On TAP: Kuttner + Meyerson

Kuttner
February 9, 2018

When Obama was president, Republicans made a huge deal about deficits bankrupting the country, refusing to adequately fund the recovery program and demanding deep cuts in federal spending. Now that Trump is in, deficits suddenly don’t matter.

The tax cut will add a trillion dollars to the national debt. The budget deal that was recently struck to keep the government open restores both military and some domestic social spending that was cut by Republican congresses during the Obama presidency—adding more deficit.

The deficit, and with it the national debt, is projected to start rising again, after coming down during Obama’s presidency. Deficit hawks are going nuts.

But Democrats should resist the temptation to pile on. Within very broad limits, there is nothing wrong with deficits and public borrowing, so long as money is put to good use. We came out of World War II with a much larger debt ratio—and that ushered in a 30-year boom. Winning that war was a good use of public debt.

A trillion-dollar tax cut for the rich, however, is not good use. Spending that money on infrastructure would be fine, and the time to have done that was while federal borrowing costs (interest rates) were low. Overspending on the military today is not a good use either.

Both Bill Clinton and Barack Obama made the economic and tactical error of making deficit reduction per se a major public issue. They thereby helped Republicans deny government the resources to rebuild America’s public household, and entrenched the conservative idea in the public mind of budget balance equaling fiscal virtue.

Keynes wept!

Deficits are often just what’s needed, and not all deficits are created equal. Fiscally, let’s whack Trump where he deserves to be whacked—for a needless and regressive tax cut. When the Democrats get back in, they will need to double down on public investment. 

Meyerson
February 8, 2018

I have two quite opposite reactions to President Trump’s desire to have his own version of a Red Square Roll-Out-The-Nukes-and-Salute! parade.

The first is to note the absurdity of all this. At a time when even hard power is best measured by a nation’s development of things like quantum computing, our new tanks aren’t really a good measure of our might. More fundamentally, this isn’t really an American tradition, and in its sure-to-be-Trumpified version, it will likely come off as more than a little Graustark, or perhaps Duck Soup, with a chorus singing the Trumpian version of “Hail, Hail, Fredonia.” All in all, given the character of the president, a spectacle both ominous (this moron may actually want to use these weapons) and ridiculous.

My second reaction, though, may well be to hold the ridicule. That is, it’s fine to ridicule Trump, who fairly personifies the ridiculous, but ridiculing the military is something else again. As Andy Levison, our pre-eminent scholar of the white working class, has noted, one defining element of that group’s beliefs is its support for the military. That’s in large part because the military offers working-class Americans a path to doing serious, valued work, in which achievement is rewarded, at a time when few other such options are open to them. To be sure, some of that work goes on in wars that shouldn’t be fought in the first place, but that’s hardly the fault of the enlistees. There’s no reason, in other words, to ridicule them.

So: To the extent that this parade is Trumpified—to the extent that it comes off as a Hail to the Chief sashay, as goose-stepping comes to Mar-a-Lago—then yes, ridicule is required. But ridicule the military (which didn’t ask for this march) and the men and women who fill its ranks? No way.

Kuttner
February 7, 2018

Poor Trump. He brags on the stock market and then the stock market tanks. Now, it’s made up about half of his losses.

I've been waiting for Trump to tweet that Monday’s sickening market slide was the Democrats’ fault. They spooked investors by refusing to approve his wall; or by failing to applaud his State of the Union address; or maybe by threatening his very presidency, the source of everything good in the economy.

Trump is implicated in the wildly gyrating stock market in one respect. Investors have been wary that central banks will spoil the party by raising interest rates. The Republicans claimed that their tax cut will pay for itself, but the nonpartisan Congressional Budget Office calculated that the tax changes will add a trillion dollars to the national debt over a decade. Then came the latest report by the Labor Department, showing that low unemployment is finally spurring some wage growth.

When central bankers see deficits and rising wages, they worry about inflation and they raise interest rates. That’s not good for an overheated stock market.

