As I get older, I encounter more and more new phrases that annoy me: 1. Universities need “safe spaces”? I’d say universities are safe spaces. 2. Read the room? No, the room needs to read me. 3. Cultural appropriation?  By all means! Life would hardly be worth living without cultural appropriation. 4. Stay in your lane?  Why would I want to do that? Here’s The Economist, in a very revealing article on Chinese authoritarianism: The initial affront that led to the tech crackdown was Jack Ma’s comparison, at a public event in October, of Chinese state lenders to pawn shops. A month later China’s stockmarket regulator suspended the $37bn initial public offering of Ant, which would have been the world’s biggest ever, in Hong Kong and Shanghai. Since then the authorities have forced Ant to become a financial holding company, undermining its lucrative, asset-light business model of matching consumers with lenders. The message, says a broker in Hong Kong, is that tech leaders should “stay in their own lane, focus on their core businesses and avoid commenting on politics or economics”. It has been heard loud and clear. Pony Ma’s parliamentary performance, in which he called for strict regulation of areas that he has invested in, from e-commerce to ride-hailing, has been seen as a signal to the Chinese government that he will not get out of line. Jack Ma is the founder of Alibaba, one of China’s two biggest tech giants.  Pony Ma is the CEO of Tencent, the other big Chinese tech giant.  The Economist says that Pony Ma was supposed to stay in his lane.  What does that mean?  They suggest it means that he should “avoid commenting on politics or economics”.  So what does Pony Ma do?  He goes out and starts advocating more government regulation in his own industry, which is pretty much the textbook definition of commenting on politics and economics.  And the Economist suggests that as a result he was seen as being a good soldier, willing to stay in his lane. Almost no one honestly wants other people to stay in their lane.  They want other people to agree with them on policy issues.  As long as you do that, no one will accuse you of not staying in your lane.  On the other hand, if you disagree with someone’s views, they’ll tell you to stop commenting on things you know nothing about. Here’s Bob Dylan: An’ though the rules of the road have been lodged It’s only people’s games that you got to dodge And it’s alright, Ma, I can make it (0 COMMENTS)

A body at rest will remain at rest and a body in motion will remain in motion unless acted upon by an outside force. — Sir Isaac Newton’s First Law of Motion Have you ever had a conversation like this? You point out to a friend that the stock price of Hunky Chunky Potato Chip Company doubled in the last six months. Then your friend explains, “Yeah, that’s because people love potato chips. Their love borders on addiction.” Or you comment that far fewer people are attending Major League Baseball games this year, and your friend’s explanation is that baseball is so boring. Your friend explained nothing. If people love potato chips so much, didn’t they love them last year too? Then why wasn’t Hunky Chunky Potato Chip’s stock just as high six months ago? If baseball is so boring, why were so many people attending last year? To explain a change in some variable, you have to point to something else that changed, not to something that stayed the same. What did change? Are people disgruntled over the baseball strike? Did ticket prices go up? Have people fallen in love with another sport? Something caused the change you’re observing. The trick is to identify the key elements that changed and not the fundamental elements that didn’t. We doubt that baseball has gotten less exciting or that people just recently discovered potato chips. It is entirely possible that the popularity of potato chips and baseball ebbs and flows, but then the variable that changed is the popularity itself. These are the opening paragraphs of Chapter 4, “Ask What Changed,” in David R. Henderson and Charles L. Hooper, Making Great Decisions in Business and Life, Chicago Park Press, 2006. I thought of it when I read the following in Tyler Cowen and Alex Tabarrok, Modern Principles: Macroeconomics, Worth Publishers, 2010: Alternatively, many governments of sub-Saharan Africa have failed to secure the property rights of foreign investors. The demand to invest is correspondingly weak, shifting the demand curve for these countries’ currencies to the left and lowering the value of these currencies. P. 415) Their error is in their second sentence. Can you spot it?   (0 COMMENTS)

