J. Bradford DeLong's Blog, page 391

Should-Read: Lousy title. Good op-ed: Belle Sawhill: Infl...

Should-Read: Lousy title. Good op-ed: Belle Sawhill: Inflation? Bring It On. Workers Could Actually Benefit: "Even if inflation does creep up above 2 percent, we shouldn���t be too worried...

...Having operated below it for many years, the economy may not be harmed if it runs for a few years above that target.... We are in the midst of a big fiscal and monetary experiment. And as with any experiment, the consequences are unknown. What we do know is that the costs of the Great Recession were enormous���at least $4 trillion in lost income.... The biggest losses were experienced by those in the bottom and middle portions of the income distribution who lost jobs and saw much of the equity in their homes destroyed. They are the ones who stand to gain the most if unemployment continues to fall and wages keep rising. Businesses, desperate for workers, reach deeper into the ranks of those who are still jobless, do more training to get those workers up to speed, and pay higher wages as they compete to hire or retain their work force. Discouraged workers ��� the millions who���ve left the labor force ��� might actually re-enter it, and workers could find their shrinking share of national income rise again. Besides, economists are not sure when super-low unemployment will set off inflation.... A stronger economy might help the left behind as much as, if not more than, any of these specific measures. The old models don���t seem to be working, and the downside risks of this experiment are limited. Let���s run a truly high-pressure economy and see what happens...

Should-Read: Ed Kilgore: What the Christian Right Sowed, ...

Should-Read: Ed Kilgore: What the Christian Right Sowed, Trump Reaped: "Gerson is especially insightful [in saying]: Conservative Evangelicals didn���t back Trump despite his unsavory personality...

...but in some respects because of it:

Trump consistently depicts evangelicals as they depict themselves: a mistreated minority, in need of a defender who plays by worldly rules. Christianity is ���under siege,��� Trump told a Liberty University audience. ���Relish the opportunity to be an outsider,��� he added at a later date: ���Embrace the label.��� Protecting Christianity, Trump essentially argues, is a job for a bully.

That is an intuitively more convincing explanation of the affection that the Christian right has for Trump than the idea that he���s a god-chosen infidel like Cyrus the Great, or a sort of Evangelical-by-osmosis.... But like Russell Moore���s accusation that the conservative Evangelical ���marriage��� to the GOP and the Christian nationalism that is the marriage���s fruit are inherently wicked, Gerson is asking Christian-right leaders and followers to retrace too many steps for comfort. Besides, he���s tainted by his association with the onetime Evangelical darling George W. Bush and his globalist outlook...

Should-Read: Dean Baker: Doesn't Anyone Care If the Trump...

Should-Read: Dean Baker: Doesn't Anyone Care If the Trump Tax Cuts Are Working?: "Capital goods orders for January...

...a hugely important early measure of the success of the Trump tax cuts. The ostensible rationale for the big cut in the corporate tax rate that was at the center of the tax cut is that it will lead to a flood of new investment.... If lower rates really produce a flood of investment we should at least begin to see some sign in new orders once the tax cut was certain to pass. The January report showed orders actually fell modestly for the second consecutive month.... Remarkably, these new data have gotten almost no attention from the media...

Dean Baker: Small Businesses Still Aren't Impressed by the Republican Tax Cut: "The National Federation of Independent Businesses... 29 percent of businesses expect to make a capital expenditure in the next 3 to 6 months...

...somewhat higher than the 26 percent reported for February of 2017, but below the 32 percent reported for August of last year. It's also the same as the 29 percent reading reported back in August of 2014 when a Kenyan socialist was in the White House.... There is no evidence here of any uptick in investment whatsoever and certainly not of the explosive increase promised by the Trump administration. Maybe if Trump did some more tweeting on the issue it would help...

Should-Read: Dylan Matthews: Larry Summers on the Midwest...

Should-Read: Dylan Matthews: Larry Summers on the Midwest and South: the case for a government bailout of the heartland: "In 2016, only 5 percent of men ages 25 to 54 in Alexandria, Virginia (a rich DC suburb), were not working...

