When I speak ill of the concept of third party presidential campaigns solving anything, someone inevitably brings up the precedent of the Republican Party. Quite clearly, Abraham Lincoln and his administration solved quite a bit. This is, in my view, the exception that proves the rule in the true sense of the term.

The crux of the matter is that the GOP, when founded, was a movement of party-switchers from among the ranks of established politicians. Galusha Aaron Grow, the first Republican Speaker of the House, is a case in point. As a young Pennsylvania lawyer, he ran for congress as a Democrat in 1850 and won. He ran for re-election in 1852 and won. He ran for re-election again in 1854 and won again. Then he switched parties in response to Franklin Pierce’s signing of the Kansas-Nebraska Act, became a Republican, ran again in 1856 and won again. Then he ran again in 1858 and won yet again. Then he ran and won in 1860 and became Speaker. Charles Sumner was appointed to the Senate by the Massachusetts State Legislature in 1850 and he sat as a Democrat, espousing anti-slavery views until nearly beaten to death by (fellow Democrat!) Preston Brooks. While convalescing back home, he was re-appointed by the legislature in 1856 this time as a Republican. Abraham Lincoln served in congress as a Whig, was an Illinois Whig activist and 1854 Whig Party Senate candidate, then ran again two years later as a Republican.

Which is all just to say that what happened in 1860 was not at all the case of an outsider third party presidential campaign sweeping the nation and changing things up. Instead, starting in 1854 and with continuing force in 1856 and 1858 a large number of established northern politicians left existing parties and came together at the Republican Party. Then, with caucuses already in place in the House and the Senate and strong bases of support in every northern state legislature, they won a presidential campaign against a splintered Democratic Party. So, yes, a third party that manages to persuade large numbers of incumbent officeholders from both parties to jump ship and join it could have a huge practical impact on American politics. But this simply underscores the fact that a lone wolf presidential bid, even if somehow successful, would change little. You walk before you run. You win seats in congress and identify a regional base of support before you sweep the nation. Presidential elections are fun. Party building is tedious.

On the subject of Executive Order 6102 it’s worth emphasizing that though monetary policy plays relatively little role in folk histories of the Great Depression, the conclusion that Roosevelt’s gold policy was his biggest contribution to recovery is the main view of economists. Take, for example, Christina Romer’s “What Ended The Great Depression”:

In addition to estimating the effects of the tremendous monetary expansion during the mid-and late 1930s, I also examine the source of this expansion and the transmission mechanism that operated between the monetary changes and the real economy. The increase in the money supply was primarily due to a gold inflow, which was in turn due to devaluation in 1933 and to capital flight from Europe because of political instability after 1934. My estimates of the ex ante real interest rate suggest that, coincident with this gold inflow, real interest rates fell precipitously in 1933 and remained low or negative throughout most of the second half of the 1930s. These low real interest rates are closely correlated with a strong rebound in interest-sensitive spending. Thus, it is plausible that expansionary monetary developments were working through a conventional interest-rate transmission mechanism.

And later in the same paper:

Finally, the Roosevelt Administration’s decisions to devalue and not to sterilize the gold inflow were clearly not endogenous. Barrie Wigmore showed that Roosevelt spoke favorably of devaluation in January 1933. Since this was many months before recovery commenced, Roosevelt could not have been responding to real growth. Indeed, G. Griffith Johnson’s analysis of the Roosevelt administration’s gold policy suggested that, if anything, the Treasury was trying to counteract the Depression through easy money, rather than trying to accommodate the recovery. Johnson and Wigmore also showed that Roosevelt’s desire to encourage a gold inflow was not based on a conventional view of the monetary transmission mechanism, but rather on the view that devaluation would directly raise prices and reflation would directly stimulate recovery.

See also Gauti Eggertsson “Great Expectations and the End of the Depression”. The unfortunate thing is that economists, being economists, are not political historians. Consequently, these kind of accounts tend to slight factors like legal, political, and institutional constraints that loom large in any serious discussion of practical policy options. But obviously the issue that exists today is what measures are available to a President faced with a hostile congress? Or, if you prefer, what measures are available to a Congress faced with an obstinate President in the grips of Kenyan anti-colonial mania?

In her 2009 speech “Lessons From The Great Depression”, Romer summarized this work and cautioned:

In thinking about the lessons from the Great Depression for today, I want to tread very carefully. A key rule of my current job is that I do not comment on Federal Reserve policy. So, let me be very clear – I am not advocating going on a gold standard just so we can go off it again, or that Tim Geithner should start conducting rogue monetary policy.

Romer could, however, be given a job on the Federal Reserve Board of Governors. What’s more, it appears to be the case that a weird loophole in the controlling coinage statute does in fact allow Secretary Geithner to conduct rogue monetary policy by minting large denomination platinum coins. That would be a strange thing to do. But confiscating the nation’s supply of monetary gold based on a WWI-era Trading With The Enemy Act was also a strange thing to do.

The other debt news of the day is another thundering warning from the Chinese media lecturing the United States about the need for our country to “cure its addiction to debts.”

As is the case every time this kind of thing happens, most media coverage isn’t highlighting the appropriate elements of context. But to review, many countries have historically used “capital controls” to regulate the inflow and outflow of foreign money. Such controls increase monetary policy autonomy and make it easier for the control-imposing country to stabilize its economy against the business cycle. But capital controls also impose various kinds of inefficiencies. Policymakers need to weigh these options. Currently, China has capital controls and the United States does not. Part of how this plays out is that US efforts to stimulate our economy through monetary expansion and currency depreciation are being undermined by Chinese purchases of dollar-denominated debt. In other words, the Chinese, for policy reasons all of their own, are purchasing American debt in order to achieve the goals of PRC exchange rate policy.

Which is fine. The US has decided that open capital markets are in our interest. The price we pay for that is reduced monetary policy autonomy. And China has decided that massive purchases of dollar-denominated debt are in their interest. The price they pay for that is to subsidize US consumption and de facto tax Chinese consumption.

This is what it is and precisely what it isn’t is some kind of favor the Chinese government is doing to the American government. The long-held position of the US government is that the Chinese government should stop doing this. That would push up the price of Chinese money relative to the price of dollars. And that, in turn, is something that we think would improve the US trade balance and create jobs in the United States. But the Chinese, for reasons relating to their own political and economic situation, don’t want to do that. So fair enough. That means, however, that if they turn around and whine about US policy in the Chinese media we need to understand that as either confusion or else something met for domestic consumption. It’s not a real threat. We’ve been asking them to stop buying so much American debt for years.

The Port Authority of New York and New Jersey’s plan to raise tolls seems like a reasonable idea to me. It’s not like Manhattan is suffering from some kind of shortage of automobile traffic that will cripple the city if people are now deterred from driving in.

But this seems like yet another reminder that New York City would really benefit from a proper congestion pricing plan. Tolling for revenue is an okay idea, but tolling for traffic efficiency would in fact raise tons of revenue and would also have a firmer policy rationale.