Relevant and even prescient commentary on news, politics and the economy.

China’s climate announcement

Easily lost in the news of the day, from the NYT:

President Xi Jinping of China pledged on Tuesday that his country would adopt much stronger climate targets and achieve what he called “carbon neutrality before 2060.” If realized, the pledges would be crucial in the global fight against climate change.

This may be mostly PR, but it may signal a significant increase in China’s commitment to decarbonization.  We will learn more as details are provided and China’s next 5-year plan is released in 2021.

If this does reflect an increased commitment to decarbonization, it could be as important as the outcome of the U.S. election for the future of the climate, for several reasons:

China is the world’s largest greenhouse gas emitter.  This is (I believe) the first time it has committed to net zero publicly.  A 2050 target would be better than 2060, but a real commitment to hit 2060 would be a huge improvement.

If China moves away from fossil fuels, it may put some pressure on states that participate in its Belt and Road Initiative to scrap plans for new coal fired power plants.  These states have their own agendas and other options, but Chinese pressure would help.

A clear Chinese commitment to clean energy may help persuade Americans who see China as both a military and economic threat and as having relatively competent leadership to prioritize climate policy.

Finally, if China is committed to a green energy transition, this opens the door to formation of a “climate club” that includes the United States, Europe, and China.  Working together, these countries and others could pressure holdouts to reduce their emissions (by imposing tariffs on their exports, for example).  This is critical.  There are many countries in the world that will not voluntarily cut back on their use of fossil fuels.  Asking nicely will not work.  International climate policy needs more stick and less carrot, and switching to a new regime will be much easier if the Chinese are on board.

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It’s all on Trump

The Post Office is Trump’s responsibility.  He appointed the Postmaster General.  If he had asked for more funding, he would have gotten it.  If there is any delay in delivering ballots this November, it’s on Trump.
The integrity of the election is on Trump.  He runs the intelligence services and is responsible for preventing foreign interference.  With his leadership, Congress would have provided more funds to help states deal with the disruption caused by COVID-19.  Any delay in counting ballots is on Trump.
The continuing deaths and economic hardship caused by COVID-19 is now on Trump.  It has been 6 months now since it was clear that COVID-19 would kill tens of thousands of people and wreck the economy.  If Trump had led a federal effort to massively ramp up testing capacity, we could be testing 20 million people a day now.  Everyone with COVID would quickly be identified and quarantined.  The epidemic would be over and we could all go back to work and school and ordinary life.  Every death, layoff, and eviction that occurs now on is on him.
The looting and violence in American cities is on Trump.  If he acknowledged the legitimacy of the protests and supported a reasonable police reform bill, the country would come together.  There would be no opportunity for looters or violent counter-protesters.  The frustration, chaos, and violence in our cities is on him.
Joe Biden and the Democrats in Congress can’t make Trump do his job, but at this point it doesn’t matter.  He’s President.  It’s all on him.  Call him out.

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Is Trump a blip?

Kevin Drum argues that he is:

One of the key questions raised by Donald Trump’s 2016 victory has been whether he represents a new turn in American politics or merely a blip who will be quickly forgotten if he loses in 2020. Over the past four years I’ve spent a lot of time reviewing the evidence about this, and the conclusion I’ve come to is pretty simple: Trump is a blip.

Let’s back up a bit. For a very long time Democrats have believed that demographics were on their side. Republicans are acutely dependent on white voters, and every election cycle the share of white voters declines by a percent or two. Since voters of color largely support Democrats, this would someday make it all but impossible for Republicans to win the presidency.

But when would that day come? The Census Bureau projects that white voters won’t lose their absolute majority until 2044, but the Republican day of reckoning will come long before that. In fact, my take is that it’s already happened. It came in 2008, and ever since then it’s been close to hopeless for a Republican to win the presidency. This makes Donald Trump not a harbinger of things to come, but a final, feral howl of white reactionary politics as a ticket to the White House. He eked out one last victory for the Fox News set not because racism was broadly on the rise, but because of a string of remarkable happenstances: Russian interference; a backlash against eight years of a Black man as president; a woman as his opponent; a last-minute FBI letter; and an unexpected blurp in the Electoral College that placed him in the Oval Office even though he lost the popular vote by millions of votes.

. . . Trump obviously depends on the support of conservative white voters, but even among this group he’ll have a hard time winning because there are simply too many conservative white people who have become disgusted by Trump’s obviously racist appeals.

. . . In the same way that 2016 featured a white backlash against a Black man in the White House, 2020 is almost certain to feature a white backlash against an open racist in the White House. . . .

I agree with Kevin that Trump’s explicit use of racist messages may have reduced his support among decent people who would otherwise vote Republican.  But this suggests only that Trump’s overtly racist appeals may be counterproductive in a country that is slowly becoming more diverse and tolerant.  It does not show that the post-Eisenhower Republican electoral coalition of plutocratic economic conservatives and social conservatives will no longer be competitive if Republicans use less overtly racist messaging, especially given the tilt in the electoral college and the Senate in favor of conservative, rural voters.  Remember that Trump appeared to be highly competitive heading into the 2020 election until the COVID epidemic hit, notwithstanding his overt racism.  It is primarily Trump’s gross mismanagement of the epidemic that has endangered his presidency, not his racism.

