The background story is, I read Foundation back when I was in high school, when I was a teenager, and thought about the psychohistorians, who save galactic civilization through their understanding of the laws of society, and said “I want to be one of those guys.” And economics was as close as I could get. Those are pretty unique novels — they really are structured nothing like even the great bulk of science fiction, because they are about how social science can be used to save humanity…, we don’t exactly have the laws of psychohistory, but we do have some pretty good guidelines. The other thing, of course, is in Foundation, Hari Seldon is able to put together his long term plan and actually nudge history in the direction he wants it to go, and so far I’m feeling not like Hari Seldon but like Cassandra. I keep on predicting bad things, no one will believe me, and then they happen…Not everyone, obviously, but social scientists in general … I have friends, political scientists, sociologists, who all share an interest at least in certain kinds of science fiction. It’s speculative, we’re thinking about what society could be like. Never mind the gadgets, although they create the alternative worlds, but a lot of it is thinking about society.

Fiction is about defining the outer limits of possibility: you show a kid a world where economists can shape the fate of humanity, and he’ll embrace realistic possibilities for social science he might never have been attracted to in the first place. Show girls superheroines and master archers as well as princesses and maybe some activity will catch a spark. I sometimes write that a movie or television show feels surprising because I didn’t think it was something that could exist. What really ends excites me about those pieces of art is that they’re times when popular entertainment is matching what’s truly possible in the world, and occasionally exceeding it. It’s artistically and societally depressing when media rooted in imagination turns out images and societies that are vastly more crabbed than our world actually is.

By that I don’t mean that we can’t explore oppression, or myopic people. But when books, or music, or movies fall into replicating the same old character tropes, or means of interactions between people, or possibilities for science and technology without acknowledging that society’s moved on around them, there’s something sad about that, both as a failure of art, and of excitement for the future. Or, as D.H. Lawrence put it, in a marvelous line cited by Austin Allen in an essay on the power of literature, fiction “Changes the blood first. The mind follows later, in the wake.”

Fiorina — who unsuccessfully challenged Sen. Barbara Boxer’s (D-CA) senate seat in 2010 — insisted that “we now have the single highest business tax rate in the world” and claimed that companies are moving jobs overseas to avoid this burden. Krugman snapped back against her assertion, noting, “nothing you said about business taxes is actually true”:

FIORINA: We now have the single highest business tax rate in the world. Guess what, with the highest tax rate in the world, we see the same thing around the world as we see in states. States with lower tax rates have more jobs, more people. People leave states with higher tax rates. The data is crystal clear.

KRUGMAN: Nothing you said about business taxes is actually true. …. If you look at the actual tax collections in the United States on business, they’re lower than other advanced countries. And if you look at the alleged finding that high business taxes cause job loses in states, it goes away. Kick the tires even slightly and the whole thing falls apart. It’s just not true.

Watch it:

Indeed, a recent study from the Center for Tax Justice (CTJ) found that “the U.S. is already one of the least taxed countries for corporations in the developed world.” As a share of GDP, the U.S. had the second lowest tax rate, behind only Iceland. In 2009, U.S. corporate taxes had fallen to only 1.3 percent of GDP, from 4 percent in 1965.

The Political Economy Research Institute at the University of Massachusetts concluded that “the worst fears of the policy debates over raising additional revenue from high-income households to sustain spending on public services are unlikely to materialize.” Millionaires will attempt to avoid higher taxes by changing the composition of their incomes, but don’t, in fact, move to avoid the higher fees.

To be a modern Republican in good standing, you have to believe — or pretend to believe — in two miracle cures for whatever ails the economy: more tax cuts for the rich and more drilling for oil. And with prices at the pump on the rise, so is the chant of “Drill, baby, drill.” More and more, Republicans are telling us that gasoline would be cheap and jobs plentiful if only we would stop protecting the environment and let energy companies do whatever they want.

In place of the news round up today, I’m excerpting Paul Krugman excellent op-ed, “Natural Born Drillers.” The Nobel-prize winning economist debunks popular but fact-free right-wing myths:

Thus Mitt Romney claims that gasoline prices are high not because of saber-rattling over Iran, but because President Obama won’t allow unrestricted drilling in the Gulf of Mexico and the Arctic National Wildlife Refuge. Meanwhile, Stephen Moore of The Wall Street Journal tells readers that America as a whole could have a jobs boom, just like North Dakota, if only the environmentalists would get out of the way.

