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How To Succeed in Business Without Really Trying

This is a somewhat late 10th anniversary of the Lehman failure post. I am not going to write much that is new, but will restate an argument I have been making for years (following John Quiggin and Miles Kimball). It is trivially easy for the US Treasury (and other treasuries) to make huge profits on the carry trade. These huge profits are, I claim, actual wealth created by the operation.

In general, the argument is that, over all recorded long time intervals, returns to a diversified pool of risky assets (such as the market portfolio of stocks) are greater than returns to Treasury bills. The average difference in returns is huge (on the order of 5% per year). This suggests that long term public debt problems could be relieved (or eliminated) if Treasuries issued more low return bonds and purchased a diversified portfolio of risky assets.

The common response seems to be that it can’t be so easy and there must be some catch. I claim it is easy to beat the market, so why am I not rich. The response to that is that the huge gains are available to an agent with deep pockets and a long planning horizon — that is states which can borrow at low rates in their own currency.

I think the 2008 financial crisis was an accidental experiment proving providing very strong evidence for these claims. The US Federal Government purchases trillions in risky assets at prices higher than private agents were willing to pay. This was done to save the economy and it was assumed that it would cost the Federal Government hundreds of billions. In the event, the Tr easury and the Federal reserve system made the highest profits ever recorded.

The reason for the huge forecast error (largest forecast error ever) is that Congress banned consideration of the expected gains from bearing risk. Normally, the CBO scores policies based on the change in the expected value of the federal debt 10 years later. This means that the scores are risk neutral. In the case of the Treasury’s rescue efforts (TARP and the earlier rescue of Fannie Mae and Freddie Mac) they were ordered to mark assets to market — to assume that risky assets had the same value for the deep pocketed infinite horizon Treasury as for private investors (which include wealth managers investing other people’s money who are fired if they have a few quarters of sub-market returns). It was possible to calculate the expected value of corrections to the estimates as uncertainty was resolved. It was in the hundreds of billions of dollars. Almost everyone was surprised by the result that things turned out as (mathematically not subjectively) expected. Barney Frank was the only policy maker who noted this before uncertainty was resolved. He was pilloried for having been soft on Fannie Mae before 2008, and had a strong personal interest in arguing that the bailout would not be a disaster for the Treasury. Also he turned out to be right.

Just google Fannie Mae profits and get to the latest report

Looking at 2017 as a whole, I am very pleased with our progress. We paid $12.0 billion in dividends to Treasury in 2017, bringing our total dividends to taxpayers to $166.4 billion. This compares to the $119.8 billion in draws that we have received or expect to receive shortly. Our pre-tax income was $18.4 billion, very much in line with pretax income of $18.3 billion 2016.

Now the $119.8 billion does not include interest paid on the Treasury securities sold to get the money to loan to Fannie Mae. These interest rates were near zero (Tand could have been even lower if the Treasury issued only Treasury bills and didn’t pay investors to bear term risk). The money sent by Fannie Mae to the Tresury does not sum up the gains to the Treasury which currently owns preferred shares, 80% of the common stock (if it were higher they would have to consolidate accounts and violated the debt ceiling) and the rights (just take but with the approval of judges) to all future dividends.

The huge profits were a side product of the effort. The main point of the rescue is that it was necessary to prevent a total collapse of the housing industry. In the crisis years, Fannie Mae and Freddie Mac were bearing the vast bulk (80% IIRC) of default risk on newly issued mortgages.

