Wednesday, August 16, 2017

Deep Structures of the Cultural Marxism Myth

Jeet Heer has posted a timely and excellent essay at New Republic titled "Trump's Racism and the Cultural Marxism Myth." In his essay, Heer recounts much of the background to the Higgins memo that I have documented here, here and here. Heer credits William S. Lind as the major popularizer of the myth, as have I in my blog posts. What I'm posting here extends the analysis and reveals significant background about personnel and timelines to the story.

In my most recent post, I started to probe further back into the myth's history with an examination of Eliseo Vivas's over-the-top invective against Herbert Marcuse since the late 1960s. Vivas was deeply offended by Marcuse's writing and expressed his displeasure in several articles and a book, Conta Marcuse. He was also a frequent contributor to the journals, Modern Age and Intercollegiate Review both of which are associated with the conservative organization, the Intercollegiate Studies Institute or ISI. From a snippet of a speech by ISI president T. Kenneth Cribb in Ellen Messer-Davidow's 1993 article, "Manufacturing the Attack on Liberalized Higher Education" I had the hunch that the ISI might offer a clue to the metamorphosis from Vivas's anti-Marcuse screeds to the full-blown cultural Marxism myth that appeared in Lind's pamphlet, Pat Buchanan's book, Higgins's memo and Anders Breivik's manifesto.

Cribb is a pivotal character in this saga. He was national director of the ISI from 1972 to 1977, then, after earning a law degree went to work for Edwin Meese during the Reagan campaign in 1980 and ended up Counselor to the Attorney General and subsequently Assistant for Domestic Affairs to President Reagan. After the end of the Reagan administration, Cribb returned to the ISI to serve as president of that organization from 1989 to 2011.
Krawattennazis Rich Higgins and T. Kenneth Cribb
In 1989, Cribb gave an address to the Heritage Foundation on "Conservatism and the American Academy: Prospects for the 1990s" in which he outlined his vision for a "sustained counteroffensive" on what he characterized as "the last Leftist redoubt, the college campus." Cribb painted a picture of relentless persecution and harassment of conservatives in American universities taken mostly from Peter Collier and David Horowitz's Destructive Generation: Second Thoughts about the Sixties. He boasted of the ISI's readiness for that counteroffensive:
In addition to saving a remnant that renews the font of conservative ideas, we are now strong enough to establish a contemporary presence for conservatism on campus, and contest the Left on its own turf. We plan to do this by greatly expanding the ISI field effort, its network of campus-based programming.
Cribb was unequivocal in his view that academia was "the one redoubt left to it [the left] by the successful conservative counterattack of the 1970s and 1980s." His promised counteroffensive was thus presented as a mop-up operation for the establishment of a "free" society, which is to say a traditionalist society freed of the nuisances of relativism and other non-conservative heresies.

Fifteen years into that mop-up operation, Cribb contributed a chapter to William Lind's Political Correctness: a Short History of an Ideology, the locus classicus of the cultural Marxism myth. Cribb's chapter was titled "Political Correctness in Higher Education." It presented anecdotes from conservative college newspapers affiliated with the ISI meant to illustrate the "alarming rate" at which "the freedom to articulate and discuss ideas" was being eroded by incidents of intolerance and corruption of the curriculum to downplay the significance of Western Civilization.

"While it would be easy to dismiss such demonstrations of intolerance as student pranks," he admitted, "these incidents are the surface manifestations of a more pervasive and insidious trend..." The headline outrage was the burning of "hundreds (sometimes thousands) of copies of conservative student newspapers."  He concluded his chapter with a brief account of the ISI's efforts to stem the tide of the alarming erosion of freedom. Along with other sections of the Lind book, whole passages from Cribb's chapter were 'cribbed' by Norwegian mass murderer Anders Breivik for his manifesto.

Curiously, there was no mention in Cribb's 1989 address to the Heritage Foundation of Herbert Marcuse, the Frankfurt School or cultural Marxism nor was there in the book by Collier and Horowitz book that Cribb had cited. "Politically correct" gets four hits though. Yet Horowitz  and Collier were active participants in 1960s New Left extremism. Similarly, ISI poster boy Dinesh D'Souza's Illiberal Education from 1991 contains one brief and not particularly scathing mention of Marcuse and one reference political correctness but no mention of the Frankfurt School or cultural Marxism.

The political correctness. cultural Marxism stew didn't get all its ingredients until the 1992 article, "New Dark Age: Frankfurt School and Political Correctness," whose author, Michael J. Minnicino, subsequently disowned his work as "hopelessly deformed by self-censorship and the desire to in some way support Mr. LaRouche's crack-brained world-view." That fine piece of Western Civilization scholarship was then taken over and reworked by Lind in 1997.

