Vox reports (but makes no editorial comment on) a Census Bureau chart showing a steep decline in middle class wealth between 2005 and 2011. This is a sensitive topic, and on the heels of Piketty, who advocates a global wealth tax, one that may fuel progressive criticism of increasing wealth inequality. While the economic malaise of the poor is something we need to address, thinking through the lens of wealth is the wrong way to go about it.

For one, median household wealth tells us less than a lot about living standards, inequality, or economic power. 

wealth

At least among OECD countries, non-income factors account for a majority of the variation in median wealth. (The relationship is stronger for the per capita counterpart, but that is skewed by a long, right tail.) Income does clearly determine a good bit of wealth, but no one would walk away convinced that the median Slovenian or Spaniard is actually richer than the American. That isn’t to say income per se is an effective measure of living standards either: wealth provides a sense of security and certainty for bad times, but that is surely of second order importance. 

But the more important point is, if there’s a measure in which a country like Israel is almost as rich as America, it’s a bad measure. At least to measure median economic prosperity. And the problem comes in measuring wealth. While we may think of it in its accounting reality, assets less liabilities, its better to think of trends through a more fundamental definition: that is a claim on future output. Wealth, after all, is the discounted present value of the future cash flows from your net position.

That makes a big difference. Not all wealth is created equal. A good amount of the returns from wealth sitting in the hands of the one percent will be taxed between 15 and 55%. A good amount of the returns from wealth sitting in the hands of everyone else will be taxed more or less at 0%. 

There’s a bigger angle to this as well. Healthcare is going to be a large part of future output, and that’s something we kinda sorta socialized between 2005 and 2011, supposedly the time period over which middle class wealth plummeted. And yet, as we each have a more equal claim on what will be a growing component of future output, implicit wealth inequality falls. Nor does this include social security and disability, which surely represent a big chunk of middle class wealth. 

Wealth, unlike income, is intertemporal. Measures of wealth inequality, unfortunately, are not as nuanced. I would venture to say, however, that anyone who thinks the utility of middle class consumption over the discountable future actually fell by 35% in absolute terms better prepare for armed revolution. 

Rather, implicit claims of more progressive taxes and even more progressive expenditures will probably keep the Bolsheviks at bay. For now. 

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Pranjul Bhandari and Jeffrey Frankel argue that the case for nominal income targeting over inflation targeting is stronger in developing countries than their advanced counterparts. The crux of this argument relies on the increased frequency of supply-side shocks in poorer countries, which require perverse policy under an inflation targeting regime.

I’m ambivalent about both the relevance and efficacy of this proposal. It’s a debate we desperately need to have, but it’s not like two of the most important emerging markets (India and China) follow any target to begin with. However, I think nominal income targeting has a few critical benefits the authors (at least in the VoxEu summary) do not cite.

Inflation is hard to define, let alone measure, in rich countries. And a lot harder in poor ones. A common measure of inflation in the United States, the Consumer Price Index, considers the price level a representative agent faces. In places like the US and Europe, it’s pretty easy to outline the parameters that define a representative agent, and the basket of goods he consumes. With a bit of econometric handiwork, the Bureau of Labor Statistics (BLS) has developed sophisticated tools to update the CPI to keep it relevant with a modern consumer. 

Inequality in America may be high, but the overwhelming number of citizens care about the same things: price at the pump, the cost of bread, and so forth. A broad consumption-driven middle-class buys the same stuff. In India, as in many other developing countries, the urban middle-class lives a world apart from its poorer, rural cousin. This has an important macro dimension. The cost of tradables (and hence the exchange rate) matters a lot more for an IT worker in riding a scooter to work than a casual laborer in the heartland of Haryana. 

There is also a lot of uncertainty around the portion of rural transactions that are even monetary in nature, with informal markets and even non-money exchange an important part of life. 

So in the United States, when inflation unexpectedly jumps, it’s a little hard to say who the winners and losers are. In India, to the large extent perishables drive prices, jumps in inflation largely reflect higher wages in rural districts reflected as higher prices in urban fringes. 

