In yesterday’s column I discussed some of the arguments for and against additional monetary stimulus. On balance, I’m for it–and I wouldn’t bet against it happening in the next month or two. The August 9th FOMC minutes released today confirm what we already knew: since QE2 ended in June, the Fed has learned that the recovery is slower and more fragile than it previously thought, and that inflationary pressures have eased. There you have it: what else does the Fed need to know before it embarks on QE3?
Perhaps Ben Bernanke has been reading the Financial Times. Last week Professor Michael Woodford of Columbia University and Mohamed El-Erian of Pimco wrote columns for the paper urging the US Federal Reserve chairman, in his keenly awaited speech at the Jackson Hole conference, not to propose a third phase of asset purchases – so-called quantitative easing. Mr Bernanke did as they advised (in that respect). On Friday, at the annual central bankers’ gathering in Wyoming, he said the Fed would keep its options open but he made no case for QE3.
Apple’s share price shrugged as though the resignation of the company’s visionary leader hardly mattered. That surprised me. Of course it helps that Steve Jobs will still be chairman–though how active a chairman, and for how long, remain to be seen. And the top of the company is full of exceptionally talented people: that’s clear. But it seems to me that Jobs’s personality and the astonishing success of his company are as tightly integrated as…well, you know what.
A lot of Tea Party types want to put the US back on the gold standard. One wonders how many of them even know what this means. Barry Eichengreen examines this “oddball proposal” in A Critique of Pure Gold, in the new National Interest.
Two other economics readings: Vincent Reinhart, Is the Economy Freefalling?, in the AEI Economic Outlook series; and the CBO’s updated Budget and Economic Outlook.
Some months ago, I speculated that the US election of 2012 could match a failed incumbent against an unelectable challenger. The odds on this scenario have shortened. The US economy is getting worse and confidence in Barack Obama is collapsing. Meanwhile Rick Perry, governor of Texas, who scares swing voters as much as he thrills his party’s conservative base, has vaulted to the front of the Republican nomination race.
There’s a lot to digest about Rick Perry and the Texas Miracle/Unmiracle. ProPublica has a nice reading guide on the topic. It mentions Paul Burka’s indispensable advice to Yankee journalists and National Journal’s thorough review of Perry and the Texas economy.
The Economist’s Erica Greider has written a good piece on the state’s record of job creation. I agree with her: it’s a complicated story but the achievement is striking nonetheless. In general, the Texan economy has a lot to boast about, and some things (notably its healthcare system) to be ashamed of. Perry’s significance on both sides of the ledger is less than his biggest admirers and critics maintain.
Paul Krugman gives Texas credit for an intelligent land-use policy which keeps housing cheap, and for effective regulation of mortgage lending which avoided the worst of the housing bust. Later in the same article, though, he says any state could do what Texas did and steal jobs from elsewhere with “weak regulation”. What weak regulation is that–the strong regulation of mortgage lending he just mentioned, or the light zoning regulation he just praised? Confusing. Still, you can’t quarrel with his observation that people are moving to Texas for the climate. The sparkling lakes and lush verdant forests are also quite a draw.
A prevailing misconception about US economic policy is that no good options remain. Fiscal policy is all used up. With interest rates at zero and its balance sheet engorged, the Federal Reserve is powerless too. Revised figures for recent growth show a failing recovery – and there is nothing anybody can do.
Commentators have been unable to agree whether the appointments to the fiscal supercommittee suggest compromise or deadlock. I think National Journal’s Ron Brownstein has it right: the appointees are disinclined to compromise, though not incapable of it. I leave you to decide whether that is a good or bad outcome by current Washington standards.
Both Senate leaders, Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., pointedly excluded any member of the chamber’s bipartisan “Gang of Six,” which has already proposed a balanced plan to tame the deficit by limiting entitlement spending and raising revenues. House leaders picked loyalists, not mavericks. All of the GOP appointees have publicly indicated opposition to raising taxes, and if Republicans block revenues, the Democrats on the panel won’t limit entitlements. The appointments deepened the capital’s conviction that the exercise is doomed to stalemate.
Betting on failure is usually the safest wager in Washington. But it’s too early to entirely write off the panel. The committee’s members may not be inclined toward compromise, but many are not inimical to it. Although they haven’t challenged party doctrine as directly as the Gang of Six, committee members like House Republicans Dave Camp and Fred Upton (both of Michigan), Senate Democrats Max Baucus of Montana and John Kerry of Massachusetts, and Senate Republicans Rob Portman of Ohio and even (to some extent) Jon Kyl of Arizona have proven willing to negotiate with the other party on difficult issues. Considering the list, one senior White House official says “the mix of people suggests a possibility for compromise—if the leadership in their party will let them do it.”
Judging by their appointments, Congressional leaders today view stalemate as a safer course than compromise. Only public pressure can change that calculation, especially in the GOP, whose resistance to tax increases looms as the panel’s biggest obstacle. More dismal polls might soften that perception—as would more pressure from financial markets.
Jonathan Chait offers the president some advice: don’t go all negative on Mitt Romney (as the president’s advisers are reportedly advocating), just remind people he’s a Republican.
Americans turned against the GOP en masse at the end of the Bush administration and never turned back. Republicans won the midterm elections in part by simply escaping public wrath against Democratic-controlled Washington, and in part by exploiting a much smaller, older, whiter electorate than you’d see in a presidential year. But very high-profile, very crazy Republican rule in the House of Representatives has rekindled and actually deepened the public’s distrust.
Today’s CNN poll is quite striking. In October of 2010, both parties were viewed about as favorably by the public (Democrats stood at 46% favorable/47% unfavorable, Republicans 44/42.) The Democratic party today is about the same — 47% view it favorably, 47% unfavorably. But the Republican Party’s favorability has collapsed — 33% of Americans view it favorably, 59% unfavorably. That -26% favorability gap is lower than the party’s rating before the 2006 election (-14%) or the 2008 election (-16%.) The GOP is completely toxic.
I agree that the poll is striking, and I will be glad if it means that the GOP is punished for its recklessness over the debt-ceiling fiasco. But I don’t read the 2010 elections as a case of “simply escaping public wrath against Democratic-controlled Washington” or “exploiting a much smaller, older, whiter electorate than you’d see in a presidential year”. I read them as saying that Obama and the Democrats have to be stopped. The GOP have over-interpreted that victory as a mandate for the radical dismantling of the public sector. But Obama should not make the mistake of under-interpreting it.
It’s a Theodore Dalrymple moment, I’m afraid. I’ve been watching the news from London and the UK with dismay–but not, altogether, with surprise. The cultural conditions for this orgy of criminality have long been apparent on the streets of many British town centres every Friday and Saturday night: areas simply given over to menacing gangs of feral teenagers roaming around as if they own the place, which they do.
My parents told me some years ago that they no longer dared to venture into their local town centre (Bolton) after dark. I was glad to hear it. For a while I had a flat near Piccadilly Circus in central London. The wall of a building nearby–two steps from the square, mind you, not in a back street–had been designated a late night urinal. To get to my front door late at night, I used to walk past a line of men pissing. Now and then a policeman would amble by this sight unperturbed–though to be fair I never saw an officer avail himself of the facility. Less common was the sight of a young woman squatting to relieve herself–something you would rarely see before midnight, at least on a main thoroughfare such as Haymarket, and probably no more than once a week. (“Couldn’t you at least use the gutter?” I used to think.)