The irony here is that these claims come just as events are confirming what everyone who did the math already knew, namely, that U.S. energy policy has very little effect either on oil prices or on overall U.S. employment. For the truth is that we’re already having a hydrocarbon boom, with U.S. oil and gas production rising and U.S. fuel imports dropping. If there were any truth to drill-here-drill-now, this boom should have yielded substantially lower gasoline prices and lots of new jobs. Predictably, however, it has done neither.

Outside of the WSJ editorial page, though, even the newspaper itself doesn’t buy this nonsense (see Murdoch’s Wall Street Journal and Koch-Fueled Cato Agree: “It’s Not Obama’s Fault That Crude Oil Prices Have Increased”).  Nor does the public (see Poll: 66% Blame Big Oil and MidEast Countries For High Gas Prices, 23% Blame Obama).

Here’s more from Krugman:

U.S. oil production has risen significantly over the past three years, reversing a decline over decades, while natural gas production has exploded.

Given this expansion, it’s hard to claim that excessive regulation has crippled energy production. Indeed, reporting in The Times makes it clear that U.S. policy has been seriously negligent — that the environmental costs of fracking have been underplayed and ignored. But, in a way, that’s the point. The reality is that far from being hobbled by eco-freaks, the energy industry has been given a largely free hand to expand domestic oil and gas production, never mind the environment.

Strange to say, however, while natural gas prices have dropped, rising oil production and a sharp fall in import dependence haven’t stopped gasoline prices from rising toward $4 a gallon. Nor has the oil and gas boom given a noticeable boost to an economic recovery that, despite better news lately, has been very disappointing on the jobs front.

As I said, this was totally predictable.

First up, oil prices. Unlike natural gas, which is expensive to ship across oceans, oil is traded on a world market — and the big developments moving prices in that market usually have little to do with events in the United States. Oil prices are up because of rising demand from China and other emerging economies, and more recently because of war scares in the Middle East; these forces easily outweigh any downward pressure on prices from rising U.S. production. And the same thing would happen if Republicans got their way and oil companies were set free to drill freely in the Gulf of Mexico and punch holes in the tundra: the effect on prices at the pump would be negligible.

Krugman also dismantles the jobs argument.

Meanwhile, what about jobs? I have to admit that I started laughing when I saw The Wall Street Journal offering North Dakota as a role model. Yes, the oil boom there has pushed unemployment down to 3.2 percent, but that’s only possible because the whole state has fewer residents than metropolitan Albany — so few residents that adding a few thousand jobs in the state’s extractive sector is a really big deal. The comparable-sized fracking boom in Pennsylvania has had hardly any effect on the state’s overall employment picture, because, in the end, not that many jobs are involved.

And this tells us that giving the oil companies carte blanche isn’t a serious jobs program. Put it this way: Employment in oil and gas extraction has risen more than 50 percent since the middle of the last decade, but that amounts to only 70,000 jobs, around one-twentieth of 1 percent of total U.S. employment. So the idea that drill, baby, drill can cure our jobs deficit is basically a joke.

Why, then, are Republicans pretending otherwise? Part of the answer is that the party is rewarding its benefactors: the oil and gas industry doesn’t create many jobs, but it does spend a lot of money on lobbying and campaign contributions. The rest of the answer is simply the fact that conservatives have no other job-creation ideas to offer.

And intellectual bankruptcy, I’m sorry to say, is a problem that no amount of drilling and fracking can solve.

Precisely.

We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power. If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives. [...]

Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.

Solar powered-electricity is getting close to the price of coal-fired electricity, Krugman notes. “And if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.”

Krugman:  ”It would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.“

The Nobel prize-winning economist, Paul Krugman, had a great piece on his blog Saturday, “Broken Windows, Ozone, and Jobs.”

This was the same point I was (briefly) making in my Friday post on Obama’s dreadful decision: “The standard would not have any noticeable negative impact on the economy and, if anything, would have driven investment and innovation even in the short term.”

Krugman explains why this is especially the case in the severe economic downturn we are now in:

I’ve actually been avoiding thinking about the latest Obama cave-in, on ozone regulation; these repeated retreats are getting painful to watch. For what it’s worth, I think it’s bad politics. The Obama political people seem to think that their route to victory is to avoid doing anything that the GOP might attack — but the GOP will call Obama a socialist job-killer no matter what they do. Meanwhile, they just keep reinforcing the perception of mush from the wimp, of a president who doesn’t stand for anything.

No argument here.

Whatever. Let’s talk about the economics. Because the ozone decision is definitely a mistake on that front.