At last we have a doctrine, a vanguard organization, and a timeline. But most importantly, courtesy of the Larouche cult, we now have a suitably unitary devil-function. The "basic Nazi trick," as Kenneth Burke labeled "the 'curative' unification by a fictitious devil-function, gradually made convincing by the sloganizing repetitiousness of standard advertising technique." Helpfully, in a 1988 address to the Heritage Foundation,William F. Campbell explained why conservatives need such a devil-function:
But as first and second generation conservatives have always known, and had to live with as an unpleasant skeleton in the family closet, there is sharp tension, if not contradiction, between the traditionalist and the libertarian wings of the conservative movement. They have been held together primarily because of their common enemies, modern egalitarianism and totalitarian collectivism, which they both abhor. 
In 1988, when Campbell made those remarks, the Soviet Union still existed and could serve the primary role of common enemy, symbolizing the alien totalitarian destiny of domestic egalitarianism. After the collapse of the Soviet Union in 1991, a new enemy had to be conjured. The Higgins memo is testament to the contortions that must be endured to conjure that devil.



Tuesday, August 15, 2017

Why Is The Fed Raising Interest Rates As Fast As It Is?

I have a theory that at least some people at the Fed are supporting interest rate increases not because they are worried about incipient inflation that must be nipped in the bud in advance under a regime of inflation targeting, but because they are looking over the horizon and worrying about a possible recession in the not-too-distant future, and they want to be able to have interest rates high enough that they can then engage in lowering them as a stimulative policy tool under the circumstances.  If they are too low, then extraordinary measures will need to be used, and some of those measures may not be available in the future.

This theory is based on nothing solid at all, nothing.  I think that those who may be thinking this (and my likely candidate(s) would be people at the very top) are constrained in speaking openly due both to the current institutional arrangement of consensus decisionmaking within an established inflation targeting system with a 2% inflation target, not to mention pressure not to talk about possible future dangers.  The current line is that the economy is doing well, and certainly it is on the standard measures of unemployment and inflation, even if the former could be better and wages could be rising more rapidly.  Indeed, it is this good performance that is supposedly underlying the moves to raise interest rates and possibly "normalize" the balance sheet (which I doubt there will be too much action on).  But my theory is that for some of them it is a matter of trying to "normalize" on interest rates as well while the possibility of normalizing is possible, while the economy is doing fairly well and one can raise them without obviously slowing things down noticeably, so that indeed there will be the ability to lower them again in the future when necessary.

He did not put this theory forward, but it was reading the recent column by Larry Summers that appeared in the Washington Post on Monday was been linked to by Mark Thoma today (unable to make that link, sorry) and also can be gotten to at larrysummers.com/2017/08/14/why-the-federal-reserves-job-will-get-harder.  He is focused on the upcoming ending of the term of his rival as Chair of the Fed, Janet Yellen, and is worried about who Trump will pick and what will happen.  While stating that he would have "preferred a slower pace of interest rate adjustment," he bottom lines that "Overall it has done well in recent years" (even though he did not get picked to be Chair).

While he thinks the economy is currently doing pretty well, looking forward he worries tha it is "brittle" with numerous dangers, and opines that there is a two thirds chance of a recession during the next Fed Chair's term.  He then notes how the still low interest rates will make it hard to use the interest rate tool to stimulate the economy, making it difficult for the Fed to do much.  He does not make the leap I did to the possibility that this fact may be on the minds of at least some people at the Fed, although they really cannot openly say it.

I agree with his concerns about what is coming due to the political situation, with "major risk now of presidential interference" in the Fed, and he makes disparaging remarks about the president quite reasonably so.  He also notes that the "temper of the times has turned against technical expertise in favor of populist passion." There is reason to be concerned about what he will do. 

But in the meantime some people at the Fed may be doing their best to make it possible for the Fed to do something in the future when the need will surely arise.

Barkley Rosser

Monday, August 14, 2017

Additional Remarks

Commander Bone Spurs was afraid that some of his supporters would be too thick to grasp the grudging, involuntary nature of his teleprompter recital. Just to make his bad faith perfectly clear, IMPOTUS tweeted additional remarks about his "additional remarks":

The "Narratives" of Higgins's "Warfare"

The word 'narrative' appears 41 times in the infamous Higgins memo, "POTUS and Political Warfare." Guys, it's time for some narrative critique. The narrative Higgins is most concerned about is something he calls "cultural Marxism," which he defines in a paragraph at the top of page four of the memo:
As used in this discussion, cultural Marxism relates to programs and activities that arise out of Gramsci Marxism, Fabian Socialism and most directly from the Frankfurt School. The Frankfurt strategy deconstructs societies through attacks on culture by imposing a dialectic that forces unresolvable contradictions under the rubric of critical theory. The result is induced nihilism, a belief in everything that is actually the belief in nothing.
What does this mean? I think what Higgins was trying to say is that the Frankfurt School's critical theory seeks to tear down Western Civilization societies by undermining Judeo-Christian culture.The Western Civilization and Judeo-Christian stipulations appear elsewhere in his manifesto memo. As an example of how this undermining is to take place, Higgins offered a series of quotes from Herbert Marcuse's 1965 essay, "Repressive Tolerance," in which, Higgins claimed, "Marcuse defined tolerance as intolerance."

In all fairness to Higgins, his interpretation of the Marcuse essay is probably not his. It is likely he never read the essay. The legendary characterization of Marcuse's essay is a set piece that has been passed down from conservative magazine article to conservative pamphlet to conservative blog post to conservative twitter screed for decades. Leaving aside the accuracy of the interpretation, the question Higgins left unanswered -- because presumably unasked -- is how did this obscure text become as diabolically pervasive and influential as Higgins claims it is?