Of course Congress’s conclusion is that something has to be done to eliminate the terrible problem that a Federal Government agency is too successful in a market. That has to be inefficient because it is socialism and look at Venezuela. There are proposals to do something about this problem of a hugely profitable government agency. They never go anywhere fortunately. The arguments are
1) Fannie and Freddie are subsidizing residential investment
This is true. No one is forced to do business with them. Mortgage initiators do because unloading risk on Fannie and Freddie makes it possible for them too to get high profits. But the cost of this subsidy was negative 12 billion last year. So why is it a problem ?
2) Fannie and Freddie are sucking money out of the economy. Their profits are like a tax.
Not so true. Their profits are the result of private sector agents choosing to trade with them.
3) If there is another great recession, they will have huge losses automatically implying a larger budget deficit exactly when the economy is depressed.
True. They also serve as an automatic stabilizer. This is a good thing. It is better for the Treasury to lose money during recessions than for private agents to lose the money. Since the Treasury belongs to citizens, rational people would cut spending if it lost money (this is called Ricardian equivalence). But you make policy for the people you have not the people Fresh water economists want. In the real world Treasuries hide profits and losses from people who don’t act as fully rational agents (this is what Ricardo actually wrote).
4) It can’t be that easy. Why doesn’t everyone do that ?
Not everyone can borrow trillions at low interest rates
5) It’s socialism
Yes. So ?

This was supposed to be a brief post. After the jump, I discuss TARP and the really big bailout — QE 1.

Before I want to complain. My assertion is that partial public ownership of the means of production would benefit the country. Yet I often find myself criticized by leftists who think I am soft on bankers. I don’t understand this. It is certainly true that the 2008-9 bailouts were good for bankers. That doesn’t mean they were bad for the rest of us.

It also doesn’t mean that similar operations now that the financial system isn’t in crisis would be good for bankers. The other complaint is that, since the Treasury can borrow at low interest rates, publicly owned financial services agencies (such as Fannie and Freddie) have an unfair advantage. They can easily drive private firms out of currently profitable markets because the immense debt capacity of the US Treasury makes risk bearing and maturity transformation cheap. This is unfair to the poor bankers who can make huge incomes doing something that modestly paid bureaucrats can do better. Cry me a river.

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The Future Isn’t What It Used to be But I will Alway Comment on Krugman

I try to avoid forcasting, but I confidently forecast that, in the future, I will continue to try and try to find cases on which I disagree with Paul Krugman.

In The Economic Future Isn’t What It Used to Be (Wonkish) Krugman notes that forecasts of potential output of the US and the EU are now far below what they were in 2008. He argues that this probably shows a genuine long run damaging effect of the great recession (following Ball,Fatas, & Summers (listed in alphabetical order)). Following Blanchard and Summers, he calls this hysteresis (introducing the word to economic was brilliant) . Finally he argues that this is immensely important, because if demand shortfalls cause permanent damage it it is much more important to fight them compared to say, inflation.

I agree, but I want to stress a point of partial disagreement.

Krugman notes the reported decline in estimates of potential output for given years (so the 2018 estimate of 2018 potential output is far below the estimate of 2018 potential output in 2008). He considers 3 cleverly named explanations of the pattern happenstance, hypochondria and hysteresis. The third is his favored hypothesis that most of the change is a true change in potential output due to slack demand.

Happenstance would be a coincidental exogenous decline in the rate of growth of potential output which happened, by pure coincidence, to occur at roughly the same time as the great recession. Krugman dismisses this (following others) by noting that the decline in estimated potential output is greater in countries who experienced more severe recessions. The happentance argument requires not one coincidence but dozens across countrie.

The hypochondria hypothesis is that potential output is what was forecast and actual output is far below potential output. Krugman argues against this by considering the simplest model of potential output which is output plus a constant times the unemployment rate (maybe minus that constant times a constant guess of the natural unemployment rate). This model is called an Okun’s law model. Like all sensible people, he assumes that official etimates of the natural unemployment rate are nonsense, but he notes that the actual unemployment rate in the Euro-zone is now 8.2%, shockingly high by US standard but lower than the average from 1990 through 2008. If one assumes that the Eurozone natural rate is actually 4%, then one concludes that potential output is higher than current output, and that potential output in the 90s was higher than then current output. This means that the change in potential output is not misseatimated and has, in fact, been extraordinarily small, and that forecasts of potential made in 2008 were too pessamistic to exactly the same degree as current forecast, so the change in the forecasts reflects a true change.

