Mourning In America
Saturday, May 24, 2003
Ahead of The Times Paul Krugman weighs in on deflation this morning, and basically concludes that: "Mourning in America was right! Deflation would be a bad thing." Note the presence of the same example of the house-buyer that appeared in this space earlier this week.
The column is unusual in that it slides Krugman into the Saturday, double-length Op-Ed column slot pioneered by Frank Rich and currently occupied by Bill Keller. The move works well: Given more space, Krugman feels freer to explain the economics underlying national policies, and actually contains his impulse for Bush-bashing that sometimes overshadows his always-solid academic arguments.
In this case, he first notes the psychology of deflation -- once people come to expect falling prices, it becomes logical for them to curtail their spending, since something will always be cheaper tomorrow. Taken to the extreme, that thinking not only hurts current demand, but ultimately impairs future productivity growth, because investments in new, more efficient plants and equipment get put off as well. Krugman calmly explains that deficit spending is not a bad thing, but we need the money to flow into the economy now, not phased-in over the next 10 years. He also makes a case that all deficit spending isn't created equal -- tax cuts, and government spending, that flow to the middle and lower classes are likely to have a much greater impact on the economy in the short-term, because that money is virtually guaranteed to be spent quickly -- the poor don't have the option of putting it away for a rainier day. Overall, the Krugman-on-Saturday experiment is a huge success -- let's see if the Times sticks to it.
Traitor to His Degree? One of the first mantras hammered into the mind of every MBA student is, "If you can measure it, then you can manage it." The current president has often traded on his MBA degree during his political career, calling himself a businessman, not a politician. But despite the credential, the MBA's "first principle" doesn't have much place in contemporary Republican politics.
That reality was on display again this week during the debate leading up to the tax-cut bill. In a remarkably frank acknowledgement of the fact that the GOP's "phase-out" plan is misleading, House Majority Exterminator Tom DeLay told the NY Times:
"Numbers don't mean anything. In the tax code and dealing with a jobs-and-growth package, you can be very creative and still have a major impact."The only real surprise there is that DeLay felt no compunction about admitting that the decision to write the bill so that the tax cuts phase out after three years was just a scheme to make the ultimate deal look as though it was crafted to respect moderates' concerns about the deficit, even though an analysis of the plan shows that if, as expected, that phase out never occurs, the package would actually end up costing more than $800 billion over 10 years -- more than $100 billion above the president's initial request.
An MBA who was actually concerned about crafting a plan to get the economy moving again would be concerned by that disconnect, since economists agree that a modest, short-term deficit can help get the economy moving again, while a yawning, longer-term gap could actually interfere with the private sector. They would want to know the real numbers, not numbers that are manufactured by manipulating the government's accounting rules with a dexterity not seen since the glory days of Enron.
But later in the week, Sen. Robert Bennett of Utah took up DeLay's mantle as the party's honest speaker, explaining that:
"The president looks at the economy and looks at the electorate and grasps that the electorate wants to see someone doing something. They don't care about the details. So here is Bush with the political smarts to understand that the best medicine is to be seen as a leader making bold strokes, moving out on an issue where others are temporizing."
I agree fully, although I'd edit the last sentence a bit -- Bush was more interested in getting a bill than in getting it right.
Pay No Attention to the Unemployment Lines Behind the Curtain: This all helps to feed one of most Democrats' greatest frustrations with the contemporary Republican party: Its intellectual dishonesty. From "Gov." George Pataki's aw-shucks denials of the extent of the state's fiscal problems in his 2002 re-election to George W's campaign against Saddam Hussein that convinced 42% of the nation that he was personally responsible for 9/11, the party has been remarkably successful in denying unpleasant facts ... and demonizing anyone who questions them (For an example, check out Fox News business anchor Neil Cavuto's shockingly strident Memorial Day commentary, in which he claimed that anti-war protesters "all but stuck a finger" at U.S. troops -- not policies, troops). The end result is that critics, especially in the mainstream media, now self-censor, repeating GOP claims verbatim to avoid being slapped as biased.
That's presumably why DeLay and Bennett felt so free to speak their minds last week. They knew their comments would be put in the context of an admiring look at the president's political skills, rather than cited as evidence of his lack of a coherent plan for actually improving the economy.
Wednesday, May 21, 2003
Through the Looking Glass: The current tax-bill negotiations, in which Congressional Republicans seem hell bent on repealing the dividend-income tax are giving writers a new metaphor they can use to describe a surreal situation. Observe this from Michael Kinsley's sympathetic take on the NY Times' inability to catch Jayson Blair sooner. Kinsley notes that he, too, had been the victim of a hoax while editing Slate, when a writer filed an article describing his efforts to use fishing line and fruit to "fish" for monkeys on an island in the Florida Keys:
The question remains, though, why my baloney-detectors didn't function beforehand, when they could have saved us considerable embarrassment. All I can say is: Congress is about to exempt dividends from the income tax—i.e., stranger things than monkeyfishing actually do happen.
