Republicans endorsing Hillary

Bob McElvaine makes a plea for undecided and even Republican voters to support Hillary Clinton over Donald Trump on the basis of patriotic sentiment in Patriotism over partisanship Clarion-Ledger 10/01/2016. He lays great stress on the economic issues: "The truth is that what Trump proposes is a return to the policies — massive tax cuts for the richest and deregulation of the financial industry — that produced not only the 2008 collapse (which Trump cheered because he could make money off it) but also the Great Depression. The slogan for Trump’s trickle-down economics should be: 'Make America a Great Depression Again!'"

He cites endorsements of Hillary from traditional Republican newspapers like the Arizona Republic, the Dallas Morning News, and the Cincinnati Enquirer.

Bob doesn't mention this San Diego Tribune endorsement in the Clarion-Ledger column but he linked it on his Facebook page: Endorsement: Why Hillary Clinton is the safe choice for president 09/30/2016.

It's nice to see Hillary getting so many newspaper endorsements. But I can't say I'm thrilled by the reasons the San Diego Tribune gives for supporting her. Like: "As a U.S. senator, the Democrat showed she can collaborate with Republicans, using what Roll Call labeled an 'incremental approach' that 'could help restore a working relationship between the White House and Capitol Hill that has been in tatters' for years."

The only way that's going to happen is if Hillary wins the Presidency and mounts an unprecedented level of Democratic Party effort to beat the Republicans in House and Senate races in 2018. Until the elections take place and Republicans know they're electorally on the run at all levels, the Trumpified Republicans Party will keep up their obstructionism on domestic issues that we've seen the last eight years. Or should I say the Ross-Barnettified Republican Party?

Also: "Argentina is finally coming out of the chaos created by Cristina Kirchner and several of her predecessors. Trump could be our Chávez, our Kirchner." (!!!)

O.M.G.

I wish we could have a 12-year run of solid Keynesian economics like Néstor and Christina Fernández de Kirchner brought to Argentina in 2003-2015. After decades of neoliberal/Angela Merkel/Washington Consensus economics, during the first 10 years of the Kirchner era Argentina had one of the healthiest growth rates in the world, higher even than China's. And the healthiest in Argentina's entire history.

he usual Bipartisan Wall Street drone, I will seriously injure myself doing backflips of joy. As for Trump being "our Kirchner," it's hard to imagine anything less possible. Cristina's successor, the "safe" oligarch Mauricio Macri who took over in December, has returned to the disastrous Merkelist policies of the 1990s, and the Argentine economy has been in a nose-dive ever since. With no prospect of returning to Kirchnerist levels of health under these policies.

Now, Trump could certainly be our Macri. Only he would probably be worse. And he would be in command of a nuclear arsenal. This graphic of Macri is more likely what a President Trump would be.

The neoliberal Long Run in Argentina and elsewhere

Paul Krugman takes on a couple of favorite neoliberal sacred cows in this post, Destructive Long-Termism 12/28/2015:

One of my long-running gripes about much discussion of current economic issues is about what I consider the long-run dodge. By this I mean the attempt to change the subject away from unemployment and inadequate demand toward supposedly more fundamental issues of education and structural reform. Such efforts to change the subject seem to me to be both wrong and, to some extent, cowardly. After all, if the clear and present problem is inadequate demand, then we should have policies to deal with that problem — I don’t care how important you think the long run is, we should deal with the crisis at hand. [my emphasis]

He quotes Tim Taylor, who he criticizes for offering dismissing the importance of fiscal and monetary policy in the present moment in favor of an even longer catalogue of neoliberal perennial platitudes, which Taylor lists as follows: "Thus, I’d argue that the growth-based agenda should focus on a different list of issues: expanding education and training; expanding research and development spending; tax and regulatory reform; expanding international trade; and investments in energy and infrastructure."

And Krugman gets a little snarky on one of the favorite neoliberal buzz-phrases:

Again, I have nothing against structural reform; some of my best friends are structural reforms. But if you have a persistent problem of inadequate demand — which is the secular stagnation argument — then find things that will boost demand. Don’t throw up your hands and whine that you can’t, and/or use demand-side problems to argue for other stuff that has no obvious relevance to the problem. You may think you’re being wise and judicious, but you’re actually engaged in an act of evasion. [my emphasis in bold]

Allianz' Mohamed El-Erian provides his own list of neoliberal prescriptions, but not to criticize them. Instead, he's celebrating the fact that the new government in Argentina intends to implement them (Argentina’s Economic Big Bang Project Syndicate 12/21/2015):

• Run down the financial reserves and wealth that were accumulated when the economy was doing better.
• Borrow from foreign and domestic lenders.
• Cut public-sector spending directly, while creating incentives to induce lower private-sector expenditure.
• Generate revenues through higher taxes and fees, and earn more from abroad.
• Use the price mechanism to accelerate adjustments throughout the economy, as well as in trade and financial interactions with other countries.

