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Sunday, February 17, 2019 12:29:12 AM
Donald and the Deflationists
"Trump and Trade and Zombies"
Why does Trump keep hiring hard-money hacks?
By Paul Krugman
Opinion Columnist
Feb. 14, 2019
To lead the World Bank, President Trump picked David Malpass, whose past economic philosophy, curiously, was at odds with the president's
policies. Doug Mills/The New York Times
U.S. political discussion has been dominated by the issue of Donald Trump’s wall — an issue on which Trump's irrationality keeps surprising even his critics. So I don’t imagine that many people have heard about Trump’s nomination of David Malpass, currently an under secretary at the Treasury Department, to lead the World Bank. But it’s a story worth following.
For one thing, while the U.S. traditionally gets to choose the World Bank’s president (Europe gets the International Monetary Fund), there will be a lot of opposition to Malpass, who has a history of being hostile to international institutions .. https://www.reuters.com/article/us-usa-trump-worldbank-idUSKCN1PV2DK . Furthermore, the Malpass nomination highlights the remarkable character of Trump’s economic appointments.
Remarkable in what way? Well, remarkably bad. Every economist, yours truly very much included, gets it wrong sometimes .. https://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/ . But Trump only seems to choose men who have been wrong about everything.
Beyond that, however, what’s remarkable is the extent to which this president consistently chooses economists whose ideology is at odds with his own professed views on policy.
[Paul Krugman did explanatory journalism before it was cool, moving from a career as a world-class economist to writing
hard-hitting opinion columns. For an even deeper look at what’s on his mind, sign up for his weekly newsletter.
https://www.nytimes.com/newsletters/paul-krugman?action=click&module=inline&pgtype=Article]
These days, at least, Trump is an easy-money guy who wants the Fed to keep interest rates low. But he keeps appointing deflationists — men who opposed any attempt to rescue the economy from the financial crisis, who bitterly attacked the Fed for keeping rates low and demanded tight money even when we had very high unemployment.
Why does he do this? I’ll get there in a minute. First, let’s talk about who’s on the Trump team.
At the top of the list is Larry Kudlow, director of the National Economic Council. He has quite a track record; as one commentator .. http://nymag.com/intelligencer/2015/02/gop-economist-bush-tax-cuts-worked-brilliantly.html?gtm=top>m=bottom .. put it, he “has elevated flamboyant wrongness into a form of performance art.”
Kudlow may be best known for his unflagging faith, in the teeth of the evidence, in the magic of tax cuts, as well as his dismissal of “bubbleheads .. https://www.nytimes.com/2018/03/15/business/larry-kudlows-not-so-on-the-money-predictions.html?module=inline ” who predicted a housing crash. Less known is his 2008 praise for Bush officials .. https://www.cnsnews.com/blog/larry-kudlow/paulsons-courageous-action-no-more-federal-bailouts .. for having the courage not to bail out Lehman Brothers. Just hours after his encomiums, Lehman’s fall had plunged the whole world into financial meltdown.
Kevin Hassett, chairman of the Council of Economic Advisers, is another bubble denier .. http://economicsofcontempt.blogspot.com/2008/07/official-list-of-punditsexperts-who.html , although his most famous prediction was in his 1999 book “Dow 36,000 .. http://web.mit.edu/krugman/www/dow36K.html ” (which, adjusted for inflation, would mean roughly Dow 55,000 today). More relevant to current policy, Hassett was among those who kept predicting, wrongly, that Ben Bernanke’s efforts to fight unemployment would cause runaway inflation .. https://economics21.org/html/open-letter-ben-bernanke-287.html .
And then there’s David Malpass, also both a bubble denier and a Bernanke-basher. Much press commentary has noted his 2007 insistence, as chief economist at Bear Stearns .. https://www.vox.com/2017/3/15/14596938/david-malpass-treasury , that there was no reason to be worried about the financial system. A few months later his own firm imploded.
But I think his most revealing piece of commentary was a 2011 screed .. https://uneasymoney.com/2019/02/05/there-they-go-again/ .. against low interest rates and what he considered a “weak dollar” policy. A low rate policy, he declared, hurts the economy because it “discourages thrift,” while the weak dollar was bad for confidence, or something.
This was really bad economics. At the time, America had 9 percent unemployment, entirely because of inadequate private spending; to the extent that low interest rates were discouraging thrift and making people spend rather than save, that would have been a good thing, not a problem. And Malpass’s argument about the dollar was just incoherent.
