Hoo boy. Tonight is national security night at the Democratic convention. Retired General John Allen just gave a stemwinder of a speech delivered in the tones of a drill sergeant and about as hawkish as anything you've ever seen at a Republican convention. As Paul Begala put it, he opened up a huge can of whup-ass on Donald Trump. Allen's speech came right after a very good speech from the father of a Muslim soldier who died in Iraq, and right before a speech by a Medal of Honor winner. The convention floor was practically shaking for all three.

Given Donald Trump's wishy-washy attitude toward military intervention, the Democrats have really stolen the national security mantle from the Republicans, who own it outright in most years. From an electoral standpoint, this is obviously great for Democrats. From an overseas intervention standpoint, it might be a little scary. It's great to steal the GOP's thunder, but do we really want to encourage Hillary Clinton's already hawkish instincts?

No matter what it does, the Bank of Japan just can't seem to generate any inflation. The BOJ meets on Friday to decide on its next move, and Prime Minister Shinzo Abe upped the ante yesterday by announcing a large spending increase prior to the meeting. He hopes to get the BOJ to coordinate more monetary easing with his stimulus package, something that might finally push inflation up.

So what's going on, anyway? Obviously I don't know, but the whole thing is peculiar because Japan's economy has actually done reasonably well since the Great Recession. As the chart on the right shows, real GDP per working-age adult has grown about as much as it has in the United States.

Why have I carefully shown GDP growth this way? Because Japan's population is shrinking: over the past two decades, the number of working-age adults has declined from 86 million to 78 million. This means that GDP will shrink too. But that's pretty meaningless. Obviously a lower population means a lower GDP. What you want to know is how much economic activity you generate per person.

So if economic growth is OK, why the inflation problem? Perhaps it's inevitable when a population shrinks and ages. If retired workers are too cautious to increase their spending, then stimulus is working against a huge headwind—and one that gets bigger every year as the population ages even more.

But it's not as if everyone doesn't know this already, and even so nobody can figure out quite what Japan needs to do to avoid a deflationary spiral. Maybe helicopter money will be next?

Here is President Obama last night, after singing the praises of Hillary Clinton:

That’s the Hillary I know. That’s the Hillary I’ve come to admire. And that’s why I can say with confidence there has never been a man or a woman more qualified than Hillary Clinton to serve as President of the United States of America.

I wasn't too thrilled with this bit of Obama's speech. Not because I want to get into an argument with conservatives about just how qualified Hillary really is, but because it seemed wrong for the moment. The conventional wisdom says that Americans are angry and want an outsider, somebody who will shake things up. Being the most qualified person ever is exactly the opposite of that. If Americans really are angry with the status quo, this was precisely the wrong way to sell her.

A little later in the speech Obama used the hoary old "in the arena" passage of Teddy Roosevelt fame. But if he was going to use it at all, this is the place he should have done it. Hillary has been in the arena, fighting all her life, while Trump has spent his life on the sidelines, bickering away and inventing feuds with other B-list celebrities. Experience is what underlies this difference, but it's a more positive way of making the point, and a more negative way of portraying Trump's lack of experience.

Oh well.

Yes, We Should Raise the Minimum Wage

Donald Trump, having discovered that raising the minimum wage is popular, has suddenly jumped on the bandwagon. He now claims to favor raising the federal minimum wage to $10 per hour. I will leave it to you to decide if you believe him.

Trump's flip-flopping aside, James Pethokoukis has a few points to make. Here's the first one:

As Scott Winship has argued, using the proper inflation adjustment would mean a roughly $8.50 modern minimum to match its 1968 level. And the current minimum is pretty much what the average minimum was from 1960 to 1980 before its steady decline during the 1980s. So a jump to $10, much the less $15 Democrats want, is a pretty big jump. What’s more, government-mandated wage floors are particularly problematic in a big country like America where living costs vary greatly by region.

In 1968 the minimum wage was $1.60. If you adjust for inflation, that comes to $11.08. So why does Scott Winship say it only comes to $8.50?