For the answer to that question, we need to go to Higgins's sources, even though he hasn't explicitly named them and quite possibly doesn't know what they are. The political correctness, cultural Marxism, multiculturalism, repressive tolerance "narrative" is out there in the miasma.

I have previously documented the plagiarism link between cultural conservative William S. Lind's propaganda pamphlets and mass murderer Anders Breivik's manifesto. Now I would like to dig a little deeper and identify a grandfather meme: Eliseo's Vivas's "Herbert Marcuse: 'Philosopher' en titre of the New Nihilists." Vivas also wrote a polemical book, Contra Marcuse, but having read the article, I think I get the drift of his diatribe method of critique.

In "The Rhetoric of Hitler's 'Battle'" Kenneth Burke warned against "vandalistic" commentary on a text, even one as exasperating and nauseating as Hitler's Mein Kampf. Inflicting a "few symbolic wounds" on the text is more gratifying than it is enlightening. With "the testament of a man who swung a great people into his wake" it would be prudent to "discover what kind of 'medicine' this medicine-man has concocted, that we may know, with greater accuracy, exactly what to guard against..."

Sunday, August 13, 2017

"Rational" Optimism?

I just finished this long, rather convoluted meditation on “rational optimism”.  Must we admit the world is getting better, getting better all the time?

Really, there are two types of multidimensionality that need to be considered.  The first is that “better” is, if it’s anything, vector valued.  Many aspects of life go into its calculation, as well as the distribution of outcomes across places and peoples.  Typically some things will be getting better and others worse, so either we abandon blanket judgments or we propose weights.  Instead the discussion on both sides is a combination of hard (or hard-ish) numbers for particular indicators, like life expectancy and poverty, and vague aggregations like “most” or “in general”.

Second, the financial notions of alpha and beta are highly relevant to this discussion.  What matters is both the mean outcome of interest and the risk attached to it.  In a sense, the modern world has purchased yield (realized material benefits) at the cost of greater tail risk (catastrophic climate change, nuclear war).  This should be obvious, but the point is that reward cannot be evaluated apart from risk.

I’m not passing judgment on the bottom line (if there even is one), just saying that, if optimism/pessimism is a matter worth speculating on, we might as well do it in a disciplined way.

Saturday, August 12, 2017

The Buchanan-MacLean Controversy

The book, Democracy in Chains (with an even more lurid subtitle) by Nancy MacLean, a respected (until now) historian at Duke University makes a strong argument that the late James M. Buchanan of UVa, VaTech, and George Mason was the crucial link between the ancient states right racism of John C. Calhoun and the current Trump administration. From Calhoun, incredibly inaccurately labeled a "libertarian," through the Agrarian Populist literary movement that was popular at Vanderbilt where Jim wanted to go but did not (he went to Middle Tennessee State, a poor boy claiming to be a "socialist,"), Buchanan becomes supposedly an effective supporter of racial segregation in Virginia in the 1950s, and then becomes the inspiration for all of later Austrian libertarianism, having attended the opening meeting of the Mont Pelerin Society in 1947 (where they chose to be called "neoliberals"), and then after founding the Thomas Jefferson Center for Political Economy at the University of Virginia, and then running to  VA Tech in the early 70s, and then to George Mason in the early 80s, well, then he had a connection with the Koch Brothers, although this fell apart in the late  90s, but nevertheless he is the main link proving that Trump is a racist enemy of democracy.

This account has brought forth a massive counterattack from many current libertarians, much of it looking to me to be justified, involving many  serious factual errors.  I am not going to list them but note these sources for discussions of such matters: Munger, Horwitz, which includes other sources.  I shall try to deal with matters not covered by them, noting that I largely agree with their critiques.  The hard bottom line is that this may be a left version of  rightist climate change denial: those reading this book need to be aware of how deeply flawed and erroneous it is, although it makes some valid points.

So what is valid?  There is a very hard point that was not a main point in the book and has largely not been discussed, with most of the attention being on the deeply flawed account of Buchanan and G. Warren Nutter's role in the matter of 1950s Virginia school desegregation (more on that  later). The hard point is Buchanan's role in Chile.  MacLean is right that while there has been much been more publicity about the roles of Hayek and Friedman in Pinochet's regime in Chile, Buchanan's role there, nailed in by a crucial visit in 1980, may have been far more influential in forming the eventual  constitution, although this happened well after the original coup by Pinochet in 1973.  He played a key role in developing their constitution, which MacLean claims has anti-democratic elements that have in place defenses for the rights of capitalists that can only be overcome by two rounds of legislative votes. Yes, does put  a pro-capitalist tilt in there, but two  rounds of the legislature to overturn it?  In fact it was accepted by a referendum and has been amended numerous times since and reestablished a parliamentary democracy. Does not exactly look like Stalin or Hitler or Mao or  Kim Il Sung or something deserving the label "democracy in chains.".  But it is not  pretty, given all the blood Pinochet spilled, and just like Hayek and Friedman, Buchanan has this  matter on his late conscience, and it is notable that he never published anything on this, and aside from a meeting in Palo Alto right after he did it, he never publicly bragged about it or acknowledged it, although apparently he did so at that  meeting.  But maybe he realized that it was the stain on his career that it is, and he was  in the end embarrassed about it and wished to cover it up.