As some of us keep trying to point out, the United States is in a liquidity trap: private spending is inadequate to achieve full employment, and with short-term interest rates close to zero, conventional monetary policy is exhausted.

This puts us in a world of topsy-turvy, in which many of the usual rules of economics cease to hold. Thrift leads to lower investment; wage cuts reduce employment; even higher productivity can be a bad thing. And the broken windows fallacy ceases to be a fallacy: something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment. Indeed, in the absence of effective policy, that’s how recovery eventually happens: as Keynes put it, a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plant and equipment.

Krugman’s next paragraph is the one I started with and then he ends:

More broadly, if you’re going to do environmental investments — things that are worth doing even in flush times — it’s hard to think of a better time to do them than when the resources needed to make those investments would otherwise have been idle.

So, a lousy decision all around. Are you surprised?

Not any more.

Now, we don’t know who will win next year’s presidential election. But the odds are that one of these years the world’s greatest nation will find itself ruled by a party that is aggressively anti-science, indeed anti-knowledge. And, in a time of severe challenges — environmental, economic, and more — that’s a terrifying prospect.

Paul Krugman had a terrific column in the New York Times Sunday, “Republicans Against Science.”  He discusses not just the anti-science nature of the GOP  as it applies to global warming, but their anti-knowledge approach as it applies to economic theory.

Here’s more:

Jon Huntsman Jr., a former Utah governor and ambassador to China, isn’t a serious contender for the Republican presidential nomination. And that’s too bad, because Mr. Hunstman has been willing to say the unsayable about the G.O.P. — namely, that it is becoming the “anti-science party.” This is an enormously important development. And it should terrify us.

To see what Mr. Huntsman means, consider recent statements by the two men who actually are serious contenders for the G.O.P. nomination: Rick Perry and Mitt Romney.

Mr. Perry, the governor of Texas, recently made headlines by dismissing evolution as “just a theory,” one that has “got some gaps in it” — an observation that will come as news to the vast majority of biologists. But what really got peoples’ attention was what he said about climate change: “I think there are a substantial number of scientists who have manipulated data so that they will have dollars rolling into their projects. And I think we are seeing almost weekly, or even daily, scientists are coming forward and questioning the original idea that man-made global warming is what is causing the climate to change.”

That’s a remarkable statement — or maybe the right adjective is “vile.”

The second part of Mr. Perry’s statement is, as it happens, just false: the scientific consensus about man-made global warming — which includes 97 percent to 98 percent of researchers in the field, according to the National Academy of Sciences — is getting stronger, not weaker, as the evidence for climate change just keeps mounting.In fact, if you follow climate science at all you know that the main development over the past few years has been growing concern that projections of future climate are underestimating the likely amount of warming. Warnings that we may face civilization-threatening temperature change by the end of the century, once considered outlandish, are now coming out of mainstream research groups.

In a AAAS presentation last year, the late William R. Freudenburg of UC Santa Barbara discussed his research on “the Asymmetry of Scientific Challenge“: New scientific findings are found to be more than twenty times as likely to indicate that global climate disruption is “worse than previously expected,” rather than “not as bad as previously expected.”

I was just at a conference of some of the top climate scientists in the world, and their projections are considerably more dire than the IPCC, as I’ll report later this week.

But never mind that, Mr. Perry suggests; those scientists are just in it for the money, “manipulating data” to create a fake threat. In his book “Fed Up,” he dismissed climate science as a “contrived phony mess that is falling apart.”

I could point out that Mr. Perry is buying into a truly crazy conspiracy theory, which asserts that thousands of scientists all around the world are on the take, with not one willing to break the code of silence. I could also point out that multiple investigations into charges of intellectual malpractice on the part of climate scientists have ended up exonerating the accused researchers of all accusations. But never mind: Mr. Perry and those who think like him know what they want to believe, and their response to anyone who contradicts them is to start a witch hunt.

So how has Mr. Romney, the other leading contender for the G.O.P. nomination, responded to Mr. Perry’s challenge? In trademark fashion: By running away. In the past, Mr. Romney, a former governor of Massachusetts, has strongly endorsed the notion that man-made climate change is a real concern. But, last week, he softened that to a statement that he thinks the world is getting hotter, but “I don’t know that” and “I don’t know if it’s mostly caused by humans.” Moral courage!

Of course, we know what’s motivating Mr. Romney’s sudden lack of conviction. According to Public Policy Polling, only 21 percent of Republican voters in Iowa believe in global warming (and only 35 percent believe in evolution). Within the G.O.P., willful ignorance has become a litmus test for candidates, one that Mr. Romney is determined to pass at all costs.

