All things must pass

This post is highly speculative; take it with a grain of salt.

Traumatic events such as wars are often followed by a backlash. The side that feels vindicated will lash out against those seen as being on the other side. After the Civil War, the radical Republicans went after (moderate) President Andrew Johnson. After WWI, the statists went after the anarchists and pacifists. After WWII (and Korea) you had a wave of anti-communism.  After Vietnam, liberal Democrats went after Nixon.

Don’t get bogged down in the details; there are generally broader trends at work. Thus Nixon’s downfall is directly linked to the Watergate break-in, but Nixon was actually attacked for a wide range of abuses, involving domestic spying, war crimes in Southeast Asia, and lots of other stuff. Congress passed laws reining in institutions such as the CIA.

I wonder if the Trump era will fall into this pattern. Obviously there is no major war going on, but at a psychological level it feels a bit like a civil war. Perhaps the Trump era will be followed by the same sort of “reign of terror” as followed earlier traumatic events. Eventually Trump will fall, and the establishment (led by the Democrats) will at some point seek to punish Trump and the administration officials that implemented his policies.

I suspect the “political correctness” movement will play the same role in the 2020s as the anti-communist movement played in the 1950s. Let’s think about some parallels. These backlash movements are often tied to very justified causes, but occasionally overreach. Thus the Confederacy really was evil, but there was overreach in trying to impeach Johnson for not being sufficiently punitive toward the South. Communism really was evil, but there was overreach in going after Hollywood screenwriters. Trump really is evil, but there is occasional overreach in going after people not deemed sufficiently “politically correct”.

Let me use an example that may at first seem off topic, but is actually linked to all the current craziness. The Me-Too movement is a long overdo attack on powerful men who abuse women. And I’d also argue:

1. Trump is a sort of anti-Me-Too figure. (The same could be said for substantial parts of the GOP.)
2. Some liberal anti-Trumpers who are mildly supportive of Me-Too are getting attacked for not being sufficiently closely allied with the Me-Too movement.

The first point is pretty obvious. Trump himself has been accused of abuse by many women, and he frequently defends other men who have been accused of abuse. Many of the women that support Trump are themselves skeptical of Me-Too, and of feminism more broadly.

On the second point, a good example occurred recently with the New York Review of Books.  Ian Buruma (editor of the NYRB) agreed to publish a piece by a Canadian media figure that had been accused of abusing 23 women. Buruma was interested in publishing an account of what it was like to be publicly shamed.  Not surprisingly, many people were outraged, as they viewed this decision as Buruma allowing the abuser to whitewash his actions in a prestigious media outlet.

I think you can make a good argument that Buruma used poor judgment in this case. On the other hand, the firing of Buruma was clear overreach and not justified by his decision, even if mistaken. Honest people can disagree about how to reconcile the public’s interest in learning the perspective of shamed people, with the public interest in shaming bad people.

I expect the eventual downfall of Trump to unleash a huge wave of political correctness across the country. It’s important to put these sorts of waves into perspective, and not overreact either way. Thus the McCarthy era persecution of the Rosenbergs was justified, whereas the attacks on the Hollywood screenwriters were not. The underlying “cause” of anti-communism was of course quite justified, right up there with the anti-slavery movement of the 1800s and the war on fascism during the 1940s. But, as with any movement full of passionate, self-righteous people, there will be occasional overreach.

It’s quite likely that I’ll eventually become caught in the anti-Trump backlash, as “collateral damage”. This might seem surprising, as I’m among the most outspoken anti-Trumpers in the econ blogosphere. If you are surprised, then you’ve never studied the Chinese Cultural Revolution, where even the devout communists eventually became shamed and persecuted.  I’ll eventually become seen as a Trumpian old white male, who just doesn’t “get it”.  Someone will dig up my old posts where I mock certain tenets of political correctness, such as the recent hysteria over cultural appropriation.

So why am I not worried about my likely fate? Let’s go back to Trump for a moment. Trump clearly has fascist instincts, and idolizes strong authoritarian leaders. But he’s also enmeshed in an American constitutional system that gives him relatively little power. So he governs as a fairly conventional Republican, except for a few symbolic actions such as the recent trade war. I’ve consistently argued that not much would change under Trump, and so far I’ve been right.