El-Erian argues that such measures "can contain the spread of economic hardship among the population, protect the most vulnerable segments, and put future generations on a better footing."

But he criticizes Argentine President Mauricio Macri, whose neoliberal policies he supports, for implementing them in the wrong sequence. El-Erian writes:

Macri took over the presidency with a bang, launching an audacious – and highly risky – strategy that places aggressive price liberalization and the removal of quantitative controls front and center, ahead of the five measures relating to demand management and financial assistance. Already, most export taxes and currency controls have been scrapped, income taxes have been cut, and the exchange rate has been freed up, allowing for an immediate 30% depreciation of the peso.

Historically, few governments have pursued this type of sequencing, much less with such fervor; indeed, most governments have hesitated, especially when it comes to full currency liberalization. When governments have taken similar steps, they usually have done so after – or at least alongside – the provision of financial injections and efforts to restrain demand.

The reason is clear: by taking time to set the stage for liberalization, governments hoped to limit the initial spike in price inflation, thereby avoiding a wage-price spiral and curbing capital flight. They worried that, if these problems emerged, they would derail reform measures and erode the public support needed to press on. [my emphasis]

El-Erian's argument doesn't seem to be entirely coherent. He seems to be upset that Macri's particular approach of drastic immediate devaluation without corresponding adjustments in wages and salaries will too quickly alienate the voters against the neoliberal program.

It's notable that El-Erian prefaces his list of options by claiming vaguely that Argentina's economy has been ailing for many years. Which, to put the most generously possible, is wildly misleading. The government of Carlos Menem gave the country a heavy dose of the neoliberal medicine in the 1990s, leading to the financial crisis of 2001. But since 2001, especially since President Néstor Kirchner came to power in 2003, the economy has grown at a healthy pace with rising real incomes and higher levels of employment.

Yes, Néstor's government and the successor government of Cristina Fernández de Kirchner committed various sins against the neoliberal Gospel: capital controls, wage and salary increases, price controls, fiscal stimulus, expansion of government services, restoring public ownership of the previously privatized Aerolineas Argentina and the YPF energy company, successfully defying the vulture funds, thumbing their noses as the auterity measures demanded by the IMF.

As Krugman notes, the true believers in the neoliberal Washington Consensus and its variants like Angela Merkel's Herbert Hoover/Heinrich Brüning "ordoliberalism" are happy to ignore the immediate needs of ordinary workers and the middle class in favor of their preferred One Percenter policies, using the promise of the benefits of the Long Run to justify economic damage in a short run that may never end.

Russian economic troubles and the EU

Wolfgang Münchau addresses the question of a Russian "bankruptcy," as people are speculating about it, in Auf dem Weg in die Staatspleite Spiegel Online 22.12.2014.

Bankruptcy is actually a legal term applying to the working out of private insolvencies. Governments don't technically go bankrupt. Although the term is often used in practice to refer to sovereign default, which is a threat that investors have to take seriously in the case of Russia.

But Münchau doesn't believe that a Russian default is imminent for 2015. There are certainly grounds for concern. As part of its effort to stop the dizzying plunge of the ruple, Russia has jacked up its interest rates to 17%, which is likely to further depress an economy hard hit by the fall in the price of oil. He notes that Russia has €400 million euros (around $330 million) in foreign reserves that give it breathing room.

But he stresses the seriousness of Russia's economic situation:

Vor der Währungskrise war die russische Wirtschaft ungefähr so groß wie die von Frankreich. Jetzt spielt sie in der Liga der Niederlande. Und sie bewegt sich in Richtung Griechenland.

[Before the currency crisis the Russian economy was about as big as that of France. Now it is playing in the Netherland's league. And it is moving in the direction of Greece.]

He notes that the US and EU sanctions are not an immediate cause of Russia's economic problems

Die Finanzsanktionen des Westens sind für die jetzige Krise nicht direkt verantwortlich, aber sie spielen eine wichtige, indirekte Rolle, die erst in ein oder zwei Jahren offensichtlich werden wird.

[The Western financial sanctions are not directly responsible for the current crisis, but they play an important, indirect role that will first become clear in a year to two.]