Off the Reservation: What do William Safire and talk-show hosts Mike and the Mad Dog have in common? They all find themselves in trouble pretty quickly when they begin writing or talking about topics outside their area of expertise. For Mike and the Mad Dog, the show degenerates into gibberish whenever they venture outside the lines to address any topic from TV rights to Title IX.
Safire got himself in trouble with this column examining the nation's current economic situation. Now, to be fair, you shouldn't expect much in the way of coherent economic policy from Safire. We are talking about a former aide in the Nixon administration -- you remember that economic team, right? The "conservatives" who gave us wage and price controls?
Rather than cuting his losses and steering clear of commenting on the markets, Safire derides economists who are concerned who are concerned about the state of the U.S. economy as "worrywarts" who "need to cheer up," specifically claiming that the prospect of deflation, the rising deficit, and the swooning dollar pose little risk to Americans' well-being. He's wrong about the first two, and inappropriately sanguine on the third.
Safire's most outrageous claim is that deflation, far from being a risk to the economy, is actually a boon for the average service-sector worker, because fear of deflation prompts the Federal Reserve to keep interest-rates low, and "that makes homes more affordable." That might be true, for now. But while a worker's salary can be cut in response to falling prices for his employer's goods and services, those 30-year mortgage payments have a tendency to stay pretty fixed. The house actually becomes more expensive over time, as the cost of paying off the mortgage consumes an increasing amount of the worker's take-home pay. Oh, and once he finishes paying off the mortgage and owns the house free and clear? He might just find that the price has deflated below the principal he's paid out.
This is not to say that deflation is going to happen. Personally, I have tremendous faith in the American consumer's ability to keep spending (enabled by banks' willingness to extend credit), and confidence that that will keep prices from falling for any sustained period of time. But if it were to emerge, it would be a serious situation. Alan Greenspan made the point yesterday: The risk of deflation is remote, but he consequences are so severe, it needs to be taken very seriously.
On the deficit, he at least gets the argument right. But claiming that this administration's proposals for open-ended tax cuts represent Keyesian fiscal stimulus is a stretch.
It's interesting that Safire made a point of observing with regard to deflation that the majority of the U.S. economy is engaged in the service sector, because his next point, about the falling dollar, cites the U.S. manufacturing sector as the prime beneficiary. The weak dollar would make U.S.-produced goods look relatively cheaper -- at least compared to the European and Japanese imports, bringing U.S. factories to a hum as we export more, and "buy American." Interestingly, as the NY Times business section pointed out today, many of our trading partners have linked their currencies to the dollar, so don't expect us to win back any manufacturing business that has fled to places like Hong Kong, China, or Malaysia. And even if we were likely to win that business back, it takes time to build the factories necessary to do that manufacturing, and corporations tend not to base decisions about the most economical plant location -- it would take a couple of years of a weak dollar before corporate decision-makers even considered making those long-term investments, and another couple of years before the factories came on line.
More importantly, he dismisses the risk that foreign investors, concerned about the eroding value of their U.S. holdings when expressed in their home currencies, will repatriate their money, leading to a credit crunch that could drive up those interest rates Safire is counting on to fuel home purchases (at least that development would likely replace deflation as a worry with runaway inflation).
Safire's defenders would note that he called for "modest deflation for a time," and tempers his love of deficits with a "we belong in the red for now." But those caveats indicate he believes these policies can be turned on and off like a spigot -- like the wage and price controls he once endorsed. As we learn every day, the global markets are not as predictable, and as Safire himself rightly points out, the real action is in the interplay of the different factors. Generally, economists claim that markets work towards equilibrium when left alone. When the Nixon administration tinkered with the dials, it led to stagflation -- the co-existence of inflation and economic stagnation, two conditions that the textbooks say aren't supposed to accompany each other. We'll see what the Bush administration's witches brew of economic tinkering turns into...
Monday, May 19, 2003
Just When It Looked Safe to Return to 43rd Street... In case you were concerned that the festival of journalistic navel-gazing inspired by defrocked NY Times reporter Jayson Blair was ebbing, Newsweek rides to the rescue with a four-article cover package. It's a bit unseemly, but not shocking, that an instrument of The Washington Post Co. would seek to join in the fun at the expense of its primary competitor -- a rival with which it has feuded in the past. But it's laughable that the magazine has the chutzpah to label its entry "A NEWSWEEK exclusive," given the voluminous coverage the story has already received.
All of the sins could be forgiven if the package lived up to its billing as a major advance in the story, but it doesn't -- Seth Mnookin got a personal e-mail from Blair, but it seems to be filled mostly with platitudes, and doesn't offer any real insight into his intent, or even his perspective on who should be held responsible. Don Imus hilariously pointed out the irony arising from the fact that Blair, whose work represents the sternest blow to the NY Times' credibility in a generation, urges his supporters "not to believe everything they read in the newspapers." No risk of that, thanks to you, Jayson.