With the recent report that the Consumer Price Index (CPI) rose by 4.2 percent in the twelve-month period from April 2020 to April 2021, many people have started to worry that worse is to come. Many have used the feared C-word: Carter. Recall that during the Carter administration, in the forty-eight months between his inauguration on January 20, 1977, and Ronald Reagan’s inauguration on January 20, 1981, inflation measured by the CPI averaged 10.4 percent annually. There are lags, of course: Carter can hardly be blamed for the first few months of inflation in 1977, just as Reagan can hardly be blamed for the first few months of inflation in 1981. Still, the 10.4 percent estimate gives a reasonable take on Carter-era inflation. Running the numbers from June 1977 to June 1981 gives a similar average annual inflation rate: 10.5 percent. Is the fear of Carter-era inflation justified? Is the increase in gasoline prices a sign of higher inflation? Is the fear of hyperinflation justified? With President Biden implementing and proposing various policies that will hurt economic growth, is there much danger in the short run of a return to stagflation? My answers: somewhat, no, no, and no. These are the opening two paragraphs of “Inflation: True and False,” my latest article at Defining Ideas, May 20, 2021. On Hyperinflation Some observers have suggested that we should fear hyperinflation. They have no idea what hyperinflation is. Hyperinflation is not just high inflation. Hyperinflation is inflation of 50 percent per month or more. The most extreme hyperinflations in history were in Germany from 1921 to 1923, Hungary from August 1945 to July 1946, and Zimbabwe from March 2007 to November 2008. We’re not even close to 1 percent per month, let alone 50 percent per month. The United States did have extremely high inflation during the Revolutionary War—have you ever heard the expression “not worth a Continental”?—and in the Confederacy during the Civil War. Other than that, the highest US inflation rate in our history was in 1918, when the government used the newly created Federal Reserve to fund its participation in World War I. Even then, the price level between April 1917, when America entered the war, and November 2018, when the war ended, increased by 27 percent. That’s 16.3 percent on an annual basis. Bad? Yes. But hyperinflation? Still not close. On Stagflation Why am I so confident? Because we are set to have very high growth in real GDP this year. The reason is not that President Biden’s economic policies are so good. They’re actually pretty bad. The $300 federal addition to the weekly unemployment benefit, which was part of his $1.9 trillion bill in March, will actually cause real GDP to grow more slowly than otherwise because it discourages millions of lower-wage people from taking jobs. My criticism is not partisan. I criticized a similar, though worse, plan after President Trump, back in March 2020, signed the CARES Act, which added a whopping $600 per week to weekly unemployment benefits. That’s the nice thing about economics: we can talk about effects of policies without knowing whether the initiator of the bad policies has an R or a D after his name. Still, even with this growth-destroying policy, with possibly more to come, real GDP will rise a lot this year. To see why, imagine a hose hooked to a water spigot with the spigot turned on but an elephant standing on the hose. Not much water comes out the other end. But if the elephant gets off the hose, then, even if the water spigot is turned down slightly, a lot of water will come out the other end. Governments are that elephant. The federal government, to some extent, but mainly the majority of state governments are standing with various weights on that hose by enforcing lockdowns. Once they get off, real GDP will increase. My prediction: we will have at least 4 percent inflation during the next twelve months and real GDP growth of at least 5 percent on an annualized basis. If the feds get off the hose in September by not renewing the $300 per month federal addition to unemployment benefits, we will have even higher growth. Read the whole thing, especially if you want me to reply to your comments.     (0 COMMENTS)

Here’s a video of an interview that Paris Schutz of WTTW, the PBS channel in Chicago, did on the expansion of the child tax credit. Jeremy Rosen argued for and I argued against. Funny story: I got on the Zoom and within a minute or two Jeremy got on. I didn’t know who he was, figuring he might be the interviewer. We got into a friendly chat about where he lives, working during the lockdown, etc. Then he said words to the effect, “This Hoover guy is sure to have a different view on this.” I answered, “I am the Hoover guy.” See how I handled Schutz’s false statement that I’m a conservative. I’ve been playing with how to handle it in the future. Here’s what I’m thinking: If a conservative is someone who thinks the government should let anyone move here from anywhere in the world as long as he’s not a criminal and not carrying a communicable disease, if a conservative is someone we thinks the government should legalize all drugs, and if a conservative is someone who thinks we should cut the U.S. defense budget by 70 percent, then yes, I’m a conservative.     (0 COMMENTS)

