Quick clarification: I'm not really wondering why Republicans care more about inflation than unemployment; that's presumably a constellation-of-interests question, and there's nothing at all wrong or exceptional with having one party more concerned about jobs and the other more concerned about stable money. No, what's remarkable is that Republicans such as Pawlenty believe that it's good politics to brag about their tilt away from employment and to inflation-fighting right now.
Wednesday, June 8, 2011
WIN
Tim Pawlenty signaled yesterday that Republicans are going to campaign on, among other things, ending the "dual mandate" for the Fed. I was working on a post trying to explain how a party could wind up running on a policy that can't possibly be an electoral winner in a time of high unemployment and low inflation -- epistemic closure? emulating George W. Bush, who wound up supporting huge tax cuts in large part to counter Steve Forbes in the 2000 primaries? -- but instead, I'll just make a note of it for now, and urge everyone, especially anyone who doesn't know what a dual mandate is, to read the fine recent essay by Matt Yglesias about liberals and the Fed.
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Maybe he just thinks it's good *policy*. I know that's generally considered about the billionth choice when evaluating why a campaign decision was made, but let's consider it.
ReplyDeleteAs you've probably noticed, the theme of his campaign in the early going has been to say unpopular but (to him) necessary things to the people that most dislike hearing them. He goes to Iowa to rail against ethanol, he goes to Florida to talk about raising the retirement age, et cetera. Whether wise or not, I think it's great that a viable candidate is saying these things, even if he ends up some kind of sacrificial lamb for daring to do so repeatedly.
But, if you're interested only in the horse race ramifications (though it seems, whenever a conservative's policy suggestion is semi-reasonable, people always find a way to criticize it anyway by criticizing its political effects), I think it sticks another knife in the idea of Pawlenty as some safe, boring consensus choice. Which is not without value.
what's remarkable is that Republicans such as Pawlenty believe that it's good politics to brag about their tilt away from employment and to inflation-fighting right now
ReplyDeleteI don't think it's really that remarkable. A reasonable person might look at the results of the 2010 House elections and conclude that Americans care way more about government debt, and the potential for inflation and a weak dollar, than they do about mass unemployment.
It doesn't make sense to me either, but it's hard to argue with that data point: a 63-seat gain in the House for the party that doesn't seem to care about mass unemployment.
the theme of his campaign in the early going has been to say unpopular but (to him) necessary things to the people that most dislike hearing them.
ReplyDeleteYes, indeed. Republican primary voters just hate hearing about gigantic upper-class tax cuts, slashing social spending, and ultra-hard money. How very daring of Pawlenty to stick his neck out like that.
Yes, indeed. Republican primary voters just hate hearing about gigantic upper-class tax cuts, slashing social spending, and ultra-hard money. How very daring of Pawlenty to stick his neck out like that.
ReplyDeleteEr, you know I listed examples of what I was talking about, right? And the idea that he's required to say ONLY things people don't want to hear is absurd and, more importantly, not what I said.
A reasonable person might look at the results of the 2010 House elections and conclude that Americans care way more about government debt, and the potential for inflation and a weak dollar, than they do about mass unemployment.
Or maybe they think that government debt, inflation, and a weak dollar (and the things that lead to them) have something to do with mass unemployment.
The problem with the Fed’s full employment mandate is that it encourages policies that have unintentionally increased unemployment. Yes, Greenspan was able to prevent high unemployment following 9/11 and the burst of the tech bubble, but in the process he inflated the housing bubble. Even prominent Keynesians like John Taylor now agree that this is the case. So Fed policy didn’t “solve” unemployment, it just put it off until the burst of the housing bubble at the end of Bush’s second term.
ReplyDeleteWe could better avoid the extremes of the business cycle if the Fed would just focus on price stability.
the idea that he's required to say ONLY things people don't want to hear is absurd
ReplyDeleteRight. You know what else is absurd? The idea that the "theme" of Pawlenty's campaign has been to "say unpopular...things to the people that most dislike hearing them". Which is, er, exactly what you said, and which is what my post was clearly intended to refute.