So it’s now highly likely that the presidential candidate of one of our two major political parties will either be a man who believes what he wants to believe, even in the teeth of scientific evidence, or a man who pretends to believe whatever he thinks the party’s base wants him to believe.

And the deepening anti-intellectualism of the political right, both within and beyond the G.O.P., extends far beyond the issue of climate change.

Lately, for example, The Wall Street Journal’s editorial page has gone beyond its long-term preference for the economic ideas of “charlatans and cranks” — as one of former President George W. Bush’s chief economic advisers famously put it — to a general denigration of hard thinking about matters economic. Pay no attention to “fancy theories” that conflict with “common sense,” the Journal tells us. Because why should anyone imagine that you need more than gut feelings to analyze things like financial crises and recessions?

Now, we don’t know who will win next year’s presidential election. But the odds are that one of these years the world’s greatest nation will find itself ruled by a party that is aggressively anti-science, indeed anti-knowledge. And, in a time of severe challenges — environmental, economic, and more — that’s a terrifying prospect.

Related Posts:

• If You Are Anti-Science, You Are Anti-Jobs
• Huntsman Slams Perry on Climate and Evolution: We Are “On the Wrong Side of Science and Therefore in a Losing Position.”

Ohio EPA Proposes Pollution Limits on Fracking

Companies drilling for oil and natural gas in shale formations in Ohio might soon face air pollution limits on new wells.

The practice of horizontal drilling and hydraulic fracturing, or “fracking,” in pursuit of gas can require multiple wells on a single site, creating a concentration of equipment that can leak hazardous airborne compounds, The Columbus Dispatch reported. That’s causing concern about the pollutants the drilling operations might release, and the Ohio Environmental Protection Agency has proposed requiring oil and gas drillers to get permits that would set pollution limits.

“This is no longer the individual little well you see out in farm fields,” Ohio EPA spokesman Mike Settles said. “This is a sizable operation with pieces of equipment that need to be covered by an air permit.”

Ohio has more than 64,000 active oil and gas wells, but they had not been considered significant threats to air quality.

Environmental groups appear to have more qualms with the idea than drillers do.

“I don’t see anything that’s particularly adverse to the industry’s interests,” said Tom Stewart, vice president of the Ohio Oil and Gas Association.

A coalition that includes the Ohio Environmental Council and other environmental groups argue there are loopholes in the permit proposal that leave room for more pollution because the permits wouldn’t apply to certain activities and because companies wouldn’t be required to install the best available pollution filters.

The permits wouldn’t limit air pollution from drilling or fracking, a technique in which water, chemicals and sand are pumped in to crack the ground and release gas or oil, because those are “temporary activities,” Settles said.

It’s possible that benzene and other hazardous compounds could evaporate from the waste water fracking produces, said Teresa Mills, Ohio organizer for the advocacy group Center for Health, Environment and Justice.

Emerging Powers Call for Extending Climate Deal

Brazil, South Africa, India and China said Saturday that November’s UN climate talks should aim to extend the Kyoto Protocol, the only binding global deal to cut greenhouse gases.

The four key emerging powers — seen as critical to the success of any future effort to combat climate change — said keeping Kyoto alive should be the “central priority” at the key UN summit in South Africa.

The bloc released the statement after two days of talks in southeast Brazil to prepare for the next UN climate conference scheduled to take place in Durban from November 28 to December 9.

The ministers “reaffirmed that the Kyoto Protocol is a cornerstone of the climate change regime,” it said.

Xie Zhenhua, a top Chinese climate change official, said he hoped the statement would “send a sign to the international community that we are pursuing efforts to make the Durban conference a success.”

Gallup Poll: Global Climate Worry Up Slightly Since 2009

Global concern about climate change has risen only very slightly over the past two years, as consumers have focused on more immediate economic worries, according to an opinion poll published on Sunday.

Nielsen’s latest global online environment and sustainability survey showed that 69 percent of 25,000 Internet users in 51 countries were concerned about climate change in 2011, slightly up from 66 percent in a similar poll in 2009, but down from 72 percent in 2007.

“Focus on immediate worries such as job security, local school quality and economic wellbeing have all diminished media attention for climate stories in the past two years,” said Maxwell Boykoff, who was an adviser to the survey and is senior visiting research associate at the University of Oxford’s Environmental Change Institute.

