Here’s Jim Geraghty:

Meet Donald Trump’s new immigration stance, which is to . . . praise how tough President Obama has been on deportations. Huh? What?

“We’re going to obey the existing laws. Now, the existing laws are very strong. The existing laws, the first thing we’re gonna do, if and when I win, is we’re gonna get rid of all of the bad ones. We’ve got gang members, we have killers, we have a lot of bad people that have to get out of this country,” he said on Fox News. “As far as everybody else, we’re going to go through the process. What people don’t know is that Obama got tremendous numbers of people out of the country, Bush the same thing. Lots of people were brought out of the country with the existing laws. Well, I’m gonna do the same thing.”

[Host Bill] O’Reilly then mentioned detention centers, prompting Trump to quickly shoot down the idea of keeping undocumented immigrants in detention centers.

“You don’t have to put them in a detention center,” Trump said.

“I never even heard the term. I’m not gonna put them in a detention center,” he added. “We want to do it in a very humane manner.”

Great news, immigration hawks! Obama will emulate those tough policies of . . . Obama and Bush! Aren’t you thrilled? Haven’t you passionately campaigned for the status quo all these years?

Still on “vacation”, so let’s just have a poll.  What’s funnier:

1.  The fact that Trump has never heard of immigration detention centers.

2.  The fact that he doesn’t know that Obama puts illegals into detention centers.

3.  The fact that Trump has decided to run to the left of Obama on immigration.

4.  The fact that Trumpistas believed that Trump was sincere on immigration.

P.S.  If you see Harding on the street, steer clear.  His head might explode.

Where is the “honest dialogue”?

Here is Ben Bernanke in 1999, talking about the situation in Japan:

With respect to the issue of inflation targets and BOJ credibility, I do not see how credibility can be harmed by straightforward and honest dialogue of policymakers with the public.  In stating an inflation target of, say, 3-4%, the BOJ would be giving the public information about its objectives, and hence the direction in which it will attempt to move the economy. (And, as I will argue, the Bank does have tools to move the economy.)” (1999)

One of the things that I find most infuriating about the current policy environment is the lack of an “honest dialogue” about the choices faced by monetary policymakers.

Go back to the 1990s and early 2000s and look at the discussion about inflation targeting, involving elite economists like Ben Bernanke. One common theme was that the inflation target should not be too high, but definitely needed to be high enough to keep economies out of the zero rate trap. As far as I know, there was widespread agreement on this point.

Now that we’ve discovered that a 2% inflation target does not keep us above the zero rate bound, especially in recessions, I’d expect exactly the sort of honest dialogue that Ben Bernanke suggested back in 1999. Instead, we have a profoundly dishonest dialogue, dodging the real questions:

1. When do you recall Bernanke, Yellen or any other central banker, telling government leaders that we faced a choice between a massive central bank balance sheet, and a higher inflation target? Or a choice between negative IOR and a higher inflation target?

2. Back in 2009-11, do you recall a Fed official telling Congress that the Fed was holding back on monetary stimulus, out of fear they might be embarrassed at some time in the future by large capital losses, even though those losses would net to zero for a consolidated Federal government balance sheet perspective, and even though the reluctance to pursue monetary stimulus further would result in a great deal of unnecessary unemployment? I don’t.  I recall vague discussion of “costs and risks” associated with QE, but nothing that would give Congressmen any idea of the actual choices we faced.

3.  How often did Fed officials tell Congress that we faced a choice between moving to a higher inflation target, and relying more heavily on fiscal stimulus?  I don’t recall any such discussion.

There’s a price to pay for dodging these important questions.  We are sleepwalking into a world where the central bank will ask for assistance from fiscal policymakers, and they won’t provide it, or at best they’ll provide too little to make a difference.

PS.  Just to be clear, I am not advocating a higher inflation target, because we have better options.  The problem is that we are also not going to adopt those better options, and instead will end up with something far worse.

PPS.  I’m not alone; Paul Krugman was equally frustrated back in 2010.

PPPS.  Speaking of honesty, I just finished volume 5 of “My Struggle”.  As I’ve gotten older, I have fewer and fewer experiences of the sort of “aesthetic bliss” that was common when I was younger, especially in arts like music, painting and film.  And now at age 60 I’ve stumbled upon my all time favorite novel.  (The entire set, not just volume 5)  I am profoundly grateful to Karl Ove Knausgaard.  (BTW, my dad’s name was Karl, and his mom spoke Norwegian.)

