I never expect to see a perfect work from imperfect man.
Alexander Hamilton
Chuckle of the Day:
Gary North Has Registered HillaryHoover.com
Rothkopf, author of Superclass, has written a gushing piece on Hillary Clinton, effusive with praise that borders on the delusional. This blogger is not a fan of Ms. Clinton, and I never had Hillary Derangement Syndrome. Let's pretend to ignore if she had never been married to Bill Clinton, New York would never have elected a carpetbagger, unaccomplished novice politician to the Senate. She has little administrative experience (beyond the State Department, and the Benghazi scandal alone raises serious questions about her leadership style). Her domestic policies are left-of-center in a right-center country, she lacks Bill Clinton's or Obama's charisma and likability (remember the paranoid "vast right conspiracy" nonsense)? Her attempt to nationalize health care crashed and burned without a showdown vote and was a key factor in the 1994 elections putting the GOP in control of Congress for the first time in decades. For crying out loud, despite her husband's having been the most successful Democratic President since FDR and with half the voters women, the first serious female candidate got outmaneuvered by an unaccomplished first-term senator whom had all the gravitas of being an overrated motivational speaker!
At best, she is merely a competent, pedestrian progressive politician. Her 8 years in the US Senate didn't demonstrate any distinct leadership or yield any significant legislation, e.g., on immigration, electoral reform, fiscal balance, etc.
Is Rothkopf right? Is the Democratic nod Clinton's for the taking? First, I do think Hillary Clinton would be a serious contender and certainly dominate her likely competition (especially governors) on foreign policy. But I think that Clinton's chances are largely dependent on what happens in the remainder of Obama's term. I think if we have a double dip recession and unemployment starts rising, it probably doesn't matter who the Democrats run--the GOP nominee will win in a landslide. Hillary Clinton probably doesn't want her political career to end that way. (But never underestimate the irresistible urge for progressives to be the first anything, to "break the glass ceiling", i.e., be the first female nominee to head a ticket.)
Second, Clinton may find it difficult to distance herself from any international crisis, say, if "the pivot" to Asia results in a military conflict between China and the US, if currency or trade wars spiral into a global recession, if the Iraq/Syria alliance sparks another regional war, etc.
Third, I disagree that Clinton did well in the Benghazi hearing. By any objective standpoint she was given softball questions by Dems, and her responses to Johnson and Paul were evasive. (It's not like these questions were new; the points had been on the record for weeks, and she had plenty of time to rehearse a viable response .) If Ms. Clinton did not know Benghazi was dangerous, that 9/11 was a symbolic date for hostile powers, etc., then she's less informed than I was. This rehearsed line thing about what difference it made how personnel died but the fact there were dead Americans was grossly offensive to me. Surely Ms. Clinton knows the difference between a random act of violence and a terrorist action, one that would likely never have happened if the ambassador spent 9/11 at the more secure embassy or if Clinton had managed the situation more proactively and prudently.
Fourth, it's not surprising Clinton now has favorable numbers. I don't hold her fully responsible for Obama's convoluted foreign policy. I don't have a problem with her work ethic. She is getting public sympathy over her recent health issues. But there's a big difference between being Secretary of State and President. A lot of people don't know her very liberal voting record, and 2016 will be a change election year.
I've heard some governors/former governors in red/purple states like Montana and Virginia may enter the race (Maybe a former Indiana governor/senator? Just starting a rumor...) I could very easily see a Montana governor positioning himself as a centrist running an anti-Washington insider campaign and promoting his ability to win red/purple states.
North is suggesting our profligate ways will probably catch up to the Dems in the nest Presidential term. I say, never underestimate Obama. If anyone had suggested to me he would run up an almost $6T debt in one term, I would have considered it far-fetched.
Just before publishing this post, I saw a link on Drudge Report saying a Hillary SuperPac has formed. Heaven help us all.
Things That Make You Shriek in the Middle of the Night
For my fellow non-economists, the discussion gets a little arcane, especially in discussing strengths and weaknesses of various business cycle models and the functionality of paying interest on reserves. (A good explanation of the latter is here. In essence, manipulating interest on reserves affects the amount or lending between banks at or near desired interest rates by effectively setting an interest rate floor. Obviously a free market person doesn't like how crony bankers obfuscate the market.) So much is kept off the official debt like the unfunded senior entitlements, the GSE-guaranteed obligations, etc.