This would be convincing except for the facts that actual estimates of potential output are based on much fancier models, which are less robust that the super simple Okun’s law model, and that forecasts of potential output are based on a third model (that it it is standard to not evaluate the model used to estimate potential output by comparing out of sample forecasts to outcomes — the result of this standard exercise would be too humiliating).

ultra wonkery (which may be totally wrong) after the jump

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Sour Grapes

As I write, Brett Kavanaugh is not yet a Supreme Court Justice. I assume he will be one soon. I am going to argue that this is the best of the bad possible outcomes.

Yes this is making the best of a bad situation and pathetic motivated reasoning. Yes Collins’s speech drove me into an almost insufferable panic and despair (don’t ask me ask, my soon to be ex-wife if I don’t get a hold of myself [by blogging]). Consider this post emergency marriage therapy (or my bothering you by my recognition of her 8th amendment rights).

First it is clear that a very large fraction of the US public believe that Kavanaugh is a criminal and think it is very wrong for him to serve on the Supreme Court. In polls this seems to be a plurality not an absolute majority.

Also, on Thursday, he demonstrated that he is a raging partisan who aims to use his robe to punish his political adversaries. I think this was already clear to anyone who paid attention, but it is now clear to many people who looked the other way. They include lifelong Republican Justice John Paul Stevens a retired justice who argued against confirmation of a new one. This is unprecedented. The ABA reopened their evaluation of Kavanaugh when it was too late to influence the Senate. I am pretty sure that is unprecedented too. 2,400 law professors signed a viral petition arguing against confirmation of someone who was likely to be incredibly powerful. I suspect this is unprecedented event 3.

This means that the perceived legitimacy of the Supreme Court is in great danger (as it was in 2000 and as it was when the Warren Court decided to take the Constitution seriously). I’d also say that Justice Kavanaugh will attract attention to the misdeeds (torts not crimes) undoubtably committed by Justice Thomas and his felonious denial of those facts under oath. He was never a legitimate Justice, and that will no longer be over looked.

5-4 decisions with Kavanaugh and Thomas in the majority will be perceived to be illigitimate by a very large fraction of the population (I guess eventually reaching a majority but maybe just a plurality). This is exactly what Chief Justice John Roberts fears most — and can prevent any time he wishes. 5-4 decisions with Kavanaugh in the minority will not destroy the perceived legitimacy of the Court or endanger the constitutional order. I hope Justice Roberts (who clearly votes based on the outcome he prefers and can rationalize anything) will act accordingly.

Also packing the court is a very extreme act which would definitely endanger the Republic. It was done — in the 1860s. The congress that changed the number of justices also impeached President Andrew Johnson and refused to seat representatives and senators elected in Confederate states. This followed the Civil War — after killing each other for 5 years Americans were prepared to change the number of justices if necessary.

It was threatened by F. Roosevelt leading to “a switch in time saves nine” a sudden shift from declaring the New Deal unconstitutional to accepting it, because the alternative was a packed court. I may have made a mistake above. I guess Roberts fears court packing even more than he fears perceived illigitimacy — the two are so closely linked it would be hard to tell even with ESP.

One point is that he can avoid both by voting with the Democrats.

Another is that desperate times call for desperate measures. Court packing is preferable to submission to an undemocratic oligarchy and armed revolution and the GOP may leave us only those three choices.

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Dumb and Dumber

Two bits of news from Twitter.

The GRU employed 305 morons who have been identified as GRU operatives, because they registered their cars at a GRU office address to intimidate the traffic police. In theory automombile registries are not available to the public. In Russia everything is available for a price.

Click the link and read the thread.