Despite State Department Green Light for Keystone XL, Pressure on Obama Continues

Protesters remain undaunted by a U.S. State Department decision Friday giving preliminary approval to the controversial Keystone XL pipeline meant to pump tar sands oil from Alberta, Canada, to the Gulf Coast of Texas.

Demonstrations have been taking place all week in front of the White House and included a “No Tar Sands Caravan” bus tour that stopped in Boulder and Denver earlier in the week. More than 400 people, including prominent climate change writer Bill McKibben, have been arrested in Washington, D.C.

Michael Brune, executive director of the Sierra Club, told the New York Times President Obama needs to veto the project despite the State Department’s initial green light.

“It will be increasingly difficult to mobilize the environmental base and to mobilize in particular young people to volunteer, to knock on thousands of doors, to put in 16-hour days, to donate money if they don’t think the president is showing the courage to stand up to big polluters,” he said, referring to the Obama’s ability to win re-election in 2012.

Apparently deeming himself a Nobel laureate of “Washington wisdom,” Will proceeded to offer a dose of his brilliance. “One of the ways that this simple, workable legislation is going to be made to work is the IRS is going to hire about 16,000 new agents,” Will proclaimed. That may be Will’s version of “Washington wisdom,” but it’s not true. This past week, IRS Commissioner Doug Shulman debunked the right-wing myth that IRS agents are going to auditing taxpayers to determine if they have health insurance.

The consensus economic view, however, is profoundly different. Nobel Prize-winning economist Paul Krugman inadvertently shows the sorry state of the understanding by economists of global warming in a recent blog post, in which he writes down a “toy model that hopefully clarifies the issues” of climate policy:

See! The problem can be boiled down to three straight lines, intersecting at the optimal balance of economic and environmental impacts. This level of understanding is about as developed as recognizing that burning fossil fuels could heat up the atmosphere, which physicists realized in 1896, 114 years ago.

Unfortunately, Krugman’s toy is actually better than most economic thinking.

Business-as-usual projections used by the federal government, such as the Energy Information Administration, the Environmental Protection Agency, the Department of Labor, and the Congressional Budget Office, don’t take into account climate disruption, which comes in the form of temporary, regional catastrophes (a flood, storm, hurricane, heat wave, wildfire), widespread catastrophes (collapse of coral reefs and forests, decadal drought), and possibly global catastrophe (several feet of sea level rise, permanent El Nino, permafrost melt). The International Energy Agency has only begun to do so in its most recent world energy outlook.

Popular economic models for climate policy, such as Dr. William Nordhaus’s DICE model, use climate damage formulas that have no basis in reality, maxing out at 10% reductions in GDP under runaway global warming ten times what has already been experienced. Citing such models, Congressional Budget Office chief Doug Elmendorf testified that the U.S. economy would be “relatively insulated from climate effects” from 4-6°C warming — at least 500% more warming than present. His “pessimistic estimate” of the damages? Three percent of GDP.

Krugman also writes about the work of Harvard economist Martin Weitzman:

As for the welfare sensitivity: Marty Weitzman has managed to scare me, by pointing out that there’s a pretty plausible case that a rise of 5 degrees C – which is no longer an outlandish prediction – would be utterly catastrophic. You don’t have to be sure about this; just a significant probability is enough.

Climate scientists have come to the consensus that a rise of more than 2 degrees C — about three times present warming — would be utterly catastrophic, and repeatedly caution that even that threshold is not necessarily safe. It is frankly baffling that even the best economists studying climate policy have the fantasy that modern human civilization has a reasonable possibility of sustaining 5 degrees C of warming without suffering on an unprecedented scale.

There are beginning efforts by the federal government to at least include some assessment of the cost of carbon pollution in its analyses, using a “social cost of carbon” in new energy regulations. But even this crude mechanism isn’t factored into policy where it’s really needed, such as the Departments of Treasury and Defense.

That said, Paul Krugman is orders more brilliant than I can even fathom, and back-of-the-napkin calculations can be a powerful tool, if the scribbles are the result of a brilliant mind. For example, climate scientist Stephen Schneider praises the effectiveness of “simple simulations of complex models” in his excellent book “Science as a Contact Sport.” Schneider, by the way, has been considering the prospect of doomsday geoengineering since 1996.

If we can do health care reform…that really does limit the growth in health care cost, then what’s left is a problem that we can deal with with fairly moderate policy. Things that would be politically impossible right now, but economically aren’t hard at all. [...]