I also agree the country is likely to become more progressive and tolerant over time.  The real question is how quickly this will occur, and how the Republican party reacts.  Will the Republican donor class accept some moderation on economic issues?  Will Republican media elites and primary voters allow the party to triangulate towards the center?  (Here is a pessimistic take by Drutman.)  Or can Republicans remain competitive by putting a bit of “compassionate conservative” lipstick on their plutocratic, intolerant pig?  Questions like these will determine how much of a blip Trump turns out to be.  And of course, all this assumes we remain a functioning democracy long enough to find out.

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The Democratic convention

I watched most of the convention, and thought it was well done.  My main concern is that most of the arguments made against Trump – and the election will primarily be about Trump, not Biden – were more persuasive to people who are already solid Biden voters.  If you are still thinking about voting for Trump, hearing that he is divisive, authoritarian, and incompetent is unlikely to change your mind.  You’ve heard those arguments a million times.

What types of arguments will work?  Remind people who voted for Trump that he lied to them about Social Security, health care, and taxes.  People hate being lied to.  They *hate* feeling that politicians are playing them for suckers.  Find a former Trump voter who is willing to say “I voted for Trump because he said he would strengthen Social Security and give us better health care.  I believed him, and if he had done that I would still be on his side.  But he lied.  He lied.  Maybe I should have seen that coming.  I see it now.”

The most common mistake in political argument is to assume that other people see things the same way you do.  They don’t – that’s why they disagree with you in the first place.

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Progressive politics and the pandemic

How will the COVID-19 pandemic and the protests over the police murder of George Floyd and other black people affect the political mood in the United States?  The libertarian-leaning economist Tyler Cowen suggested in March that the COVID-19 pandemic would mark the “death of the progressive left.”  It would erode support for key progressive goals, including redistributive economic policies and aggressive action on climate change.  He asked provocatively what we have heard about climate activist Greta Thunberg recently, and suggested that the pandemic will make protecting the climate “seem like another luxury from safer and more normal times.”

Cowen may be proved right, but progressives and Biden apparently did not get the memo.  Since Cowen wrote Biden has moved to the left and expanded his polling lead over Trump, and there are reasons to think the pandemic and the protests over police violence will shift the center of gravity in this country to the left.

There are some specific ways the pandemic is likely to increase support for the policy agenda of progressive Democrats.  The pandemic has highlighted gaps in our health care system that will likely increase support for universal health insurance.  The pandemic-induced recession may create an appetite for government spending to create jobs, including jobs to fight climate change.  Biden has proposed a massive green infrastructure program that polls well.  The plight of parents trying to balance work with the need to take care of children may increase support for childcare.  Covid-19 has revealed serious weaknesses in our aging unemployment insurance system, which seems ripe for a make-over.

These examples share a common logic that undermines the case for laissez-faire and may shift the mood of the country to the left in a fundamental and enduring way.

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The UI fiscal stimulus

Apropos my previous post, a new NBER paper by Casado et al estimates the effect of pandemic unemployment benefits on local spending:

The FPUC supplement to unemployment insurance of $600 ended at the end of July 2020. Prior to its expiration, the average weekly benefit paid was $812, which would fall to $257, implying a decline in the replacement rate of 68%. The replacement rate was roughly 1.25 in the latest data, so the new replacement rate would be roughly .4, all else equal. At the unemployment rate of .077 in the latest data, spending this reduction in benefits would lead to a decline in spending of 44%. If the FPUC supplement is reduced to $200, the replacement rate would fall by 44%. The implied reduction in spending from these benefits would be 28%. Even if the FPUC supplement is reduced to $400, the replacement rate would fall by 19% and spending would fall by 12%. Thus, substantial declines in the generosity of UI benefits are predicted to have dramatic adverse effects on local spending.

Sure, you can question the results, and wonder about the size of multipliers, but this could be a disaster and the only reasonable policy choice is to extend the UI benefits.

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The rational self-interest theory of politics meets Donald Trump

In a semi-rational world, Trump and Senate Republicans would have agreed to a reasonably generous economic relief package along the lines of the HEROES Act approved by the House.  Without an extension of the special pandemic unemployment benefits and aid to state and local governments, a humanitarian disaster is inevitable and a macroeconomic disaster a real possibility.  Trump’s executive orders are grossly inadequate to prevent mass homelessness and hunger.  This will quickly become evident.  Layoffs of government workers will mount.  How on earth do Trump and Republican members of Congress think they can avoid electoral accountability for the coming train wreck?  How will Trump explain breaking off talks and rejecting a much more generous aid package, when it will be obvious that a bigger package was needed?  What will Republican Senators say to their constituents?  Remember, the party of the president gets the blame for bad outcomes, deserved or not.