The Economist has an article on central bank digital currencies (CBDCs): If citizens can convert bank deposits into central-bank money with a simple swipe, the technology “has the potential to be run-accelerant,” said Lael Brainard, a Federal Reserve governor, in 2019. This could pull deposits out of the banking system and onto the central bank’s balance-sheet, disintermediating the banks. . . . If CBDCs proved popular, they could suck all deposits out of the banking system. In America this would stretch the central bank’s balance-sheet from $8trn to a whopping $21.5trn. Who, then, would provide the $15trn of loans that banks now extend to the American economy?Perhaps a central bank could simply pass the funds back to the banks by lending at its policy interest rate. But it is hard to see the idea of the Federal Reserve extending trillion-dollar loans to the likes of JPMorgan Chase or Bank of America as being politically uncontroversial. I’m no expert on digital currencies, so I encourage commenters to correct me.  But I suspect that the fundamental problem here is not digital currencies, rather it is digital currencies combined with zero interest rates. Let’s step back from digital currency for a moment, and think about dollar bills.  Why don’t people hold all their wealth in the form of ultra-liquid cash?  There are two reasons.  First, alternative investments might offer a higher rate of return.  Second, even if alternative safe investments pay zero interest (as is the case today), alternative investments are less risky than currency notes, because large cash holdings can be stolen, lost in a fire, or attract the attention of government money laundering investigators. Imagine there were digital currencies in the 1990s, when safe investments such as T-bills and CDs paid 5% interest.  In that case, the demand for zero interest digital currency would be relatively modest, as alternative investments would pay a much higher rate of return.   Today, risk-free interest rates are zero, but people continue to hold much more wealth in bank deposits than in currency, because physical cash is inconvenient. But what if interest rates fell to zero and a perfectly safe form of cash was offered by the central bank—a digital currency?  Might savers prefer digital cash to zero interest bank accounts?  That seems possible, and that’s presumably the scenario the Economist worries about in the quotation above. This hypothetical relates to a fundamental problem with our entire financial system; we have socialized risk in such a way that savers are shielded from the consequences that result when their funds are misused.  Imagine the following (highly simplified) data for the US: 1. Treasury bonds = $20 trillion 2. FDIC insured bank accounts = $20 trillion 3. Bank loans = $20 trillion Of course these numbers are not exact, but they demonstrate a basic problem with our financial system.  In this example, the economy has $20 trillion in safe assets and $20 trillion in risky assets.  But from the perspective of savers, it looks like we have $40 trillion in safe assets–the T-bonds plus the FDIC-insured bank accounts.  While banks do take risks with depositor funds, the depositors are shield from those risks by FDIC.  The bank accounts are privately safe but socially risky. Now suppose that a digital currency is offered and savers move all $20 trillion from bank deposits to digital currency.  On the central bank balance sheet the digital currency “liabilities” will be “backed” by $20 trillion in T-bonds.  In other words, the central bank will have to buy up $20 trillion in T-bonds to match the growth in the liability side of its balance sheet as people hold more digital currency.  The $40 trillion in safe assets falls to $20 trillion.  Unless . . . Presumably, the people who sold the $20 trillion in T-bonds to the Fed will need another place to put their funds.  And since those “other places” will be more risky, they will have to offer a higher rate of interest to savers.  Suppose that in order to keep money in the banking system, savers demand 1% higher interest on bank accounts than on digital currency (which pays zero interest by assumption.)  In that case the financial system will look like the following: 1. Digital currency (backed by Treasury bonds) = $20 trillion 2. FDIC insured bank accounts paying 1% interest = $20 trillion 3. Bank loans charging an extra 1% interest = $20 trillion So as long as there are enough safe assets like T-bonds (or mortgage backed securities backed by the Treasury) to back the newly issued digital currency, the move to digital currency doesn’t actually destroy the banking system.  But it does make banking more costly (and thus might shrink the system.)  Because digital currencies are an attractive substitute for bank deposits, banks must pay depositors a higher interest rate, and those extra costs get passed along to borrowers.  Recall the complaints from the real estate industry that reforming the GSEs might cause mortgage rates to rise by a few basis points—that’s the type of issue we are looking at here. At least I think that’s the issue; please correct me if I am wrong.  