Fed Reform?

Matt Yglesias has yet another post up pondering why Fed Chairman Ben Bernanke is continuing to ignore the problems of unemployment in our economy and instead is constantly focus on the non-existent threat of inflation.  As he sees it, the problem is Bernanke's poor communication skills and weak analysis:

He [Bernanke] said that if the economy improved enough, tapering would begin and he said it even though inflation is low and inflation expectations were falling. It's essentially a posture that looks at QE purchases as evil per se, and thus something to be halted in the face of good news even in the absence of inflation. The Evans Rule for interest rates embeds the dual mandate in the correct way, saying that mass unemployment will lead the Fed to temporarily ignore a bit of inflation. The taper criteria did the reverse, saying that good economic news means tighter money even if inflation is well-behaved. With that kind of dual mandate in place, bad news out of GDP revisions means tapering is less likely which means the stock market rises. Meanwhile, we're all left to cross our fingers and hope that the GDI number proves more accurate...

What we need is a new statement from the chairman that good news is not bad news and there's absolutely no chance of tighter money as long as inflation stays below target.

This could quite possibly be true, Bernanke could just be bad at communicating his intentions to markets and could just have a tendancy to royally screw up his press conferences and statements.

Or not.  As I see it, economists have been arguing for years now that the the reason the Fed has constantly prioritized fighting fantasy inflation over doing something about unemployment is a technical failure.  Analysis is incorrect, the correct information is not communicated or is done so in the wrong way.  Unfortunately their is a far simpler answer; while the Fed is required by law to keep inflation and unemployment low they actually don't believe in doing that and act accordingly.  That is if Bernanke et al. believe that unemployment is irrelevant (like the European Central Bank seems to think) their behavior may be bad policy, but it's not at all poor performance.  In short, a focus on nonexistent inflation while simultaneously ignoring unemployment is a feature, not a bug.

To broaden the conversation, I think it's important visit the political debates back in the 70's about where the dual mandate came from.  Originally Senator Hubert Humphrey teamed up with Congressman Augustus Hawkins from the Watts section of Los Angels to purpose a tough dual mandate provision for the Fed that would require them to aim for 3%(!) unemployment and if that failed offer New Deal style public works jobs as a stop gap.  Unfortunately Humphrey and Hawkins lost to powerful interest groups and politicians, including the President Jimmy Carter, and what we got instead was a toothless law that "required" the Fed to work towards full employment and low inflation, but had no mechanism to ensure that's what it actually did.

I'm not saying that Humphrey-Hawkins should be revived, but it's pretty clear that the present institutional setup of the Federal Reserve is not working for the American people, and hasn't been for some time now.  We should continue the discussions of Bernanke's follies, but progressives should also look for ways to fix the systemic problems currently going on as well.  Looking at a way to rewrite the rules of the Fed and how it operates should be at the top of that list.  

It's The Policy, Stupid

Jonathan Chait had a good article about Paul Ryan's attempts to re-brand himself as a economic populist with stunts like going on Morning Joe to declare “I'm focused on poverty these days.” While also trying to cut anti-poverty programs like Medicaid and SNAP (the new version of food stamps).  It touches a lot on the goofiness that is Paul Ryan but struck me as good evidence that the GOP reaction to the 2012 elections will be mainly cosmetic changes to things like messaging, with little if any change in the substance of policy.

After their 2012 election loss all sorts in the GOP and affiliated with it started talking about what went wrong and how to fix it.  Some argued that what was needed was changes in messaging to appeal to the emerging segments of the electorate (minorities, women, young people) that have been shunning the GOP as of late.  Another group felt that these defections where not do to poor communication strategies, but rather the fact that the GOP has lost touch with what voters are really concerned about, or at the very least what these particular groups care about.

For all the sound and fury surrounding people like Josh Barro, it still looks like the cosmetic messaging crowd is wining the argument.  I've written before on what I think about Paul Ryan, but for better or for worse, he does seem to be the policy leader of today's Republican Party.  The fact that he thinks his huge cuts to benefits to the poor will be okay as long as he says the correct talking points on Morning Joe seems really strong evidence that major policy changes are not in the works.

Maybe reformist forces will emerge as David Frum predicted above, who knows.  But ever time I read a story like this I am struck by how difficult this change really is going to be.  Adopting new political rhetoric is one of the easiest things to do in politics, and politicians do it all the time.  By the way, this is a growing trend, the College Republicans came up with a very similar take: change the message, not the policy.