Liberals can enjoy Trump’s rhetoric getting tripped up by a swooning market. But before they succumb to the temptation to blame it on him, please consider that this is a little tricky.

First, we liberals like full employment and wage growth. We also don’t believe that higher deficits, within broad limits, cause higher interest rates. That’s the result of the Federal Reserve’s inflation obsession, not a fundamental law of economics.

It’s certainly true that Trump’s form of economic stimulus—massive tax cuts for the rich—is about the most inefficient and inequitable form of stimulus one can imagine. It would have been far better to spend that trillion on infrastructure and jobs. We should be whacking Trump for that.

As for the stock market, it will stabilize or decline, depending on the whims of investors and speculators and the perversity of the Fed. The stock market is one more market that’s far from efficient.

Trump is a fraud and a fool, but not every bad thing that happens is his doing. It’s not even clear that having some air come out of an overheated market is all that bad.

Meyerson
February 6, 2018

The last couple days’ stock market swoon has a multitude of causes, not least the inherent instability of markets. One perennial cause for such drops, however, is the fear of inflation, of higher interest rates and tighter credit. Which, in our shareholder-uber-alles form of capitalism, translates into a phobia of rising wages.

By any measure, it’s hard to find very much that could have triggered this fear. In January, wages were reported to be 2.9 percent higher than they were the previous January, which, however, was the highest such increase in several years. As my colleague Justin Miller has noted, much of that increase was the result of January 1 statutory hikes in the minimum wage in roughly a dozen states. More generally, however, wages have been piddling along for the past 40 years, while capital income has ballooned.

As America has never bred many Marxists, the belief that capital and labor are inherently in conflict has never gotten much purchase here. During the three decades after World War II, the power of unions and of New Deal institutions yielded a broadly shared prosperity. That was supplanted during the past four decades, however, by a return to what looks—grimly—like a more normal capitalist order, in which capital and labor are indeed counter-posed, with capital coming out on top. I doubt you’ll find many Marxists among the institutional investors, much less the algorithms, that have tanked the market in recent days, but they sure seem to subscribe to the capital vs. labor formulations: If wages rise, their rate of capital return may slow to just three or four times the rate of wage increases. Pity.

Kuttner
February 5, 2018

The stock market is plummeting, with the Dow losing well over a thousand points in three trading days. What’s at work?

For starters, the market has been rising at a completely unsustainable rate, driven by low interest rates, stock buybacks, high corporate profits, and investor expectations of even dizzier heights. At some point, it had to come down to earth, even with the pro-corporate tax-cuts.

In addition, the declining unemployment rate has been translating into (modest, long-overdue) increases in workers’ wages. This tends to spook markets, not just because bosses don’t like giving workers pay increases (true, but oversimplified), but also because central bankers tend to worry excessively about inflation.

If low unemployment causes workers to command higher pay, and employers don’t take the cost out of profits but pass it along in the form of higher prices, inflation ensues. Projected inflation rates are still very low by historical standards—with global trade, weakened unions, and the gig economy, workers just don’t have that much bargaining power, even at 4 percent unemployment rates.

Even so, investors correctly worry that myopic central bankers will tighten money at the slightest sign of inflation. And tighter money means slower growth and higher returns in the bond market, both of which are bad for stocks. So investors, having enjoyed average gains of more than 20 percent over the past year, head for the exits.

So, is this the big one: the end of a steadily rising bull market in stocks that is now in its ninth year, the second-longest one on record? (If I knew the answer to that, I would not be writing this post; I’d be in the south of France.)

Whether this is a momentary glitch, or the beginning of a long-awaited “correction” in stock prices of 20 percent or more, depends on whether most investors decide to be prudent rather than greedy, or whether a majority of investors think the market will keep going up.

But one thing is clear. Central bankers have an unfortunate habit of needlessly choking off recoveries due to excess inflation phobia. If investors expect central banks to run true to form, the market is likely to keep declining and the great, post-collapse bull market could be over.

