A couple days before, the new President shouted his dystopian vision of America to a quarter million or a million or whatever number of brave souls who braved a wet Washington day to hear his inaugural address. The wasteland of empty factories and unmet hopes and dreams stops today, he said to a smattering of applause, with the ghosts of Reed Smoot and Willis Hawley, the grandfathers of economic isolationism, flanking his either side.
Trump has been channeling his inner Hoover since descending down his golden escalator.
It is the view of Fed Chair Janet Yellen that signs of overheating in the broader economy are “scarce.” The indispensable Grant’s Interest Rate Observer isn’t so sure and devoted its front page and then some of its March 10 issue to inflation and how it’s measured. After all, the price level is the North Star of central bank policy.
100 Years Later, Was the Federal Reserve a Good Idea?
Not since the Great Inflation of the early 1980s has the Fed been so controversial. Its causal role in the housing boom and bust remains contentious. Other factors aside, the Fed was a poor overseer of the safety and soundness of the financial system. At best, the central bank was a passive bystander during the boom and early stages of the housing bust; it couldn’t even accept that we were in the midst of nationwide housing downturn.
This year is likely to be one of financial crises in industries and countries around the world. Whether those turn into a global financial crisis is an open question, and the answer will likely turn on the health of the U.S. financial industry and broader economy. No crisis is global if American financial markets hold up. The best I can foresee, at this moment, is that a true global financial crisis is not likely.
Does Monetary Policy Have a Future?I have chosen a provocative title, but it is fully justified. Fed officials are flying on autopilot, but the controls don’t work anymore, or at least not reliably. Fed watchers are largely clueless. The investment community and the economy may be collateral damage.
Let me begin by briefly reviewing the recent past. All through last year, Fed officials were signaling they would begin a program of rate increases. At first, there were going to be 8 increases of one quarter point. As the year progressed, the first increase faded into the future. Finally, in December 2015, the Fed finally hiked its new interest-rate targets by 25 basis points. In my opinion, the FOMC did so largely to keep its credibility.
Why Three Rate Hikes in 2017 May Not Be Enough
Most notable has been the change of heart by Governor Lael Brainard. She was a prominent dove prior to the election. Now she has turned hawk, in what may be one of the greatest conversions since that of St. Paul on the road to Damascus.
Were We Watching the Same Presidency? Obama Was Not a Restrainer
The Threat from Federal Debt
Trump faces tough choices because President Barack Obama left him with a fiscal mess. A river of red ink under President George W. Bush turned into a torrent under Obama. Federal debt held by the public soared from $5.8 trillion in 2008 to $14.2 trillion in 2016. As a share of gross domestic product (GDP), the debt almost doubled from 39 percent to 77 percent.
A Challenging Road Ahead for Our New US Trade Representative
Many nations have trade-distorting policies. Eliminating distortions would benefit U.S. exporters, not to mention people in those countries. The USTR rightly should strive to achieve reforms overseas. However, the USTR should never lose sight of a basic economic reality:
Ending the Reign of the Administrative Law Judge
One especially alarming example of the breakdown of essential separation of powers within the administrative state is the Securities and Exchange Commission’s use of administrative law judges (ALJs). ALJs adjudicate most of the SEC’s enforcement actions. They have the authority to impose significant civil penalties and can bar respondents from working in the securities industry.
Several House Republicans Introduce a Bill to Legalize Young Immigrants
Please Stop the Tyranny
If you mention this “deregulation” today, most people think it refers to wild Reagan administration efforts to undo environmental, health, and safety protections. In fact, the deregulation movement predated Ronald Reagan’s presidency, had broad bipartisan support, and had little to do with health, safety, or environmental policy. Rather, deregulation targeted regulations that directed business operations in different sectors of the American economy: which airlines could service which routes, what railroads could charge what amounts for their services, how telephone service would be billed and what technologies would be used, how the power industry was organized, and much more.
Everyone needs to take a step back. This bill is a train wreck waiting to happen.
The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago. The ObamaCare regulations it retains are already causing insurance markets to collapse. It would allow that collapse to continue, and even accelerate the collapse. Republicans would then own whatever damage ObamaCare causes, such as when the law leaves seriously ill patients with no coverage at all.
Monday, March 13, 2017
Last January, Senators Bob Menendez and Maria Cantwell offered an amendment to the Keystone Pipeline bill stipulating that “Land or an interest in land for the pipeline and cross-border facilities described in subsection (a) may only be acquired from willing sellers.” You might think that Senate conservatives—always (loudly) mindful of private property rights—would be inclined to sign on. Alas, only Senators Kelly Ayotte and Rand Paul broke Republican ranks to vote “yes.”
Earlier this month, Tom Steyer’s NextGen Climate charged that Senate Republicans were “willing to completely abandon their own principles in order to kowtow to their Big Oil backers.” While conservatives certainly won’t relish lectures about principles from the likes of Mr. Steyer, in this case, he has a point. TransCanada—the company building the Keystone XL Pipeline—is using eminent domain to seize private property in a fashion that would send conservatives around the bend were those methods employed in other contexts.
One of the most striking features of the opposition to the Trump administration’s initial executive order against migrants from seven majority-Muslim countries as well as all refugee claims is how important state governments were to it. The lawsuit that led to a nationwide injunction against the order was filed by the state of Washington, later joined by Minnesota. Seventeen other states joined a brief supporting Washington and Minnesota. This is strange on its face. Setting aside the disputed question of how much unilateral authority the president has over immigration policy relative to Congress and the federal judiciary, it at least seems clear that immigration policy is a federal matter, not the business of the states. Individual persons affected by the ban might sue on the basis of religious discrimination, national origin discrimination, or lack of due process, but why are the states involved?
In my previous essay, I wrote about the value of factions, and how liberalism’s strengths come from diversity and disagreement. I mentioned that diversity is hard because it asks us to tolerate views that we abhor. As Will Wilkinson has argued, the United States has been slowly sorting itself into two competing tribes that come with rather different sets of values.
A stark challenge for liberalism is managing this level of disagreement. Of course, we have a set of procedures that are designed for just that—they are embodied in the Constitution. The liberal order is built upon the rule of law, and so we might expect the Constitution to carry us through potential dark times and see us through to the other side. I want to suggest that a reliance on the law won’t be good enough.
On Tuesday, the House Science Committee held a hearing to examine the Social Cost of Carbon (SCC). The SCC is an estimate of the total impact—most of which will occur in the future—from an additional ton of CO2 emitted today. To advance its climate agenda, the Obama Administration built an interagency working group (IWG) to calculate the SCC (presently $39 per ton) and used the value to justify regulating greenhouse gas emissions. The SCC faces an uncertain, but probably bleak, future as a regulatory tool under the Trump Administration, and it is not clear that it deserves a better fate. But it is still worth thinking about the statements offered to the committee and what SCC calculations tell us about the scale of climate risks.
Sunday night, reports emerged that the Trump administration would soon announce a massive increase in defense spending. Monday morning, the president made the announcement that his administration would soon release a budget blueprint that included a $54 billion increase in defense spending—offset by cuts to the Department of State, foreign aid, and a variety of domestic discretionary program. President Trump referred to it as a “public safety and national security budget” in his remarks. But the statement gave little indication of what threat the additional $54 billion was necessary to counter.