...In Flint, Michigan, the share was 51 percent. That staggering fact frames a new paper by three Harvard economists���Benjamin Austin, Ed Glaeser, and former Treasury secretary/chief Obama economic adviser Larry Summers.... it���s notable that Glaeser and Summers are now embracing an active government role in revitalizing struggling parts of the country, and trying to work through the best way to do it.

While the idea that Youngstown, Ohio, needs more help than San Francisco might seem intuitive to a non-economist, the economic case for policies targeting certain areas, rather than certain kinds of individuals, is somewhat shakier.... Most variation in incomes is within regions, not between them.... Why implement policies to boost specific geographic areas when you could just direct money to poor individuals instead?... Austin, Glaeser, and Summers argue that place-based policies are necessary because different regions respond to various public policies differently.... The authors roughly estimate how responsive workers in different areas are to employment subsidies that boost their wages by estimating how employment changes in different areas as wages rise and fall. Sure enough, they find that West Virginians are more than three times as sensitive to changes in the rewards to work as Wyoming residents are. That is: Employment subsidies targeted at struggling states like West Virginia are likely to be considerably more effective than subsidies to better-off states like Wyoming...

Should-Read: Josh Barro and Isaac Chotiner: Policy withou...

Should-Read: Josh Barro and Isaac Chotiner: Policy without politics, immigration, and Trump���s self-awareness: Isaac Chotiner: "Are you enjoying this moment? By 'this moment', I mean the last 14 to 15 months of being a political commentator?...

...Josh Barro: No, I���m not. I worked in public policy think tanks for a few years before I did [political commentary], and I wrote specifically on state and local government finance. So the reason I got into writing about politics was to be able to write about some of those issues, where I felt like I was able to explain things more clearly than people might otherwise hear them explained, help them understand relatively complicated areas of policy and what���s a good idea or a bad idea. And our politics are just not very much about policy right now.... The news that we���ve had on the tariffs over the last week or so, if the president actually goes through with this policy, will have important economic effects, but there���s been a lot of time spent on, frankly, bullshit.... I go crazy when people debate the ins and outs of what Trump said about DACA policy. It just seems irrelevant to understanding how Washington, over these last 14 months, is actually working....

Isaac Chotiner: If I���ve ever read anyone who I���ve considered kind of a centrist technocrat, it would be you, which I would assume you would view as somewhat of a badge of honor, to be referred to as that. Or not. What do you think?

Josh Barro: I think centrist technocracy has not had a great decade.... And we���re still reckoning with this. A lot of the big mistakes were in monetary policy, especially in Europe. The eurozone, which was absolutely seen as a technocratic project, has been a disaster, especially for Southern Europe, and it���s been fueling a lot of these populist movements....

Isaac Chotiner: Is there something inherent in centrist technocracy that you���re likely to have these kinds of problems? For example, in the case of immigration, I guess you could say that the reason that no one wanted to enforce these things was because the interests involved didn���t want them to. I guess what I���m wondering is: Does this change your larger analysis of whether centrist technocracy can work, rather than just think, ���Oh, various bureaucrats made stupid choices or choices that were politically unfortunate���?

Josh Barro: Why did you not have robust immigration enforcement? It���s partly because interest groups on both sides didn���t really want it. Businesses wanted to have cheap labor available to them, both legally and then also illegally. Part of the advantage of illegal immigration is that they don���t have to pay people minimum wage. They don���t have to follow labor laws. And then on the left, you had various reasons for wanting higher levels of immigration. Often, the people who might immigrate are relatives and associates of people who are already here. It���s perfectly reasonable that they want those people to be able to immigrate. There are also political effects. Democrats benefit from demographic change in the country. So basically you had two sides of the issue that were not motivated to enforce, and those interest group voices, especially the business community, are overrepresented in Washington.... As for whether a centrist technocratic government is possible that works well, we���ve seen some countries that have avoided these problems. Canada and Australia are good examples.
Canada has managed their immigration system very well, and they have a large number of immigrants....