Kuttner
February 2, 2018

My friend Tom Edsall wrote a very smart column in The New York Times on Trump’s immigration offer to the Democrats. Edsall quotes a number of political scientists and strategists, but the bottom line is: Take the deal.

Trump is offering to more than double the number of number of young people brought here illegally as children who can qualify for citizenship. In exchange, Democrats must support $25 billion for Trump’s wall, as well as his unsavory demands to limit so-called chain migration and to end the visa lottery.

Why take the deal? Because Trump’s strategy jams the Democrats. If the Dreamers are deported, much of the Hispanic community will blame the Democrats as well as blaming Trump. But conversely, if the number of Dreamers is more than doubled, it splits Trump’s base, especially immigration hard-liners.

Yes, the other elements of the proposed deal are odious, but all of them can be fought another day. For instance, construction of the wall can be suspended, after the Democrats take back Congress. The issue of whether to have a visa lottery, a decidedly secondary issue, can be revisited another day. Likewise the details of which family members legal immigrants can bring in.

Chuck Schumer, who has flatly said no way, should think again. The Democrats should turn the tables on Trump by simply announcing that they will take his deal, in the interest of the Dreamers. Other aspects of immigration policy have been repeatedly revised over the last century, and will continue to be.

Then we will find out if Trump is for real on this—or whether the offer is one more Trump lie.

Meyerson
February 1, 2018

When is a commitment of $1.3 trillion worth precisely zero? When Donald Trump makes it in his State of the Union address.

On Tuesday night, Trump promised that he’d put before Congress a massive investment in infrastructure, to the tune of $1.5 trillion. What he neglected to say was that just $200 billion of that would actually be federal dollars. The balance would be funds that he hoped—if conditions were right, if the wind was from the east, if the weather was sunny and the creek didn’t rise—would come from state and local governments and private investors. That is, from sources the federal government does not control.

Traditionally, the federal government has picked up the lion’s share of infrastructure spending—and since that hasn’t amounted to all that much in recent decades, we have some of the industrialized world’s worst roads, rails, and airports to show for it. State and local governments, which often have limited bonding capacity and which can’t run deficits (unlike the feds), have seldom been able to pick up as much as half the cost of such projects, even during these decades when those projects have been too few and far between.

For a number of months, however, the word in Washington was that Trump’s administration would pony up no more than 20 percent of the trillion dollars it was touting. In the SOTU, however, that trillion magically grew to a trillion and a half, while the federal commitment remained anchored at $200 million, which would come to 13-and-a-third percent of the newly enlarged commitment.

So why stop there? Since the federal share won’t go any higher than that $200 mill, why not pledge a $5 trillion infrastructure project? A $10 trillion project? Once you begin taking credit for projects to be funded (or not) by other people’s money, resulting from other people’s autonomous decisions, there’s a whole lot you can take credit for. Why not take credit not just for the federal tax cut but for state and local tax cuts, too? Trump has gone beyond the doctrine of l’état c’est moi. L’état plus the 50 little états and Lord knows how many cities, counties and private investors—they’re all, as Trump sees them, moi, aussi.

Kuttner
January 31, 2018

In the mid-2000s, Napster had a futuristic slogan: “Own Nothing, Have Everything.” You know, hang out at Starbucks with your laptop and your iPhone, with all the world’s music, and videos, and books, and free information at your fingertips, and no physical stuff to worry about. On the Road, 21st-century style.

Well, the future has arrived faster than many people expected, and millennials are being asked to internalize the Gospel that life has never been sweeter. I may not have a house, as my parents did, but hey, I have to move around a lot anyway, and I don’t have the hassle of furniture and a mortgage. And I may not have a car, but it’s cool and healthy to ride a bike. And I make be bunked up with four roommates, but look at all the people I get to meet. I can pick up and travel, if I can afford a ticket. And with all the great cheap eats, I don’t even need a kitchen. My parents sure got it wrong (and could they please send me a check?).