There is no representative basket.

Measurement in India is also confounded by tricky conflicts of interest. The bureaucrats that estimate inflation have wages expressly indexed to the CPI-IW. This probably is an order of magnitude or two less important than the more philosophical problems with inflation, but given its slight upward bias over the past decade not something to ignore altogether either. 

Unlike inflation, price level, and real GDP, nominal GDP is something we can estimate pretty well and, more importantly, have an extremely clear definition to work with. This is an enormous advantage in favor of a NGDP based anchor. 

But currently, India doesn’t target anything, and there’s probably good reason for that. Monetary operations in developing countries are in many ways more complex, if less consequential, than those in advanced markets. For example, the Indian economy is far more sensitive to the exchange rate than most rich countries (especially the United States) are. Sensitive both because of institutional arrangements (such as fuel subsidies) whereby the terms of trade are important and because of volatility in capital flows, particularly short-term debt. 

Specifically because India imports certain dollar-priced goods (oil, but other minerals too) the exchange rate affects not only demand, as in most countries, but also supply. A depreciation can lead to unsustainable deficits and infectious inflation much quicker than in advanced countries. 

Fiscal dominance, or at least political interference, is a much larger concern. As Raghuram Rajan noted not long before he was tapped as the RBI chief, by imposing high liquidity requirements on banks – held through Indian government debt – the RBI was effectively financing artificially-cheap borrowing by the Centre. 

So one may ask – a nominal income target, but in what? Nominal rupees or nominal dollars? Or nominal trade-weighted units? It’s a bit like whack-a-mole. A nominal income target in a foreign currency, while something I definitely need to think more about, comes dangerously close to certain worries of competitive devaluation. However, it does at least intuitively deal with most of the problems of just an inflation target, or just a nominal income target.

A final problem with rules-based, as opposed to ad hoc, monetary policy is low labor mobility and dearth of a strong fiscal transfer system. If America is booming, but Alabama is sagging, a deep social safety net via food stamps, unemployment insurance, and social security ensures that an inflation-targeting Fed doesn’t harm Alabama too much with monetary tightening. And wages will move towards equality as Alabamans move out, reducing local supply. But that’s not the case in India, suggesting monetary moves have far more political implications, the rural-urban divide key among these.

I find any sort of long-run target that doesn’t consider exchange rates to be worrisome in the world of free and fickle capital. I’ll be writing more about a dollar-denominated nominal income target for emerging markets in the days to come, but am curious to see what people think about this. However, given the problems with measuring inflation I think we can be sure that were India to choose between the two, it should chart its own course instead of copying the Reserve Bank of New Zealand. 

Evan Soltas thinks so. With both inflation and unemployment figures finally pointing in the direction of a rate hike, only meek housing numbers portend any extended period of low interest rates. This is important because, as Evan notes, housing has consistently been a key driver of monetary policy and the crash in construction leaves a big dent to this day. 

I’m a little less convinced this is cyclical factor deserving monetary nourishment as much as a structural change in the housing market itself. This isn’t something I’m too sure about, and this is largely a note for my benefit. While Evan says “It [the weak recovery] is no less apparent if you include multifamily housing”, I’m not so sure. 

Housing

Now, single-family houses are definitely the most important part of the market, which is why a weak recovery in 1-unit structures will persist in a graph of the market as a whole. But the consistent improvement in 5-unit housing starts, that is apartment buildings, is curious.

It tells us a little bit about where the recovery is and is not. People in New York City live in apartments, people in Tennessee do not. It tells us a little bit about the changing structure of home ownership. People rent apartments but own houses. And surely enough, rental vacancy has fallen over a third from its double-digit peak in 2009. The divergence in housing starts is just the market responding the a change in consumer preferences.

A reasonable doubt may be that consumers are starting to rent precisely because the recovery is so week, and that I am diagnosing a symptom, not the disease. However, that is unlikely to dismiss this theory. Homeownership rates have been in persistent decline since well before the crisis, and the recession didn’t really accelerate the trend.

