Mark Thoma Has Smart Things to Say About the Federal Reserve's Policy Shift:
John Taylor Has Made David Glasner Unhappy

Paul Ryan Calls for Fewer Jobs and Higher Unemployment in America

Paul Ryan calls for fewer jobs and higher unemployment in America:

Just yesterday we heard that the Federal Reserve is coming with a new bailout. This matters. So, the Federal Reserve is basically saying that we don’t have a recovery, Obamanomics didn’t work, so now they’re coming with their bailout…. We don’t need sugar-high economics. We don’t need synthetic money creation…. We don’t want to print money…. This may help big banks… but it doesn’t help the rest of us…. [M]y mom. We have this rule in Wisconsin. When you turn 65 you’ve got to move to Florida for the winter. She follows the rule. But you plan your retirement based on your income. You’ve got it mapped out. You have it budgeted. Here’s how much for food, here’s how much for gas, here’s how much for energy. I hope to play a round of golf on the weekend and go out to dinner. You have a budget, it’s based in dollars. And when they undermine the value of our dollar it wipes out our standard of living. One of the most insidious things a government can do to its people is to debase its currency. We want honest money. That means we want honest government. It’s one and the same.

"Honest money" is a Ron Paul dog whistle: the good productive workers, the bad exploitative usurers, the necessity of a hard-money depression to cleanse the monetary colon--you know the drill.

Ron Paul in 2003:

Bring Back Honest Money by Rep. Ron Paul: Mr. Speaker, I rise to introduce the Honest Money Act. The Honest Money Act repeals legal tender laws…. Historically, the free-market choice for money has been some combination of gold and silver…. [T]he primary beneficiaries of legal tender laws are… banks, which have been improperly granted the special privilege of creating fiat irredeemable electronic money out of thin air through a process commonly called fractional reserve lending…. [S]ince 1950 these private companies (banks) have created almost $8 trillion out of nothing…And Mitt Romney joins Ryan:

[T]he American economy doesn’t need more artificial and ineffective measures. We should be creating wealth, not printing dollars.

And Paul Krugman freaks out:

Mitt Romney, Liquidationist: How times have changed. Back in 2004, Greg Mankiw declared, in the Economic Report of the President, that:

Aggressive monetary policy can reduce the depth of a recession.

But now, after the Fed has finally moved a bit in the direction of doing something about the Lesser Depression, Mitt Romney – supposedly advised by Mankiw among others – is outraged….

[Romney's] word “artificial” caught my eye, because it’s the same word liquidationists used to denounce any efforts to fight the Great Depression with monetary policy. Schumpeter declared that

Any revival which is merely due to artificial stimulus leaves part of the work of depressions undone

Hayek similarly decried any recovery led by the “creation of artificial demand”.

Milton Friedman – who thought he had liberated conservatism from this kind of nonsense –must be spinning in his grave.

The Romney/liquidationist view only makes sense if you believe that… workers lack the incentive to work, or are stuck with the wrong skills, or something. And that’s just not what the evidence says; instead, it points overwhelmingly to an insufficient overall level of demand. When dealing with ordinary, garden-variety recessions, we deal with inadequate demand through conventional monetary policy, namely by cutting short-term interest rates. Until recently even Republicans were OK with this. Now we face a more severe slump, probably driven by deleveraging, in which even a zero rate isn’t low enough, so monetary policy has to work in unconventional ways – in particular, by changing expectations about future inflation…. This is no more “artificial” than conventional monetary policy – harder, yes, but it’s still about trying to get the market rate aligned with the “natural” rate consistent with full employment.

So where are Romney and his party coming from? Basically, they’ve thrown out 80 years of economic analysis and evidence because it doesn’t fit their ideological preconceptions, and they’re resorting to dubious metaphors – “sugar high” and all that – as a substitute for clear thinking.

What you really have to wonder about is all the not-stupid economists who have aligned themselves with this guy and that crew. Probably they imagine that once the election is past sensible economics will return. But the odds are that they are wrong, and that they’re sacrificing their own credibility to put charlatans and cranks in the driver’s seat.

The puzzle of the Republican economists who are plausible candidates for the highest federal office--the Hubbards, the Mankiws, the Rosens, the Taylors, the Feldsteins, the Lazears, and the others--is that the whole point of attaining high federal office is so that one can then make the world a better place. The hours are long. The hours are long. The pay is not that great. The chance of getting slimed and smashed by the political process is high. The food in the White House Mess is not that good. If you sacrifice all of your policy knowledge and commitments so that you can play the Inside Game then you might as well have never been born. Better to stick to your policy guns and if that means that you have to play the Outside Game only, well then, so be it--better to be a knowledgeable choice than an ignorant echo.

As Kurt Vonnegut wrote in his Mother Night: We are who we pretend to be, so we need to be damned careful who we pretend to be.

It is interesting to note that the behavior of the serious Republican economists here--that none of them has been willing to stand up and public and say that the 11-1 vote of the FOMC is even a defensible judgment call--is very similar to the behavior of the moderate Republican senators since… 1993, unwilling to stand up for their policy preferences and make a difference but instead insisting on being echoes of their leadership, and ciphers who might as well not have been there.

Here is Norm Ornstein on Olympia Snowe:

For Republicans, it’s almost more of a religion or a tribal identification than it is for Democrats…. Watch Olympia Snow get caught up in this the way that she did. I worked with Olympia very closely on the campaign reform staff. She was under enormous pressure from McConnell and others. She stood fast. Then you fast-forward to the aftermath of the Citizens United decision. What we worked on with Olympia, when campaign finance reform was floundering over the Republicans' insistence that if you are going to keep corporations out of the game, you need to freeze labor out too. Trying to find a common ground. So we came up with something that ended up being the Snow-Jeffords amendment--which was a way of keeping corporations and unions out of elections and communications when we are close to elections, all of that stuff.

It passed the court when Sandra Day O’Connor was still there. It was the target, as much as anything in particular was, of Citizens United. So we get the response to Citizens United: the Disclose act. Now you can quibble with portions of that. But this is a bill that passes the House handily, and then gets to the Senate and all 59 Democrats support it. And not one Republican, including Snowe—this was her most important legislative achievement--would vote for cloture, and so it dies. We would be in a different place if that bill had passed--not radically different but different, and you will see more of this sort of coming forward. The desire not to be shunned within your own party is a part of it.

It’s almost like you are in a religion. You look at misbehavior on the part of the leaders of that religion, and you are shocked and dismayed, but you are not leaving your religion. And you are still going to go to church: you just can’t give up something that you held in a lifelong way.

I am reminded of Paul Sweezy in the 1950s, getting increasingly disturbed at news of the GULAG and yet also willing to stand up and say in public that:

The political leadership in the Soviet Union is acting as the agent of the working class.... [T]he working class is the ruling class in the Soviet Union…. [There is] more genuine democracy in the economic and social spheres in the Soviet Union than anywhere else in the world…

And willing to accept correction on matters of technical economic theory from Josef Stalin:

The publication in 1952 of Stalin’s Economic Problems of Socialism in the USSR would make possible today a more satisfactory reply.… In the light of [Stalin’s] explanation…I would like to amend the statement which Mr. Kazahaya criticizes.…[The amended statement] conveys my meaning more accurately than the original wording and is, I think entirely in accord with Stalin’s view…

Just don't let me hear that anybody has said in their class that their model of monetary policy is entirely in accord with Paul Ryan's view. Just saying…