re going to correct market failures, the most important of which is the long-term failure of the economy to create the quantity and quality of jobs needed to reconnect growth to the living standards of the majority.

So, regardless of Tuesday’s outcomes, I’ll keep up the good fight. I will, however, be doing a bit less of it here at OTE over the next few months. Why’s that? Am I backing down in the face of harsh personal evaluations re value added and effectiveness?

Hell, no! To the contrary, I’ll be posting less frequently here because I’m writing a book: An Economics for our Time that will lay out a policy agenda designed to reconnect economic growth with broadly shared prosperity. In fact, the previous few paragraphs come from the intro chapter.

In other words, I’m not backing down, I’m doubling down. So stay tuned…

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17 comments in reply to "A few thoughts about the political economy of the midterms and an announcement re “On the Economy.”"

  1. Chris G says:

    Great post. Thanks.

    Bernie Sanders (in conversation with Bill Moyers) hits on some points which are complementary those you mention above – http://billmoyers.com/episode/bernie-sanders-breaking-big-moneys-grip-elections/

    PS
    > At the same time, it does beg the question: so what are we in the analysis business up to? What’s our value-added?

    You give people something to say “Yes!” to when they finally get sick enough of the status quo to ditch it.


  2. Fred Donaldson says:

    Your website Alexa rank in the US is 141,120 (out of more than 500 million in the nation) with 643 other sites linking into you, and each visitor spending an average 1.58 minutes. The last time I checked you had about 7,000 unique visitors. That’s all very good.


    • Jared Bernstein says:

      Good to know…thnx. A touch more compelling writing and I’ll bet I can bump that avg visit up to two minutes!


  3. Tammy Gottschling says:

    If you need a research assistant I am offering my assistance since you are “doubling down.” WITT!


  4. Carl says:

    I’m sometimes as grumpy as they come when it comes to talking about government and economic failure, so I appreciate the positive mensch-like workmanship here.

    I’m still eager to vote on Tuesday, and hope that something good comes out of the churn, even if it takes two more years for improvement in government.

    Maybe by then the economy won’t be in the crapper anymore.


  5. DG says:

    It’s great to hear that less is more in this case. Can’t wait for your book!


  6. urban legend says:

    Well, I think I’m in the 99th percentile on the time thing.


  7. urban legend says:

    I happened to be going through transcripts of a few of FDR’s “Fireside Chats,” and they make you want to cry. The consultants — at least the Democratic ones — seem to be so laissez-faire about public opinion, so passive: whatever the polls say, that’s where the public is and will be, and the idea of actually trying to move public opinion seems to be treated as so foreign, so naive. And yet there is FDR explaining the banking system in basic terms, describing the problems and how he is addressing them, or giving a basic Keynesian rationale about purchasing power to support his efforts to raise wages. And today’s American wouldn’t like higher wages? And couldn’t possibly absorb the idea that a higher minimum wage would tend to push everyone’s wages up and increase consumer demand and employment and strengthen an economy that has been held back by stagnant middle class incomes?

    Yeah, yeah, it’s not the 1930s where radio is the only game in town. But that’s what communication experts are supposed to be able to do. We have as something commanding comparable attention only the State of the Union, where a President who chose to do so could engage in some education, explain what the problems are and what kinds of things need to be put in place, and set off some fireworks by identifying who is putting obstructions in the way of doing those things. The fireworks could then stir much higher interest in addresses or press conferences outside the State of the Union. Instead, the SOTU has descended into a ritual rah-rah session that educates nobody.

    The idea that public opinion cannot be moved is directly disproved by the 10-point swing against Kerry in a two-week-plus period in 2004 (from 2.5 points up to 7.5 points down) all because of a lying set of TV commercials and a decision not to challenge them. But that seemed to be the prevailing wisdom when the national Democrats simply gave up on winning back the House months in advance even though there were 40-50 Republican seats won in 2012 by a fairly small majority, and even though the amount of ammunition the Republicans had handed to us was staggering.

    We hoped Obama the Professor would be another FDR. I have come to know FDR, and he ain’t no FDR.