And if there are not enough safe assets to back digital currency, then the central bank might have to fund private banks, the nightmare scenario involving JP Morgan discussed in the quotation above. One advantage of the second system (with $20 trillion in digital currency) is that it might be a bit easier to abolish government deposit insurance.  People would have a safe place to put their saving, which would be much more convenient than holding Treasury bonds.  I say “a bit” easier, as the banking industry would continue to strongly oppose the abolition of FDIC. At a still deeper level this example exposes a quirk in our monetary system that most economists probably don’t think about.  Prior to 1913, all base money was cash (currency and coins).  Everyone could hold any type of base money they wanted to hold.  There was no law saying that only blue-eyed people could hold $10 bills.  This all changed after 1913.  A new type of base money was created—deposits at the Fed.  But only banks (and a few other institutions such as GSEs) were allowed to hold deposits at the Fed.  This may or may not have been a good idea, but it’s a very strange system.  Digital currencies threaten to upend that system.  Holding central bank digital currency is essentially like holding a deposit at the Fed. It seems to me that if we issue a central bank digital currency, we’d want to have a system where negative interest rates are possible in times of stress, to prevent a massive flow of funds from the banking system into digital currencies.  I don’t know if that’s technically feasible.  No doubt the technological revolution in money will raise many other difficult questions. PS.  I wonder if younger economists are familiar with Eugene Fama’s brilliant 1980 article entitled “Banking in the Theory of Finance“, which indirectly relates to this post.  I strongly recommend this article; it’s the one where Fama suggests replacing base money with a new unit of account, reserve balances that entitle one to own a spaceship. (0 COMMENTS)

Last January, my anonymous professor friend at the University of Texas proposed the creation of an Office of Free Speech: [E]very university should have an “Office of Free Speech” where faculty can lodge complaints when their academic freedom or free speech rights are violated, or when policies are put in place to limit the possibilities for intellectual diversity.  This office must have adequate funding to complete independent investigations of such allegations, and it should report directly to the highest authority governing the university, either the board of trustees or regents for most private universities or the regents or state legislature for public universities.  These investigations must have teeth; attacking academic freedom (not simply criticizing speech with speech) cannot be allowed to stand as acceptable behavior for administrators, faculty, or students.  The same sorts of consequences available for other offenses should be applied to those who use their position at the university to deprive others of their institutional or constitutional rights. Now he points out that the UK is trying something like his proposal: The Higher Education (Freedom of Speech) Bill will bring in new measures that will require universities and colleges registered with the Office for Students to defend free speech and help stamp out unlawful ‘silencing’. For the first time, these legal duties will also be extended to students’ unions, which, under the measures in the Bill, will have to take reasonably practicable steps to ensure lawful freedom of speech. This delivers on a manifesto commitment to strengthen academic freedom and free speech in higher education and will help protect the reputation of our universities as centres of academic freedom. Universities, colleges and students’ unions that breach these duties may face sanctions, including fines… A new Director for Freedom of Speech and Academic Freedom will sit on the board of the Office for Students, with responsibility for investigations of breaches of the new freedom of speech duties, including a new complaints scheme for students, staff and visiting speakers who have suffered loss due to a breach. I say there’s a 97% this is just a coincidence.  What say you? (0 COMMENTS)

I received the picture above in my quarterly electricity bill for my cottage in Minaki, Ontario. I knew, given the number of rivers there are in Ontario, that water power was a big part of the story. Thus the name Hydro One. I also knew that nuclear power was a big part of the story. I just didn’t know how big the latter was. What are they trying to tell us Americans? (0 COMMENTS)

