Kevin Drum

The Market for Economics

| Thu Feb. 4, 2010 3:31 PM EST

Ian Crosby offers up some interesting questions:

Paul Krugman maintains that Austrian business cycle theory is "as worthy of serious study as the phlogiston theory of fire." Milton Friedman claimed, less colorfully but no less categorically: "The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false."

Am I right to interpret this concurrence of opinion by two Nobelists from opposite ends of the political spectrum as a strong evidence that the Austrian critique is misguided?  Are latter-day Austrians the economic equivalent of creation scientists and climate-change deniers?  Or are there mainstream economists who take them seriously?  And if they do, what does it say about macro as science that there should be basic disagreements about a fundamental object of study in the discipline?

After talking to a few working economists, he concludes:

The real lack of consensus in macro, it seems, is not how to respond to a downturn in the business cycle, but what causes the business cycle in the first place.  And if mainstream macroeconomists agree that the Austrian explanation of this phenomenon is demonstrably lacking, it is not because they have a well-supported alternative or viable research program of their own.

Today’s Austrians may be a small and dubious minority.  But they have hardly opposed themselves to the edifice of a successful science.

Does that conclusion seem right to you guys?

And why is Austrianism appealing, anyway? Krugman argues that Austrianism appeals to people because it offers easy, clear-cut rules about cause and effect, and because it appeals to individuals' moral sense.*

But I think part of the reason people are attracted to the Austrian school is that more mainstream economists don't seem as interested in gaining public (i.e., nonacademic) acceptance of their ideas as the Austrians are. Whether or not they're "serious," the Austrians are definitely serious about promoting their theories. The Austrians have the Mises Institute, dedicated to spreading their ideas. They have the legions of Ron Paul supporters, most of whom lean towards Austrianism and are eager to tell you about it. And various Austrians and Austrian-leaning folks are responsible for clever things like the Keynes vs. Hayek rap video and Peter Schiff's series of YouTube videos. Russ Roberts, a professor at George Mason University who is behind the rap video, has written about the peculiarity of GMU's "Austrian-flavored" economics department:

We don’t just speak to the academy. We blog. We write novels. We write letters to the editor. Op-ed columns. We write books for a general audience. This isn’t an aberration. It isn’t just tolerated. It’s honored.

The point is that while it's easy to find someone ready to convert you to Austrianism, you just don't see "mainstream" economists out there trying to explain the basics of their theories to the masses. The closest you get to a public evangelist for Keynesian economics, for example, is Krugman, who generally focuses his New York Times column on the political and policy implications of economics—not the underlying theory. And yet when he has tried to explain the counterintuitive parts of Keynesianism, Krugman's actually been fairly effective. Witness this Slate article from 1998, in which Krugman talks about a microeconomy in order to explain his theories about the larger economy. More of that, please! 

Kevin is traveling today.

*I edited several sentences in the middle of this post for clarity.

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Do Elections Have Consequences?

| Thu Feb. 4, 2010 2:19 PM EST

John Cole uses this video of Sen. Al Franken (D-Minn.) to highlight some unfortunate behavior on the part of Sen. John McCain (R-Ariz.):

You see, McCain put a hold on Craig Becker, a nominee for the National Labor Relations Board, back in October, but never submitted any questions for Becker in all that time. The point of Franken's questions, which get at the fact that Becker is a former labor lawyer, is to point out that nominees for something like the NLRB are very likely to be from one side or the other—in this case, either management or labor.

Republicans, who generally take management's side, are going to oppose the labor-type nominees. And Democrats are going to oppose the management-type nominees. And because the minority's opposition to someone is often enough to block that person's confirmation (because of holds and the filibuster), you have a real problem. Elections are supposed to determine who runs the country. But the way the system works currently is that winning a presidential election gives you the right to determine foreign policy and assassinate Americans but gives you very little power over domestic governance. Winning a presidential election should at least give you the power to hire people to help you run the country. It should also probably give you a better shot at actually implementing your agenda. Right now, both those things are impossible.