    • urban legend says:

      Obama presided over the mid-term disaster in 2010 that was the worst since 1894, even worse than the Hoover Depression debacle in 1930 during a period of skyrocketing job losses. FDR’s Democrats gained House seats in the 1934 mid-term. It can, therefore, be done.


  8. readerOfTeaLeaves says:

    Best of luck with the book, and I hope it’s part of the conversation leading up to 2016.

    I hope that ‘economics’ will begin to take into consideration the importance of trust. I’m convinced that part of what we are seeing is profoundly damaged trust in our political system, which has impacted our economic system. This lack of trust has substantially delegitimized US government, as well as market capitalism.++

    I voted (full of hope) for Obama (twice), and have been in a state of indignate shock as no banker, derivative trader, or commodities trader was even fingerprinted – let alone prosecuted – in the past 6 years.

    I think that many of us (naively, foolishly) trusted that there would be some system of justice that would hold people accountable for their actions in what appears to have been a massive system of mortgage and derivative fraud, perpetrated to claim ‘plausible deniability’. (Suffice to say, after watching the government act like a feckless, helpless chump, I ignore all requests for political campaign donations. And I don’t think that I’m alone.)

    When I have heard public officials like Alan Greenspan, or Tim Geithner, or other federal economic authorities, I have been struck by the absence of moral language. (And heaven help us, talk about QE was ‘absence of moral language’ on steroids!)

    However, when I listen to people talk about their own lives, what I hear is a deep sense of injustice; a sense of anxiety and unease that a system that *only* values ‘making money’ is fundamentally amoral, and therefore not sustainable. (Most of the people who express these worries are quite affluent, but the sense of moral outrage that I detect has very little to do with wealth: it is much more about concerns that society is becoming more dangerous and unpredictable; that too many people are stretched too thin.) I get the same sense when I read comments on blogs related to economics and finance.

    From what I see, most American public language about economics — apart from Bernie Sanders and Elizabeth Warren — fails to mirror the moral concerns that I hear when I listen to individuals talk about their lives.

    Romney was never able to speak to the moral aspects of economic life, nor could Bush. I don’t think they know how; they can talk about business, about tax rates, and about ‘streamlining’. About profits, losses, and capital gains. But they cannot articulate why unregulated economic systems – particularly when they are primarily ‘transactional’ – can never address human needs for reciprocity, fairness, and security.

    Conservatives talk about morality only in the realm of social issues; however, on economic issues, their inability to incorporate moral arguments is startling. Paul Ryan is almost iconic in this respect, as was Eric Cantor. Their language is always about transactions: tax rates, tax structures, business requirements, budgets. I’m not sure they understand that the nature of economic interactions **create relationships** between people. The quality of those relationships is determined by the economic rules in play. Prostitution, after all, ‘makes money’. So does embezzlement, fraud, and extortion. All of those economic activities are highly transactional. But none of them create stable, healthy relationships that can sustain an innovative or vibrant economy over time.

    Obama tried to bring a sense of morality into conversations about economics. Unfortunately, given his administration’s failure to prosecute massive financial crimes, his credibility was damaged. He talked the talk, but the walking didn’t happen in a convincing fashion. That opportunity has now been lost, although he’s planted seeds that one hopes will germinate.

    I hope that when you ‘double down’, you give at least 10 minutes consideration to the nexus between a system of justice, and economic viability. After what I’ve read, seen, and heard over the past decade, I don’t think that it is plausible to have a functioning economic system without a strong system of justice. But that requires acknowledging that economic activities have a moral dimension; that they create relationships, and the nature of those relationships determines whether society is reasonably safe and prosperous, or whether we will devolve into some kind of mafia economy.

    ————————–
    ** TBTF is among the most shoddy, embarrassing conceits ever invented by humankind

    ++ I saw a speech by Mr. Putin, in which he stated that the Russian economy needs to function in a way that can generate *trust*. The fact that Putin articulated this fundamental fact of human nature in clear and simple terms impressed me. I am not at all surprised to read that the BRICs are looking out for themselves, and that includes going off the dollar: it is yet one more consequence of damaged trust in the US version of ‘free market’ capitalism run amok, IMVHO.