The answer has to do with which inflation measure you use. If you use the usual CPI indicator that gets reported in the news every month, inflation has risen 6.9x since 1968. If you use the PCE indicator, it's only gone up 5.3x. So which is correct?

I don't have the chops to adjudicate this, and anyway, the real answer is: it depends. They both have advantages and disadvantages depending on what you're interested in. However, without getting into all the gory details, I want to make a couple of points.

First, CPI measures only money that consumers spend. PCE measures everything, including business expenditures. The place where this makes the biggest difference is healthcare spending. Consumers generally spend a fairly small amount on medical care (copays, deductibles, etc.) with the vast bulk being covered by insurance or the government. As a result, medical expenses account for about 6 percent of the CPI index, but a whopping 20 percent of the PCE index.

But if medical spending accounts for a bigger percentage of the PCE index, something else must be lower. It all has to add up to 100 percent, after all. As it turns out, there are several differences in weighting, but the biggest by far is housing. Primary shelter accounts for only 15 percent of the PCE index, but 33 percent of the CPI index.

So which is more accurate? Again, it depends on what you're interested in. But without making any sweeping statements on one side or the other, I'll say this: for the poor, CPI is almost certainly more accurate. I can't prove this with the BLS survey numbers used to construct the CPI, since the accuracy of those numbers is precisely what we're arguing about. But consider two things:

  • The poor do, in fact, say that they spend about 40 percent of their income on housing (compared to about 30 percent for the middle class and above).
  • Common sense suggests that this is right. Do you really think that a family earning $25,000 spends only $300 per month on rent? Likewise, do you think they spend $5,000 per year on medical care?

It's hardly conceivable that the PCE weights are anywhere near representative of the real-life expenditures of the poor, and these are the people who are affected by the minimum wage. In particular, housing prices are a big expense for the poor, and housing costs have increased 7.4x since 1968.

I'm generally loath to play too many games with inflation measures, since you can very quickly get into a quagmire of cherry picking just the bits and pieces that help your argument. But in this case, it really does seem clear: in the case of the minimum wage, the lived experience of the poor over the long term is much closer to the CPI than to the PCE. A minimum wage of $10 would get us back to roughly where we were in the late 60s and early 70s. Is there really a good reason we shouldn't do that?

Donald Trump Caught Using Apple Macbook

Donald Trump participated in a Reddit "Ask Me Anything" yesterday:

The subgroup that sponsored the AMA is almost literally a white supremacist site, but I guess no one cares about that any more. Just Donald being Donald. Rick Hasen notes something even more damning:

Let me guess. It was "a friend's" Macbook? I'll bet Trump has been eating Oreos too. And watching HBO. And getting mocha lattes from Starbucks. When will the media rip the veil off this hypocrisy?

Hillary Clinton Tells the Truth!

Here is Gail Collins a couple of days ago in a big profile of Hillary Clinton with the ironic subhead, "How is it possible that we still don’t really know the most famous woman in America?" She's describing Hillary's 2000 run for the Senate in New York:

She had trouble with the carpetbagging issue. At one point, Clinton attempted to woo the locals by claiming that although she’d been brought up as a Chicago Cubs fan, she had always rooted for the Yankees because people need a team in each league. This was contradictory to every law of Midwestern fandom, which holds that no matter what else you do, hating the New York Yankees is a central principle of life.

Hillary Clinton is indeed a guarded person. That said, perhaps the reason we don't know her is because of reporting like this. Collins doesn't quite say that Hillary was lying, but that's the pretty obvious subtext. It's what nearly everybody thought at the time.

There's only one problem: Hillary really was a fan of both the Cubs and the Yankees. And she really was a big baseball fan as a kid. Bob Somerby collects the evidence today. Here's a childhood friend reminiscing about her in 1993, six years before New York was even a twinkle in Hillary's eyes:

"We used to sit on the front porch and solve the world's problems," said Rick Ricketts, her neighbor and friend since they were 8. "She also knew all the players and stats, batting averages—Roger Maris, Mickey Mantle—everything about baseball."