Yep they are a bunch of corrupt buffoons who probably didn’t manage anything except for hacking the DNC, John Podesta and Smartech. What is Smartech ?
It’s the internet company that the Bush administration used to evade the Presidential Records Act hiding 22,000,000 e-mails which should have been preserved (“but her e-mails”). Unlike Clinton.com, it definitely was hacked by the Russians . Projection it’s always projection. Always.

It was also used by Senator Graham whose sudden switch from Trump critic to Trump fan has lead many people to assume he is being blackmailed. It was also use by Senators Corker and Flake before their mysterious retirements (and Flake’s incomprehensible Kavanaugh related decisions — damn I was trying to not name he who can not be named).

Click this link. It’s just a thread on twitter, but it has links to sources. Also I knew many of the facts (from various sources some of them reliable) but didn’t know about Flake and Corker.

So the corrupt idiots seem to have managed to get kompromat on 3% of the US Senate — probably enough to decide who will be on the Supreme Court.

I have one question which I urgently want answered. Did Susan Collins use Smartech ? I won’t care in 100 minutes when she announces her final vote on Kavanaugh, but I want to know now.

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Textualism and The Exegesis of the 1982 Georgetown Preparatory School Yearbook

My understanding is that Bret Kavanaugh presents himself as a textualist, following Antonin Scalia he argues that words in the constitition and laws should be interpreted using their conventional meanings when they were written. This is in contrast to the different approach based on considering legislative history (which is impossible for the main body of the Constitution because the procedings of the Convention were secret). It is in very marked contrast to the approach based on following precedent and deferring to the interpretation made by other judges in the past. This third “living constitution” approach makes statute law like common law mainly a body of precedents. Notably over here (in Rome) no one argues for the third approach. It is a truism that “giurisprudenza non è legge” (jurisprudence is not law I translate un-necessarily since English legal terms come from right here in Rome (unlike the English legal tradition)).

Although not a lawyer, I felt the need to present pretentious introduction so that I might address the question “have I boofed yet”. Don’t worry, I have absolutely no intention whatsoever to answer this question, but I hope you are not shocked to read my confession that, at an earlier period in my life, I have, in fact, farted.

Addressing the Senate Judiciary Committee eminent judge Bart Kavanaugh argued that the slang term “boofed” which he wrote on his page of the 1982 Georgetown Prep yearbook should be interpreted as meaning “farted”. I see that he has no respect for or loyalty too textualism.

First an actual textualist would consider context. The slang term appears in the printed passage (among the oldest surviving exemplars of Judge Kavanaugh’s opus) “Judge, have you boofed yet?” Judge Kavanaugh asserts that he was publicly asking a close friend if he had, as of then, at any time in his life, farted. The word “boofed” alone doesn’t clearly refer to something other than farting. The additional (highly ironic) proper name “Judge” and the words “have”, “you” and “yet” provide enough context to prove beyond reasonable doubt that Judge Kavanaugh is a perjurer, criminal, and felon.

But a textualist considers more than the context within the document undergoing learned exegesis. It is necessary to inquire as to how the word was used by contemporaries of the author. Kavanaugh must explore, and must ask the eminent Senators to explore, 35 year old discussions of anal sex by teenagers to be true to his stated principles.

Or he could just admit that when he was 17 he publicly asked a friend if that friend had fucked a butt yet.

An embarrassing youthful indiscretion is not a felony. But Kavanaugh chose to lie, because that’s what he does.

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Paul Krugman Declares Victory

Paul Krugman put many of his thoughts together here “What Do We Actually Know About the Economy? (Wonkish)” Basically he concludes that some economists are confused but Paul Krugman knows a lot (no one has ever accused him of being diplomatic). Of course I agree with him.
However, I am very pleased to note that I finally find one or two points of disagreement.

I’d just click the link but to try to summarize

“Macroeconomics is better than you think, microeconomics worse, and data are limited”

[skip]

in an important sense the past decade has been a huge validation for textbook macroeconomics; meanwhile, the exaltation of micro as the only “real” economics both gives microeconomics too much credit and is largely responsible for the ways macroeconomic theory has gone wrong.