Hate is not productive in the context of rational discussions. It is collectivist when it fabricates collective sins. And it is downright bigot in many social interactions. Yet, it is not always and everywhere useless. Hating slavery or other forms of tyranny, for example, would seem commendable in any libertarian ethics. Being an expression of human emotions, art cannot blacklist hate—except with the threat of force and especially state force. The Hong Kong government, under the domination of Big Brother in Beijing, is under pressure to prevent the inclusion of dissenting art in the opening exhibition of the M+ Museum (see Joyu Wang and Yoko Kubota, “Pro-China Lawmakers in Hong Kong Find a New National-Security Target: Art,” Wall Street Journal, May 18, 2021). One of the contentious exhibits shows a photograph of Chinese artist Ai Weiwei offering a middle-finger salute to Tiananmen Square. Other works by the same artist have shown similar scenes involving the White House and the Eiffel Tower. Whether this counts as art should be left to the museum’s individual customers. But Hong Kong’s recent national-security “law” forbids provoking hatred toward the Chinese government. The Wall Street Journal reports: In the Hong Kong legislature days later, pro-Beijing lawmaker Eunice Yung grilled Chief Executive Carrie Lam—the city’s top local official—on the subject, alluding to Mr. Ai’s art as insulting to China and potentially in violation of the national security law. “How would you explain to a kid about a middle finger pointing at Tiananmen Square?” Ms. Yung said in a later interview. She urged the museum to remove any offensive art from its collection. I put “law” in quotes because, in the Western legal tradition (at least in the Anglo-Saxon and French traditions), a law is not just anything that the Prince, democratic or not, decrees. (See F.A. Hayek’s work on this topic.) Another contentious painting in the museum’s collection shows Mao Zedong examining a urinal. (One would be forgiven to think that this sort of inspection is a normal chore for a central planner who takes his responsibilities seriously.) That hateful, insulting, or offensive speech (which can be loosely put in the “hateful speech” category) can be useful is even truer when rational challenges of orthodoxy are limited by the very state that forbids hate against itself. Hate as a substitute to free and rational debates is less likely to thrive in a free society. And it is arguably impossible to ban certain forms of speech without recognizing and encouraging the state’s power to ban any speech it does not like. Incidentally, the M+ Museum story shows again why the economic power of the Chinese state should not be feared (except perhaps militarily in the short run). This power is a direct function of the state’s capacity to extract resources from the Chinese economy, that is, from Chinese producers and consumers. This extractive capacity depends on the wealth and entrepreneurship of the Chinese economy: if there is little to extract, the most extractive state won’t extract much. The extractive performance of the Chinese state will diminish as its grip on the economy and its control on free speech tighten. Free speech is an important input in the production (and maintenance) of efficient social institutions, which in turn are necessary for economic efficiency and prosperity. As Walter Scheidel reminds us in his book Escape from Rome, the long-lasting grip of Chinese emperors on their country explains why it lagged behind the decentralized and freer West. The imperial-like communist regime of Mao Zedong continued the totalitarian tradition. After the communist dictator’s death, the Chinese economy started escaping from the state’s stranglehold but the past two decades have been marked by a slowdown of this movement and a return to the long-term trend of tyranny and oppression. Ronald Coase and Ning Wang’s 2012 book How China Became Capitalist was largely about the hopes raised by the happy interregnum and indeed warned that free speech would be indispensable to the continuation of China’s economic growth. All this also explains why we should be concerned about the mounting attacks on free speech in the West. (0 COMMENTS)

Every five years or so, the United States has a major societal-wide crusade.  Sometimes there’s a shocking event.  Other times, there’s an ongoing evil.  Either way, all Americans are supposed to join forces and take decisive action to win the crusade.  And even if you can’t personally do anything, you’re supposed to get very angry. You’re supposed to be very angry about the problem. You’re supposed to be very angry about anyone who stands between us and victory. You’re supposed to angrily support our crusaders. And you’re supposed to be very angry about people who aren’t very angry. Here is a list of all the full-blown crusades I personally recall, in chronological order.  Yes, there’s a line-drawing problem, so if you think I’ve I missed one, please share in the comments. 1. Islamist Iran.  When Iranian students took American embassy workers hostage, even kids under ten were angry.  Something had to to be done!  When the hostage rescue mission failed, my parents broke their “no TV at dinner rule” because they needed to know what had happened.   A popular t-shirt actually read, “Vote Yes for Lake Iran.” 2. The War on Drugs.  