So, your entire "argument" is based on the idea that this can't be the "theme" of a campaign unless he says nothing but unpopular things? Say what?
ReplyDeleteI listed examples, and they're perfectly valid, and in no way refuted by the fact that he still agrees with Republicans on plenty of other matters because the idea is not to tell people unpopular things just because they're unpopular, but to tell people things despite them being unpopular. The presupposition behind this is that these are things other candidates think but deliberately don't say. I can't believe I had to explain this, but there you go.
I would think the word "inflation" is as much a contrived boogeyman as "deficit." Most people don't really understand it, but know they don't like it. Who knows, Pawlenty may be looking for new problems to solve in order to stand out.
ReplyDeleteSo, your entire "argument" is based on the idea that this can't be the "theme" of a campaign unless he says nothing but unpopular things?
ReplyDeleteNope! But as far as I can tell, your "argument" is based on the idea that the "saying unpopular things" must be the "theme" of Pawlenty's campaign merely because he once said something that his audience might have disagreed with.
(Notwithstanding the fact that the actual "theme" of his campaign, as you've probably noticed, appears to be something like MOAR TAX CUTS = MOAR REVENUE = PONIES FOR EVERYBODY YIPPEE!)
By your standard, every political campaign since the beginning of time has had a "theme" of "saying unpopular things."
I said it was the theme of his campaign "in the early going." And it is. If you want to speculate that he won't keep it up, be my guest. But the idea that he hasn't done this so far simply because he has also (gasp!) agreed with people he's spoken to about other things is a non-sequitur.
ReplyDeleteAlso, this isn't "he once said something that his audience might have disagreed with." I don't know if that's ignorance or just really transparent rhetoric, but it's not accurate. The entire first week launch of his campaign was based around the idea; deliberately going to Iowa for the ethanol stuff (and this is from a guy who by most accounts really needs to do well in Iowa, too), then to Florida for the SS stuff, then off to DC to talk about unions and spending freezes, then to Wall St. for bailouts and finance, et cetera. Are you detecting any kind of pattern yet? From whence comes the fiction that every candidate does this? Romney sure hasn't. In fact, he did the opposite: he came out in favor of ethanol in response.
As far as I've seen, to the extent "progressives" have cared about the Fed they've been cozying up to Ron Paul's "end the Fed" campaign. Getting rid of an obviously failing institution gives some people the populist warm fuzzies, never mind how awful the alternative is (going back to gold).
ReplyDeleteA significant part of the 2010 GOP campaign was the claim that the Democrats had not done enough about jobs (or, alternatively, had done the wrong things).
ReplyDeleteIn 2012, they may be able to convince voters that removing unemployment from the Feds' mandate would actually be good for employment, but I suspect that won't work. It is counterintuitive, and likely wrong as well.
I said it was the theme of his campaign "in the early going."
ReplyDeleteBy which you apparently mean, the first week of his campaign. Then it's right back to Hooverism, voodoo economics, and free ponies for everyone.
Oh well, I guess one week is better than nothing.
From whence comes the fiction that every candidate does this?
Every candidate tries to do this, in order to ingratiate themselves to Beltway pundits who can call them "brave" and "gutsy" for telling hard truths to core constituencies. Some are better than others. Clinton did it right (remember Sister Souljah? Welfare reform?). Pawlenty's problem is that, right after calling for the end of ethanol subsidies and social security, he went on to promise free ponies for everyone, thereby showing that his heart wasn't really in it.
Aye, some are better than others in that some actually do it and some just want to be seen as doing it. But you seem to be positing some magical threshold beyond which it all becomes meaningful. As if a certain percentage of his positions need to fit this description for any of them to be valuable. I don't see why that would be. Ending ethanol subsidies is a good idea. Raising the retirement age is a good idea. And even if you disagree with both, both are things most politicians avoid saying and avoid going to Iowa and Florida to say, even if they think them. These stances don't blow off into the wind just because you don't like his position on taxes.
ReplyDeleteAlso, if Republicans are promising "free ponies," then 2008 Democrats were promising free unicorns.