You would end up still with the U.S. having lower taxes than almost all other OECD countries. And you’d end up with our social programs enhanced, not reduced, because we’d have universal health care coverage and some other improvements in the social safety net, and we would be good for the foreseeable future. All of this hinges on being able to actually talk about tax increases, even modest ones, without it being political suicide. It requires that you be able to talk about spending health dollars wisely and not have people start screaming about death panels.

Watch it:

The Wonk Room has more.

Is Paul Krugman history's greatest monster? (Wikimedia)

The man himself alludes to this, but both Arnold Kling and Megan McArdle seem to think that Paul Krugman should feel deeply embarrassed to have written the following in August 2002:

The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

If you read the read the entire column, Krugman was actually expressing skepticism that the Fed’s policies would have this result. He was saying that people were understating the odds of a “double dip” recession. But he didn’t say a double dip recession was inevitable. He said that if a double dip recession were to be avoided, the most likely mechanism would be the inflation of a housing bubble. As it happens, we didn’t get a double dip recession. Instead, we got soaring household spending driven by a housing bubble that replaced the NASDAQ bubble. The column, in other words, was completely correct. And it’s not as if Krugman never revisited the housing the bubble question between 2002 and the fall of 2008. It was precisely because he recognized, as early as 2002, that policy was aimed at producing a new round of bubble-led growth that he was able to see before most that there were major bubble-related risks to the economy.

– “And first off the government doesn’t create jobs. Let’s get this notion out of our heads that the government creates jobs. Not in the history of mankind has the government ever created a job. Small business owners do, small enterprises do. Not the government.” [RNC Chairman Michael Steele, 2/2/09]

– “Instead of focusing on three major issues — job creation, housing and compassion for Americans who have lost jobs through no fault of their own — to boost the economy, this bill has morphed into a bloated government giveaway.” [Sen. Saxby Chambliss (R-GA), 2/10/09]

– “When it comes to slow-moving government spending programs, it’s clear that it doesn’t create the jobs or preserve the jobs that need to happen.” [House Minority Leader John Boehner (R-OH), 1/21/09]

However, when Defense Secretary Robert Gates announced plans to end production of the F-22 at the current 187 planes — down from the 381 planes the government was expected to order — many of these same conservatives were up in arms over the jobs that would be lost.

Chambliss, in particular, said that he was concerned people in his state would lose jobs if F-22 production was cut, because “when it comes to stimulating the economy, there’s no better way to do it than to spend it in the defense community.” Sen. Johnny Isakson (R-GA), who also voted against the economic recovery package, similarly said, “I also believe that it is unacceptable that this administration wants to eliminate 2,000 jobs in Marietta and potentially 95,000 jobs nationwide at a time when unemployment rates are rising across the country.”

Today on ABC’s This week, New York Times columnist Paul Krugman called out this hypocrisy:

KRUGMAN: What’s so wonderful is watching Republican congressmen saying, “But this will cost jobs!” The very same Republican congressmen who were denouncing the stimulus, saying government spending never creates jobs, but cutting defense spending costs jobs. It’s wonderful.

Watch it:

Military correspondent David Axe has pointed out that it’s possible very few workers will lose their jobs because of Gates’s announcement. In fact, thousands of workers will likely be “snapped up for active production lines churning out F-16s, F-35s, C-130s and modernized C-5s for Lockheed, not to mention the prospect that industry rivals Boeing and Northrop might lure Lockheed workers for their own active production lines for the F-15, F/A-18 and others.”

I think Joe Stiglitz is being a bit unfair here:

The U.S. government is basically using the taxpayer to guarantee against downside risk on the value of these assets, while giving the upside, or potential profits, to private investors, he said.

“Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.”

It’s a bit more subtle than that. The government is guaranteeing private investors against downside risks but has secured for itself a fair share of the upside. In other words, you have a situation where the private investors are taking a chance of a small loss in exchange for the opportunity at a big win. The government is taking a chance of a large loss in exchange for the opportunity of a big win and giving up all the autonomy and decision-making power in the meantime. In one scenario, taxpayers and investors alike make a bunch of money. In another scenario, taxpayers lose a ton of money—many hundreds of billions—and investors lose a small amount. It’s a bet that looks fair if (a) you think the win-win scenario is much more likely than lose-lose, or (b) you think the social gains from creating recapitalized banks exceed the fiscal cost to the taxpayers of suffering through lose-lose. Option (a) seems like wishful thinking, but option (b) is perfectly reasonable. The unreasonable thing here is that the Geithner Plan seems to allocate an unreasonable large share of the social gains of recovery back to the financier class. So I think Stiglitz is only being slightly unfair.