What’s really striking, however, is that the policies Malpass attacked were precisely the policies Donald Trump now demands: low rates and a weaker dollar. So why would Trump want to promote him, and people like him?
Here’s how I understand it: The first thing Trump looks for in an appointee is someone who shares his values — above all, his absolute lack of compassion for those less fortunate than himself. And if you want an economic official who doesn’t care about the poor or the unlucky, you must perforce go for a right-winger.
But Trump also has another criterion: He wants people who will be personally dependent on him, who don’t have any kind of professional reputation to defend and therefore won’t take a stand on principle. That is, he only wants hacks.
And here’s the thing: Right-wing hack economists are, with hardly any exceptions, hard-money, hyperinflation-is-around-the-corner types. So Trump ends up with officials whose past views are diametrically opposed to what he says now.
Sign up for Frank Bruni's newsletter
Get a more personal, less conventional take on political developments, newsmakers, cultural milestones and more with Frank Bruni’s exclusive commentary every week.
Does this mean that the men he has chosen will stand in the way of his policies? No, not at all. They are hacks, after all, and will tell Trump whatever he wants to hear.
But it does mean that Trumpian economic policy is being made by men who, almost by definition, don’t know what they’re doing. To have gotten their jobs, they not only had to have track records of talking nonsense, but to have suddenly started talking completely different nonsense — reversing their long-held positions to curry favor with the Very Stable Genius.
So what will happen if and when this economic team has to deal with real problems, like a global slump? Somehow, I’m not optimistic.
Related
More from Paul Krugman.
Opinion | Paul Krugman
Donald Trump and His Team of Morons
Jan. 14, 2019
https://www.nytimes.com/2019/01/14/opinion/government-shutdown-trump.html
.. posted here Jan. ..
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146127097
Opinion | Paul Krugman
Bad Faith, Pathos and G.O.P. Economics
Dec. 27, 2018
https://www.nytimes.com/2018/12/27/opinion/republican-economists-bad-faith.html
Opinion | Paul Krugman
Hard-Money Men, Suddenly Going Soft
Dec. 20, 2018
https://www.nytimes.com/2018/12/20/opinion/conservative-economics-trump.html
Opinion | Paul Krugman
Springtime for Sycophants
March 12, 2018
https://www.nytimes.com/2018/03/12/opinion/trump-trade-peter-navarro.html
.. posted here Mar. 2018 ..
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=139300519
https://www.nytimes.com/2019/02/14/opinion/trump-david-malpass.html
See also:
Trump Versus the Socialist Menace
[...]
What Americans who support “socialism” actually want is what the rest of the world calls social democracy: A market economy, but with extreme hardship limited by a strong social safety net and extreme inequality limited by progressive taxation. They want us to look like Denmark or Norway, not Venezuela.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146794552
Vanity Fair: Everyone inside the White House hates Trump
[...]
Economic adviser Larry Kudlow has told people he’s probably got six months left. “Larry’s really tired of it all,” a source close to Kudlow said.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146708721
Have We Had Enough of the Imperial Presidency Yet?
Even a feeble president can impose his will on the nation if he lacks
any sense of restraint or respect for political norms and guardrails.
[...]
ndeed, the line between the Trump White House and conservative media outlets has become blurred beyond recognition. The former CNBC host Larry Kudlow now serves as head of the National Economic Council, while the former “Fox & Friends” host Heather Nauert has been nominated to serve as ambassador to the United Nations. Bill Shine, a former executive at Fox News, now runs the White House Communications Office.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146062099
What not Ivanka? At least she will sit on Trumpty’s lap.
[...]
After Ayers turned the job down, Trump tried to recruit Treasury Secretary Steven Mnuchin, United States Trade Representative Robert Lighthizer, top economic adviser Larry Kudlow and North Carolina Republican Congressman Mark Meadows, all of whom declined, one source said.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=145443712
Trump’s Potemkin Economy
[...]
And the early phase of the trade war that was supposed to be “good, and easy to win” isn’t generating the kinds of headlines Trump wanted. Instead, we’re hearing about production shifting overseas to escape both U.S. tariffs on imported inputs and foreign retaliation against U.S. products. It’s really worth reading the submission by General Motors .. https://www.regulations.gov/document?D=DOC-2018-0002-1991 .. to the Commerce Department, urging a reconsideration of a tariff policy that “risks undermining GM’s competitiveness against foreign auto producers” and “will be detrimental to the future industrial strength and readiness of manufacturing operations in the United States.” In other words, “Don’t you understand global supply chains, you idiot?”