Beginning in the 70s and throughout the 80s, my schools were covered in anti-drug propaganda.  So were billboards all over LA.  Everyone was supposed to be vigilantly searching for drug dealers offering free samples of hard drugs in suburban elementary schools.  My high school hired Dave Toma to preside over an apocalyptic anti-drug revival meeting for the whole school. 3. Free Kuwait.  When Iraq invaded Kuwait, American society flipped out again.  Back then, I doubt most Americans even knew the difference between Iraq and Iran, but they were still enraged.  If you opposed action, the knee-jerk question was, “Well, what do you propose to do?!”  Even most anti-war activists would glumly respond, “Give sanctions time to work.”  When I stopped by my old high school, my history teacher had a “Free Kuwait” bumper sticker on his podium. 4. The War on Terror.  The aftermath of the dissolution of Yugoslavia never attained crusade status, though the Kosovo War came close.  (How many times did I hear contemporary media use the phrase “ethnic Albanian Kosovars”?)   9/11, however, launched the biggest crusade of my lifetime.  Flags and stickers and bloodthirsty opinions were everywhere.  My dad was visiting me when the U.S. started bombing Afghanistan.  My mom phoned him to let him know the U.S. attack had begun – and he gushed, “It’s about time!” 5. The Iraq War.  Almost everyone vocally supported the destruction of the Taliban.  The crusade to unseat Saddam Hussein, in contrast, sparked mild domestic resistance – and massive domestic counter-resistance.  The Congressional war authorization vote won by more than 2:1.  The Dixie Chicks got “cancelled” before being cancelled was a thing. 6. The 2008 Financial Crisis.  TARP was controversial, but primarily because so many people wanted to bail out “Main Street as well as Wall Street.”  Other than Scott Sumner, almost no one wanted to hear about simple technocratic fixes like nominal GDP targeting. 7. COVID.  I don’t count opposition to Trump or Brexit as a crusade, because public opinion was always sharply divided.  The COVID crusade, in contrast, went from a minor issue in late February 2020 to the end of the world by April.  And while it may seem like there’s been “debate,” it is the hysterical consensus that stands out.  All 50 states declared a “state of emergency.” And even today, “I’m vaccinated, so I should be exempt from these rules.” remains a heretical position.  (Not to be confused with the mainstream position that, “The CDC now says vaccinated people are allowed to do X”). 8. Black Lives Matter. Until George Floyd, this was just one popular issue out of many.  Now, almost a year latter, I continue to encounter heavy-handed “anti-racist” propaganda and bizarre expiation attempts.  The police publicly murder an innocent man, so all of the black characters on The Simpsons have to be voiced by black voice actors?  “In Derek‘s fall, we sinned all.”   When I classify X as a “crusade,” this obviously doesn’t mean that the events that sparked the crusade didn’t happen.  Nor does it mean that the events weren’t bad.  What it means, rather, is that the public reaction was highly emotional, and hence deeply unreliable.  Once a crusade is underway, you can no longer comfortably ask pertinent questions like, “How bad is this event on a 0-10 scale, where 10 is the extinction of humanity?”  or “What are the odds that our efforts will make things worse?” or “Are we mistreating bystanders?”  And a fundamental principle of Effective Altruism is that you should always ask such questions. Now I wish I could say that I’ve opposed every single one of these crusades, but that’s not true.  Alas, I was an earnest drug warrior as a child.  Indeed, I favored summary execution for even the smallest drug offense, which freaked out even some of the adults in my life.  (Though I never freaked out an adult enough to make them admit, “Well, drugs are bad, but they’re not summary execution bad.”) Still, I saw the error of my ways before turning 18.  I realized I was dead wrong about the War on Drugs.  And I’ve had the sense to spurn each and every subsequent crusade.  Verily, you will not stampede me. How popular are these crusades really?  On reflection, most Americans probably support all the crusades unleashed during their adult lives.  After the fervor dies down, they may feel occasional regret, but selective amnesia is far more prevalent.  And it’s hard not to look down on such sheeple.  Yet shouldn’t we be equally critical of folks like me who oppose every crusade that comes along?  You might even quote Inherit the Wind, which ends by hinting that cynics are even worse than fanatics: DRUMMOND [evenly]: I’m getting damned tired of you, Hornbeck. HORNBECK: Why? DRUMMOND: You never pushed a noun against a verb except to blow up something. HORNBECK: That’s a typical lawyer’s trick: accusing the accuser. DRUMMOND: What am I accused of? HORNBECK: I charge you with contempt of conscience! Self-perjury. Kindness aforethought. Sentimentality in the first degree. DRUMMOND: Why? Because I refuse to erase a man’s lifetime? I tell you Brady had the same right as Cates: the right to be wrong! My answer: In a world where opinion leaders take Effective Altruism to heart, we should indeed look down on those who stubbornly refuse to support well-vetted, self-aware causes.  But since the real world is ruled by hysteria and herding, there is a strong built-in presumption that any crusade popular enough to get off the ground is unworthy of your support.  And since most of us (thankfully) only live through a dozen or so crusades per lifetime, you shouldn’t be surprised if exactly zero of them surmount that presumption. (1 COMMENTS)