And how come reporters keep asking him about the title?  How could it be titled anything else?

PPPPS.  I won’t post much over the new few weeks, due to summer vacation.  I will have a few posts at Econlog, which have already been written.


“I’m not a politician”

Some professions look really easy, even to outsiders.  Others look really hard.  In fact, most are difficult for outsiders.  Consider the following imaginary remarks:

1.  It’s not my fault the patient died; I’m not a brain surgeon.

2.  It’s not my fault that my client got the electric chair; I’m not an attorney.

3.  It’s not my fault that I missed the game winning shot; I’m not a basketball player.

My response would be, “If you are not a brain surgeon, then don’t do brain surgery”.  Ditto for attorneys and NBA basketball players.  And if you aren’t a skilled politician, then don’t do politics.  And for God’s sake, don’t get your apprenticeship by running for President.

Some people will argue that Eisenhower was not a politician.  Nonsense.  He had not been elected to public office, but he had extensive political experience at the very highest levels of government.  Trump has none, and it shows.

Trump is already making excuses, in case he loses.  He says it won’t be his fault, as he’s not a politician.

There’s a reason that we usually nominate politicians to be presidential candidates, it’s tough when your very first job is in a field that you know nothing about, even more so when it is the most difficult job in the world.

Here’s the WaPo:

It is peculiar in the extreme  — unprecedented, according to the former agent — for a candidate for president to prompt concern about inciting violence against his opponent. Even if not intentional, Trump is so cavalier and/or inarticulate as to invite sincere concern about his words’ effect on his loyalists. But then, in his word salad of half-sentences and disconnected thoughts, it is often hard to figure out what in the world he is trying to say. (On the difference between coal from the United States and China, he announced, “We have a very, very small planet compared to the universe, right? And that stuff is going up and they’re not cleaning it.” What?!?)

What we do know is that Trump has repeatedly egged on his crowds and boasted that he would have hit this or that protester in the face. His henchman Roger Stone warned of “days of rage” at the convention if the nomination didn’t go to Trump. This is the language of thugs and fascistic pretenders who seek to discredit and undermine democracy itself.

Hillary Clinton was certainly entitled to rub it in. At an event on Wednesday, she told the crowd in Iowa, “Words matter, my friends, and if you are running to be president or if you are president of the United States, words can have tremendous consequences.” She continued, “Yesterday, we witnessed the latest in a long line of casual comments from Donald Trump that crossed the line. His casual cruelty to a Gold Star family, his casual suggestion that more countries should have nuclear weapons, and now his casual inciting of violence.” She concluded, “Every single one of these incidents shows us that Donald Trump simply does not have the temperament to be president and commander in chief of the United States.” Can anyone really take issue with that?

Well, we passed “unfit for office” months ago, but Republicans might want to consider whether Trump’s Second Amendment threat is the last, best chance to dump him. Neither House Speaker Paul Ryan (R-Wis.) nor Senate Majority Leader Mitch McConnell (R-Ky.) responded to a request for comment. They might consider coming out en masse against Trump. At a time when many ordinary Republicans are decamping from Trump’s camp, GOP “leaders” seem paralyzed by indecision. They risk a real calamity (political and, God forbid, otherwise) if they remain silent. But mostly they look lost, irresponsible and blinded by partisanship.

What’s surprising about Trump is not that he has a flaw, other candidates were known for garbled sentences.  (Although I consider that to be kind of inexcusable in a Presidential candidate.  After all, talking is one of the President’s most important responsibilities.)  What surprises me about Trump is that he’s so bad at so many of the skills needed to be a politician, like not giving the Secret Service the impression that you are trying to encourage others to assassinate your rival:

Trump insults nearly every subset of Americans. He lacks rudimentary knowledge of our government and critical policies. But are Republicans really going to persist in running a candidate for president whose campaign the Secret Service had to speak to multiple times concerning language that can be taken as a call for violence? CNN reported:

A US Secret Service official confirms to CNN that the USSS has spoken to the Trump campaign regarding his Second Amendment comments. “There has been more than one conversation” on the topic, the official told CNN. The campaign told USSS Donald Trump did not intend to incite violence.