But he thinks that some EU leaders are now surprised at the implications of sanctions as the prospect of a major decline in the Russian economy are already facing the EU.

With the eurozone in a protracted depression, they are taking on a lot more risk with sanctions against Russia than they would be taking absent Angela Merkel's draconian austerity policies.

The pro-Western Ukrainian parliament has rescinded Ukraine's position of not joining any military bloc, indicating their intent to proceed to seek NATO membership. Russian Foreign Minister Sergei Lavrov called the action "fully counterproductive," following a statement Monday from Russian Prime Minister Dmitriy Medvedev that the action Ukraine took Tuesday would make Ukraine "a potential military opponent of Russia." (Ende der Blockfreiheit: Lawrow warnt Ukraine vor Eskalation Spiegel Online 23.12.2014)

Spiegel Online also notes that Ukraine formally adopted its neutral status of staying out of military blocs under Russian pressure in 2010.

Tomothy Garton Ash adopts a triumphalist tone in Angela Merkel has faced down the Russian bear in the battle for Europe The Guardian 12/22/2014

The fact that he describes Merkel in the first paragraph as "strongest on economic power" makes me wonder just how much attention he's paying to the actual state of the eurozone under Merkel's austerity policies, though he says he "remain[s] critical of her handling of the eurozone crisis."

But he gushes over her handling of the Ukraine crisis:

At the beginning of this year, German president Joachim Gauck, an east German Protestant, took up the appeal that other Europeans had already made for Germany to assume more leadership responsibility in Europe. In the course of the year, Merkel, an east German Protestant, has answered that appeal. The eastern half of Europe is her world. She has it in her bones. She understands it.

One of the early influences on her was a teacher of Russian. As a schoolgirl, she won East Germany’s Russian-language Olympiad. On her office wall, she has a portrait of Sophie von Anhalt-Zerbst, the Pomeranian princess who became Empress Catherine the Great of Russia. She can speak to Putin in Russian, as he can to her in German. [my emphasis]

The touch about her keeping a potrait of Catherine the Great on her wall adds a bit of reinforcement to my thought that she takes the Soviet management of the Warsaw Pact as her model for managing the European Union.

Ash treats the Ukrainian crisis as though it were a Russian aggression that fell unexpectedly on the virtuous West. In that spirit he quotes Merkel, who has had no compunction about pushing for the ouster of democratically elected governments in Greece and Italy as part of her eurozone crisis management, saying, "Old thinking in terms of spheres of influence, whereby international law is trampled underfoot, must not be allowed to prevail.”

As Charlie Pierce might say: Honky, please.

He even goes on to say, "Everyone knows she is Europe’s real chair." But that doesn't count for him as a sphere of influence.

He also sees in her enthusiasm for sanctions against Russia Churchillian resolve:

As she never tires of repeating, her strategy has three prongs: support for Ukraine, diplomacy with Russia and sanctions to bring Putin to the negotiating table. To see Germany leading the way in economic sanctions against Russia is extraordinary. In the early 1990s, I wrote a history of West Germany’s Ostpolitik, culminating in German unification, and the first commandment of that Ostpolitik was that eastern trade should always go on. Sanctions were called for by the US and resisted by Germany. Today, Germany has more trade with Russia than any other European power. Its energy, machine-tool and other eastward–oriented businesses form a powerful lobby, not least within Merkel’s own Christian Democratic Union. Yet she has taken them down the path of sanctions. [my emphasis]

Ostpolitik was successful in dialing back tensions between East and West and reducing the risk of nuclear war.

Merkel's policy looks to me like a reckless roll of the dice, particularly since she undertook it with no indication she intends to abandon her destructive austerity policies.

Where Garton Ash sees a cautious, determined stateswoman, I'm inclined to see a talented political tactician locked into a dogmatic, unrealistic economic dogma ("ordoliberalism") who gambles big and is constantly riding the tiger.

Garton Ash isn't entirely unaware of that. At the end of his gushing piece he notes:

And then she has been lucky – an essential attribute for any successful stateswoman or statesman. (I can’t bring myself to write statesperson.) Without a spectacular fall in the price of oil, the sanctions, which are still patchy, and not supported by China and other important economic partners of Russia, would not have had this dramatic impact.

The battle of Europe is far from over. In Russia itself, deepening economic crisis will not necessarily translate into more accommodating policy. There is no route map to a post-Putin regime. The cornered bear may lash out. In the bloodied fields of eastern Ukraine, there is still the risk of a series of 1914-style miscalculations leading to an escalation. Russian military planes have flown into the air space of Baltic Nato members.