Kevin is traveling today.

The Power to Assassinate American Citizens

| Thu Feb. 4, 2010 2:01 PM EST

Today, via the Washington Post's Ellen Nakashima, we get more confirmation that the Obama administration believes it has the power to unilaterally order the assassination of Americans who it suspects are terrorists:

Director of National Intelligence Dennis C. Blair acknowledged Wednesday that government agencies may kill U.S. citizens abroad who are involved in terrorist activities if they are "taking action that threatens Americans."

There don't seem to be any non-executive branch checks on this power. But Barack Obama is a good and wise man. What could possibly go wrong?

As usual, Glenn Greenwald is the person to go to on this:

Although Blair emphasized that it requires "special permission" before an American citizen can be placed on the assassination list, consider from whom that "permission" is obtained:  the President, or someone else under his authority within the Executive Branch.  There are no outside checks or limits at all on how these "factors" are weighed.  In last week's post, I wrote about all the reasons why it's so dangerous—as well as both legally and Consitutionally dubious—to allow the President to kill American citizens not on an active battlefield during combat, but while they are sleeping, sitting with their families in their home, walking on the street, etc.  That's basically giving the President the power to impose death sentences on his own citizens without any charges or trial.  Who could possibly support that?

[...]

It would be perverse in the extreme, but wouldn't it be preferable to at least require the President to demonstrate to a court that probable cause exists to warrant the assassination of an American citizen before the President should be allowed to order it?  That would basically mean that courts would issue "assassination warrants" or "murder warrants"—a repugnant idea given that they're tantamount to imposing the death sentence without a trial—but isn't that minimal safeguard preferable to allowing the President unchecked authority to do it on his own, the very power he has now claimed for himself?  And if the Fifth Amendment's explicit guarantee—that one shall not be deprived of life without due process—does not prohibit the U.S. Government from assassinating you without any process, what exactly does it prohibit?

That, at least, I have a bit of an answer for: the government can take your life, but it can never take your steel plants.

Kevin is traveling today.

Did Bush Almost Bomb Georgia?

| Thu Feb. 4, 2010 1:31 PM EST

Politico reports breathlessly that George W. Bush's administration "considered—and rejected—a military response to Russia’s 2008 invasion of Georgia." Andrew Sullivan draws the conclusion that the Bush team "came close" to bombing Georgia to stop Russian troops from pouring into the tiny country through a critical tunnel. But that's not really what the article says.

The key quote, in the sixth paragraph of the story, explains that "No principal advocated the use of force." It's both appropriate and unsurprising that Bush and Cheney's national security aides—or the national security aides to any president—would lay out all the potential responses to a crisis like the invasion of Georgia. And it's only responsible for the pricipals—actual decisionmakers like Bush, Cheney, and National Security Adviser Stephen Hadley—to discuss all the options. But if none of the actual decisionmakers ever pushed to use military force, it's hard to argue that it was seriously considered. This really seems like a non-story.

Kevin is traveling today.

The Democrats' Jobs "Plan"

| Thu Feb. 4, 2010 12:44 PM EST

Scott Brown is set to be sworn in as the newest member of the United States Senate later today. That means Democrats will need at least one Republican to switch sides if they hope to beat a Republican filibuster of their jobs bill. An initial vote on the package is set for Monday. Brian Beutler has the latest on how the Dems' plan to do that:

"You need two to tango. And you need Republicans for bipartisanship," said Senate Majority Whip Dick Durbin (I-IL). "Hope is prospective...we don't have bipartisanship at this moment. I hope we'll have it in a matter of minutes, hours, days."

Hope may be prospective. But it's not a plan.

Maybe the Dems really do have a GOPer on board, and they just don't want to say yet. But more likely, they're expecting the bill to fail and plan on blaming the Republicans for it. That might be good politics, but it doesn't actually help anyone get a job.

Kevin is traveling today.