In a column that feels like a rush job, Allen Sloan, the magazine's Wall Street editor who's known for groundbreaking, meticulously researched reporting, calls for Publisher Arthur "Pinch" Sulzberger and Editor Howell Raines to be docked some pay in response to the ruckus. In an environment where some of the Times' own reporters are calling for Raines' head, the suggestion seems quaint.
Mnookin misses an opportunity to dive deeper into the issues rising to the surface in this scrap when he reports that the hottest anger at Raines' town-hall meeting last week came from the Metro Desk staff, who offered the strongest warnings about Blair over the years. It's too easy to dismiss their anger at being ignored on this case as a one-time thing. It's important to remember that the Sulzberger/Raines business strategy for the Times involves building it into a national newspaper. In that environment, the metro desk is necessarily de-valued. The despair that Newsweek columnist Jonathan Alter feels about the Times' loss of credibility on the national stage as a result of this scandal parallels my disappointment as the paper has de-emphasized its local coverage, allowing important issues in government and development to go under-reported.
The Affirmative Action Angle I'm with Ellis Cose, who argues in the final element of the Newsweek package that the Blair fiasco shouldn't be read as an indictment of affirmative action. As a former editor, I have to agree -- a charismatic, energetic reporter can get away with a lot in a newsroom, regardless of their race. I also know several people who got a leg up as part of an affirmative action recruiting program and have re-paid that opportunity with hard work that brought new, valuable perspectives to their newspapers.
I do think there's a lesson there about not rushing young reporters into high-profile positions (or at least keeping them under an editor's stern thumb) before they've paid their dues, but that feels like whistling in the wind -- the role of the serious, standards-enforcing, walking-encyclopedia copy editor in American journalism seems to be fading into memory. That development is an underlying cause of the Blair fiasco, and the inadvertent errors that get into print every day as a result are a bigger long-term threat to the credibility of the mainstream U.S. media than any individual plagiarizers or fiction-writers.
Sunday, May 18, 2003
Bob Graham's Moment? No one gives the senator from Florida much of a shot in the Democratic presidential process. But for the past few months, he has been the loudest voice in the field questioning whether the Bush administration's action on global terror really matched the rhetoric. He went so far as to warn that declaring war on Iraq in the name of fighting terrorism was:
"The equivalent of the Allies' declaring war on Mussolini's Italy but ignoring Hitler's Germany."
Now that it's clear that Al Qaeda remains lethal, will his candidacy receive additional credibility? The more relevant question is probably whether the courtly senator can summon the energy to capitalize on his prescience, especially as the rest of the field descends upon the issue?
Another major question arising this week is whether the press will finally be embarrassed by its stenography of Bush administration claims, and begin to actually investigate the administration's record, and the nation's security. Anecdotal evidence is not strong. A mini-scandal broke out this week when it was revealed that Texas state public safety officials tried to involve the Department of Homeland Security in a local political battle between Republican and Democratic state legislators. In an extreme version of the Senate's filibuster, the Democrats left the state to prevent a vote on an unfair congressional redistricting plan. Upon hearing that several had been ferried to Oklahoma on a private plane, Homeland Security was contacted and asked for help in locating it. The search was unsuccessful.
The Department's inspector general, the incomparably named Clark Kent Ervin, has been tasked to investigate whether the federal resources were improperly used for a political purpose. While he's at it, he might want to take a look at why the department couldn't find the plane. We're spending millions upon millions for shoe-checkers at the airports to prevent the last attacks, but vulnerabilities that could be exploited in the next attacks seem to be going ignored.
There's no question that a Democrat will win the White House in 2004 if people vote based on their answer to the question of: "Are you better off today than you were four years ago?" The question of "Do you feel safer today than you did four years ago?" probably isn't fair -- this president won't be held responsible for Sept. 11th (even though the White House's stonewalling of an independent commission to study what the intelligence community knew in the months leading up to the attack raises questions about whether he should be). But Bush should and must be held responsible for the answer to the question: "Are we safer now than we were on Sept. 12, 2001?" Many signs indicate that the answer is: "a little," and that's not enough.
Memo to Art Howe: As the Mets were cruising to their first-ever win at Pac Bell Park yesterday afternoon, Roger Cedeno decided to make it interesting in the ninth by misplaying Rich Aurilia's fly ball and allowing it to go over his head. Cedeno should have caught the ball, but didn't and the hometown scorer let it go for a hit. Armando Benitez managed to retire the next three Jints to get out of it, but the lesson stands. To paraphrase NY Times Metro Editor Jonathan Landman:
We have to stop Roger Cedeno from playing for the Mets. Right now.