The Real Reason People Want To Cut Entitlements And An Update

Matt Yglesias made a great point today the fact that the US Chamber of Commerce is continuing to demand entitlement cuts despite the fact that healthcare cost increases are slowing down and future deficit projections have fallen as well.  As Matt sees it, the reason business elites want to cut entitlements is not to save them or stop us from turning into Greece.  Instead the powers that be hate things like Social Security in principle and use media coverage of big deficit numbers as a way to try and whip up support for their ongoing political goals of cutting entitlements.   As Yglesias has argued:

The Economy consists of adding up all the economically valuable stuff that happens. All the goods and services and labor that are bought and sold. And with most government spending, you can make some kind of case that the spending boosts The Economy. It boosts The Economy because we need infrastructure or educated workers or healthy ones...And mailing a check to your grandma doesn't fit the bill...

The important thing to note about this hatred [of Social Security] is that it's not unjustified. The haters aren't wrong. I loved both of my grandmothers, but they spent a lot of years just sitting around consuming goods and services while producing nothing of economic value. Retired people don't boost The Economy. Trimming their cost of living adjustments does. The more you trim, the more boost you get. Doing the reverse of Social Security and saying that everyone over the age of 65 has to write a check to the government or be turned into Soylent Green would boost The Economy even more.

Which isn't to say we should do any of that. But it is to say that there's an essential tension here. Most of us like the idea of spending funds on bolstering the living standards of elderly people. But the Job Creators who want public policy to serve the needs of The Economy are always going to dislike that idea. There's no magic formula of "tweaks" that will end the dynamic. Taxing working people to hand out free money so people don't need to work is antithetical to the spirit of capitalism, and so the leaders of the business community and their friends in government will always want to curb it. 

So while it might be interesting to have more policy descriptions about how to structure our increasingly wealthy increasingly old society, people at the US Chamber just aren't interested in that.  Don't expect them to change their tune, even when new numbers show their fear mongering is unjustified.  They are driven by ideology, not genuine concern.

***********************************

In other news I am now the associate politics editor for The Good Men's Project.  I will be writing/editing about national politics over there at least a few times a week starting next week.  I will also be working with the other politics editor, Minneapolis's own Miranda Wilson!  Check out our intro post here.  Longwalkdownlyndale will continue to be an ongoing project of mine, but feel free to go over there as well.

How We Talk About Foreign Policy

I have a theory about how foreign policy is discussed in our media: foreign policy is barley discussed at all, what is discussed is how foreign events might influence politicians and politics in Washington.  This is not to say that people don't discuss other countries, they do.  But they don't discuss foreign policy as I understand it, that is the question of what policies our country should have when dealing with other countries.  Instead, when most people discuss foreign policy, or more properly "Foreign Policy," they are really just talking about American politics.  In particular, how the President is failing to magically transform the rest of the world into societies that we approve of more.

Jim Newell had a funny round up of today's Sunday news shows over at Salon and his summation of how they discuss events in Syria are telling.  First up "This Week" :

First, and solely because it starts a half-hour earlier than the other shows, we’ll check out “This Week,” where Jonathan Karl is substituting for George Stephanopoulos. “Is the U.S. going to get involved in another war in the Middle East?” Always, Jonathan Karl, always. Let’s see what Marco Rubio has to say.

Rubio, a war-friendly Republican, says that President Obama blew it by waiting so long to get involved in Syria. (Assuming this really is the broad change in strategy it’s been billed as.) Now who are we giving arms to? Al-Qaida “elements.” What would President Rubio have done? Karl asks. Well, Rubio never would have allowed it to get to this point, of course. If Rubio were president, Syria would be a sunny democratic Utopia already, because he would have managed it so perfectly, you just have no idea how perfectly President Rubio would have done things.

So basically we have someone running for president criticizing the current president who happens to be from another party.  But wait there's a pannel on foreign policy too:

Jeremy Bash, “former chief of staff to the CIA director,” is here to defend Obama’s decision. “Now is the right time to arm the rebels,” after Syria “barreled” across that red line of using chemical weapons. ABC News’ Martha Raddatz would like a no-fly zone, if the point is to make a significant difference whatsoever. Bash is talking about how difficult it is being in the room where these decisions are made, so everybody calm down.

How does the use of chemical weapons change our national interest anyway? George Will asks. (No one ever answers this question.)

Glory be, it’s a panel with Newt Gingrich. “This will turn out to be one of those cases where the United States sets itself up to be defeated,” and Putin will be smiling.

So the panel gave us, at most, a charlatan who resigned in disgrace making bad Cold War analogizes and an incredibly broad question (what are "national interests" anyway) nobody even acknowledges.

The other Sunday shows don't do much better.  Here's the discussion about Syria on "Meet The Press":

“ARE WE RAMPING UP FOR WAR IN SYRIA?” David Gregory asks super-seriously in his opening blast...