This is a trend that will certainly become more important in years to come. While Evan is worried that the housing market remains depressed, the rental market is headed towards steamy recovery.

shelter

That kind of “v” recovery in rental prices is exactly the kind economists love to see. Unfortunately it’s not for the economy as a whole, confirming a longer term shift in underlying economic dynamics, towards a nation of renters. While single-family housing starts may be underwhelming, apartment creation will be necessary for affordable housing over the next decade.

And while the consensus that the taper didn’t affect the overall recovery, but did slam housing, seems to be true, lumber futures – a good gauge of where markets think housing will go – have been going strong. 

It’s clearly true that tapering, and tightening in general, will slow the recovery of housing relative to recovery of the economy as a whole. But that’s not necessarily a bad thing. Rents are a superior gauge of economic activity as they are more reactive to underlying labor market indicators – like job creation, consumer confidence, and employment – than home prices which ultimately reflect an asset and hence are sensitive to the magnitude of the initial drop in price. 

Sure, single-unit construction dominates the market. Yet homebuilder ETFs have shown a stronger recovery than housing prices in general, or one-unit construction in specific, would suggest. The market, I think, is pricing in the eventual need to vastly improve America’s multifamily apparatus, as there are no signs a decline in home ownership will halter. 

And, as I’ve written before, the argument that student loans reflective of inadequate demand is holding back housing is not strong. Fact is, an overwhelming number of students want to live in places where they can’t afford to buy a home.

But more importantly, those jumping at the correlation between student loans and home ownership over a few years of data are not paying enough attention to large, structural shifts in economic geography over the past fifty years. For nearly a century, suburban growth eclipsed urban. Millenials, the fraught group in question, are changing that. Two-thirds of young graduates now want to move to cities for a better job, compared to a fraction not too long ago. Not to mention the more than 80% that are willing to move to any city if needed.

Dad is no longer a company man, nor mom a housewife. Rather, graduates are likely to vie for shorter commitments focused on training and, in a number of cases, with a higher probability of relocation in the future. Not to mention the logistical, locational difficulty of maintaining a dual-income family (specifically outside of urban centers).

And that’s the demand side. Jobs that cater to college graduates are slowly disappearing from middle America toward coastal centers that capitalize on economies of scale and network effects. Vox notes that the age at which graduates first purchase a house is becoming later. True, but not necessarily relative to household formation itself – something happening later across the country driven by graduates. (Not to mention, as a commenter on Twitter mentions, the increasing necessity of a post-Baccalaureate degree).

So if the argument is that further monetary accommodation will improve the housing market, I’d buy. However, that’s different from the argument that high investment in single-unit housing is the weakest link in the recovery. And the Fed shouldn’t be making choices about structural trends.

I’m in favor of keeping rates lower for longer only as an insurance that the left tail of doing too little is worse than the expectation of doing too much. Not all labor market indicators are decidedly healthy – employment of 25-54 year olds, for example – and current levels of inflation aren’t overwhelming enough that we can be sure they’re here to stay. We can afford to be a little behind the curve. 

Tyler Cowen has an excellent column suggesting that while the past thirty years has indeed been tough for the American middle class, it has also realized astonishing improvements in the living standards of the global poor. Primarily China, and to a lesser extent its neighbor India, have together brought hundreds of millions out of poverty and malnourishment. Surely this is more important than the stagnation of (an already extraordinarily high) income in the western world.

In any way you slice it, the world is becoming a more egalitarian place. Indeed, it is probably the single-fastest restructuring of international economic hierarchy in the modern era. China’s urban upper-middle class is effectively as well-off as America’s lower-middle class. There used to be a time, not so long ago, that the United States could boast it would be better to be born dirt poor here than with a silver spoon anywhere else.

Tyler posits the story as the tension amid between and within country inequality. And he at least implies the enlightened western mind should focus on the success of the former as at least an order of magnitude more important than the failure of the latter. I am not inclined to disagree.

