TUESDAY, JANUARY 15, 2013
The key thing Jon Stewart knew: Oof.
By light years, Paul Krugman has been the most valuable player in upper end journalism over the past dozen years.
That said, we have increasingly felt that his political judgments aren’t always as crisp as his understanding of policy. And uh-oh:
Last night, Jon Stewart had a bit of fun at Krugman’s expense. We think the tape is worth watching. Click here.
A bit of background:
Last week, Stewart was mocking that trillion dollar coin before it rolled under that million pound couch. Krugman voiced his annoyance, even calling Stewart “lazy.” This produced last night’s rebuttal.
Our take: As an economist, Krugman understands policy in ways that few journalists ever do. But as a comedian, Stewart understood something too.
Stewart understood how easily this magical platinum coin could be mocked. He knew that every person in every bar would have thought the idea was just nuts.
Politics involves understanding the way the world will look to others. Tjis is a skill at which we liberals are often remarkably weak.
Going into bars to tell jokes is one way to learn about others. Professors rarely do this.
Warning: Grover Norquist does!
Stewart understood how easily this magical platinum coin could be mocked. He knew that every person in every bar would have thought the idea was just nuts.ReplyDelete
And rather than try to explain why the idea was not nuts, which is what Krugman did, he went for the cheap laffs instead; thereby confirming for those bar-goers that the coin idea was indeed just the stuff of comedy. Otherwise, why would the liberal-leaning Stewart have joked about it?
Heckuva job, libs! We shoot ourselves in the foot again! With advocates like these...
We mostly agree that it would be obviously nuts for the government to pay its bills by printing money via a $1 trillion coin. Then, why is it considered OK to do the same thing via the Fed's Quantitative Easing? Maybe the difference is that the coin is easier to understand.ReplyDelete
Stewart gets laughts when he suggests minting a $20 trillion coin or a "quillion dollar" coin. That's an argument anyone can understand. If the governent can just print a "quillion" dollars, then money becomes meaningless.
Stewart's argument would also work if he applied it to Quantitative Easing. He could point out that the Fed actually is effectively printing hundreds of billions of dollars, so it could equally well print $20 trillion or a "quillion dollars". But, that point wouldn't get laughs, because hardly anyone understands the process by which the Fed creates money.
There's another difference, other than understandability. Unlike the trillion dollar coin, QA is limited because the amount of money created by QA is part of the debt limit. The President can't unilaterally create all the money he wants. However, if the debt limit were abolished, then Obama or any future President could unilaterally print any amount of money.
The federal government is already borrowing or printing 40% of what it spends. How much more would they print if the President could unilaterally create unlimited amounts of new money?
So ideas that would work should be abandoned, rather than fought for, because people in a bar somewhere might ridicule them. In that case, Gore got what he deserved because he was, after all, easily, and often, ridiculed. So the liberals Bob is always railing aginst were right in abandoning him, rather than fighting for him, because hey, people in bars were laughing at him.ReplyDelete
Bob blows it again, and in a painfully, obviously, stupid fashion.
The trilion dollar coin only made sense as leverage for negotiation over the size and shape of deficit reduction in face of the debt ceiling. In 2011, mentioning the coin in negotiations with Republicans may have been a good way to extract concessions. This time around, as soon as Obama said he wasn't going to negotiate over the debt ceiling, employing or threatening a workaround ceased to make sense.ReplyDelete
Krugman missed that because either he failed to realize that the debt ceiling was truly non-negotiable for Obama or he overestimated the willingness of Republicans to exceed the debt ceiling. That's not particularly surprising because 1) Obama has quite properly shown himself to be risk averse when it comes to potential economic shocks resulting from Republican intransigence and 2) Republicans have shown themselves unwilling to engage in routine governance since Obama took office.
In the abstract, Krugman is correct. Absent a clean debt ceiling agreement, the trillion dollar coin (or threat of the $1T coin) is probably the best solution. That said, as Bob points out, Krugman proved himself to be tone deaf. By skipping straight to a politically dangerous, albeit novel position, Krugman failed to make the rhetorically stronger argument: Congress believes that fiscal responsibility is refusing to write a check to pay your credit card bill. Obama's refusal to negotiate (and unwillingness to entertain the coin) appears likely to be vindicated, as a clean debt ceiling increase looks imminent.
Congress believes that fiscal responsibility is refusing to write a check to pay your credit card bill.ReplyDelete
Not quite. Congress believes that fiscal irresponsibiity is paying your credit card bill by using money borrowed from some other credit card.