Maybe Trump still wants to win but doesn’t have the mental capacity to game this out.  Krugman argues that Trump is way out of his depth and has surrounded himself with sycophants who promise miracle cures; payroll tax cuts are just another hydroxychloroquine.  Some Trump critics have consoled themselves with the thought that even if Trump is evil, at least he’s incompetent and lazy.  There is something to this idea.  But it’s hard to shake the feeling that a president who understood where his electoral bread was buttered would be a real asset on economic policy right now.

There are other possibilities.  Perhaps McConnell feels his position as party leader will be threatened if he tries to move a bill without majority support within his caucus.  A few days ago I expressed cautious optimism that Republicans would not try to hobble a Biden presidency by destroying the economy in the run up to the general election.  But maybe I was wrong.  Or maybe Trump and McConnell are betting that their indifference to suffering will let them get a relief bill without measures to protect the November vote, or with more corporate goodies, or with less overall spending.  Whatever is going on, Republicans are playing a dangerous game.

 

 

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Elites versus the public on renaming army bases

According to the Washington Post:

Half of Americans oppose renaming military bases currently named after Confederate generals, while 42 percent support the changes. Once again there is a significant partisan split, with 81 percent of Republicans and 50 percent of independents opposed and 66 percent of Democrats in favor. A majority of Americans ages 50 and older are opposed to any renaming, while a plurality of those under 50 support the change.

Despite the fact that the public leans slightly towards keeping current names, military and political elites (with the notable exception of the President) seem to be fairly unified in favor of renaming.

Senator Mitch McConnell of Kentucky, the majority leader, told The Wall Street Journal last week that he would not block the effort to rename the bases, and in an interview with a Louisville radio station, he said he didn’t “have any problem” with renaming the bases for “people who didn’t rebel against the country.” He has urged the president not to veto the bill.

“The issue of Army bases being named after Confederate generals is a legitimate concern in the times in which we live,” said Senator Lindsey Graham, Republican of South Carolina. “I’m OK with a process that the Senate came up with. And there’s a lot of good things in this bill.”

So . . . what gives?  Why are Republicans refusing to play the race card here?  I can understand why military leaders object to having bases named after traitors, and they also need to create a force that can function effectively in a diverse world.  But what about Republican politicians?  Is this all being driven by members of Congress in tight races?  Is that plausible, given that most Americans oppose renaming?

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Democrats, please talk about carbon taxes

Or at least think about how you will talk about them in January . . .

It now seems likely that Joe Biden will win the presidency, and there is a reasonable chance that Democrats will capture the Senate as well.  If they do get unified control of the government, climate policy will high on their legislative agenda.  What is unclear is whether their approach will include a carbon tax.  This is troubling, because carbon taxes have very substantial economic and political advantages over other approaches to climate policy.

No doubt many Congressional Democrats understand the arguments for carbon taxes, although some progressives seem to be skeptical of using prices to reduce emissions.  Joe Biden’s climate plan says that “polluters must bear the full cost of the carbon pollution they are emitting”, which seems like an oblique reference to a carbon tax.  But so far Democrats have been avoiding the “t word” and instead emphasizing subsidies, direct job creation, and social justice, and this will make it difficult to switch gears after the election and implement a carbon tax.  The Democrats may be painting themselves into a rhetorical corner.

Any strong climate bill will face real challenges getting through Congress and maintaining political support.  Getting a carbon tax through Congress and preventing a public backlash will clearly require an effort to familiarize the public with the idea.  I believe this is possible, but Democrats (and Republicans) who support carbon taxation need to think about how and when this conversation will unfold.

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More economic wisdom from the Library of Economics and Liberty

In a post today at Econlib, David Henderson writes:

Postscript:

There was an unusually high percentage of good comments on my op/ed on the WSJ site. Here’s one I just noticed:

In Michigan, our Governor ordered auto insurance companies to issue rebates – due to folks driving less I guess.

But amazingly, our Governor who is owned by the teachers union, gave no such order  to rebate the portion of property taxes that go toward public schools. Even though there is no way teachers, who stopped in school teaching in March, provided the same level of service.

This needs to change.

Indeed!

This is, in fact, an absurd comment, strictly on economic grounds.  The cost of producing auto insurance has gone down due to the pandemic – people are driving less and having fewer accidents.  In fact, many auto insurance companies are offering rebates to customers as a good will gesture.  In contrast, it is not at all obvious that the cost of producing public education has gone down.  Of course, the quality of public education has gone down – on line learning is, for many students, a decidedly inferior alternative to in person instruction, and on line instruction does not provide child care to parents.  But as Henderson is well aware, price is driven by cost, not quality.  The bundle of goods and services I get when I go to the grocery store today is decidedly lower quality than it was 6 months ago, because I risk getting COVID-19 when I shop.  Yet the price of food has risen because the cost of grocery store inputs has risen.  (To be clear, I am not defending the governor’s order on auto insurance, or her handling of schools and property taxes, just explaining why the two situations Henderson is comparing are not at all comparable, on narrow economic grounds.)

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