However.

The real story here is really not about inequality. It’s about living standards, and that tells us something about the futile conversation America has had on inequality within its own borders. For example, the research behind Tyler’s column, suggests that global Gini inequality did indeed fall: from 72.2 to 70.5.

Sure that’s something – especially given that North-South inequality had been increasing for the years before – but it’s certainly nothing incredible. Because two big things happened over that time: the international poor crawled into the middle class, and the global one percent pulled further away.

The former still dominates the latter, but the net effect is a lot less impressive. That can mean one of two things. Either the last thirty years have not been as amazing as everyone thinks, or a change in inequality is not the correct lens through which to view the transformation.

I don’t think anyone would go with the former. But this can be extended to the United States as well. I don’t pretend that inequality doesn’t matter, but the real question America has to deal with is an erosion of living standards at the fringes.

And many times these have nothing to do with economic inequality. For example, consider the incredible disutility caused by America’s racist, aggressive, expensive, and futile criminal justice system. Indeed, incarcerating millions of black people every year for smoking crack and pot, and forcing them into penal labor, isn’t pretty far from modern-day slavery.

Or what about the post-industrial ghost towns scattered across Appalachia where unemployed families bond over crystal meth? This contributes to inequality, but only analogously to the poor Indian farmer of 1980. That is to say, the more the only even remotely-sensible political platform in town (the Democratic Party – whether you want to accept it or not) keeps screaming about increasing taxes on the one percent by one percent, as a solution to everything from runaway deficits to inequality, those who are truly suffering miss out on any and all political representation.

America’s criminal justice system has been a heinous crime – and that is blatantly obvious to anyone with a heart – for over a decade. But it takes a libertarian and a man who lived in the Newark slums to do something about it. Democrats, the supposed party of opportunity and progress, have had basically nothing to say about the clearest cause of systematic suffering in the country.

And immigration reform is a close second, yet the party’s effective nominee has clearly hawkish views about sending kids who came into this country back to gang-ridden Central America.

They still have the audacity to claim they champion the poor man’s cause.

To the extent the narrow definition of inequality is the primary avenue to achieve this end, maybe they do. After all, Democrats have had basically nothing new to say about the subject than increasing the capital gains tax, and adding a new top rate at 40%. Or was it 50%?

It’s time that we started talking about living standards. And this may alleviate inequality in the long-run, but just like the reduction of the global Gini by 2 points, that won’t be the main story. Instead, over the next thirty years we’ll see an increasingly large share of the income go towards those the top quartile. And before we talk about taxing them more, let’s talk about how we want to spend that revenue most effectively in improving the broad welfare of the country.

Call be a tax-and-spend liberal, but let’s at least start talking about the “spend”.

In Battle for Bretton Woods, Benn Steil is a storyteller first, economist second. But that doesn’t mean this intriguing account of the two men who made the international monetary world sacrifices on the tricky, technical implications thereof.

Following the tradition of Liaquat Ahmed’s wildly-successful Lords of Finance, Steil writes the financial history following the life of an economic great, John Maynard Keynes, and his rogue rival, Harry Dexter White.

For a book discussing the most important economic event of the century, Steil is working in a surprisingly uncompetitive market. There seem to be no other books aimed at a popular audience describing the brilliant exploits of this Soviet spy. It turns out that White – the American economist who taught not at Harvard or MIT but Appleton, Wisconsin – was Red. As Steil noted from his essays,

“Russia is the first instance of a socialist economy in action,” the bureaucrat wrote in an unpublished essay that Mr. Steil discovered in White’s papers. “And it works!”

But perhaps what sets White apart from his undercover counterparts is, we learn, his zeal to secure unquestionable American dominance in the new world order. By any measure, the debate between the two men was hardly ideological. Indeed the ultimate result largely matched the expectations of both parties – discouragement of competitive devaluations, stability in exchange rates, control of cross-border capital flows nestled in the spirit of never-before-seen international cooperation in economic affairs.