Similarly, although the eventual overreach of anti-Trump political correctness will resemble the Chinese Cultural Revolution on a stylistic level, in fact it will be mostly empty theatre—not mass murder. I’m in the fortunate position where I’m not vulnerable to public shaming. It makes no difference to me if I lose my job–heck I’d love an excuse to retire! I don’t care what others think of my political views; indeed I’ve always been a contrarian thinker.  And I don’t follow Twitter, which is where the shaming often occurs.  (Others will not be so lucky.)

In the post-Trump era, I’ll cheer the attacks on Trump officials who did abuse government power and I’ll attack the excesses of left-wing PCism where appropriate. Classical liberalism is my lodestar, an ideal that never needs replacement. Both the left and the right have periods where they reject classical liberalism. Right now, the biggest threat in the world is right wing, xenophobic, misogynistic, authoritarian nationalism. And that’s where I focus my attacks. But there will come a day where the biggest threat will be left-wing PCism run amuck, and when that occurs I’ll focus my attacks on that group.

BTW, one aspect of the current moment that is often overlooked is that there is a sort of generational war simmering below the surface. During the 1960s, the hippies were not just horrified by the Vietnam War and racism; they were horrified by the older generation. After all, the older generation had produced the system that the hippies despised. Something similar is occurring with the Me-Too movement. The younger generation is clearly contemptuous of the older generation, at least regarding the sexual harassment issue. And how could it be otherwise? The older generation tolerated these abuses for decades. Indeed someone recently dug up a tape of a “roast” at one of the major networks, where several participants made fun of Matt Lauer’s practice of abusing women. To my generation, this stuff was just a big joke—the “casting couch” phenomenon. How could the younger generation not be horrified by us old fogies, who just don’t get it?

Earlier I referred to the Buruma firing, and this seems relevant:

Were there in-house objections to the piece?

No. We had a proper office discussion and everybody expressed their views and not everybody agreed. But all views were aired and in the end, when the decision was made, the office stuck together.

Was there a gender breakdown during the discussion?

How old are you?

I’m 66

I like Buruma a lot, but he comes off poorly in this interview.  People of my generation need to spend some time rethinking their assumptions and at the very least come up with better defenses for their views, assuming they decide not to change their views.  (Of course it goes without saying that younger SJWs need to be more tolerant of views with which they disagree.)

I’m already looking past the Trump era, and even past the post-Trump backlash excesses.  Its helps to view the past, present, and future from a “timeless perspective”.  At least it’s less stressful to see things that way. All things must pass.

PS.  Here’s what the NYRB should have done.  Hire someone to write an opinion piece on Me-Too.  Have them interview a few abusers to get a sense of what it’s like to be shamed, and whether they’ve rethought their attitude toward women.  But also include interviews with the women who have suffered emotional trauma from the abuse, to put things into perspective.

 

The Tea Party won

The Tea Party has finally achieved its objective.  The GOP is in control of all branches of government and Tea Party favorite Donald Trump was elected President.  They won.

But what exactly did they win?  Their big issue was the budget deficit, which as of 2015 was rapidly shrinking (as is generally the case during economic recoveries.)

Screen Shot 2018-09-19 at 12.22.54 AM

 

The recovery has since picked up speed, so the deficit should be falling especially fast right now.  Unfortunately, the FRED data site does not have updated figures, but the deficit is no longer falling.  Indeed it’s exploding, expected to reach $1.1 trillion in 2019.  Nothing like this has ever happened in America during a period of peace and prosperity.  There is such a firehose of spending that Washington is hardly able to shovel dollars out the door as fast as they are being appropriated:

The federal government is primed to spend as much as $300 billion in the final quarter of fiscal 2018 as agencies rush to obligate money appropriated by Congress before Sept. 30 or return it to the Treasury Department.

The spending spree is the product of the omnibus budget agreement signed six months late in March coupled with funding increases of $80 billion for defense and $63 billion for civilian agencies. The shortened time frame left procurement officials scrambling to find ways to spend the money.