  Leon Panetta, formerly my Congressman and later the holder of various high appointments in the Clinton and Obama administrations (head of OMB and later Chief of White House Staff under Clinton and Director of the CIA and Secretary of Defense under Obama) has a local institute named after him that has 4 events every spring. In other years, the events are held in person. This year they were on Zoom. I “attended” the last of the four last night. The event was in two parts. In the first 45 minutes, Leon questioned former Vice-President Dan Quayle and former President Bill Clinton on various issues. In the second 45 minutes Leon asked his guests questions that various attendees had written and submitted. There were some interesting highlights. Quayle had some of the funniest lines and some good political analysis and Clinton had what seemed to be good political analysis and was weak on economics. In discussing Israel, Quayle said, “The Israeli government is almost as dysfunctional as ours.” Clinton laughed and applauded. It was a pretty funny moment. In discussing the future of the Republican Party, it was hard to ignore the elephant in the room, Donald Trump. Quayle didn’t. But he did say that when it came to predicting what Donald Trump would do, he was batting 0 for 4. First, he had predicted that Trump wouldn’t beat Jeb Bush. Then he predicted that Trump wouldn’t win the nomination. Then he predicted that Trump would lose to Hilary Clinton. Finally he predicted that Trump would be molded by the presidency. On Liz Cheney, Quayle pointed out that the Republicans had accepted her even after she voted to impeach Trump. “But I don’t know what her end game is.” Clinton pointed out something that I found depressing about Republican voters, although a check of the facts this morning tells me that Clinton left out a lot out. Clinton said that South Carolina congressman Bob Inglis had had a 95% conservative voting record but had lost in the 2010 primary to Trey Gowdy over 2 issues: (1) Inglis believed in climate change but thought you should use market methods to deal with it (Clinton was unclear what those methods were) and (2) Inglis insisted that Barack Obama was U.S. born and a Christian, not a Muslim. A search of the Wikipedia entry on Inglis, though, shows that some other issues were relevant too. For example, he voted for the bailout. Clinton spinning? Hard to believe. Here’s the question I wrote out and submitted: Given the huge budget deficits we have now and in our future, and given that all 3 of you have cared about that, what major steps would you recommend for cutting the growth of spending? Be specific about spending programs. Virtually all the submitted questions that Leon asked were about politics. But right at the end, he asked a question that seemed to be based on mine. Of course he did it his way, which is his absolute right. He asked what they would do about the deficit, both on the spending and on the revenue side. Quayle led by pointing out how little Trump had cared about the deficit and highlighted his sudden desire to give each person $2,000 instead of $800 (Quayle didn’t remember that the number had been $600, a forgivable mistake.) He said that Republicans seemed not to care about deficits any more but that they should. He said that Social Security would be relatively straightforward to rein in by gradually raising the age at which people could get full benefits and by raising the cap below which earnings are taxed. (I assume he meant raising it more than it already is raised each year.) Medicare, he said, was a much tougher problem. That’s too bad, because we know that a Social Security recipient values a dollar of benefit at one dollar, whereas a user of Medicare typically values a dollar of Medicare spending at much less than one dollar. So for a given reduction in spending, the cut that would hurt retirees less would be some kind of cost-sharing in Medicare, not a decrease in the rate of growth of Social Security spending. Quayle then said that we are unlikely to confront this until we hit a crisis. Clinton surprised me. He said he was more optimistic than Quayle and that a lot of the proposed spending in the infrastructure bill would be very productive and that that would make things better and then the deficits wouldn’t be so worrisome, or so big, or something. At least that’s what I think he said.     (0 COMMENTS)