Paul Ryan's Budget

| Thu Feb. 4, 2010 12:06 PM EST

Rep. Paul Ryan (R-Wisc.) has received a lot of attention in recent days for his plan to slash the deficit. (If you haven't yet, read Ezra Klein's interview with Ryan.) Mostly that's because he actually has something resembling a plan. The bulk of the "savings" from the plan come from converting Medicare to a voucher program and limiting the value of the vouchers. In other words, Ryan would change Medicare from what is essentially a single-payer plan for the elderly into a coupon program, with coupons that wouldn't cover the full cost of your medical care. (Ryan would also essentially privatize Social Security, but he doesn't get much in the way of savings from that.) And it's true—if you eliminate the whole "social insurance" bit about Medicare, it gets a lot cheaper. 

Now, Kevin says the plan is all "smoke and mirrors" because Ryan doesn't say "how his spending limits will be met." But using vouchers is actually a great way to set spending limits, if that's what you want to do. The real problem with Ryan's plan is that it's the kind of plan you propose when you don't actually have to pass a plan. Ross Douthat writes that "even if there were a politically-feasible path toward the kind of overhaul Ryan has in mind, it’s not clear how many Republican politicians would want to take it." Even Rep. Mike Pence (R-Ind.), who appeared with Ryan at a press conference on Tuesday to discuss the plan, hasn't embraced its proposals. The Atlantic's Derek Thompson has it right: "It's a shocking budget, and the kind of thing that no party in power would ever have the cojones to propose." It's the "gradual extermination" of Medicare, Thompson says. 

The biggest problem with Ryan's plan is that it doesn't actually control health care costs. It simply shifts the burden of paying for them from the public sector to individuals. Instead of the government going bankrupt trying to pay for medical care, it'll be individuals. That's all well and good for the rich, who might be able to pay for their own health care. But people who would have relied on Medicare are going to be out of luck. Medical costs wil rise much faster than the value of the voucher will. Ryan's plan seems to pretend that the problem isn't medical costs—it's just that the government is trying to pay for them. James Kwak is good on this:

The implicit premise [of Ryan's plan] is that we have to screw ordinary people–or at least make them bear a high degree of risk–in order to save the government budget. But what is the government budget? It’s a pile of money that we contribute and that our representatives are supposed to spend on things we can’t buy for ourselves individually. I know that those representatives make mistakes, are borderline corrupt, etc. But Medicare is exactly the kind of program that we want government to provide–a program that shifts risk from individuals to the government, and thereby the country as a whole–and that’s why it’s so popular.

Other countries manage to keep their citizens healthy at a much lower cost than we do. They don't have to dismantle their social insurance programs to do it. Why should we?

Kevin is traveling today.

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More Question Time?

| Wed Feb. 3, 2010 5:21 PM EST

Last week, President Barack Obama and the House Republican caucus held a riveting, televised question-and-answer session at the GOP's retreat. Now a bunch of lefty and righty bloggers, academics, and media figures (including Mother Jones' David Corn, who drafted the petition) have formed a coalition to demand more events along the same lines. Alex Balk thinks this is a bad idea:

It's a good idea unless you've seen how Question Times actually work in parliamentary democracies, where members of the governing parties ask self-serving softballs (e.g., "Do you agree with me that the American worker is the hardest worker in the world?") designed to run out the clock, while the opposition party tosses up as many cheap shots as it can in hopes that something will stick. And even were the process to be modified so that it was simply the President and Republicans, what does it benefit the President to reward the opposition with a continuing platform from which they can repeatedly voice their disagreements without offering credible, concrete alternatives? I mean, doesn't he already do that enough with the Senate's Democratic caucus? Nobody wants to watch that.

David actually addresses this concern fairly well in his piece announcing the coalition:

None of us are naive and believe that implementing Question Time will cure what ails our country and our political process. We do realize that if QT does become a Washington routine, politicians and their aides will do what they can to game it to their advantage.... There may well be attempts to institutionalize Question Time in a fashion that renders it nothing more than a canned replay of pre-existing spin. But even though there are problems with the presidential debates—which have been taken over by the political parties and a corporate-sponsored commission—those events still have value.