Through August, defense and civilian agencies obligated some $300 billion in contracts. But to spend all the money appropriated to them by Congress, they may have to obligate well over $200 billion more in the final quarter of fiscal 2018, which ends in two weeks.

“It is not impossible for this to happen, but it is unprecedented for that high of a percentage to be obligated to contracts for a fiscal quarter,” David Berteau, president of the Professional Services Council, told Nextgov. “You’d have to spend almost 50 percent of the yearly total in three months.”

And yet the federal government may do just that.

This is what happens when you give the GOP full control over the government.

Hardly anyone is reporting this story, even though it’s one of the most bizarre things to have happened in America during my lifetime.  Perhaps this is because none of our “tribes” has an incentive to acknowledge these facts.  The GOP wants to tell voters that it’s a responsible, small government, conservative party, pushing back against the deficit spending of the Obama years.  The Dems want to tell voters that the GOP is a mean-spirited, small government, conservative party.  Both are lying.  The press plays along with this framing, because it lets the two tribes set the terms of the debate.  The GOP is actually a big government party.  Neither the NYT nor Fox News will tell you that.

To get a sense of the weirdness of this state of affairs, imagine the right-to-life movement were to get control of all branches of American government.  And then assume that they immediately proceeded to make abortion mandatory for all pregnancies involving unmarried women.  Because deficit spending is a dry economic issue, people don’t grasp the strangeness of what’s happened.

PS.  Off topic, this FT piece made me smile:

The US and Canada have been sparring over access to the protected Canadian dairy market, American insistence on scrapping a dispute settlement mechanism in the original pact, and Ottawa’s request for cultural exceptions to be maintained in the media sector. . . .

On Tuesday, Steve Scalise, a Louisiana Republican and the House majority whip, fired off a statement attacking Ottawa, saying there was growing “frustration” that Canada was not “ready or willing” to make a deal.

“Mexico negotiated in good faith and in a timely manner, and if Canada does not co-operate in the negotiations, Congress will have no choice but to consider options about how best to move forward and stand up for American workers.”

Good to see the GOP standing up for Johnny Depp, Brad Pitt, Robert Downey Jr., Tom Cruise, and other “American workers”.

 

 

About that “malinvestment”

When I first started blogging, a number of Austrian commenters told me the real problem was not tight money.  Rather there had been “malinvestment” in housing, especially in the “sand states”.  The recession was the price we had to pay for all of this poorly thought out investment.

That theory never even made sense in 2009.  If the problem was malinvestment in housing, then resources would have shifted to the other 95% of the economy. Instead, output fell in almost all sectors.  (I’m referring to 2008-09; resources did shift to other sectors during the 2006-07 construction slump.)

Today it makes even less sense. The NYT has an article on the housing market in North Las Vegas, which was the epicenter of the bust. It’s now booming:

Amazon has opened two huge centers in North Las Vegas for distributing goods and handling returns, bringing thousands of jobs. A third facility is on the way. Sephora, the cosmetics company, recently broke ground here for a giant warehouse.

With nearly a quarter-million people, North Las Vegas is one of the fastest-growing cities in the country. It’s also young — the average resident is just 33 years old.

The Times reports that prices are soaring and homes typically sell in three days.

I agreed that there had been some excessive housing construction in the inland portion of the sand states, perhaps because builders expected the US population in 2050 to be 50 million higher than is now predicted.  (Recall that 2006 was the year of the immigration crackdown.)  But I argued that these cities were fast growing, and this problem was relatively mild.  In my view the malinvestment is better termed “too early investment”—some houses were built a few years before they were needed.  The Austrian counterargument was that these houses would remain empty for decades, and eventually depreciate sharply (in a physical sense.)  It looks like I was closer to the truth.

I would add that Kevin Erdmann’s take on the crisis is being increasingly confirmed by events:

Jazzmine Guiberteaux moved here a few years ago from Oakland, Calif. — one of many California real estate refugees who headed to Nevada in search of more space and cheaper housing. But she is increasingly being priced out.