Rather, the differences derived entirely from the relative position of an emerging behemoth to a fading empire decades past its prime. Where Britishers wanted to think, until the last minute, that Bretton Woods was a landmark conference between two great equals, the Americans saw it as a way to end British dominance forever.

Maybe the most fascinating part of the book, especially for someone of Indian-descent, is the extent to which the socialists in FDR’s administration advanced the anti-colonialist cause, dismantling imperial preference and hence empire itself.

Steil recounts this drama as the magical coincidence of far left and far right. On the one hand, the State department was filled with hardcore free marketers that wanted a world without any tariffs or subsidies, something at odds with imperial preference (which in effect provided Britain’s otherwise uncompetitive exporters captive demand). On the other hand, the socialists advising FDR (not the least White himself) saw the British empire as a grotesque invasion of national sovereignty and axiomatically hated imperialism.

I was always taught that the Americans, despite their lip service towards democracy, always did too little, too late when it came to expediting the end of European Colonialism. While White’s role does not definitively challenge this, it does provide evidence that the Americans went well out of their way by ending a system that would cripple Britain and only benefit American exporters modestly at best.

The central debate between White and Keynes concerned the relationship between creditor and debtor nations, and the role of the American dollar. While Keynes wanted a system that placed the burden of responsibility on creditors to sap their trade surplus, White insisted on a less forgiving system that wouldn’t require very accommodative monetary policy. This is where the latter question comes in: Keynes advocated for the creation of an international reserve currency that would help deficit countries to settle their balances, the bancor, with an elastic supply from a fund towards which all countries would contribute, splitting the austerity between creditor and debtor nations. White, instead, wanted a system where all countries were pegged to the dollar at a fair rate and only the dollar would be convertible to gold, in which debtor countries may only obtain a limited loan from an international fund (the IMF), and where debtor countries may devalue their currencies only 10% (and another 10% if needed). White won the day.

Thus was born the gold-exchange standard where foreign currencies were pegged to the dollar which in turn was convertible to gold to qualified parters (as opposed to the classical standard where all currencies were convertible at any time, by anyone).

As promised, the economics is less interesting than the intrigue thereof, and Steil does a wonderful job telling the tale of deceit and drama that wrought Bretton Woods. We learn of the carefully orchestrated conference agenda in which Keynes was relegated to the debate of a relatively irrelevant institution (the World Bank) while White carefully controlled the creation of the Fund.

The timing of this book couldn’t be better. We are today living through the logical conclusion of a system that was bound to break. As the sole producer of an international reserve currency, it became necessary for the United States to run persistent trade deficits to ensure adequate supply of liquidity abroad. However, the fixed exchange rate system exported American monetary policy, and hence inflation, abroad. The mad irony then is that America is today the world’s largest debtor, a paradox otherwise known as the Triffin dilemma.

Published earlier this year is Eswar Prasad’s The Dollar Trap which discusses the impossibility of a dollar standard in a world with free capital flows, but the lack of any viable alternative. The irony comes from the fact that both official and unofficial American attitudes towards the situation echo Keynes, not White (again reflecting its relative position in the world).

More than anything else, Steil paints the picture of a rich intellectual, nationalistic, and ideological drama between a technocrat and an economist that set the tides for economic policy in the twentieth century. It was economists more than army generals or foreign diplomats that defined geopolitics. This is a trend that continues to this day. Indeed, whereas American-led peace talks secured by the Security Council may seem like a century-old anachronism, the international affairs office of the Treasury department continues to be an exceedingly important component of our foreign policy.

And, people don’t even know about it. When Ben Bernanke opened American credit lines of over half a trillion dollars to a select-few countries and rebuked the requests of others, he arguably made more important geopolitical decisions than Hillary Clinton ever did as Secretary of State. Indeed, the Indonesian Prime Minister once even personally requested Clinton to open a swap line between its reserve bank and the Fed. Unfortunately, that’s not a question over which she much control.