At Wednesday's White House press conference, when David asked Bill Burton whether the administration would commit to more Question Time-type events, Burton essentially said no, arguing that last week's event worked because of its "spontaneity." Burton and Balk have a point. Even if Question Time happens again, it probably won't be as good as it was last week. But I think David actually comes out on top here. No one thinks that a few question-and-answer sessions will fix America's problems. But QT could make things a little bit better. How can that be bad?

(FWIW Kevin thinks last week marked the "first and last" Question Time. Despite all this, he could very well be right.)

Kevin is traveling today and tomorrow.

Interrogating Abdulmutallab

| Wed Feb. 3, 2010 3:47 PM EST

Flickr/Mike Licht (Creative Commons).Flickr/Mike Licht (Creative Commons).On Tuesday, Sens. Blanche Lincoln (D-Ark.) and Jim Webb (D-Va.) joined Sen. Lindsey Graham (R-S.C.) and a bunch of Republicans to slam the Obama administration's plan to try the alleged 9/11 co-conspirators in federal court. Graham announced that he planned to introduce a bill—with Lincoln and Webb's support—to prohibit funding for civilian trials for Khalid Sheikh Mohamed and the other accused planners of the 9/11 attacks. The Senate rejected a similar bill, 55-45, back in November, but Graham and many of his allies pointed to the failed Christmas attack allegedly carried out by Umar Farouk Abdulmutallab as evidence that the Obama adminstration's strategy for fighting terrorism isn't working.

Many of the critics of the Obama administration's response seem to be claiming that Abdulmutallab should not have been arrested or read his Miranda rights. They seem to believe he should have been turned over to military custody so he could face the same military tribunals that they want KSM et. al. to face. (TPM's Justin Elliott has a good piece on why tribunals might not be the most effective way to try and convict terrorists.) And some of the critics are suggesting that Abdulmutallab should have faced "harsher" interrogation—an argument-by-euphemism for using techniques that have been banned as torture.

On Tuesday night, the Obama adminstration fought back at the criticism with a barrage of leaks to the press. Abdulmutallab is cooperating with investigators, sources told the New York Times. Gaining his trust by involving his family was supposedly key to getting him to provide information on Al Qaeda. So the Obama administration is defending its way of dealing with terrorist suspects by claiming that its way works. (The Obama administration's way is also the way it was almost always done before 9/11, and sometimes after—shoe-bomber Richard Reid was Mirandized, too, and no one raised a fuss.)

But in some ways, using the "it works" defense is too weak. Attorney General Eric Holder has a better idea: defend the Obama administration because, when it comes to Abdulmutallab, it's following precedent, the Constitution, and the law. In a letter to Sen. Mitch McConnell (R-Ky.), the Senate minority leader, Holder writes:

The practice of the U.S. government, followed by prior and current Administrations without a single exception, has been to arrest and detain under federal criminal law all terrorist suspects who are apprehended inside the United States... Some have argued that had Abdulmutallab been declared an enemy combatant, the government could have held him indefinitely without providing him access to an attorney. But the government's legal authority to do so is far from clear. In fact, when the Bush administration attempted to deny Jose Padilla access to an attorney, a federal judge in New York rejected that position, ruling that Padilla must be allowed to meet with his lawyer. Notably, the judge in that case was Michael Mukasey, my predecessor as Attorney General. In fact, there is no court-approved system currently in place in which suspected terrorists captured inside the United States can be detained and held without access to an attorney; nor is there any known mechanism to persuade an uncooperative individual to talk to the government that has been proven more effective than the criminal justice system.