[skip]

Now, the thing about IS-LM-type analysis is that using it isn’t that big a deal in normal times, but it makes some very strong predictions – predictions very much at odds with many peoples’ priors — about abnormal times. Specifically, this kind of analysis says that when there is a really big adverse shock to demand – say, from the collapse of a major housing bubble – there’s a regime change, and neither monetary nor fiscal policy have the same effects they do in normal times.

On the monetary side, old-fashioned macro says that once interest rates have been driven down to the zero lower bound, monetary policy loses traction.

[skip]

What about fiscal policy? Traditional macro said that at the zero lower bound there would be no crowding out – that deficits wouldn’t drive up interest rates, and that fiscal multipliers would be larger than under normal conditions.

The overall story, then, is one of overwhelming predictive success. Basic, old-fashioned macroeconomics didn’t fail in the crisis – it worked extremely well. In fact, it’s hard to think of any other example of economic models working this well – making predictions that most non-economists (and some economists) refused to believe, indeed found implausible, but which came true. Where, for example, can you find any comparable successes in microeconomics?

Then by microeconomics he means mostly microeconomic theory (the micro on which the Chicago school decided Macro had to be founded) and by data without theory he means accidental theory — basically assuming any parameter you estimate is stabe so any estimate reveals the law of motion of the economy.

I have mild criticisms of each of the three parts of the essay.

First on macroeconmics we are short one equation. Krugman discusses IS-LM but 1960s macro was IS-LM-Phillips curve. In any case, to complete the model one needs a model of aggregate supply. Krugman doesn’t mention the death, rebirth and re-death of the Phillips curve. 1960s macro implies that wage inflation should be increasing. The change from 10 to 3.9% unemployment with a very modest change in the rate of nominal wage inflation is a mystery. The unreversed decline in the share of labor is a puzzle (not to mention a tough problem for workers). This is also a case in which Paul Krugman in particular made predictions which were contradicted by the data. He mocks those who forecast hyperinflation in 2010, but he forecast deflation. Instead wages and prices conditnued to increase albeit very slowly. Krugman recognizes that even he didn’t appreciate 1960s macroeconomists (for example James Tobin) who stressed downward nominal wage rigitidy. This shows that off the shelf 1960s macro wasn’t a total success (largely because some of it was left on the shelf).

The current puzzle is worse. It has lead some people to use the wages taboo site:angrybearblog.com . The failure is the exact opposite of that predicted by Friedman and Lucas who argued that the correctly understood Phillips curve (as a structural causal relationship) is not a downward sloping curve but a vertical line. The data seem to think it is pretty much a horizontal line. But changing parameters are a problem for macroeconomics no matter which direction they change.

On microeconomics, Krugman briefly praises empirical micro, but then goes on to criticize the theory.

I am contrarian enough to immediately try to think of a success of a surprising prediction based on micro theory which non-economists found implausible. The prediction was popularized by Krugman who argued that the California electricity crisis would be resolved if the Federal Government put a maximum price on electricity flowing across state lines. The argument was that the crisis was created by electicity companies (including Enron) and that, if they couldn’t charge huge prices to relieve shortages, they wouldn’t create shortages to relieve. The hypothesis was based on a close reading of California’s rules for electricity pricing and the guess that that really was time for some game theory. When they finally intervened, the shortages vanished. Then Enron went bankrupt and was investigated showing that the game theory was entirely exactly correct. I think this was good micro theory. They key point was that economics 101 (really 1st semester economics 101) was inadequate because one can’t assume the wholesale electricity market is perfectly competitive. It is dominated by a few firms hence the game theory. This shows how good micro is based on sweating the details. Someone not involved in the scam had to read the regulations to figure out how they were being manipulated.

But more generally Krugman’s review of micro does not correspond to the current balance of articles and citations, because most research is now empirical. Micro theory still exists, but it doesn’t interfere with empirical work in microeconmics.