Lindsey Graham, hawk of hawks, is of course the first guest. “It seems like ‘not being Bush’ is our foreign policy.” Doesn’t sound like a bad foreign policy when you put it that way. “AK-47s will not neutralize [Assad's] advantage over the rebels … we need to do more.” What forced the president’s hand on this, David Ignatius? The use of chemical weapons forced a decision that was already made “in embryo” within the administration. Andrea Mitchell believes that Iran is the factor that tipped this. The administration realizes “that they are now at war with Iran.” Maybe want to throw a “proxy” in there?

Gregory shows a graphic that more than 90,000 people have been killed in the Syrian civil war so far. Why can’t America make it all happy again? A “political negotiation can only happen” when the military calculus on the ground changes, Graham says, and he believes, as he always believes, that that means a no-fly zone. We can “crater the runways with cruise missiles.” He trusts that the American people believe we need to “do something” in Syria.

Not much better.  Note that while some "expert" named Andrea Mitchell mentioned Iran, she didn't bother to talk about the election that just happened which brought moderates to the power for the first time since the 90's!  Also no mention of what's going on in Turkey.

This is not a discussion about whats going on in the world, why it's going on and what we should do about it.  It is a discussion of the politics of Washington DC, the attempts by some to further their careers in journalism and politics and the rattling off of talking points.  The interesting thing is that you can get more from five minutes of non-traditional news than from watching three hours of the important Sunday shows with all the important people.

Why I Don't Trust Glenn Greenwald

Rick Perlstein pointed out some serious problems that are emerging with Glenn Greewald's "bombshell" story about the NSA's PRISM system for gather online information.   Perlstein pointed out that in a post by open source guru Karl Fogel, Greenwald may have made an "epic botch" because:

It looks like Greenwald & co simply misunderstood an NSA slide, most likely because they don’t have the technical background to know that “servers” is a generic word and doesn’t necessarily mean the same thing as “the main servers on which a company’s customer-facing services run”. The “servers” mentioned in the slide are just lockboxes used for secure data transfer. They have nothing to do with the process of deciding which requests to comply with — they’re just a means of securely & efficiently delivering information once a company has decided to do so.

In essence the NSA's access to "servers" in Glenn's slide doesn't mean that the NSA gathers everything that everyone does on the internet.  It just means that some companies like Facebook have set up secure server "lock boxes" to transfer specific pieces of data in accordance with specific FISA Court ordered warrants. 

As another Tech blogger (also via Rick Perlstein) put it:

The difference between these two explanations isn’t some nuanced distinction that only tech geeks should care about. This is the difference between companies voluntarily giving the government direct and unilateral access to arbitrary customer data and companies merely complying with the law in a technically efficient way that doesn’t change the nature of the data received by the government. If Greenwald and MacAskill have documents or detailed statements from Snowden that provide illumination on this point, they should share this information. Because as it stands now, the only way their story is true is if all the companies involved are lying, and the NSA is lying, and Senators Feinstein and Rogers are lying, and the President is lying, and the New York Times’ sources are lying. 

This certainly isn’t impossible. Much more likely in my estimation is that Greenwald’s use of “direct” and “unilateral” was technically imprecise or the result of exaggerations from his source. 

In fairness, the NSA's and Obama administration hasn't helped by being so secretive about this program even after it was exposed.  And neither have politicians calling people traitors or the media covering the story as a soap opera completely with the dish on Edward Snowden's girlfriend. 

To be sure I know very little about computers and servers and have never even read these blogs before, so I am a far cry from someone who could be called an expert on these affairs and could be wrong.  But I do know a bit about political media and people like Glenn Greenwald.  At the very least Greenwald owes us an explanation on what specifically "access" to "servers" mean, and if he is shown to be wrong a formal retraction is needed as well.  Interestingly enough when people started raising these questions to Glenn he went into full on lawyer mode (Glenn is an attorney, not a journalist or IT person by training) and gave a telling response, "It means what it says: that they can take things directly from the servers of those companies. What else could it mean?"  Note how he's not answering the question of what type of serves they are, and also adds in a little "babe in the woods" routine as well.  Of course this might just be cause Glenn is ignorant of the obscure but important technical details here.  But it also looks to me like someone trying to cover their rear ends after their "bombshell" story looks more and more like it was built on a foundation of sand.

More than just why I think you should read Greenwald with some skepticism, I think this is a great example of why it's bad to have only "politics" reporters cover highly specialized realms like national security and technology.  Glenn's classic MO is to pick an issue, get all worked up about it, and try to find proof that someone (usually Obama, almost always a Democrat) is bad.  But while trying to find "a scandal" Glenn missed very important details that now through his whole story into doubt.  It's nothing new, he doesn't know how the government works either.