It’s a great lifestyle, in your 20s, maybe. But what happens when you are 35 and want to have kids? What happens when you are sick of gig jobs and the itinerant life?

Though some millennials may have swallowed this story in order to make a virtue of necessity—nobody likes to be the loser generation—the reality is that millennials are the most downwardly mobile generation since the Great Depression. And I haven’t even mentioned student debt.

Alexa, find me a decently paying job. Oh, Alexa can’t do that.

The progressive politician who becomes the voice of the Screwed Generation, who gives voice to deep and shameful frustrations and stunted dreams, who offers something better, could be the next president.

Meyerson
January 30, 2018

Particularly since Donald Trump’s election, California has claimed the mantle of the nation’s most progressive state. It’s the only sanctuary state out there, the state where there are real restrictions on the extent to which cops can cooperate with ICE. It continues to push the envelope on climate change legislation, and, with New York, has mandated that its minimum wage rise to $15 an hour over the next few years.

But Jonathan Lasner, a very enterprising reporter with the Southern California News Group—a chain of California papers currently being decimated by its private equity owners—has come up with a truly mind-boggling index of the Golden State’s progressivism. Since the Great Recession ended—that is, from 2011 through 2017—fully 59 percent of all new union jobs have been created in California.   

To be sure, that’s a high percentage of a low number. Lasner has combed through the Bureau of Labor Statistics’ annual state-by-state count of union members, and discovered that union ranks in California grew by 60,000 during those seven years. In the other 49 states combined, they grew by 42,000 members.

Any quantitative comparison of California with other states should have California coming out on top, of course, simply because California has far and away the most residents. But to have more of anything than all the other states combined reflects not just the state’s size, but also its economic and political climate. Unlike Republican-run states, California’s government isn’t enacting policies that shrink unions, while California has also been creating jobs—albeit most of them pretty bad—in huge numbers in recent years.

That, in turn, leads to a more depressing take on California’s union gains: That increase of 60,000 unionized jobs comes to a mere 2.8 percent of the total number of new jobs created in the state since January 2011. Really, it’s a drop in the bucket—but a bigger drop than the other states put together.

Kuttner
January 29, 2018

What happens next with special counsel Robert Mueller and President Trump?

Clearly, White House Counsel Donald McGahn or his associates were the source of the explosive leak that Trump had directed McGahn to fire Mueller, and that McGahn blocked the move by threatening to resign. But why did McGann choose last week to leak the story of an episode that happened last June?

The most obvious explanation is that Trump was again making noises about firing Mueller. If that was the concern, McGahn’s leak worked, with several key Republicans again warning that firing the special counsel is a red line that Trump can’t cross.

Mueller is expected to interview Trump in the next few weeks. That’s a sign that Mueller is close to filing his report. The way this works is that you wait until you have all the goods on the ultimate target from other interviews and investigations, and then you bring in Mr. Big last. If Mueller is ready for Trump, that’s a sign he’s wrapping up.

The report, when filed, is likely to be devastating in its detail. Far more details on Trump’s efforts to kill former FBI Director Comey’s investigation; evidence of complicity by Trump’s family and perhaps by Attorney General Jeff Sessions and possibly by Vice President Pence; lots more detail on how Russian money has been propping up a failing Trump real-estate empire for more than a decade, and detail on what the Russians expected and got in return.

In short, more than enough to impeach Trump.

And then, House and Senate Republicans will go into a huddle and decide whether it’s time for him to go—whether to advise him to resign in exchange for a deal with Mueller, perhaps sparing his family.

Republican leaders will likely be split on this. Throwing Trump under the bus will infuriate his hard-core base. But keeping Trump in the face of overwhelming evidence of impeachable offenses will make the 2018 elections a cakewalk for Democrats.

And one more complication: If Vice President Pence is implicated, then both men might have to resign or be impeached. And that creates an intriguing set of choices for one Paul Ryan, House Speaker—and next in line for the presidency.

Does this beat Game of Thrones, or what?

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