"The battle of Europe": Western policymakers need to dial back the melodrama and try to stay with a don't-do-stupid-stuff approach to the Ukraine crisis.

Keynes is becoming a better-known name again, finally

Keynes and the contra-cyclical economics associated with his policy recommendations have been getting a lot more attention lately, due to the prolonged stagnation in Japan, the slow recovery in the US and the ongoing depression in the eurozone.

Bloomberg Businessweek recently featured a cover story by Peter Coy, John Maynard Keynes Is the Economist the World Needs Now 10/30/2014:

... even in the past tense, the British economist, investor, and civil servant John Maynard Keynes has more to teach us about how to save the global economy than an army of modern Ph.D.s equipped with models of dynamic stochastic general equilibrium. The symptoms of the Great Depression that he correctly diagnosed are back, though fortunately on a smaller scale: chronic unemployment, deflation, currency wars, and beggar-thy-neighbor economic policies.

An essential and enduring insight of Keynes is that what works for a single family in hard times will not work for the global economy. One family whose breadwinner loses a job can and should cut back on spending to make ends meet. But everyone can’t do it at once when there’s generalized weakness because one person’s spending is another’s income. The more people cut back spending to increase their savings, the more the people they used to pay are forced to cut back their own spending, and so on in a downward spiral known as the Paradox of Thrift. Income shrinks so fast that savings fall instead of rise. The result: mass unemployment.[my emphasis]

Coy also describes the need that more policymakers and advisers are seeing for alternatives to neoliberal orthodoxy, aka, the Washington Consensus:

The big question is whether today’s international financial architecture is up to the challenge of restoring balance to global trade and investment. The IMF, to its credit, has pivoted away from the austere prescriptions of the “Washington Consensus” that it championed through the 1990s and toward a more Keynesian perspective. “His thinking is more relevant at the current juncture than it had been in previous troughs of the global economy,” says Gian Maria Milesi-Ferretti, deputy director of the IMF’s research department.

But the IMF lacks the authority that Keynes’s stillborn international clearing union would have had, and it’s perceived in some quarters to be beholden to U.S. interests. Brazil, China, India, Russia, and South Africa are trying to set up an alternative. Germany isn’t heeding the IMF much either as it presses France and Italy to take the same austerity medicine as Greece, Ireland, Portugal, and Spain. “Flash-in-the-pan, short-term stimulus programs” aren’t the way to boost growth, German Economics Minister Sigmar Gabriel said on Oct. 20 in advance of a joint ministerial meeting in Berlin. At loggerheads, the Germans and French punted a joint proposal to Dec. 1. Eswar Prasad, a Cornell University economist and author of The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance, writes in an e-mail that Keynes’s proposed system “requires good domestic policies and a heavy dose of international cooperation,” both of which are in short supply. [my emphasis]

Coy doesn't mention that Sigmar "Sigi Pop" Gabriel is a Social Democratic Minister in Angela Merkel's Grand Coalition government who is willing backing Merkel's Herber Hoover/Heinrich Brüning economic policies for the eurozone.

Peter Temin and David Vines also write about Keynes in Why Keynes is important today VoxEU 11/14/2014. They discuss how a theory called Ricardian Equivalence came to be a dominant idea among those Paul Krugman calls the Very Serious People:

Ricardian Equivalence is a theory that concludes that any expansion of public spending will be offset by an equal and opposite decline in private spending. The theory is based on a few important assumptions. It assumes forward-looking consumers who adjust their current spending in anticipation of future taxes to pay for the spending. Under these conditions, any increase in current spending leads consumers to anticipate a rise in future taxes and decrease their current spending to save for this.

This theory dominates current macroeconomic discussion. It fits into the form of current macroeconomics that assumes not just forward-looking consumers, but flexible prices as well. And if a Keynesian suggests fiscal policy in current conditions, a modern economist is likely to invoke Ricardian Equivalence.

They also link to a column by Krugman on the concept, A Note on the Ricardian Equivalence Argument Against the Stimulus (Slightly Wonkish) 12/26/2014, in which he explains:

Ricardian equivalence says that what determines consumption is the lifetime present value of after-tax income, and hence that, say, a temporary tax cut won’t stimulate spending, because people will figure that whatever they gain now will be offset by higher taxes later. It is a dubious doctrine even done right; many people are liquidity constrained, and very few people have the knowledge or inclination to estimate the impact of current government budgets on their lifetime tax liability.

But even if you assume that the doctrine is right, it does NOT imply that government spending on, say, infrastructure will be met by offsetting declines in private spending.