A 35-year-old mother of two, with another child on the way, she works in a clothing shop and drives for Uber to earn extra cash. She has had to move three times in five years.

Ms. Guiberteaux’s previous landlord terminated her month-to-month lease on Mother’s Day. It took her 10 days to get a new place. “The rent is higher,” she said. “But it’s in a better neighborhood.”

When Kevin’s book comes out in a few months, it may end up being the most important housing book of the decade.

BTW, the NYT has this picture of a downtrodden resident, who is forced to rent rather than own:
Screen Shot 2018-09-14 at 8.34.30 PM

You can see the picture more clearly in the NYT article. I couldn’t help but notice the Pottery Barn look.  The downtrodden have certainly come a long way from the 1960s, when the NYT carried pictures of shacks in Appalachia and slums in the Bronx.

I know, I’m a heartless out of touch elitist who doesn’t understand how much people are suffering.

PS.  Ten years after Lehman, market monetarists should feel really good about how things are playing out.  Not only is the boom in the housing market tending to confirm the MM/Erdmann view of the world, but more and more policymakers are talking in terms that sound suspiciously market monetarist.  Clare Zempel directed me to an article discussing Janet Yellen’s take on what we should do next time:

Elaborating on how the central bank should think about what to do if rates have to be cut to zero again in the future and can’t go any lower, she said the Fed should promise now that it will keep rates low enough to let a hot economy make up for lost time.

Does that remind you of anything?  Hint, here’s my new California license plate, which I picked up a few days ago:

Screen Shot 2018-09-11 at 2.08.35 PMOh, and NGDP just keeps chugging along at a fairly stable rate.

There may be no blogging tomorrow, as I plan to attend a 13-hour film in crime-ridden Santa Ana.  Wish me luck.

 

Anne Applebaum on Eastern Europe

Anne Applebaum is one of America’s most distinguished conservative reporters.  (In the “classical liberal sense.)  Interestingly, in 2018 we’ve reached the point where distinguished conservatives and center-left reporters are almost identical on a wide range of foreign policy issues.  She has written the single best article I’ve ever read on the recent transformation of Eastern Europe.

Applebaum has dual citizenship with Poland, and is especially good on that country.  But the essay ranges over a wide range of topics.  For instance, until today I could never really “get” the Dreyfus Affair of 1894.  I knew that a French military officer was wrongly accused of treason.  And that the fact that he was Jewish probably played a role in this scandal.  But I never understood why this event was viewed as being so important.  It’s mentioned in almost every book I’ve ever read on French society in the late 1800s and early 1900s.  You could be reading a biography of an artist or author, and they’ll always spend a lot of time discussing that person’s opinion on the Dreyfus Affair.  Why?

After reading Applebaum’s story you’ll suddenly get it. History will start locking into place, at a psychological level. Indeed any future historian that wants to write a 21st century history of Europe should probably start with the Dreyfus Affair.

She’s also great on Hungary.  It’s long, but read the whole thing.

PS.  I see that Trump is gloating about how Nike stock dropped right after the Kaepernick ad was put out:

President Donald Trump had plenty to say about a topic he has been obsessed with, tweeting that Nike was getting “absolutely killed with anger and boycotts” and asking what the company was thinking with their divisive decision.

If the President were smart then he should have waited to see the impact on sales.  But then if he were smart . . . well a whole lot of things would be different:

Ten days after Nike announced that Colin Kaepernick would be the face of its “Just Do It” 30th anniversary ad campaign, the sports apparel behemoth’s stock price closed at an all-time high on Thursday at $83.47, according to a report from Bloomberg.

People seem to have tuned Trump out, which bodes well for the midterms.  And the good news keeps piling up, as the “brave” Manafort flipped today.

PPS.  Robert Shiller is in the news today:

At the same time, the president’s apparent Teflon to slough off scandals, conflicts of interest, evidence of incompetence, and other issues that would doom traditional political figures is well documented.

Shiller says this mindset is reflected in the market, which he considers overvalued.

“I think Trump encourages us to be more risk-taking” when it comes to investments, said Shiller.

Shiller’s hypothesis that this thinking may have seeped into the public consciousness.