We know the Democrats are either incompetently or intentionally misleading people about the viability of senior entitlements, the unsustainable pay-go system. Many current seniors will get far more than they ever pay into the system (including premiums) in one or both programs. In the case of Medicare, costs are already being subsidized given below-market reimbursements. Programs are already running pay-go deficits and drawing on reserves. Today's workers need to face up to the need for radical reforms sooner rather than later because a delay simply forces the bills on the next generation of taxpayers. A smaller generation of taxpayers not only going to have to pay their own taxes, but they'll inherit the unpaid for share of their elders'. The GOP, fearing with good reason political attacks over necessary reforms to reform program benefits and/or increase taxes, premiums or deductible, also attempts to delay the pain.
Who are we kidding? We are looking at over $20T in debt by the end of Obama's Presidency. The last time a Democratic Congress ran a surplus was FY1969 ($3B). [This source holds GW Bush responsible for FY2009, although the Democrats controlled Congress, did NOT pass Bush's budget but continuing resolutions]. The biggest surplus? About a quarter trillion in FY2000 when Clinton was on the GOP spending diet (and the Treasury was collecting unsustainable capital gains during the Internet bubble). Obama has already more than doubled the publicly held debt, and I fully expect that Obama Care will blow way past budgets just like federal health programs always have.
Just like the domestic auto took on unsustainable union pacts, which eventually had to be shed in bankruptcy, I expect that the federal government will eventually have to default on its obligations in order to shed its unsustainable entitlements and make necessary reforms.
"At some point, holders of Treasury securities are going to recognize that these unfunded liabilities are going to affect the fiscal capabilities of the government and then you're going to have the same situation that happened in Greece happening in the U.S.," says Jeffrey Rogers Hummel, who is a professor of economics at San Jose State University and the author of a recent paper on the consequences of a U.S. government default. "In the short run it's going to be painful, but in the long run it'll be a good thing."
Follow-Up Odds and Ends
Yesterday I mentioned Boudreaux/Perry's recent WSJ column taking on progressive economists like Krugman and Reich whom hype statistics about median income flat since the 1970's. Don does an excellent job getting several points across I've discussed in past blog posts; let me single out a few for comment here:
- A relevant statistic is total compensation--not just wages. Depending on the employer, employer-paid benefits can amount to a significant percentage on top of wages (a major portion, if not all, of health insurance, life, disability or other insurance, defined benefit or contribution retirement plans, federal payroll taxes (social security/Medicare): all of these are fungible costs in addition to wages. Plus, there are security benefits more difficult to quantify--like tenure. Government debt, for instance, usually pays lower interest, because the investor is guaranteed repayment; businesses normally have to pay a premium because they take on greater risk. Similarly, one would expect wages under long contracts or for tenured positions to be somewhat less because workers are less exposed to risks of layoffs. Yes, I know some public sector job cuts occurred during the recession, but they were more modest and delayed relative to the private sector. This happens to me all the time: my asking hourly rate is higher for a shorter-term gig (like days vs. weeks vs. months vs. years).
- A growing economy increases the supply of lower-skill/lower paid positions. A growing business can add shifts or locations with modest cost (if any) to overhead/senior-level personnel. This leads to the point of discussing misguided minimum wage policies. Employers usually raise wages to retain trained, more productive/experienced workers. Statutory wage floors artificially limit the number of starter jobs.
- The demographics have changed. Take, for instance, women. My mom raised 7 kids and started working outside the home while my 2 youngest siblings were still in school and I had graduated. One of my sisters got married just before earning a college degree in education and took a library job after her youngest children were in school. Another sister, a registered nurse, took a break before my nieces started school. Other women may choose to take part-time roles or take, say, a job with lower-paying responsibilities not involving heavy travel or extended working hours. I have a brother-in-law whose employer had merged and was consolidating operations and did not want to relocate for an alternative job assignment. I've lost more than one job opportunity for being "overqualified": in fact in a study reported in USA Today, nearly half are overqualified for their jobs:
Vedder, whose study is based on 2010 Labor Department data, says the problem is the stock of college graduates in the workforce (41.7 million) in 2010 was larger than the number of jobs requiring a college degree (28.6 million).
That, he says, helps explain why 15% of taxi drivers in 2010 had bachelor's degrees vs. 1% in 1970. Among retail sales clerks, 25% had a bachelor's degree in 2010. Less than 5% did in 1970.
Oh, yes! Obama wants to "invest" in the world's highest educated janitors, waiters, and cabbies! And what do you think happens to wages when the supply of qualified workers exceeds their demand?"There are going to be an awful lot of disappointed people because a lot of them are going to end up as janitors," Vedder says. In 2010, 5% of janitors, 115,520 workers, had bachelor's degrees, his data show.
Musical Interlude: My Favorite Groups
Steely Dan, "Do It Again"