This brings me to Krugman’s critique of the accidental theorist. He considers how one would go wrong assuming correlations are constant whether or not the economy is in a liquidity trap. This is, indeed, an example of how theory is useful. The theory is very very simple, the interest paid on cash is zero and can’t be negative (except for storage costs).

I really agree entirely with Krugman that one can’t analyse data without assumptions, without a specification or prior or something. But it is a bit odd to call all identifying assumptions “theory”. This is technically true but highly misleading. Non-economists don’t perceive arguments about keeping cash in a safe as theory (although they are theory in a way). Very generally, a lot of the new empirical economics consists of looking for natural experiments– often using the states which are the laboratories of democracy as uh laboratories.

The theory is also common sense. it is immediately comprehensible to ordinary people who also find it convincing. It is very very different from the sterile theory which lead macroeconomics astray. It is also very different from the industrial organization applied game theory which was useful when discussing elecriticy shortages in California, and, finally, not at all like the theoretical work for which Krugman was awarded a Nobel memorial prize.

Finally, new empirical micro is relevant to macroeconomics. The micro distribution of changes in wages with a huge spike at zero which appeared around 2009 is very strong evidence for downward nominal rigidity. Basing macro on the assumption that people’s behavior fits micro observations of peoples’ behavior is a way to micro found which is completely unlike the project started in the 70s. I don’t think it should be dismissed as un-necessary, like the failed effort or accidental theory.

I also don’t think Krugman dismisses it. But I do think his emphasis is other than ideal

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Krugman 10 years after Lehman

I have to link to this column, which is better than Krugman’s average.

It is mostly Krugman’s usual shrill praise of fiscal stimulus. I find two things notable. One is that he has no time or column inches for unconventional monetary policy. He’s back to “monetary policy was ineffective because we were at the zero lower bound on interest rates.” Being an extreme skeptic about the effectiveness of QE and all that, I am pleased.

Second he stresses housing not high finance

Why didn’t financial stability bring a rapid bounceback? Because financial disruption wasn’t at the heart of the slump. The really big factor was the bursting of the housing bubble – of which the banking crisis was a symptom. As Figure 2 shows, the housing bust led directly to a dramatic drop in residential investment, enough in itself to produce a deep recession, and recovery was both slow and incomplete.
[figure 2 about here[
The plunge in home prices also destroyed a lot of household wealth, depressing consumer spending in general.

He pretty much has gone full Dean Baker. I very much agree with Baker.

So what has the macroeconomics profession learned ? Hmmm there still is no housing sector in the work horse models — it is assumed that all investment is business fixed capital investment. There is still no effect of perceived wealth on consumer spending — the Euler equation still rules.

In contrast there is now a huge literature on the importance of financial instability for macroeconomic aggregates. The simple point that the financial crisis was brief and the great recession wasn’t has not been reflected in the academic literature (which I have read).

update: See Barkley Rosser (in comments) noting he wrote independently from Dean Baker (and sometimes earlier).

Also Krugman wrote another post about it with FRED graphs

It is interesting that if you are a star (Krugman or Bernanke) you can grab em by the reduced form & do extremely simple empirical work. Sadly, one must have a reputation for people to take seriously one’s impressions when eyeballing FRED graphs.

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Noah Smith asks how did Alt-right Nativism go Main Stream

This is a brilliant Twitter essay. Click the link, but I think it can be partly summarized with the first and last two tweets.

1/I noticed Brit Hume defending Tucker Carlson’s remarks about diversity today, and it made me think about how ideas go from the political extremes to the political mainstream. I kind of have a model in my head for how this process happens.

if media entrepreneurs like Bannon and Carlson had chosen to focus on things like kneeling football players or trade wars or MeToo, the issue of diversity might have been a side issue, and lots of people on the Right might be pro-immigration libertarians to this day!

20/Thus do media entrepreneurs harness the incredible power of oppositional, tribal thinking to control our minds and tell us what to believe.