The second matter is the most controversial, and indeed is the centerpiece of MacLean's book.  This is the matter of his role with Nutter in 1959 in the school desegregation issue in Virginia, the one point regarding which an actual professional economist has come out for MacLean, namely Brad DeLong.  This is a much murkier matter, and after looking at it I see it as unclear with MacLean leaving out crucial  details, quite aside from ignoring crucial exculpatory evidence, even as she has some case.  This has to do with a report Buchanan and Nutter wrote to a specially appointed commission to deal with the school desegregation issue in 1959, in the context of Prince Edward County going for massive resistance against the 1954 Brown vs Board of Education SCOTUS ruling that led to the racial integration of public schools.  I think Buchanan should have signed the petition of VA academics supporting that ruling, but he did  not.  His proposal with Nutter suggested allowing vouchers for private schools along with  public schools, and MacLean and DeLong claim that this supported the effort to close down public schools in Prince  Edward County.  MacLean is right that at the time this did  effectively support that movement, although the Buchanan-Nutter proposal did not call for ending public education, and Buchanan has been in many places on record supporting the existence of public education, if with private school competition in the form of vouchers.

This  is  the central part of the book's argument, and it is the most heatedly debated, and I do not  have the bottom line on it, although it looks to me that MacLean has overstated her argument. A crucial issue has to do with race, obviously.  MacLean herself accepts that there is zero  evidence that Buchanan was himself a racist and that all of  this was just part  of his  supposedly libertarian/Koch/Trump view of the world. As it is, I think that whatever was really going on in 1959, the bottom line on Buchanan's views is given on p. 56 of her book where she grants that he supported "voluntary" and "local" desegregation based on local conditions, which she then effectively dismisses with a remark that he did not know what was going on in Arkansas and elsewhere, a comment that looks to me to be seriously stupid, to be very blunt.  Bottom line here is that Buchanan and Nutter may have effectively played a role in supporting the pro-segregationists in Virginia in 1959, but that was not their  position.

What about major problems with MacLean's arguments?  I shall note three, starting with one noted by others and effectively granted by MacLean herself.  This is the claim she makes in the final chapter that Tyler Cowen supports suppressing democracy.  This is based on a quote she supplies that was definitely taken out of context, a context where it was clear that the content of the isolated quote was contradicted by what immediately followed it.  Even those who have supported MacLean's book on Facebook such as Gary Mongiovi have agreed that MacLean was simply out to lunch on this matter, although while she has recognized that the quote is problematic, she has not fully retracted her argument related to it.  This is almost certainly tied to Cowen being director of the largely Koch-funded Mercatus Center at George Mason, with this being sort of the final piece de resistance of her book and argument, supposedly from racist anti-democratic John C. Calhoun to supposedly anti-democratic and implicitly racist Koch-funded libertarians at George Mason and Donald Trump.

A second problem reflects that MacLean is not an economist and seems to seriously misunderstand public choice theory, with her views on rent seeking being a strong example.  In discussing rent seeking, a concept originated by Buchanan's important coauthor, the  late Gordon Tullock, and labeled by the centrist liberal development economist, Anne Krueger, she consistently identifies the supposed rent seekers as politicians seeking voting support from activist liberal groups such a unions and civil rights groups, especially the latter, whom the the supposedly anti-democratic tendndencies of Buchanan are directed against.   But in fact in public choice theory the rent seekers are priviate interest groups that use government to create artificial monopolies, which generate the rents these groups are seeking.  It is really a quasi-Marxist view that sees capitalists using the government to enhance their  corrupt  profits.  It is ironic that I have seen public choice economists show up at URPE social gatherings at meetings to discuss how they have this in common with the radical left URPE folks, opposition to corrupt use of the government by rent seeking private interests.  I am not sure the URPE  people were all that open when I saw this, but there is no doubt that MacLean simply is completely wrong here and totally misrepresents public choice theory on this point, although the strongly pro-free market stance of both Buchanan and Tullock can easily mislead people on this.

Finally we have her misuse of the term "libertarian," which is also a central part of her argument, that there was this stream of essentially anti-democratic racist thought and action going straight from John C. Calhoun through the Agrarian Populist literary movement through James Buchanan and public choice theory to Koch-funded modern libertarians who are responsible for Trump and all he represents, an argument essentially made in the opening chapter, where she has Buchanan starting the Thomas Jefferson Center at UVa and his memo with Nutter being crucial centerpieces of this wholel strand.  The problems with this are numerous.  For starters, Buchanan never was a libertarian, even if he was somewhat sympathetic to their position, and he certainly was not a more radical anarcho-capitalist type of libertarian.  Public choice theory does analyze how government agencies and actions may be corrupt and self-interested and involve rent seeking, but most public choice theorists certainly argue that the state has legitimate roles in society and the economy.  Like the Austrian Hayek, whom Buchanan respected although he was not himself an Austrian, he preferred the label "classical  liberal," which MacLean at one point recognizes but simply dismisses as not being a useful term because of all the confusion with how Americans use the term "liberal." But this was indeed what both Buchanan and Hayek called themselves.  Hayek specifically rejected the term "libertarian" in his famous essay "Why I am not a Conservative," with Buchanan himself later writing a similar one entitled "Why I am Also not a Conservative," although MacLean for discussions of what was going on in Virginia in the 1950s that "libertarian" and "conservative" were essentially the same.  Oog.