So you've gone from "Pawlenty's central campaign theme is telling unpopular truths to people who dislike hearing them" to "But ending ethanol subsidies is a good idea!"
ReplyDeleteIt just goes to show, if you backtrack far enough, anyone can find areas of agreement!
By the way, I challenge you to find a single thing said by any Democratic presidential candidate in 2008 that even comes close to the sheer magical-fantasy-factor of Pawlenty's major recent economic address. (You know, the one where he said that tax cuts three times the size of the Bush cuts will lead to 5% growth for ten years and trillions in additional revenue?)
So you've gone from "Pawlenty's central campaign theme is telling unpopular truths to people who dislike hearing them" to "But ending ethanol subsidies is a good idea!"
ReplyDeleteUm, there's no "going" from one to the other. Both are true, simultaneously. This isn't complicated.
By the way, I challenge you to find a single thing said by any Democratic presidential candidate in 2008 that even comes close to the sheer magical-fantasy-factor of Pawlenty's major recent economic address. (You know, the one where he said that tax cuts three times the size of the Bush cuts will lead to 5% growth for ten years and trillions in additional revenue?)
You mean like Obama claiming that nationalizing health care and adding millions of people to the rolls will be completely budget neutral? How about suggesting that he could completely pay for his proposals by merely closing corporate tax loopholes? Do you think even HE believed that one?
Your "challenge" is misguided at its core, of course, because the things I find magical-fantastical are things you actually buy into. And probably vice-versa. That's why simply declaring them as such is so pointless: it's just a reiteration of the policy disagreements we all know are there.
But since you asked, I don't think Pawlenty can give us 5% growth for a decade -- I don't think anyone can, realistically. But then again, if he can deliver 3.5% growth instead, the claim will be far from "magical," even if it technically falls short, and that's the point of dispute.
Chris and Andrew (and everyone else):
ReplyDeleteGood discussion, and thanks for keeping the language mostly on the civil side.
Andrew:
Do you concede at all that Pawlenty's anti-ethanol comments are a "truth-telling" example?
Chris:
Do you really think that the various Dem health care plans in '08 are similar to what Pawlenty said yesterday? The Dem plans were all carefully run through economic models and calibrated to "work' budget-wise; does Pawlenty have any economist who would even say that 5% annual long-term GDP growth is possible, let alone that his mix of policies will get there? I'm with Jon Cohn; I think there's just a very different level of substantive seriousness here -- it's not just a case of buying into one set of beliefs or another.
Do you concede at all that Pawlenty's anti-ethanol comments are a "truth-telling" example?
ReplyDeleteYes, I absolutely do. However, considering Pawlenty's recently-revealed "plan" for "growth", I absolutely reject the notion that campaign "theme" has been "to say unpopular ... things to the people that most dislike hearing them."
You mean like Obama claiming that nationalizing health care and adding millions of people to the rolls will be completely budget neutral?
Well, the Congressional Budget Office seems to think that it is. That's persuasive to me. What do you think the CBO would have to say about the budgetary effects of Pawlenty's tax-cut-a-palooza?
wkdewy and BrianTH:
ReplyDeleteIntelligent criticism of the Federal Reserve is not limited to the right. Paul Krugman recognized that the Fed was causing a housing bubble (all the way back in 2005!): http://www.nytimes.com/2005/05/27/opinion/27krugman.html
Krugman’s analysis of the bubble is spot-on, although his suggestion that “the Fed can find something to take its place,” strikes me as daft.
There is a great deal of consensus in economics that deviation from the Taylor Rule in setting the Fed funds rate was a major cause of the housing bubble -- although there is debate as to whether it was the main cause or just a factor that made the bubble larger and longer-lasting. This is strangely ignored by the media and policy makers, so I hope Pawlenty points it out. But it’s also worth keeping in mind that just reducing the Fed’s mandate (or abolishing the Fed, Ron Paul-style) is not a silver bullet for sound policy.
Couves,
ReplyDeleteI agree that the Fed should do more to watch out for asset bubbles. But that is not inconsistent with thinking the Fed should maintain a dual mandate, since of course asset bubbles can be bad for employment over the medium-to-long run.