This cheap shot is way off base. Congress (including the Republican House) ordered the President to spend the money with full knowledge that current tax revenue would be insufficient -- and, therefore, that borrowing would be necessary to cover it. Only Congress authorizes spending, not the President, and the Republican effort to convince the public that raising the ceiling is allowing the President to spend indiscriminately is simply a flat-out lie. There is no clever talking point to justify Republican behavior on this. It is as irresponsible as it gets -- as every legislature before, Republican or Democratic, understood for almost a century.ReplyDelete
Congress (including the Republican House) ordered the President to spend the money with full knowledge that current tax revenue would be insufficientDelete
In principle this is true or it ought to be true. I'm not always sure what pols in Washington know and understand.
I continue to be amazed and disgusted at the fiscal irresponsibility of almost every pol in Washington. I agree that it would be irresponsible to not lift the debt ceiling. And, urban legend, you're right to criticize Republicans for first approving the spending but then threatening to disapprove the debt limit rise necessary to actually spend that much money.
OTOH it's also irresponsible for the government to continue to borrow 40% of what it spends during peacetime. This is not a sustainable course. IMHO the President ought to be leading the battle to reduce the cost of entitlements and make them sustainable.
I don't know which party is the more irresponsible, nor do I much care. What worries me is that continuing to run huge deficits will lead to some sort of disaster.
But, you're an idiot, so we don't much care what worries you. We don't trust you to decide what's sustainable. You have no credibility.Delete
The Europeans have essentially wrecked their union by following your thinking about government spending.
Your predictions and worries about inflation as a result of monetary expansion have been shown groundless.
Go cry somewhere else, please, you whiny little liar.
We need to remember, I think, that Obama has frequently drawn lines in the sand, and then invited his negotiating opponent to walk right over them. If Krugman didn't expect Obama to draw a real line in the sand in this case (and is still nervous whether Obama will stick to it this time), who can really blame him? Who knows: maybe Obama is encouraged to stand his ground only when his left flank is making trouble.ReplyDelete
Stewart missed an opportunity to blow everyone's mind by just following through to the implications of the trillion dollar coin (TDC) idea. The fact of the matter is that in a country like the US, which is a sovereign issuer of its own fiat currency, money is purely a social convention. Dollars are a unit of measure used for keeping the books. The Government cannot run out of dollars, just like we cannot run out of inches, kilograms, or degrees Fahrenheit. Most people still think about the country's money using mental models appropriate to the time when were on the gold standard. Stewart could have done something to help break the hold of that misplaced concreteness, and he could have made it funny too.ReplyDelete
The advocates of Modern Monetary Theory (MMT) at sites like http://neweconomicperspectives.org/ argue that talk of using the TDC to get around the Republican threats about the debt ceiling is playing small ball. Minting a really high denomination coin, such as $60 trillion, would completely debunk our misconceptions about money, debt, and the deficit. For example, see http://neweconomicperspectives.org/2013/01/wake-up-progressives-the-trillion-dollar-coin-can-be-game-changing.html
"Most people still think about the country's money using mental models appropriate to the time when were on the gold standard. Stewart could have done something to help break the hold of that misplaced concreteness, and he could have made it funny too."Delete
Following the MMT approach, maybe Obama should mint a $7 quadrillion coin and share that money with the world. He could give $1 million to every person on earth. We'd all be millionaires. So, everyone on earth could live in luxury and nobody at all would have to any work.Delete
What could possibly go wrong?
Calm down, David in Cal. The coin wouldn't work that way. It's just a gimmick that would allow **only** the Treasury to acquire the cash necessary to avoid a default.Delete
In any case, the point is moot. Obama is not considering it, which is fine by me. Invoking the 14th Amendment is the better option.
David in Cal, your comment is clearly meant to be taken as irony. Taking your suggestion literally is obviously ridiculous. But it seems that you haven't followed through to a clear understanding of what makes it ridiculous. The suggestion is a vivid example of the fallacy of misplaced concreteness. It confuses the menu with the meal. Money is a way to refer to and keep track of objects and events (goods and services) in the real economy. People's potential economic well-being is a function the productive capacity of the real economy, not of how much money is sloshing around.Delete
The world is in a recession. This is synonymous with saying that there is a tremendous amount of real productive capacity that is under-utilized. That means that a lot of currency could be added to circulation before the dollars start competing for a limited amount of goods and services; i.e., inflation is not a near-term danger. Having the government make investments in rebuilding and improving our decaying infrastructure would leave real wealth in place as well as stimulate the economy.
But Mysterion is right. The money that the Fed would give the Treasury in exchange for a platinum coin would not go into circulation, at least not immediately. It would fill the public purse, but Congress still controls the strings to the purse. That's the point behind this whole debt ceiling debate: the Executive can only spend what has been appropriated by Congress. In fact, by law, the Executive must spend exactly what was appropriated by Congress; the Executive cannot unilaterally decide not to spend some appropriation.