As it is, MacLean seems to be unaware that the origin of the term "libertarian" was originally from the left, coming out of France, with there actually being people who identified themselves as "libertarian communists" in the 1920s.  There are still people who consider themselves to be "libertarian socialists," with Noam Chomsky being perhaps the most prominent example.  It was only in the 1950s that the term began to be used by people more on the political right than the political left, but still people like Hayek and Buchanan did not identify with it or use it for themselves.

This problem continues right up to the present situation, where indeed the Kochs claim to be libertarians, as does Tyler Cowen.  I agree with her that they have been supporting many things I do not support and have been massively influential with their massive funding campaigns over a long time in many places.  But I note that indeed they have supported some things I support out of their libertarianism, including prison reform, drug legalization, liberal approach to immigration, enlightened views on gay rights, and relatively dovish foreign policy, among some others, even as they support many other things I do not like, some of which Donald Trump supports, such as rolling back environmental regulations and crushing labor unions.  But when MacLean links the Kochs with Trump there is indeed a further problems: they did not support him, certainly not in the GOP primaries, where reportedly they preferred  pretty much anybody but him, although it would appear that they may have made at least some peace with him since he entered office.  But they disagree with him on many of his policies, see the list above of things they support I agree with and which Donald Trump by and large disagrees with.

What this represents is something that MacLean is clearly unaware of but which is important, that there is a major split within the Austrian School of Economics and among libertarians themselves, with the public choice people really on the side of all this, something that makes her main argument all the more ridiculous.  This is the split between the Rothardian-Misesians and the Hayekians.  The former, more influenced by the late Murray Rothbard than by von Mises really, have their great base at the Ludwig von Mises Institute (LvMI) in Auburn, Alabama, whereas the latter pretty much have their main HQ these days at George Mason University, precisely the crowd that MacLean has her story end up with.  These former are much more inclined to Trumpian views on race and immigration in particular, and they actually fit her main argument much better, also defending neo-Confederate "Paleo-Conservative" ideas.  Thus they are fine with the argument that a business owner has the right to discriminate against someone on racial (or gender) grounds.  Curiously one of the politicians closely linked to the LvMI who has expressed such views is none other than Ron Paul, who long opposed civil rights legislation when he was in the US  Congress representing an East Texas district, and the longtime director of the LvMI, Rockwell, was his former chief of staff.  These are the people who fit MacLean's story, but the split between them and the George Mason Hayekians has been steadily widening, with the matter of Donald Trump adding to this, as basically none of the Masonites supported him, while quite a few of the LvMI crowd have done so.  MacLean seems really to be amazingly misinformed and misguided about crucial aspects of this whole matter, quite aside from her errors regarding the work of the late James M. Buchanan himself.

Barkley Rosser

Friday, August 11, 2017

The Higgins Memo, Anders Breivik and the Lyndon LaRouche Cult


Back in 2011 after mass murderer Anders Breivik slaughtered 77 people in Norway I had a look at his "manifesto" because I  had heard that it spun a conspiracy theory around "cultural Marxism," multiculturalism, "political correctness" and the Frankfurt School. It turned out that the document was largely plagiarized from "Political Correctness: a Short History of an Ideology?" by William S. Lind, who at the time he wrote his pamphlet was Director of the Center for Cultural Conservatism at the Free Congress Foundation. It also turned out that Lind's "short history" was also largely cribbed, in his case from an article published in 1992 in a Lyndon LaRouche  cult journal called Fidelio. The author of that article subsequently repudiated both his article and his association with the LaRouche cult.

Rich Higgins, the author of the May 2017 memo, "POTUS and Political Warfare," was in the strategic planning office of the National Security Council until soon after his memo was discovered and read, presumably by General McMaster, he was given the option to resign and then escorted out of the building. Higgins memo rehashes all the old Lyndon Larouche, William S. Lind, Anders Breivik rigmarole.

I'm not going to repeat that all here. I wrote about it in a series of posts at Ecological Headstand in July and August of 2011 and revisited the topic in an EconoSpeak post from August 2015, Politics of Pastiche: "voters... need someone to fire all the political-correct police". One fascinating aspect of this story is that Frankfurt School historian Martin Jay had an encounter with Lind and wrote about it in Salmagundi,"Dialectic of Counter-Enlightenment: The Frankfurt School as Scapegoat of the Lunatic Fringe."