And in fact to the extent some people might like asset bubbles in the short term (say for political reasons), that may not be solely or primarily about short-term employment effects anyway. Asset bubbles may be making a lot of money for your donors. Asset bubbles may be improving the economic sentiments of your potential voters. And so on. Meanwhile, asset bubbles don't necessarily show up as general inflation, and in fact that is part of what defines them as such.
So if you want to ADD watching out for asset bubbles to the Fed's to-do list in some fashion, I think that may be a good idea. But I don't think removing employment from the Fed's mandate is a necessary or sufficient step toward that end.
Good discussion, and thanks for keeping the language mostly on the civil side.
ReplyDeleteNot at all. The fact that most commenters are fairly civil is the only reason I'd consider posting here. Most places are a cesspool.
Do you really think that the various Dem health care plans in '08 are similar to what Pawlenty said yesterday? The Dem plans were all carefully run through economic models and calibrated to "work' budget-wise; does Pawlenty have any economist who would even say that 5% annual long-term GDP growth is possible, let alone that his mix of policies will get there?
That's a bit hard to say; we need to see what Pawlenty's plan looks like a bit more specifically, no? We're comparing a very polished plan to what's basically an introductory speech outlining the rough basics of a plan. But, regarding having an economist vouch for it: would you find that persuasive, if he did? Or would you just think less of the economist in question?
Well, the Congressional Budget Office seems to think that it is. That's persuasive to me. What do you think the CBO would have to say about the budgetary effects of Pawlenty's tax-cut-a-palooza?
ReplyDeleteThe CBO has to calculate what you give them. If I recall correctly, the fact that it's "budget neutral" by their estimation comes from the fact that the period measure involves two more years of collecting taxes on the law than it does in giving out benefits.
Also, you ignored the more egregious example: the assertion that Obama could "pay for every dime" of his proposals by closing corporate tax loopholes.
BrianTH,
ReplyDeleteI think you misunderstand the intent of the full employment mandate, which is to periodically stimulate economic activity by increasing the monetary base. That this policy creates bubbles which ultimately cause unemployment, is irrelevant to the intent of stimulating employment in the short term. It would certainly be nice if they also looked at the long term consequences of this policy, because they'd be forced to recognize that it's inherently self-defeating at best, and not an inducement to sound policy.
But currently, it’s the price stability mandate (notice: it’s not the “inflation stability mandate”) that requires the Fed to watch out for the creation of bubbles. Most other central banks do just fine with *only* this mandate. They understand what the US has apparently forgotten: Asking your central bank to do anything more than maintain a stable currency is just looking for trouble.
Aside from reducing the Fed’s mandate to price stability, the best thing we could do would be to replace the current leadership, which is still making excuses for Greenspan’s obvious incompetence, while continuing his disastrous policies.
If I recall correctly,
ReplyDeleteLet me stop you right there. The claim being made was the the ACA provided for six years of benefits and 10 years of revenues within the 10 year budget window. The so-called "10/6 dodge."
It just so happens that your esteemed plain bloghost has debunked this nonsense on numerous occasions. I suggest you read the links cited in those posts to get a sense for yourself of how credible the "10/6 dodge" claim really is.
Also, you ignored the more egregious example: the assertion that Obama could "pay for every dime" of his proposals by closing corporate tax loopholes.
Well, I ignored it because I don't remember Obama actually making that assertion. I do recall him saying that he would "pay for every dime" of spending proposals, but I don't think that the offset was limited to closing tax loopholes, but rather included other spending cuts and tax increases. That's not so outlandish.
It just so happens that your esteemed plain bloghost has debunked this nonsense on numerous occasions.
ReplyDeleteI shall read these entries. Though before even doing so, I'm not sure I find the CBO's estimates to be a highly compelling argument that the plan will be budget neutral. Do you, honestly? Most of the supporters I know don't, but support it anyway.
Well, I ignored it because I don't remember Obama actually making that assertion.
Ah, then let me stop you right there (first item):
http://www.factcheck.org/2008/08/fact-checking-obama/