Isaac Chotiner: I think the one that���s more shocking to me than the snobbiness���and I agree, there was a certain snobbiness to some of that���is the cruelty, which I still can���t quite get over, has not registered more with people. He���s just not nice.

Josh Barro: The weird thing about this, though, is he���s been like that forever. And yet, in his contexts, in business and entertainment, he was able to be like this and then turn on a dime and act like your friend again, and people would go along with it. It���s like he���s clearly having fun, and it���s like people halfway feel like they���re in on the joke. So obviously, I don���t think Mexican immigrants feel this way. But if you���re some celebrity who was feuding with Donald Trump, and he said horrible things about you, you didn���t take it quite as seriously as you would with some other people. And frankly, I think some voters have felt that way. He did about as well with the Hispanic community as Mitt Romney had done, which is not great, but it���s millions and millions of Hispanics went out there and voted for Donald Trump after all the things that he said. There���s something about him that allows him to be nasty and for people to not react in the same way that they would react if a normal person was that nasty.

Isaac Chotiner: Before the campaign especially, there was a twinkle in his eye about some stuff. If you ever go back and listen to him on Howard Stern, there���s some sense that he has an understanding of himself as a character and could find humor in that. I find that to be less and less the case now. I don���t feel like he looks like he���s having fun. Occasionally, like with his tweet about the Oscars, saying I���m the only star.... It was funny and self-aware, exactly. And I find the self-awareness aspect of himself as a character to be less and less a part of him now.

Josh Barro: I think it���s two things. One is that the cruelty appeals to some people, and it fits in with the message of basically, ���They���ve been taking advantage of you, and I���m not going to let them take advantage of you anymore.��� He demonstrates strength through cruelty, which I think is ridiculous, but it appeals to some number of people. But then the other thing to remember is that Donald Trump is not popular. So I think most people do have the reaction to this that you have to it. So if you���re asking, ���Am I taking crazy pills?,��� it���s no. Most people agree with you...

Franklin Delano Roosevelt: First Inaugural Address

Franklin Delano Roosevelt (March 4, 1933): I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels...

...This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper.

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself���nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live. Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.

Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.

Hand in hand with this we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss through foreclosure of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act and act quickly.

Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order: there must be a strict supervision of all banking and credits and investments, so that there will be an end to speculation with other people's money; and there must be provision for an adequate but sound currency.

These are the lines of attack. I shall presently urge upon a new Congress, in special session, detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.

Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first considerations, upon the interdependence of the various elements in and parts of the United States���a recognition of the old and permanently important manifestation of the American spirit of the pioneer. It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.

In the field of world policy I would dedicate this Nation to the policy of the good neighbor���the neighbor who resolutely respects himself and, because he does so, respects the rights of others���the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.

If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we cannot merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.

With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.

Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.

It is to be hoped that the normal balance of Executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.

I am prepared under my constitutional duty to recommend the measures that a stricken Nation in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption.

But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis���broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.

For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.

We face the arduous days that lie before us in the warm courage of national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.

In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come.

Should-Read: Chris Ladd: The article removed from Forbes,...

Should-Read: Chris Ladd: The article removed from Forbes, ���Why White Evangelicalism Is So Cruel���: "Modern, white evangelicalism emerged from the interplay between race and religion in the slave states...

...Many Christian movements take the title ���evangelical,��� including many African-American denominations. However, evangelicalism today has been coopted as a preferred description for... an older, largely discredited title: Fundamentalist.... And among those evangelical churches, one denomination remains by far the leader in membership, theological pull, and political influence. There is still today a��Southern��Baptist Church. More than a century and a half after the Civil War, and decades after the Methodists and Presbyterians reunited with their Yankee neighbors, America���s most powerful evangelical denomination remains defined, right down to the name over the door, by an 1845 split over slavery...

Should-Read: So is it now time to shift to the prime-age ...