The "lunatic fringe" is now installed in the White House. Although Higgins, Ezra Cohen-Watnick and Derek Harvey were fired, according to the Foreign Policy article:
In the meantime, however, the memo had been working its way through the Trump White House. Among those who received the memo, according to two sources, was Donald Trump Jr. 
Trump Jr., at that time in the glare of media scrutiny around his meeting with a Russian lawyer at Trump Tower during the presidential campaign, gave the memo to his father, who gushed over it, according to sources. 
In a comedy of errors, Trump later learned from Sean Hannity, the Fox News host and close friend of the president, that the memo’s author had been fired. Trump was “furious,” the senior administration official said. “He is still furious.”
See also Chip Berlet's summary from August 2011 of Breivik's Core Thesis is White Christian Nationalism v. Multiculturalism.





Thursday, August 10, 2017

The Financial Crisis Tenth Anniversary

Yesterday, August 9, is being widely proclaimed as the tenth anniversary of the beginning of the financial crisis that fully crashed in September, 2008, with the recession that began at the end of 2007 plunging more profoundly and widely after that.  The specific event on August 9, 2007 was the limiting of withdrawals from US mortgage backed hedge funds by the BNP Paribas bank in Paris.  In a post yesterday, one of the leading analysts and prophets of the crisis, Dean Baker, noted that BBC erroneously claimed that housing prices in the US began falling after that date, when in deed Dean accurately notes that it was the decline in housing prices starting somewhat earlier that led to this action by BNP Paribas ten years ago. 

As one of those who analyzed what was going on better than most and with better timing, I link to my post of July 11, 2008, which analyzed what had been happening and forecast a full-out  crash coming soon, which indeed occurred a bit over two months later.  The title of that post is "Falling from the Period of Financial Distress into the Panic and Crash."  I note that the unpublished paper I cited in that post by me with Mauro Gallegati and Antonio Palestrini, "The Period of Financial Distress in Speculative Markets: Interacting Heterogeneous Agents and Financial Constraints," was finally published in Macroeconomic Dynamics in Feb. 2011, vol. 15, pp. 60-79.  A few comments now.

1)  Regarding the matter of the housing market bubble, everybody, including Dean Baker, always cites the numbers provided by the Case-Shiller index of housing prices in the 10 and 20 largest municipalities.  This is indeed an excellent source, but it is not the only one, and it is arguably biased because of its focus on large metropolitan areas.  A much broader index is that estimated by the Federal Housing Finance Agency.  Whereas the Case-Shiller index peaked around June, 2006, the FHA one peaked in January, 2007, over a half year later.  The FHA index is arguably more representative of the broader market, although it is probably true that the worst of the speculative markets and crashes were in larger metro areas, with declines in some of those already at down 10 to 12 percent by August, 2007, as Dean accurately notes in his post.  But even now I rarely see anybody citing the FHA index, with the occasional exception of Calculated Risk.

2)  Regarding the behavior of the Fed in the crash, Dean is right to pound on them not getting that the housing bubble was a problem and that the decline from its peak was a problem threatening a recession, indeed a major one, although they were clearly getting worried after the beginning of the period of financial distress ten years ago, especially as mortgage financiers began going belly up one after another.  As it is, the one person at the Fed who seems to have seen the danger earlier than any other, although she was overruled and later went along with some of the Pollyanna policies, was Janet Yellen.  Needless to say, I have praised her forecasting abilities on several occasions, and she was calling the housing bubble from 2005 on.

3)  In terms of the behavior of the Fed at the time of the crash, there had been some preparations for it, mostly by people at the New York Fed, and indeed the various alternative entities the Fed rolled out temporarily after the hard crash were cooked up in advance by them.  However, the most important thing the Fed did remains widely unknown and unadvertised, although I have posted on it previously, and it has been publicly reported on, it not on front pages anywhere ever.  That would be the half a trillion dollar save the Fed did for the European Central Bank, taking a bunch of very bad assets onto the Fed balance sheet, which were then gradually and quietly rolled off over the next six  months to be replaced by Mortgage Backed Securities.  The euro was crashing, and the ECB was facing the threat that both BNP Paribas and Deutsche Bank were in danger of failing.  This was the immediate danger that could have led to a full blown global financial crash of a 1931 level or worse.  This save was probably the most important thing the Fed did to keep the crisis from bringing about another Great Depression, although it remains not well known, partly because both the Fed and the ECB did not want it advertised.  A good account of this can be found in Neil Irwin's book, _The Alchemists_. 

There is so much more I have to say about all this, but these are a few items that either were not well known at the time or have been largely forgotten since.

Addendum:  Could link to both other posts and cite a bunch of papers, but will not.  So, a bit more on all this is that according to Minsky and Kindleberger there are three kinds of bubbles: ones that go up and crash suddenly and more or less totally, ones that go up and then go back down again without a hard crash, and ones that go up and reach a peak and then go into a period of financial distress and then later crash.  The vast majority are the latter, which was the pattern for the main financial markets as called by me, peak ten years ago, a year and a month of period of financial distress and then crash.  Oil did the first pattern back then, peaking at $147/barrel in June, 2008, then plunging to the low 30s by November before recovering.  Real estate followed the second pattern, going back down the way it went up.  This is because residential homeowners have emotional investment in their houses and refuse to believe or accept the falling prices after the peak. So they do not sell, and volumes collapse rather than prices.