It's Called Partisanship

Jonathan Chait has a funny piece up showing the ridiculous nature of how conservatives can relate to "government power."  He points out that the same federal judge that threw out Obamacare a few years ago, a guy named Roger Vinson, ironically also okayed the NSA program that resulted in a massive tracking of phone metadata that's been in the news recently.  Vison sees grave danger in the government requiring people to purchase health insurance:

If [the government] it has the power to compel an otherwise passive individual into a commercial transaction with a third party merely by asserting — as was done in the Act — that compelling the actual transaction is itself “commercial and economic in nature, and substantially affects interstate commerce,” it is not hyperbolizing to suggest that Congress could do almost anything it wanted. 

And at the same time he  sees nothing wrong with an interpretation of the Patriot Act that says the government has the ability to record the details about every phone call ever made in the the country.

Chait sees this as just another example of conservatives behaving badly, and it certainly is.  But what it really shows is that partisan dynamics in American politics are at least as important as ideological ones, if not more so.  In order for America's two political parties to work they have to get a lot of different groups and individuals to agree on broad base of policies they favor and then work to get that party elected and enact that policy framework.  Sometimes this is easy, people who want to cut taxes probably don't care about increasing unemployment insurance programs that much either.  Other people might just care about one issue, like abortion, and not care too much about the other stances there party takes.  But sometimes it can be hard.  In this case, economic libertarians have to check their libertarian hats at the door when comes to national security issues in order for libertarians to build a viable party with neoconservative hawks and other groups that favor a big robust national security state. 

This results in a dynamic that is great for bringing groups into your coalition, but there's nothing about it that will help insure an ideological consistent platform for the party.  This is why the GOP can call for "cutting spending" and then blast Obama for "cutting medicare" when his proposes doing that to reduce the deficit.  Or they can bemoan the deficit and defense cuts at the same time.  It's ideologically inconsistent, but it makes perfect sense for a party that wants to attack Obama for something and spend a lot on the military. 

So while it may be ridiculous for a party to blast "government overreach" and predict a Orwellian nightmare world in the future if people get access to health care and then turn around and have no problem with tracking everyone's phone calls, this is the product of partisan incentives to bring security hawks into the same party and economic libertarians.  It might show the shallowness or hypocrisy of people involved, and this can happen with Democrats too, but it doesn't show a problematic ideology.  These sorts of give and takes are necessary to hold the modern GOP coalition together.

The Ever Expanding Culture War

One thing I've noticed of late about conservative politics is how many issues seem to being drawn in a culture war model of political discussion. By culture war I mean a description of an issue or policy as not just wrong on the merits but someone morally offensive and a dire threat to American civilization. Paul Krugman recently found a great example of this in an article denouncing New York City's new bike sharing program Citi Bike in Front Page magazine:

Bicycles are one of the obsessions of Mayor Bloomberg and his transportation secretary Janette Sadik-Khan. Khan is the granddaughter of Imam Alimjan Idris, a Nazi collaborator and principle teacher at an SS school for Imams under Hitler’s Mufti, Haj Amin al-Husseini. The bio of his son, Wall Street executive Orhan Sadik-Khan, frequently mentions the bombing of the family home in Dresden and surviving trying times after World War II. It neglects to mention that the times were only trying because their side was losing…

In partial revenge, Khan has made many New York streets nearly as impassable as those of her grandfather’s wartime Dresden.

Remember this is the response of a conservative political magazine to the popular idea of allowing people to rent bikes to ride around America's densest city.

These types of bizarre denunciations aren't just limited to more obscure magazines however.  None other than the Wall Street Journal recently ran a video editorial that denounced the Nazi bike plot with such choice gems as, "Do not ask me to enter the minds of the totalitarians running this city." and, "The bike lobby is an all-powerful enterprise."  While it's true that the Journal has had a conservative editorial board since time immemorial, what is fascinating is how the supply side economics and tax cuts conservatism of yesterday is being replaced with Fox News style rabble rousing and culture war.

It's not just bike sharing that is getting drawn into a culture war model of politics either.  Recently Virgina's Republican Governor Bob McDonnell tried to impose a $100 annual fee on owners of hybrid and electric cars.  While North Carolina's state legislature has been trying to stop Tesla from selling their popular electric cars anywhere in the entire state.  One would think that conservative Republicans would like the idea of a new car company coming to town to do business, free enterprise and all that right?  Well if it's associated with liberals in must be bad, and must be stopped.  The entire fate American civilization hangs in the balance.  Or on the pedal, as it were.