I have three thoughts.
1) read Noah not me.

2) It is interesting that some people are so smart that they can overcome the twittyness of Twitter and write well using it as a platform and medium (see also @HeerJeet). Noah is careful to include a link in each tweet, so each point is supported by evidence (one can trust or click) and his typed text is an abstract of a longer essay. Also he has a valid point.

3) Of course he leaves things out.

He focuses on Steve Bannon and Tucker Carlson. The idea (already perfectly summarized in his last tweet) is that conservatives can be made to argue for anything by provacateurs who provoke liberals into arguing against it. He notes that he left Trump out of it. I have to add two things.

His stream doesn’t mention Obama. I think it is clear that the election of a half Kenyan president provoked nativists. They basically said so. The also brilliant Ezra Klein explains here.

I would also mention the research of Theda Scocpal and students. They went to Tea Parties and talked to people. They noted that the kept hearing about illegal immigrants and not about deficits or bailouts.

I think most right wing Americans were nativists ten years ago. The conservative elite are opinion followers as much as opinion leaders. Another story about the mainstreaming of xenophobia is “I must catch up with those people because I am their leader” Ledru-Rollin 1848. Having presented evidence from 1848 that this is nothing new, I still want to suggest that new media make it more possible for ordinary people to guide the leaders with clicks and comments and such.

In conclusion, I suspect that, given the xenophobia of the base, the conservative elit mainstream was bound to follow. entrepreneurs in media and elsewhere find niches, that doesn’t meant they create them. After the jump I will make a strained analogy.

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In Defence of Comrade D’Souza

David Frum does not have a favorable view of Dinesh D’Souza and his latest movie, “Death of a Nation.” He argues sthat D’Souza’s alleged history is fiction, and that D’Souza is governed almost entirely by resentment of all of the experts in all of the fields in which he dabbles, who note that he is dishonest, partisan, and unoriginal.

It is alarming that D’Souza has become prominent again and is praised by the President.
However, I do agree with D’Souza and disagree with Frum on one critical point. D’Souza claims to have remained loyal to the movement he had joined by the the time he went to college. Frum argues that D’Souza has changed ( I admit he ends with a question). Frum can’t claim that D’Souza changed because he decided to hitch his wagon to Trump or Trumpism — D’Souza is the guy who wrote that the left is responsible for 9-11 because we provoked Islamic terrorists with our liberalism (see the quote in Frum’s essay). He hasn’t declined since then, there is no place lower to go.

Frum argues that conservatism used to be about something other than D’Souza’s mixture of racism and resentment. He notes that the old debates are forgotten. He gives one (1) example

Many of the disputes of the 1980s that excited me as a young conservative have subsided into forgetfulness. Who recalls now that it was once controversial that telephone services should be competitive rather than a regulated monopoly?

I am old enough to remember the breakup of ATT and I do not remember any such debate. ATT argued against the career prosecutors at the Justice Department, but I never read anyone else who agreed with them. The decision was made by a judge applying the Sherman antitrust act. It was an example of strict regulation, a state intervention n the economy. There were people who argued that the Sherman Antitrust Act should be reinterpreted so that it was toothless. Tney won the argument. They were and are Republicans. Frum’s one example of good policy by Reagan was a decision to not interfere with an ongoing case, but rather to allow career prosecutors (bureacrats) to continue as if there weren’t a new President.

Frum is not ignorant. He knows that the ATT breakup is conflated with deregulation (even though it was regulation not deregulation) because if followed soon after the deregulation of airlines, interstate trucking and beer brewing. He knows he can’t ascribe that actual deregulation to conservatives, Republicans or Reagan because the bills were passed by congresses with huge Democratic majorities and signed into law by Jimmy Carter. Those werenì’t the “disputes of the 80s” because they were resolved by 1980 at the latest.