How can I put this politely . . . umm, no.

I just don’t understand

Trumpistas in 2016:  “Sumner, you just don’t understand.  You professors live in an upper middle class bubble, where you don’t see all the suffering out in the real America.  The economy is not doing well; it’s doing horribly.  Things are so bad that average people are turning to meth, to opioids.”

Trumpistas in 2018:  “Sumner, you just don’t understand.  Trump has made America great again—the economy has never been better.  Look at the stock market.  Look at the black unemployment rate.  As Trump says, America is doing great.”

I’m willing to concede that I just don’t understand, so please help me to learn.

Are we really doing better than ever?  Better than the LBJ years, when RGDP growth averaged 5% over 21 quarters, instead of peaking at 4.2% for one or two quarters?  Maybe so.  After all, we really are richer than in the 1960s.  But if that’s your criterion, then wouldn’t the same apply to Obama’s second term, when real median household income reached an all time record in 2016?

Today the Census bureau released the income data for 2017, and it showed another 1.8% increase in real median household income, to a new record of $61,372.  Pretty impressive.  But it’s also true that this measure rose by an even more impressive 3.2% in 2016, and by an extremely impressive 5.2% in 2015.

They also announced a reduction in the poverty rate, from 12.7% to 12.3%.  Again, pretty impressive.  But the rate fell from 13.5 % to 12.7% in 2016.  And it fell from 14.8% to 13.5% in 2015.

There are many ways of looking at a picture as complex as the US economy.  In 2016, I saw an amazing wealth generating machine that produces living standards that earlier generations (and most other countries) can only dream about.  Trumpistas saw economic carnage everywhere they looked.  Both are valid arguments, depending on what data points you want to emphasize.  You can even claim the economy is doing better under Trump than Obama.

What is not a valid claim is that we’ve suddenly gone from being a disaster to being great again, because of a few upward tweaks in some data points. Tweaks that are not dramatically different from what occurred in previous years and decades.  All the problems in the Rust Belt are still out there.  Either the Trumpistas were lying in 2016, or they are lying today.  (I say they were lying in 2016–we’ve always been great.)

PS.  In a previous post I noted that people in south Orange County seemed friendlier than in Boston.  In fairness, I should note that this might partly reflect my “white privilege”.  People in south Orange County are certainly not as friendly to a visiting high school football team from Santa Ana, a city that is 80% Hispanic.  In that respect, my daughter’s Newton, Massachusetts high school was superior to the Aliso Niguel high school.

My wife and I like to visit Santa Ana, which is less boring than Mission Viejo.  You might wonder how we dare visit a city full of “rapists and murderers”.  Here’s Wikipedia:

In 2011 Forbes ranked Santa Ana the fourth-safest city of over 250,000 residents in the United States.

That ranking partly reflects traffic safety, but its crime rate is also fairly low.  (Ranking 11th safest in terms of violent crime.)  Ironically, I almost ran someone over in Santa Ana a few days ago.  A motorcycle merging onto the freeway flipped over right in front of me, and the guy tumbled into my lane.  Fortunately, I was going a bit slower than normal (I had just merged, and was only up to about 60mph.) I slammed on the brakes and came to a stop about 10 feet from the guy.  Drive defensively!

PPS.  Commenter Ben Cole will like this:

“Just run the presses — print money,” Trump said, according to Woodward, during a discussion on the national debt with Gary Cohn, former director of the White House National Economic Council.

And this made me smile:

As a candidate, Donald Trump pledged to balance the federal budget and lower the national debt, promises that are proving difficult to keep.

Actually that’s fake news.  Trump didn’t promise to balance the budget; he promised to run budget surpluses that were so enormous that the national debt would be entirely paid off in 8 years.  And yes, I’d say if you increase government spending and sharply cut taxes, causing the deficit to suddenly double to $1.1 trillion (in 2019), despite 3.9% unemployment, then it would prove “difficult” to keep your promise.

As an analogy, if a person who goes to AA each week suddenly goes out and buys an entire crate of Jack Daniels, it might be difficult for them to keep their sobriety promises.