Barkley Rosser

Wednesday, August 9, 2017

Avik Roy Claims Reagan Embraced Universal Health Care Coverage

Avik Roy entitles his latest spin with:
Why Ronald Reagan Embraced Universal Coverage: ‘No one in this country should be denied medical care for lack of funds,’ said the Gipper.
Here is more from this select reading of history:
Take the example of health care. Most readers of Olsen’s book will be surprised to learn that Reagan embraced universal coverage. In “A Time for Choosing” — Reagan’s celebrated conservative manifesto delivered at Goldwater’s 1964 Republican National Convention — Reagan declared, “No one in this country should be denied medical care for lack of funds.” In a speech to the Phoenix Chamber of Commerce — in Goldwater’s backyard — Reagan said, “Any person in the United States who requires medical attention and cannot provide for himself should have it provided for him.” While Reagan opposed “compulsory health insurance through a government bureau for people who don’t need it or who have . . . even a few million dollars tucked away,” he championed the Kerr-Mills Act of 1960, a law introduced by two Democrats that gave federal money to states with which to provide medical care for the elderly in need. Reagan said that he was “in favor of this bill — and if the money isn’t enough, I think we should put up more.”
But wait you say – what about this speech? Roy continues:
In the 1960s, Reagan opposed Medicare for two principal reasons: participation was mandatory, and because Medicare spent scarce taxpayer funds to subsidize coverage for wealthy people — even millionaires — who didn’t need the help. The Reagan approach to health-care reform is worth revisiting. It could involve repealing Obamacare’s individual mandate, and repealing a similar mandate that forces people to participate in Medicare. It could involve a robust system of tax credits and health savings accounts to help the poor afford the coverage and care that they need, instead of forcing them to depend on single-payer programs like Medicaid. And it could roll back federal subsidies — whether through Medicare or the tax code — for those who don’t need them. A coherent Reagan-style reform could dramatically reduce federal spending and taxes, especially over the long term, by focusing our expenditures on those who are truly in need.
Rather than looking at some cherry picked quotes from the 1960’s, why not look at the actual record during the Reagan Administration:
Even as the number of uninsured Americans climbed significantly, the administration had no interest in proposals for universal health insurance. It looked at Medicare, as many in Congress did, primarily as a budgetary problem and a potential source of fiscal savings. Nor was the primary concern with system-wide medical spending. That broader focus gave way to a narrower emphasis on how to contain federal spending on Medicare and Medicaid in the context of rising budget deficits. Meanwhile, conservatives promoted pro-competitive healthcare policies that relied on market incentives, consumer choice, and competition between private plans to restrain spending on medical care.
In other words we have tried what Roy advocated and the results were that the number of Americans without health insurance increased. The dissatisfaction with the health care system during the Reagan-Bush41 years led to the election of Harris Wofford to the U.S. Senate as he basically ran on one issue – a progressive health care reform agenda. This Salon discussion reminds us of the health care debate that followed, which belatedly led to Obamacare. Obamacare admittedly needs some serious enhancements if not major changes in a progressive direction. But Avik Roy’s argument that we should do this Reagan style is nothing more than revisionist history.

Wednesday, August 2, 2017

The Output Gap per the Gerald Friedman Defenders

Menzie Chinn back on February 20, 2016 had some fun with the defenders of that awful paper by Gerald Friedman (who never even bothered to estimate potential GDP as of 2016 and how it might grow over a decade):
One thing that should be remembered is that the trend line extrapolated from 1984-2007 implies that the output gap as of 2015Q4 is …-18%...I want to stress that estimating potential GDP and the output gap is a difficult task.
It is a difficult task and perhaps the CBO estimate of the gap is understating it. But to pretend the potential GDP would continue to grow by some akin to 3.4% from 2000 to 2015 is just absurd. Well it seems this crowd has “updated” their trend line analysis. J. W. Mason writes:
This alternative measure gives a very similar estimate for the output gap as simply looking at the pre-2008 forecasts or extrapolating from the pre-2008 trend. “Our estimates imply that U.S. output remains almost 10 percentage points below potential output, leaving ample room for policymakers to close the gap through demand-side policies if they so chose to.”
The ‘alternative measure’ comes from an interesting new paper:
The fact that most of the persistent declines in output since the Great Recession have parlayed into equivalent declines in measures of potential output is commonly interpreted as implying that output will not return to previous trends. Using a variety of estimates of potential output for the U.S. and other countries, we show that these estimates respond gradually not only to supply-side shocks but also respond to demand shocks that have only transitory effects on output. Observing a revision in measures of potential output therefore says little about whether concurrent changes in actual output are likely to be permanent or not. In contrast, some structural VAR methodologies can avoid these shortcomings, even in real-time. This approach points toward a more limited decline in potential output following the Great Recession.
While it is true that this new paper suggests that the output gap may be as large as 10%, Mason’s back flip is not justified for two reasons. First of all, the authors of this new paper are very critical of any crude trend line analysis. But more importantly – notice how the Gerald Friedman crowd substantially changed its tune on what trend line they should be using. Alas – the level of intellectual dishonesty in defense of what Gerald Friedman wrote a year and a half ago may be worse than the original paper.

Tuesday, August 1, 2017

Is Mick Mulvaney "The Most Dangerous Man In Washington"?