As we move towards a G-Zero world, as international relations superstar Ian Bremmer likes to call it, the United States dollar still represents an overwhelming majority of foreign exchange transactions and is the primary reserve currency. To this end, American monetary policy is exported worldwide and will continue to create dramatic tensions with other countries.

Battle for Bretton Woods is first an epic story (even for those with little interest in economics). But it’s also a reminder how economic policy dominates geopolitics.

I don’t think Paul Krugman is very convincing in his argument that repeated calls for higher interest rates derive from class interest:

You’re living in a fantasy world if you don’t think this has something to do with the diatribes against currency debasement and all that.

Krugman’s argument is simple, and fair at first approximation: the rich earn a disproportionate share of their income from interest-bearing assets and have the most to loose from “artificially low” interest rates.

Similarly, to the extent low interest rates create inflationary pressures, the rich have more to loose given a net surplus position in nominal assets. However, as I remember the story, the economists making this argument made a fundamental error in assuming simple asset swaps (i.e. QE) could somehow cause hyperinflation. Arguing against hyperinflation may be a straw man, but it’s still a fair worry (for rich and poor alike). I don’t think you had many rich people militate in favor of deflation.

But that’s not the most puzzling part of this argument. A side-effect of the Fed’s stimulus have been elevated asset prices. There’s no voodoo behind this: the price of an asset is the discounted value of its future cash flows, and this necessarily increases as the interest rate falls. Since the rich own a disproportionate share of real assets across the country – primarily real estate and equities – they stand to benefit from this program. Indeed the stock market has been setting record highs for the past few years.

Krugman’s tandem argument that high interest rates/low inflation portend a redistribution from the young to the old is also tenuous. (Sure, if there was a long-term increase in expectations this would act like a one-off capital levy. But that hasn’t been the case.) Note that wealth is just a claim on future income, and since Fed policy has increased asset prices and therefore P/E ratios, capital gains will fall in the future, ceteris paribus. To think about it another way, the Fed has moved future returns into the present to stimulate consumption. Or, equivalently, low interest rates increase asset prices redistributing consumption from the future to the present. (Or young to the old, contra Krugman).

Magnitudes matter. Nothing Krugman is saying is inherently false, but seems to be guided more by intuition than data. I’m just pointing out a number of other effects. His primary source indicates that the ratio of interest-bearing income to debt increases as we move up the income distribution. But even at the latter end, debt is twice as important. Krugman is probably right that were the last group to be spliced further, those at the tippy-top may have more even portfolios.

But at the tippy-top you also have a diverse group of people without homogenous incentives. For example, the private equity industry has made a killing financing large, leveraged buyouts at throwaway prices. This similarly stimulates demand for mergers and acquisitions which is one of the few profit centers left for investment banks. These people surely fall among the rich.

On this note, observe that to the extent the data Krugman presents holds to any significant magnitude, we’re talking about 0.01% of the population. Sure, class interests matter for this group, but more effective avenues (even if low interest rates were a huge problem for them) would include lobbying for specific subsidies and tax breaks, which actually works, rather than have discredited economists spill ink in the Wall Street Journal.

Another overlooked consideration is that the United States is somewhat unique. Despite a large current account deficit and soaring obligations, we earn more in foreign income than foreigners earn here. And in fact, the ratio of GNP/GDP has only been increasing. This derives from a large long position by (rich) American investors in emerging markets. To the extent the the dollar is debased (something Krugman suggests the rich are very worried about), the US claim on the rest of the world’s future income increases. (And, conversely, foreign reserves across the world would plummet).

None of this is to say that any of the noisemakers clamoring about money printing and debasement are right. I’m just suggesting that class interest may not be nearly as relevant as Krugman suggests. Occam’s Razor would demand a simpler explanation: these people are simply ignorant or want to sound serious.

But hey, which one percenter among us hasn’t dumped our net worth into the money market.