Unfortunately, your comment indicates that you did not take the time to read up on Modern Monetary Theory. It's worth spending some time on, especially because it so counterintuitive. This is particularly true of MMT's descriptive component, its explanation of how money actually works. It's not just another perspective, it's a figure/ground shift. Wikipedia has a good entry on it (MMT also goes by the name Chartalism).
mejimenez -- I appreciate your response. Here's where I differ with you.Delete
IMHO Congresses and the Presidents have been pretty darn irresponsible about spending whatever money they could. I don't feel safe, simply because Congress and the President must approve the spending of money hypothetically created by a trillion dollar coin. After all, Congress and the President actually are spending the huge amount of money actually created by Quantitative Easing.
As mejiminez points out, the money could be spent over time.Delete
When I worked on Wall Street, I discovered an amazing fact.
Money is no more than electrons flowing through computers.
If the Treasury were to mail out checks they would be honored.
If the Treasury were to send a series of electrons to bank accounts, the electrons could be used to buy things and pay off debts.
The Treasury cannot run out of electrons, no matter how Republicans in the House of Representatives vote. It is Congress who must exercise fiscal responsibility.
Some of our citizens keep holding up the specter of the Weimar Republic to frighten us as if we were children on our first camping trip.
To compare the US economy to that of Germany between the wars is sheer folly.
Blaming President Obama or the Democrats for spending what Congress has already mandated is futile.
I agree with David in Cal that Congresses and Presidents have been irresponsible about spending the Government's money. But that has nothing to do with whether that money came from taxation, borrowing (selling Treasury Notes), the Fed's Quantitative Easing, the Treasury depositing a platinum coin at the Fed, or Lincoln just printing Greenbacks. The lack of responsibility was reflected in what they chose to spend the money on: 2 undeclared wars, a give-away to Big Pharma in Medicare Part D, subsidies to Big Oil, subsidies to Big Agriculture, and so on. That money should have been spent on increasing the real wealth of the Commons; i.e., it should have been spent on infrastructure and education. Such investments would have contributed significantly to the growth of the real economy.Delete
Assuming though that the trillion dollar coin or something like it became necessary to prevent the U.S. defaulting on its debt and the worldwide depression and chaos it would bring? It would set a very bad precedent of course but I don't think there would be much choice.ReplyDelete
"Stewart understood how easily this magical platinum coin could be mocked."ReplyDelete
That's no doubt true. But did he understand why it can so easily be mocked? Did his satire dig deep enough to expose the roots of that easy mockery? I think we have to admit that it didn't, and that's the problem.
The coin idea may be worthy of mockery, but the idea people (including notably VSPs) have of how money works, that makes that mockery come so easily to them, is an even bigger target, though harder to hit.
A really great bit of political comedy might have gone that far with the story. Come to think of it so might a really great bit of political journalism.
For think about this:
How does one go about dislodging a deeply entrenched piece of conventional wisdom? In the case of the coin, the conventional wisdom that makes it subject to mockery is a set of ideas like this:
- that money is a kind of scarce & precious commodity, rather than, say, a form of score keeping
- that the government can literally run out of it, or run out of some mysterious something-or-other that makes it have real value
- that if the amount government prints or mints exceeds some mysterious threshold that is set, somehow or other, not by man but by nature, very bad things will happen
Not the stuff of ordinary politics? Maybe not. But pretty much every major progressive advance has had to contend with similarly-entrenched 'truths' of the conventional wisdom.
I don't have a recipe for disloding such 'truths'. But I'm pretty sure having your public intellectuals refrain from saying anything that might provoke people to question their assumptions is not one of the ingredients.
Nicely done, Amileoj. Exactly what I was trying to get at, but much clearer.ReplyDelete
This misapprehension of what money actually is -- tied as the misconception is to puritan notions of virtue, thrift and punishment -- has got to be among the most destructive and widely myths held today.ReplyDelete
Money as a mere social convenience, a medium of exchange, sustained by the taxing ability and underlying productive capacity of sovereign states, is deeply offensive to our rulings classes, because it promotes the view that 1) Our Betters not wealthy because they divinely favored or smarter than the rest of us, and 2) the wealthy don't have an eternal and everlasting claim to keep everything they "make" -- there's no divine right to keeping an unlimited number social convenience chits, if those chits could be used more productively elsewhere. Indeed, preposterously high concentrations of such chits in too few hands is positively destructive.