This claimed by Catherine Rampell on the Washington Post ed page today, with a column entitled what is in quotes in the title of this post, with the answer being caveated as only being true after "the tweeter-in-chief," clearly the most dangerous man in Washington.  Mulvaney is the Office of Management and Budget (OMB) chief who has been questioning the need to raise the debt ceiling and voted against doing so on a regular basis when he was in Congress.  While Treasury Secretary Mnuchin wants a "clean" increase in the debt ceiling, Mulvaney has been saying since at least May that such an increase must be accompanied by "crippling spending cuts," unlikely to be accepted by Congress, thus threatening to bring a default.

On Sunday on Jake Tapper he sided with the declaration by Trump that nothing should be passed by the Congress until a Repeal and Replace of Obamacare is passed.  Given that this  does not look very likely at all, such a position also clearly signals a lack of concern about what might happen if the debt ceiling is not raised in time, which is probably mid-October at the very latest.

In an earlier discussion on this, some have argued that this might not be any worse than one of those "government shutdowns" we have previously seen, which did not amount to much. Social Security checks went out, the military kept operating, with aside from some bureaucrats in Washington being told to stay home the main thing the public saw was temporary closures of national parks.  In contrast, Rampell argues that a failure to raise the debt ceiling would be followed by "a constitutional crisis, political and global financial crisis."

As it is, during the 16 day shutdown in 2014, according to  OMB stats, about $2.5 billion was not paid to furloughed workers, although then paid later after the shutdown was over.  However, something is off here, as that is equal to about 25 days of a $3.7 trillion overall federal budget.  It is unclear how such programs as Social Security and Medicare were being paid, much less the interest on the national debt under these circumstances. Perhaps those 16 days were timed just right to catch two paychecks covering a 30 day period, which still does not quite cover things.  Maybe this wonder can be repeated, but offhand I am skeptical, even if  Rampell is overstating things.

Barkley Rosser

Understating Trump's "Achievements"

I regularly hear and see on media and the internet that Trump "has accomplished nothing in six months" or variations on that, with some of these remarks focusing more on his legislative agenda, with discussions about whether it is "dead" or not here after only six months, which is either a very long time or a very short time.   I think this rhetoric is both unwise and inaccurate. It is unwise because it suggests that we want his agenda to be passed, to the extent we know what it is (specifics for large parts of it are missing). Such talk simply encourages the Trujmpisti to push harder to pass all their awful plans.  Thus we should be glad that Obamacare is still in place and not encourage the bums to continue to try to replace it with one of  their half-baked plans that will throw lots of people off their  health  insurance.

As for inaccuracy, while it is true that a lot of big ticket items on the legislative agenda remain stalled, notably in the areas of health care, tax "reform," financial sector "reform," and infrastructure, in fact Trump has done much damage with his executive actions, mostly involving undoing Obama regulatory actions, quite aside from getting Neil Gorsuch on the SCOTUS, which is very important and has already led the SCOTUS to partially support his awful Muslim ban.  In any case, while withdrawing from the Paris climate accord is mostly symbolic, he and his underlings have made many moves in the environmental area, none of them good, making it easier for companies to pollute and redirecting research towards fossil fuels and much more. His moves in the immigration area have been awful, although Obama did a lot more deporting than we remember. Nevertheless, although supposedly he was going to focus on deporting criminals, the focus of Obama, he is deporting any illegal immigrant he can get his hands on, and the implementer of his draconian immigration policy is now his chief of  staff.  Prison reform is out the window for now, even though this was an area where liberals and conservatives have agreed in recent years something should be done.  His cutting back on public parks and monuments and the crazy stuff coming out of his education dept, well,the list goes on.

The economy has continued to improve on many fronts, and Trump has loudly bragged about and taken credit for this.  But this is clearly just an extension of  what was going on for some time under Obama, with indeed Trump's failure to implement much of his supposed economic agenda from trade to fiscal policy changes leaving the Obama policies in place.

Trump supporters are now pointing to the end of ISIS control in Mosul as a foreign policy success for Trump.  Needless to say this looks like the economic policy debate, with the military strategy that ended up with the victory in Mosul having been put in place by Obama and barely changed by Trump.  I guess we can credit him with not messing that one up.

OTOH, most of the rest of his foreign policy is an embarrassment, a joke, or just a plain disaster. Popularity of the US has collapsed around the world.  While his visit to France did not lead to any obvious mess there, his visit to the Middle East led to the disastrous Saudi-led embargo against Qatar, and his visit to Poland led to the government implementing a plan to end the independence of the judiciary.  No wonder the British do not want him calling on them.  However, it must be admitted that in a few areas things are not as bad as they might be because somebody convinced him not to follow through on campaign promises, including to start massive trade wars with Mexico and China, although he seems to be moving towards something along those lines, and very importantly maintaining the nuclear accord with Iran, although all reports have him very unhappy that he has had to certify that those darned Iranians have been keeping their side of  the bargain.  He really would like to sanction them even harder and who knows what.

And as for US relations with Russia and policy towards it, well, probably the less said the better.

In any case, let us not encourage him and his followers to "be successful" by "achieving his agenda."  The less of it achieved, the better off we shall be.

Barkley Rosser