I guess the Secret Service is also “unhinged and deranged”.

Now I see that Trump is starting to drag down GOP Senate candidates, even as he grows ever more apathetic about his own race for President.  Won’t it be nice when Hillary has a majority Democratic Senate to rubber stamp her appointments?

PS.  How many times have you heard the following:

I’m not an economist, but it seems like . . .

I always brace myself for what’s coming next.

PPS.  Why does Trump have to step in it every single day?  Here’s the latest from Jim Geraghty.

PPPS.  And here Trump provides additional details on how he plans to pay off the entire national debt in 8 years.


Fix monetary policy; there are no alternatives

The annual Fed meeting at Jackson Hole will soon begin.  I hope they discuss how to fix monetary policy.  I fear they will be distracted by impractical fiscal/monetary schemes.

The recent discussion about monetary policy has been horribly confused.  Here are a few examples:

1. Prior to adopting a 2% inflation target, there was lots of discussion about where to set the target.  I recall almost universal agreement that the target had to be at least high enough to prevent a zero bound problem.  Now that we have experienced a zero bound problem, has that view changed?  If so, why?

2.  I see a lot of discussion to the effect that the Fed is unable to hit its inflation target, because it’s out of ammunition.  That’s not just wrong, it’s a freshman economics level error.  The Fed raised rates in December (and refused to cut them a few weeks ago), precisely because they are worried about overshooting their inflation target.  Indeed at least since the taper tantrum of 2013, the Fed hasn’t believed the US economy needed any more monetary stimulus than they are already providing.  This discussion of the Fed being out of ammo shows a profession that is deeply confused on some of the most basic ideas in monetary economics.  It’s not a pretty sight.

3.  When I discuss the possibility of reforms such as level targeting, or NGDP targeting, the response is often that the proposal is “politically unrealistic”.  Then the naysayers turn around and recommend fiscal/monetary coordination, which shows an almost laughable naïveté about the actual way that fiscal policy is implemented in the US.  And even if by some miracle the GOP Congress would agree to countercyclical policy, the proponents don’t even seem to know what it is.  They propose fiscal stimulus right now, even though doing so at a time of 4.9% unemployment would constitute a procyclical policy, and hence would make the US economy even more unstable.

I hope the economists at Jackson Hole discuss possible ways to fix monetary policy, and don’t get distracted by hopeless fiscal/monetary chimeras, but what I read in the opinion sections of elite media and blogs makes me very pessimistic.

Anand sent me to a post by Paul Krugman:

And I realized something not too flattering about myself: I’m feeling nostalgic for 2011 or so.

Liquidity-trap macroeconomics — which I didn’t invent, but did play a role in bringing back into the mainstream — had become the story of the day. And the basic message of the models — that everything changes when you hit the zero lower bound — was being overwhelmingly confirmed by experience.

The thing is, it was all beautifully hard-edged: a crisp boundary at zero, a sharp change in the impact of monetary and fiscal policy when you hit that boundary. And the predictions we made came out consistently right.

Yes, except for all the things they got wrong, which the market monetarists got right.  Like the 2013 austerity.  Or the removal of extended UI in 2014. Or whether the BOJ would be able to devalue the yen.

But now things have gotten a bit, well, murky.

Now Krugman is being much kinder than I was at the top of this post.  Since we exited the “liquidity trap” the discussion has been borderline incoherent.

The zero lower bound is not, it turns out, quite as hard a boundary as we thought.

Does “we” include the guy who twice recommend negative IOR in published papers in early 2009, and was scoffed at?

More important, probably, is the fact that two of the major advanced economies — the US and, believe it or not, Japan — are arguably quite close to full employment. We don’t know how close, because we don’t know how much pent-up labor supply is still waiting on the sidelines. But you can no longer argue that supply limits are no longer relevant.

Correspondingly, you can also no longer argue with confidence that there can be no crowding out, because the Fed won’t raise rates.

Yes, before you had to argue they’d do less QE to crowd out the fiscal stimulus.

We are, if you like, half-out of the liquidity trap, with one foot on dry land — but the other foot is still hanging over the edge, and it wouldn’t take much to topple us right back in.

What I would argue is that in this murky, fragile situation we should be conducting policy largely as if we were still in the trap — because we badly need to get both feet firmly on dry land with some distance between us and the quicksand.