Meanwhile, I actually think the most distressing thing about the criticism from folks like Krugman and Stiglitz is what you can infer reading between the lines from how ferocious it is. They, and other leading critics, are acting like people who’ve been totally shut out of the consultation/communication loop. And it’s distressing to see people of their stature and expertise getting shut out while the administration works harder on kissing Wall Street’s ass to try to persuade the finance class to avoid deliberately sabotaging the economy.

The Obama administration seems to respond to criticism from the right by turning the other cheek and becoming more solicitous, while responding to criticism from the left by putting its fingers in its ears.

Here’s an intriguing swathe of Ryan Lizza’s profile of Rahm Emanuel:

“They have never worked the legislative process,” Emanuel said of critics like the Times columnist Paul Krugman, who argued that Obama’s concessions to Senate Republicans—in particular, the tax cuts, which will do little to stimulate the economy—produced a package that wasn’t large enough to respond to the magnitude of the recession. “How many bills has he passed?” [...] “Now, my view is that Krugman as an economist is not wrong. But in the art of the possible, of the deal, he is wrong. He couldn’t get his legislation.”

Whether or not you think Emanuel is right about the legislative politics, it seems to significant for the White House Chief of Staff to concede that Krugman is correct about the economics and the legislation President Obama signed into law may, in virtue of its concessions to conservatives, be too small to rescue the economy.

I also always find this particular form of ping-pong to be a big odd:

1. Practical Politician A offers Proposal X.
2. Outside Commenter B says that X is too moderate on the merits.
3. Practical Politician A angrily retorts that better legislation on the merits would have been impossible to secure.

I think the right way to understand the (1)/(2) dynamic here is that the criticism in step (2) makes it easier to secure the passage of legislation. If you propose something, and every single progressive in all the land immediately lauds it as the greatest bill ever written, then your legislation is now an extreme left proposal and it’s doomed. If you’re going to make concessions to political reality then you need to weather a bit of criticism from your left—that’s what establishes the proposal as moderate and sensible. Things like “some liberal economists such as Paul Krugman say the proposal is too small” is a helpful piece of context-setting that prevents the proposal from appearing too radical.

Cato’s Brink Lindsey has an informative, but ultimately pretty strange, new research paper out titled “Paul Krugman’s Nostalgianomics: Economic Policies, Social Norms, and Income Inequality”. You could almost think of it as two papers, in fact. One an informative discussion titled “Economic Policies, Social Norms, and Income Inequality” looking at the transition from the low-inequality equilibrium of postwar America to the high-inequality equilibrium of the present day. And the other a kind of silly attack on Paul Krugman that accuses him of being a proponent of misguided “nostalgianomics.”

The basic shape of things, however, goes like this. For a long time, a lot of people just kind of shrugged off increasing levels of inequality as the inevitable result of broad impersonal forces—the terms “skill-biased technological change” and “superstar effect” came into play a lot here. More recently, a group of social science researchers and a group of progressive media figures have called attention to the substantial evidence that SBTC and superstar effects can’t account for the whole thing. Krugman is both a very prominent social scientist and a very prominent progressive media figure, so he’s played an important role in calling attention to this stuff. In his paper, Lindsey takes the unusual-for-a-libertarian tack of agreeing with Krugman (and others) that public policy changes have played an important role. But he argues that the changes have mostly been changes that, on net, are positive. So it’s wrong of Krugman to espouse nostalgianomics and support a return to the policies of the 1950s. Which is fine, except I read almost every Krugman column and I’ve read Conscience of a Liberal (and, indeed, other works of Krugmanania such as Pop Internationalism and Peddling Prosperity) and it’s not as if the book ends with a call for the return of comprehensive regulation of airline fares or the re-establishment of the AT&T monopoly. To observe that the growth of inequality has policy roots isn’t to say that the right response to it is to methodically reverse every policy change of the past thirty years. It’s simply to deny the previous conventional wisdom—that it would be impossible to reverse the growing inequality of our society.

Indeed, I think that in a lot of ways the most interesting recent research on inequality turns out to be about skill-biased technological change after all. Specifically, Claudia Goldin and Lawrence Katz argue in The Race Between Education and Technology that we shouldn’t look at SBTC as something that just comes along and causes inequality. Rather, it causes inequality when society fails to respond to SBTC by expanding the quantity of educated citizens. Seen in this light, the SBTC component of growing inequality is, indeed, a policy failure.