David Leonhardt at the Upshot suggests (in other words) the only hope Republicans have is that kids today will be too young to remember George Bush. While it is definitely true that 2008 was an anomalously liberal moment – the unlikely marriage of epic crisis with election – there isn’t much reason to believe today’s youth will forget the failure of movement conservatism as they age and that, indeed, the uneasy of the Obama era will weigh heavier than the tragedy of the Bush era.

Consider a primary argument about the time in which kids come of age:

To Americans in their 20s and early 30s — the so-called millennials — many of these problems have their roots in George W. Bush’s presidency. But think about people who were born in 1998, the youngest eligible voters in the next presidential election. They are too young to remember much about the Bush years or the excitement surrounding the first Obama presidential campaign. They instead are coming of age with a Democratic president who often seems unable to fix the world’s problems.

Which purportedly mirrors the eighties:

But the temporary nature of the 1960s should serve as a reminder that politics change. What seems permanent can become fleeting. And the Democratic Party, for all its strengths among Americans under 40, has some serious vulnerabilities, too.

There’s a big difference between the 1960s and 2010s that is obscured when we think about politics independent from policy. In 60s and 70s problems that loomed large included indomitable inflation, rapidly increasing crime across many major cities, a decisive failure of economic micromanagement, an international oil crisis, fall of the Bretton Woods monetary system, and with it persistent trade and budget deficits.

And while liberals would eventually be able to combat many of these issues, they were wholly unprepared at the time. Indeed, the dominating economist-cum-public intellectual of the day was Milton Friedman. Of course, the snake oil supply-side salesman couldn’t deliver an inch of what they promised, and even though the conservative solution failed, it is fair to say that it was the problem for conservatives.

Today’s most prominent problems include thirty years of stagnant income for those at the bottom and with it soaring inequality, incredibly daunting questions of environmental and ecological sustainability, persistently high unemployment, a shortage of skills due to an ailing education system, declining mobility (economically and physically), a low savings rate for a sound retirement, and declining benefits across the board. And in the background lies a supply-side endowment keeping energy affordable, decades of deregulation, an improving trade balance, historically low crime (and mass incarceration), and very low inflation. The supply-siders got what they came for. And, to top it all, today’s most prominent economist-cum-public intellectual is Paul Krugman.

There is certainly debate between liberals and conservatives about ways to deal with today’s issue and the point of this post isn’t to convince you that we (liberals) have the answer to the looming questions of the day. But without question the Obama presidency wasn’t a blip when the problems of the day, as even conservatives would cede, are liberal in nature.

That is to say that while fundamentally conservative principles like smaller government and cultural-familial values might be the answer, they are not the apparent answer. Instead, the biggest threats of the day at first site require a formidable degree of collective action, indeed probably to the level the world has never seen before. Here are some things we have to deal with, in no particular order of severity:

  • A monetary system that doesn’t lead to the necessary imbalances of today’s dollar standard.
  • Education of a student body that is behind the world on many measures.
  • Solvency of entitlement-institutions that both parties agree are here to stay but only one has an a way to actually pay for it.
  • Mass incarceration.
  • Unstable financial institutions that can quickly move capital across borders.
  • Nuclear weapons.
  • Rising inequality (which, game theoretically, will at least require some form of bilateral side payment to ensure revolution is not the dominant strategy for the poor).
  • Last, and about the opposite of least, climate change that threatens every aspect of the way we live requiring not just national, but international, coordination of the finest sort.

This is a liberal problem.

And to say that young Americans will forget the lies and human tragedy of the Bush administration, filled with scoundrels of the first order, is hopefully a joke. Because Americans just a few years older remember the 90s with a sort of nostalgia that Bill Clinton probably does not deserve, but receives anyway. Cultural memory is a fickle thing, but with neocons dying all over (and this will be literal soon enough) it doesn’t look like America has forgiven George Bush.

There are ways the Republican party can fix itself. But let Rand Paul win the primary before the party talks about appealing to anyone not asking their doctor about Botox.

 

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