  9. jonny bakho says:

    Dem Candidates are running to the middle trying not to offend wealthy elites. This inhibits them from running on economic populism- Raise the Min Wage, Expand Medicaid, Invest in the country’s future by hiring labor, etc.

    Republicans have shifted the blame for the poor economy from wages are too low to immigrants are taking all the jobs. There is too little push back from Dems. If you don’t give people a reason to vote, they won’t


  10. Cecilieaux Bois de Murier says:

    You will be missed. Although what I really miss was the pre-White-House-bubble Jared Bernstein who was on the radio, TV, newspapers, everywhere, debunking nonsense with gentle humor.
    As to OTE and elections, maybe the likes of us have to learn to talk in stupid. The Republicans have mastered this illogical language.


  11. John Daschbach says:

    My guess is one thing which is hurting anti-Republican’s in recent elections and certainly this one is the orthogonal nature of economic issues and social issues. Certainly here in Colorado this appears to be the case. The governor (a pro-business Democrat) and senator up for re-election in a state with unemployment at ca. 4.7% and help-wanted signs all over, median house prices at all time highs, the uninsured rate down by 45%, etc. are in trouble. Why? The governor stayed an execution and supported small changes in gun control after the Aurora mass shootings. The Republicans are running strongly on anti-abortion, pro gun, pro capital punishment, social issues. These issues have a strong resonance with some voters.

    On the other hand, we see, correctly or not, Democrats associated with issues like GMO food labeling, Climate Change, and other elitist causes. My perception is that people are inherently anti-elitist in the US.

    Climate change is probably the greatest evidence of damaging elitism. The same sort of elitism also plagues progressive economic policy. Lot’s of elites make statements about climate change which only serve to prove they are either ignorant of the real science or purposefully deceiving the public for political reasons. Climate change politics and progressive economics both fail in similar ways.

    To high scientific probability we know that terrestrial global temperatures have increased 1.4 F in the 20th century. The range of good scientific estimates for human influence on this varies from around 40% to 90%. The range of estimates for CO2 sensitivity (doubling of CO2) are 2.7 F to 8.1F. We also know the global temperature hasn’t increased in 16 to 19 years. As Richard Feynman made clear, if 95% to 98% of model predictions are above the observations then the model is wrong. The scientific fact is we don’t know what the future climate will be like. A 3 F warmer, somewhat wetter world, would likely on balance be good for humans, while an 8 F warmer world has a reasonable probability of being not good for humans (but good for some other life forms). In both cases the impacts will be distributed, good for some human populations and not good for others. To say we know what the climate will be, and what the impacts will be, is pure dishonesty.

    Similarly, economic policy changes are often hard to predict accurately, and clearly impact different groups in the population differently. It often appears that economic policy on both sides fails to acknowledge this fact. I suspect that this underlies much of voter dissatisfaction and thus we end up with a system in which strong social views dominate politics.


    • smith says:

      Economic policy changes are often easy to predict accurately. Stimulus spending in the wake of a depression, while increasing the deficit, also know as Keynesian economics, works, but clearly impacts different groups in the population differently. They help those most in need, and consequently attenuate the power of the ruling elite, not limited to the 1% but reaching down to the top 5, 10 and even 20%. It often appears that economic policy advocated by one side fails to acknowledge this fact. I suspect that what underlies much of voter dissatisfaction are disingenuous politicians on both sides who are happy with the status quo, backed by Supreme Court approved money from billionaire villains right out of a Frank Capra movie. Voters rarely see viable alternatives. Thus we are left with the prospect of Jeb Bush vs. Hillary Clinton, and not Rand Paul vs. Elizabeth Warren.


  12. Chuck Sheketoff says:

    Yes, onward! Be sure to follow the tips from Don’t Buy It (http://www.powells.com/biblio?inkey=2-9781610391771-0&PID=29828&PID=29828) – active sentences, name the villians, etc. Look forward to seeing the book. And of course we’ll have you come and talk about it and sell copies in Oregon.


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