In contrast Republicans brought us “voluntary” import quotas on Japanese made cars and steel tariffs (not just Trump — Bush imposed them too). Somehow Frum managed not to notice that the pro-market party’s symbol was and is a donkey not an elephant.

Yes the ATT breakup was caused by the political struggle of a Republican politician — named John Sherman. Critiquing D’Souza, Kevin Kruse wrote that if one has to go back to the 1860s to argue that the GOP is the party of civil rights, one has a weak case. Similarly, if one goes back to 1890 to argue that the GOP is the pro-competition party, one has a weak case.

Aside from the fact that the alleged controversy with anti-capitalist supporters of ATT is not just forgotten, but was udetectable at the time, Frum does not mention foreign policy. There the key debate was about the alleged clear and present danger. Conservatives were sure that the CIA under-estimated the power of the USSR and the world communist movement. They (Kissinger, Kilpatrick not minor figures) argued that we had to work with right wing dictators to face the terrrible threat. Then the USSR collapsed. Frum doesn’t discuss the debate over the need to overlook human rights violations in El Salvador, because it was vitally necessary to keep the FMLN out of power (remind me which party nominated the current president of El Salvador ?). It is necessary to Frum that the military and foreign policy debates of the 1980s be forgotten, because he was totally wrong.

He also doesn’t mention voodoo economics.

I’d say D’Souza is at least consistent. He is a racist just as he was in 1981. He is consistent in his single minded hatred of liberals and Democrats. Frum, in constrast, has changed completely since he was fired by the AEI.

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Polling the Left Agenda — Finally

Click this link. Data For Progress decided to ask people about policy proposals which very serious centrists consider way too far left for America. American voters respond differently.

As should already be clear from existing polls (click and search for “fair”), there is strong support for egalitarian populist redistributive public policy. At Data For Progress, they chose to emphasize the positive — four proposals with overwhelming support, but I think it is just as striking that opinion is almost equally split on a top marginal income tax rate of 90% (2% more oppose than support) and universal basic income (2% more oppose than support).

In particular, a (very narrow) plurality of whites without a bachelors degree support a universal basic income. One way to summarize the results is that pundits’ guesses about public opinion match the opinions of college educated whites (surprise surprise). That is the group least enthusiastic about universal basic income (by far) (OK I admit I am white and have university degrees so I should say “we are” but like hell i’m going to be classed with my fellow White American College educated opponents of UBI).

I suppose it is important that an overwhelming majority support a jobs guarantee. The problem of finding useful work for millions of people (and not crowding out unsubsidized private sector employment) doesn’t worry people anything as much as the risk that one lazy person takes advantage of cash welfare once.

The key question for Democrats (and the USA) is why did most of a group of people more of whom support than oppose UBI vote for Trump ? How can there be such a huge gap between bread and butter big dollar issue polling (where the median US adult is to the left of the mainstream of the Democratic Party) and voting ?

I think the explanation is that the partisan gap is a partisan gap in beliefs about matters of fact (what has happened) not on policy proposals. Do click the link (I can’s summarize all the data) but one of the key patterns is that responses are surprisingly similar for rural and urban voters, the white and non-white working classes, and Trump voters and Clinton voters. It is clear that opinions the polled issues are not key to deciding votes. I’m sure that the authors are sure this is because Democrats are too timid to appeal to the public (at least that’s one of the things I think). But I want to stress another point.

There are some fact polls — people are asked to answer questions which have a correct answer (where was Barack Obama born — what fraction of the US Federal Budget is spent on foreign aid). On those questions, the answers given by Republicans and Democrats are very very different.

I want to see polling data on 2 dimensions — not the usual equaltiy on the x axis, liberty on the y axis, but values (or priorities or policy preferences) on the x axis and questions of fact on the y axis. Dataforprogress.org makes more convinced than I used to be (which is barely possible) that the Republicans are a coalition of the rich and selfish (college educated white Republicans) and the misinformed (patriotic populist voters who support universal basic income and voted for candidate bone spurs next to his golden toilet).

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