(The link advocated fiscal stimulus.)  He seems to be arguing that we need fiscal stimulus because we need to raise rates so they we can cut them again if we get into trouble in a few years. That’s 100 times better than arguing the Fed should raise rates so that it can cut them again (an insane idea you sometimes see in the business press), but I still don’t quite buy it.

Fiscal stimulus is a demand-side policy.  It’s not going to have a significant impact on trend RGDP or trend NGDP.  So if we do more fiscal stimulus when unemployment is 4.9%, we probably won’t see dramatically higher nominal interest rates.  I will concede that it’s possible the Fed would have a bit more “conventional” ammo the next time a recession hit (from rates being a bit higher), but that additional monetary ammo would come at the expense of less fiscal ammo.  In Krugman’s view, fiscal stimulus doesn’t come from high G, it comes from rising G.  If we already have high G when we go into the next recession, it’s going to be that much harder to get rising G.  If fiscal stabilization policy is to work it must be countercyclical, that means don’t do it now.  This new “fiscal stimulus forever to put sand under the tires of monetary policy” (my words, not his) seems more than a bit ad hoc to me, a proposal from people who want shiny new airports and high speed rail, and will grasp any half way plausible model to justify that preference.  I put Larry Summers in that camp, maybe even more so that Krugman.

So I don’t think more fiscal stimulus today would make the US economy any more stable in the long run. Instead we’d just be:

Another day older and deeper in debt


So many deranged and unhinged conservative commentators

I’m not the only one who has become deranged and unhinged.  Here’s Howard Kurtz some other mental cases:

David Brooks unloaded in the New York Times:

“With each passing week he displays the classic symptoms of medium-grade mania in more disturbing forms: inflated self-esteem, sleeplessness, impulsivity, aggression and a compulsion to offer advice on subjects he knows nothing about.

“His speech patterns are like something straight out of a psychiatric textbook.”


“He also cannot be contained because he lacks the inner equipment that makes decent behavior possible. So many of our daily social interactions depend on a basic capacity for empathy. But Trump displays an absence of this quality…He is a slave to his own pride, compelled by a childlike impulse to lash out at anything that threatens his fragile identity.”

Charles Krauthammer, perhaps Trump’s most prominent critic on Fox, seemingly uses his training as a psychiatrist to diagnose the candidate:

“It’s that he can’t help himself. His governing rule in life is to strike back when attacked, disrespected or even slighted. To understand Trump, you have to grasp the General Theory: He judges every action, every pronouncement, every person by a single criterion — whether or not it/he is ‘nice’ to Trump.

“This is beyond narcissism…His needs are more primitive, an infantile hunger for approval and praise, a craving that can never be satisfied. He lives in a cocoon of solipsism where the world outside himself has value — indeed exists — only insofar as it sustains and inflates him.”

Some of Krauthammer’s words on Fox are being used in a Hillary ad.

The Wall Street Journal’s Peggy Noonan has jumped on the crazy train:

“Here is a truth of life. When you act as if you’re insane, people are liable to think you’re insane. That’s what happened this week. People started to become convinced he was nuts, a total flake.”

George Will, who took the step of leaving the Republican Party, accuses Trump of practicing “post-factual politics”:

“He seems to understand that if you produce a steady stream of sufficiently stupefying statements, there will be no time to dwell on any one of them, and the net effect on the public will be numbness and ennui. So, for example, while the nation has been considering his interesting decision to try to expand his appeal by attacking Gold Star parents, little attention has been paid to this: Vladimir Putin’s occupation of Crimea has escaped Trump’s notice.

Will says politics is “being poisoned by the injection into its bloodstream of the cynicism required of those Republicans who persist in pretending that although Trump lies constantly and knows nothing, these blemishes do not disqualify him from being president.

If you’d polled conservatives a few years ago, and asked which commentators are the best, these four would probably have made the list.  And note that there are not employed by the media because of their knowledge of the nuances of DSGE models of the economy, they are regarded as shrewd observers of society.

[BTW, isn’t Krauthammer a great name for an austere conservative?]

But now (we are to believe) these four wise, distinguished commentators have all, simultaneously, become as deranged and unhinged as yours truly. Is there some sort of virus going around, causing mass hysteria?

Actually there is, but the people being infected are not the ones who see Trump for what he is.