Should-Read: So is it now time to shift to the prime-age employment rate as our principal thumbnail shorthand gauge for the state of the labor market?: Nick Bunker: Just how tight is the U.S. labor market?: "Spoiler: There���s room for the job market to improve...

...If the current unemployment rate is indicative of a very tight labor market, then why does wage growth continue to be so tepid? If the supply of potentially employable workers is tapped out, then the price of labor���wages���should grow at an increasingly faster pace. Yet as the unemployment rate declined and hit levels many associate with ���full employment,��� wage growth has yet to break out of the range of 2 percent to 2.5 percent per year. One simple explanation of this anomaly of a tight labor market with weak wage growth is that the labor market is not actually that tight. Indeed, the unemployment rate currently does not do a good job of predicting wage growth. What the data show is that a given unemployment rate can be associated with a wide range of wage-growth levels....

The unemployment rate is still a useful measure of the health of the labor market. But it should be taken in the context of other measures. Even if two labor markets have the same unemployment rate, one will be tighter than the other if their employment rates vary significantly. When assessing the health of the labor market, policymakers have to look at both unemployment and employment. If the U.S. labor market still has room to run, then policymakers should look favorably at monetary and fiscal policies that would increase aggregate demand. This information is particularly important for policymakers at the Federal Reserve as they consider the pace at which they raise interest rates...

Trump���s Tax on America: Fresh at Project Syndicate

Project Syndicate: Trump���s Tax on America: "After a year of serving as a useful idiot for congressional Republicans and their wealthy donors to push through tax cuts and deregulation, US President Donald Trump is now following through on his protectionist promises. Sooner or later, Republicans might realize that inept kleptocracy is not the best form of government after all.

Mitch McConnell, the US Senate���s Republican Majority Leader, recently proclaimed that ���2017 was the best year for conservatives in the 30 years that I���ve been here,��� not least because President Donald Trump���s administration ���has turned out to be ��� very solid, conservative, right of center, pro-business.��� One would undoubtedly hear Republican donors express similar sentiments over their shrimp hors d���oeuvres. After all, the Trump administration has rolled back environmental regulations and cut taxes for the rich. What���s not to like?... Read MOAR at Project Syndicate

Econ 113: Spring 2018: Problem Set 2: Who Benefitted from Slavery? DRAFT

Read this webpage: http://www.bradford-delong.com/2018/03/econ-113-spring-2018-problem-set-2-who-benefitted-from-slavery-draft.html
Chase the link to the handout and read it: http://delong.typepad.com/slavery_cui_bono.pdf
Print out and to the problem set at: http://delong.typepad.com/2018-03-05-econ-113-s-2018-ps-2-aeh.pdf

Who profited from North American slavery before the Civil War?

Ask a historian, or a political scientist, or a politician the question, ���Who benefited from North American slavery?��� and the answer you will probably get is, ���The slaveholders, of course. The slaveholders got to work their slaves hard, pay them little, sell what they made for healthy prices, and get rich."

We economists have a different view...

We economists think seriously about the real long-run "incidence" of events and processes. We economists think historians, political scientists, historians, and all others should take microeconomics to learn about incidence--and then take it again.

What's our take on the beneficiaries of North American slavery before the Civil War? Three groups gained the most:

Those slaveholders who owned slaves when it became clear that Cotton would be King--that the British industrial revolution was producing an extraordinary demand for this stuff and that Eli Whitney���s cotton gin meant that it could be produced cheaply--profited immensely as the prices of the slaves they owned rose.
Consumers of machine-made cotton textiles, from peasants in Belgium able for the first time to buy a rug to London carters to Midwestern pioneers who found basic clothing the only cheap part of equipping a covered wagon, probably profited the most in aggregate.
Northern and western Americans whose taxes were lower because of the tariffs collected on imports of goods financed by cotton exports profited as well.

Why were these the principal profiteers from North American slavery?

Here is the argument: http://delong.typepad.com/slavery_cui_bono.pdf