Adam Serwer, who first wrote about the Holder letter, has a good list of the ways in which Abdulmutallab's successful interrogation "explodes" key torture myths. But I also especially enjoyed the take of "M.S." at The Economist (although I know Kevin hates their semi-anonymous blogs):

THERE are apparently a significant number of people in America who don't think that Umar Farouk Abdulmutallab should have been arrested, read his rights, and interrogated by FBI officers, with a view to ultimate prosecution in a court of law for the crime of attempted murder. I don't really understand what it is that these people do think.... Eventually, one assumes, such people want Mr Abdulmutallab tried by some other parallel system of justice, a military tribunal perhaps, so that he gets less of an opportunity to defend himself than he would have in the normal criminal-justice system. As Scott Brown says, "In dealing with terrorists, our tax dollars should pay for weapons to stop them, not lawyers to defend them." I have no idea what Mr Brown is afraid might happen to Mr Abdulmutallab in court: that, with a clever lawyer, he might beat the rap? The man's underpants burst into flame in full view of an airplane full of passengers.

This is a really important point. The criminal justice system is how America has traditionally dealt with terrorists. It has so far proven more effective at actually convicting them than military tribunals have. The burden of proof should fall on those who advocate using a different system.

Kevin is traveling today and tomorrow.

Decision "Next Week" On Health Care Strategy

| Wed Feb. 3, 2010 2:39 PM EST

Senate Majority Leader Harry Reid said last night that he hopes Democrats will settle on a strategy for moving forward on health care reform by sometime next week. That's good news of a sort, but take it with a few grains of salt. 

The way forward is already pretty clear. If the Democrats are going to do this, the Senate needs to use the filibuster-proof reconciliation process to pass some fixes to its health care reform bill. Then the House needs to pass the "fixed" Senate bill. That's the only remotely realistic path that anyone has suggested that gets to comprehensive reform. Every other plan is either politically unworkable (e.g., having the House pass the Senate bill unchanged) or doesn't lead to comprehensive reform (e.g., breaking the bill up). If the Democrats want to pass reform, the path is obvious. Reid is sort of beating around the bush here. When he talks about settling on a strategy, what he means is agreeing on potential "fixes," figuring out workarounds to potential procedural roadblocks, and, most important, figuring out whether he and Pelosi have the votes to proceed.

It's worth remembering that some Democrats, including Steny Hoyer, the House Majority Leader, said last week that this week would be the week that Dems would settle on a strategy for getting health care reform done. When confronted with that fact at his weekly press briefing on Tuesday, Hoyer said, "Did I say that? I was in error." He added that he anticipates making a decision "just as soon as the way forward is clear."

Democrats would also do well to think about another thing Hoyer said on Tuesday. He told the story of a woman with an "orange-sized tumor" and no insurance who called his home, explaining that she didn't know what she was going to do. She couldn't go to the emergency room, because she wasn't gushing blood, she wasn't poor enough to qualify for Medicaid, and she wasn't old enough to qualify for Medicare. But she didn't have the $12,500 she needed to have the tumor removed. "That's what this health care debate is about," Hoyer said. "We talk a lot about this complication, that complication, this that and the other thing. But what this debate is about is really that woman who called and left me a message and said 'what do I do?'"

Kevin is traveling today and tomorrow.

Chris Dodd vs. the Volcker Rule

| Wed Feb. 3, 2010 1:53 PM EST

Chris Dodd (D-Conn.), who has apparently been possessed by the spirit of his colleague Max Baucus (of "gang of six" fame), is desperate to get bipartisan financial regulatory reform. Unfortunately, that probably means not actually reforming the financial sector. Here's the Times:

Mr. Dodd, Democrat of Connecticut, added that the administration was "getting precariously close" to excessive ambition for the legislation. "I don’t want to be in a position where we end up doing nothing because we tried to do too much," he said.

It's hard to see how anything that the administration has proposed to rein in the financial sector amounts to "excessive ambition," if by "excessive ambition" you mean something like "overregulation." But if "excessive ambition" means "too hard on the banks to actually pass," well, that's just sad. Digby says "One hates to be cynical about this, but Dodd is leaving.  And he's going to need a job." That could be right. But the other prospect, just as frightening, is that Dodd has accurately assessed the situation and realized that real financial reform can't get through Congress because the banks own the place. (That is basically what Kevin thinks, after all.) Either way, the Volcker rule is looking increasingly like a good proposal that will remain just that—a proposal.

Kevin is traveling today and tomorrow.