But more broadly, the generic “progressive” idea is that we should have a more progressive tax code that spends more money on egalitarian social welfare programs. That’s not a return to the 1950s. It’s an effort to ensure that the gains of the past 30 years worth of policy shifts are spread more equitably. More liberal immigration policy, for example, is good for immigrants and on net good for the economy, but it’s bad for low-wage native born workers. But it really is on net good for the economy. In principle, the pie could be redistributed (through tax-and-transfer or tax-and-service) such that everyone winds up with more pie than they had before (and the immigrants end up with much more pie) rather than giving huge additional pie slices to the richest people. And the same goes for most of this over stuff. That’s what I’m for, and I’m pretty sure it’s what Krugman’s for. Conscience ends with a call for universal health care, not with a call for a return of the ban on interstate banking.

Q: Do you agree, or how do you respond to Paul Krugman in the New York Times who said that centrists have done their best to “make the plan weaker and worse?”

NELSON: Well, first of all, they’re not cuts. Let’s just get that up front. These are adjustments downward from numbers that were offered by the House in their version and by the Senate in its version.

Watch it:

Nelson’s compromise bill provides 12 to 15 percent fewer jobs than the House legislation. Yglesias notes that Nelson helped cut one of the “least-controversial and most highly-stimulative provisions, deciding that that was a good place for ‘adjustments downward.’”

Look, there’s some people who have said that it’s not big enough, there are others who say it’s too big. Well, the — as I said before, Democrats or Republicans, we welcome good ideas. And so the challenge for all of us, I think, is to identify good ideas, good spending plans, that deliver on my commitment to create or save 3 million jobs. I want this to work. This is not an intellectual exercise, and there is no pride of authorship. If members of Congress have good ideas, if they can identify a project for me that will create jobs in an efficient way, that does not hamper our ability to — over the long term — get control of our deficit, that is good for the economy, then I’m going to accept it.

If Paul Krugman has a good idea, in terms of how to spend money efficiently and effectively to jump-start the economy, then we’re going to do it. If somebody has an idea for a tax cut that is better than a tax cut we’ve proposed, we will embrace it. So, you know, one of the things that I think I’m trying to communicate in this process is for everybody to get past the habit that sometimes occurs in Washington of whose idea is it, what ideological corner does it come from. Just show me. If you can show me that something is going to work, I will welcome it.

Maybe Krugman will reply on his blog. Either that or maybe Secretary of State Hillary Clinton can broker some kind of sit-down.

But right now we seem to be facing two major economic gaps: the gap between the economy’s potential and its likely performance, and the gap between Mr. Obama’s stern economic rhetoric and his somewhat disappointing economic plan.

Today in his press conference, a reporter questioned Obama about Krugman’s criticisms. Obama said that he is open to the economist’s ideas: “If Paul Krugman has a good idea, in terms of how to spend money efficiently and effectively to jump-start the economy, then we’re going to do it.” Watch it:

Watch it:

Last month, Krugman told radio host Bill Press that he is “in communications” with the Obama team.

Transcript:

CHIP REID: Thank you, Mr. President-Elect. I’d like to follow up on that. Larry Summers, as he said, is up on the Hill now, and we’re told he’s getting an earful from some Democrats who say this plan just isn’t big enough. And I know you resisted putting a number on it, but your staff has talked about a high end of $800 billion or something like that. They say if that’s true, and 40 percent of it is tax cuts that don’t have the bang for the buck, that spending has, it’s not big enough. Paul Krugman today said it falls far short for what you’re going to need to put America back to work. How do you respond to those critics?

OBAMA: Look, there’s some people who have said that it’s not big enough, there are others who say it’s too big. Well, the — as I said before, Democrats or Republicans, we welcome good ideas. And so the challenge for all of us, I think, is to identify good ideas, good spending plans, that deliver on my commitment to create or save 3 million jobs. I want this to work. This is not an intellectual exercise, and there is no pride of authorship. If members of Congress have good ideas, if they can identify a project for me that will create jobs in an efficient way, that does not hamper our ability to — over the long term — get control of our deficit, that is good for the economy, then I’m going to accept it.

If Paul Krugman has a good idea, in terms of how to spend money efficiently and effectively to jump-start the economy, then we’re going to do it. If somebody has an idea for a tax cut that is better than a tax cut we’ve proposed, we will embrace it. So, you know, one of the things that I think I’m trying to communicate in this process is for everybody to get past the habit that sometimes occurs in Washington of whose idea is it, what ideological corner does it come from. Just show me. If you can show me that something is going to work, I will welcome it.