And this, in a 1994 story about a White House party for documentarian Ken Burns when he released "Baseball":

"That was a great swing," Burns told her. "Did you get some batting practice before the screening, just to warm up?" Mrs. Clinton, who as a kid was a "big-time" fan of the Chicago Cubs and New York Yankees and "understudied" Ernie Banks and Mickey Mantle, smiled.

How about that? Hillary was telling the truth the whole time. Hard to believe, isn't it?

Tough Times at Fox News

The New York Times reports on hard times at Fox News:

Megyn Kelly and her co-hosts [at the Democratic convention], including Bret Baier and Brit Hume, have not been speaking during commercial breaks, according to two people with direct knowledge of the anchors’ interactions, who described the on-set atmosphere at Fox News as icy. During ads, the hosts are often absorbed with their smartphones.

....Employees say there is a continuing split inside the network, with one camp of old-guard Fox News loyalists — some of whom owe their careers to Mr. Ailes — upset at his ouster. Some are resentful toward Ms. Kelly for cooperating with lawyers brought in by the network’s parent company, 21st Century Fox, to investigate Mr. Ailes’s behavior. (About a dozen women have reported improper behavior by Mr. Ailes to investigators.)

Another contingent inside Fox News is equally dismayed by the responses of stars like Kimberly Guilfoyle, Greta Van Susteren and Jeanine Pirro, who were quick to publicly defend Mr. Ailes after he was accused of harassment in a suit filed by the former anchor Gretchen Carlson.

And the pressure really seems to have gotten to Bill O'Reilly:

"I think the time has come now, where this whole network is going to have to band together, all of us, and we’re going to have to call out the people who are actively trying to destroy this network, by using lies and deception and propaganda. We're going to have to start to call them out by name, because that's how bad it's become," he said.

...."Jesse Watters goes on the floor of the Democratic convention, and some photographer comes up and starts swearing at him and cursing at him right in his face? This is provocation," he continued. "These people are doing this. They want me dead, Bolling, literally dead."

Bolling responded to O'Reilly, "I’m not sure they want you dead."

"Oh they do, believe me," O'Reilly said.

Poor Bill. I think he revels in the notion that we all want him dead. It would be a shock to his ego to find out that most of us just want him to go away.

As for Jesse Watters, he's been ambushing liberals for years, but he and O'Reilly both complain mightily whenever someone tries to do the same to him. If being yelled at is the worst that happens to him, he should count himself lucky.

My 17-Word Democratic Convention Speech Roundup

Tonight's speech roundup:

  • Michael Bloomberg: Trump is a con man.
  • Tim Kaine: Trump is a liar.
  • Joe Biden: Trump is a sociopath.
  • Barack Obama: Trump is an asshole.1

Decisions, decisions. Who's right?

Whatever else you think of it, the Democratic convention sure has had a strong lineup of speakers. Even Bloomberg, who's a little stiff on the podium, was pretty good tonight. Biden and Kaine were both sociable and folksy, and Obama, as usual, was inspirational. We'll see how the public responds to all this, but it's hard to see how the Democrats could have done much better in the prime time hour than they have over the past three days.

1My translation from the original Obamish.

Here's a bit of miscellaneous entertainment for you as you watch the convention—or even if you don't:

I know no one cares about this because it's boring policy stuff and no one takes any of Donald Trump's policy suggestions seriously in the first place, but I'm trying to fill the time while the B-listers natter on at the Democratic convention. I was disappointed that Jerry Brown didn't do a better job, but California already has all the great weather, so I suppose I can't complain that we don't have all the great convention speakers too.

Anyway, here's the Committee for a Responsible Budget on what the national debt would look like under President Trump vs. President Clinton:

According to the CFRB, Hillary Clinton has proposed $1.4 trillion in new spending and $1.2 trillion in revenue increases to pay for it. Pretty close! Donald Trump's proposed budget, by contrast, is about $10 trillion out of whack.

On the bright side, the top 1% get their taxes reduced by about 12 percentage points. So it's all good.