Which is why Bob, John Stewart and so many others, regard the coin option not only a difficult to explain, but as inherently ridiculous. They don't know what money is, and they object to any action which violates that orthodoxy -- because, don't you know, it's so easy for people to laugh at these unaccountable notions!
In this respect, lots of liberals, including Bob Somerby, are no different from David in Cal, in the way they view money. And, if the matter is left to lots of liberals, and Bob Somerby, that's exactly the way things will stand.
2 Truths that need to be widely understood:ReplyDelete
- The government of the United States can NEVER RUN OUT OF DOLLARS.
- As long as its debts are owed in dollars, the government of the United States can NEVER GO BANKRUPT.
The above is why any analogies of the US budget to a household budget, to a business, to an individual trying to pay off credit card debt, or to the budgets of non-monetarily sovereign nations like Greece, are completely specious, and should be directly challenged and rejected as false any time they are made.ReplyDelete
You have a point, majneb, about non-monitary sovereign namtions. But, how about monetary sovereign nations, such as Argentina, which is now suffering from 25% inflation rate. Or, Israel which had hyper-inflation of over 400% during much of the period 1984-86. Or, Zimbabwe, whose currency lost so much value that it is now worthless. These countries didn't run out of money, but their money lost a huge amount of value.Delete
Could the same thing happen to the US dollar? I don't see why not.
At long last, can we stop once and for all worrying about nonexistent problems and start getting to work solving our actual ones?Delete
Inflation is not a problem in the United States. It hasn't been a problem for quite a long time. If anything, the rate of inflation is and has been much too low.
On the other hand, we have real and present concerns like persistantly high unemployment, a gargantuan and growing inequality divide, and real income that has been basically stagnant for 40 years. Let's get to work solving these actual problems. If someway, somehow, down the road aways, for some unexplained reason we have too much inflation, then we can deal with that at the proper time.
Further, the minting of high value platinum coins as an antidote to the debt ceiling would have nothing to do with inflation, as they would not be circulating.
Also, John Stewart, as much of a liberal as he may be in other respects, is fantastically well off compared to the average american who benefits from government assistance. He likely will not suffer if congress refuses to raise the debt ceiling, so he is free to mock the antidote to such refusal, regardless of the suffering that antidote would alleviate among the general population.ReplyDelete
So Bob, why didn't you refer to Mr. Stewart as a "multimillionaire player?"
Puh-lease! Darlings, it simply wouldn't do!!Delete
Finally, finally, finally, finally mejimenez, mysterion, anonymous 1:27PM, and majneb say what liberals need to say and push hard. Thank you and Thank you and Thank you!ReplyDelete
Why deficit spending is necessary to stimulate the economy after ceasing vast military expenditures.ReplyDelete
From the State of the Union address.
“We should take no comfort from the fact that the level of unemployment in this transition from a wartime to a peacetime economy is lower than in any peacetime year since 1971. This is not good enough for the man who is unemployed today. We must do better for workers in peacetime and we will do better.
To achieve this, I will submit an expansionary budget this year--one that will help stimulate the economy and thereby open up new job opportunities for millions of Americans.
It will be a full employment budget, a budget designed to be in balance if the economy were operating at its peak potential. By spending as if we were at full employment, we will help to bring about full employment.
I ask the Congress to accept these expansionary policies--to accept the concept of a full employment budget. ...
With the stimulus and the discipline of a full employment budget, with the commitment of the independent Federal Reserve System to provide fully for the monetary needs of a growing economy, and with a much greater effort on the part of labor and management to make their wage and price decisions in the light of the national interest and their own self-interest--then for the worker, the farmer, the consumer, for Americans everywhere we shall gain the goal of a new prosperity: more jobs, more income, more profits, without inflation and without war.
Richard Nixon SOTU
Finally, finally, finally, finally mejimenez, mysterion, anonymous 1:27PM, and majneb say what liberals need to say and push hard. Thank you and Thank you and Thank you!ReplyDelete
You starry-eyed liberal folks just don't get it, do you? Mr. Somerby is a comedian, a professional at making people laugh. Unlike you rarefied yuppies, he knows what makes people giggle in bars. When he says that some liberal proposal, no matter how feasible in actual fact, will make people in bars laugh and proceed to vote Republican (once it's explained by Fox News), he knows of whence he speaks. Did I mention that he's a professional comedian?ReplyDelete
That's why he advised Al Gore to shut up and back off in 2000, when Mr. Gore was running for President. He clearly realized, even that long ago, that any statement, proposal or candidate that can be mocked right-wing media, should immediately be abandoned by liberals. To actually stand firm and counter right-wing mockery with rational argument is simply not an option - this is so obvious there's no need to explain why it's so.