[...]
Meanwhile, reports say .. https://www.nytimes.com/2018/06/07/us/politics/white-house-tariffs-growth.html .. that the Council of Economic Advisers did an internal report concluding that Trump trade policy will cost jobs, not create them; Kevin Hassett, the chairman, pressed on these reports, said that he could neither confirm nor deny them .. https://www.cnn.com/2018/06/29/politics/hassett-report-trump-tariffs-cnntv/index.html ; in other words, they’re true. But meanwhile Hassett is declaring that last year’s corporate tax cut has led to a “massive amount of activity coming home .. https://www.marketwatch.com/story/white-house-advisor-foreign-investment-is-skyrocketing-even-with-harley-davidsons-move-overseas-2018-06-26 ” — which is just false. Some companies are rearranging their accounting, producing what looks on paper like money coming back to the U.S., but this has no real effect on investment or employment.
P - But the most Potemkinesque story of the past week was the declaration by Larry Kudlow, the administration’s top economic official, that the budget deficit is “coming down rapidly” as “those revenues come rolling in .. https://www.marketwatch.com/story/this-is-how-larry-kudlow-defines-a-falling-deficit-2018-06-29 .”
P - Actually, the deficit is rising fast, mainly because of a plunge in corporate tax receipts — the direct result of the tax cut:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=143311261
A Quisling and His Enablers
[...]
This is not a column about whether Donald Trump is a quisling — a politician who serves the interests of foreign masters at his own country’s expense. Any reasonable doubts about that reality were put to rest by the events of the past few days, when he defended Russia while attacking our closest allies.
[...]
But that’s Trump, a man whose presidency has been marked by around seven false statements per day .. https://www.washingtonpost.com/news/fact-checker/wp/2018/05/01/president-trump-has-made-3001-false-or-misleading-claims-so-far/?utm_term=.b3b67761901c .. in office. What about his officials?
P - Well, they have been acting like the courtiers in the old story about the emperor’s new clothes. (The emperor’s new hairpiece?) If the boss says something whose falsity is obvious to anyone with eyes to see, they’ll claim to believe his version.
P - So Larry Kudlow, the administration’s chief economist (actually “economist,” but that’s another story) went on TV to declare that Trudeau “stabbed us in the back .. https://www.nytimes.com/2018/06/10/us/politics/trump-trudeau-summit-g7-north-korea.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=a-lede-package-region®ion=top-news&WT.nav=top-news .” Peter Navarro, the administration’s chief trade expert (“expert”) went even further, repeating the stab-in-the-back line and declaring that Trudeau faces a “special place in hell.”
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=141581336
"Trump and Trade and Zombies"
Why does Trump keep hiring hard-money hacks?
By Paul Krugman
Opinion Columnist
Feb. 14, 2019
To lead the World Bank, President Trump picked David Malpass, whose past economic philosophy, curiously, was at odds with the president's
policies. Doug Mills/The New York Times
U.S. political discussion has been dominated by the issue of Donald Trump’s wall — an issue on which Trump's irrationality keeps surprising even his critics. So I don’t imagine that many people have heard about Trump’s nomination of David Malpass, currently an under secretary at the Treasury Department, to lead the World Bank. But it’s a story worth following.
For one thing, while the U.S. traditionally gets to choose the World Bank’s president (Europe gets the International Monetary Fund), there will be a lot of opposition to Malpass, who has a history of being hostile to international institutions .. https://www.reuters.com/article/us-usa-trump-worldbank-idUSKCN1PV2DK . Furthermore, the Malpass nomination highlights the remarkable character of Trump’s economic appointments.
Remarkable in what way? Well, remarkably bad. Every economist, yours truly very much included, gets it wrong sometimes .. https://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/ . But Trump only seems to choose men who have been wrong about everything.
Beyond that, however, what’s remarkable is the extent to which this president consistently chooses economists whose ideology is at odds with his own professed views on policy.
[Paul Krugman did explanatory journalism before it was cool, moving from a career as a world-class economist to writing
hard-hitting opinion columns. For an even deeper look at what’s on his mind, sign up for his weekly newsletter.
https://www.nytimes.com/newsletters/paul-krugman?action=click&module=inline&pgtype=Article]
These days, at least, Trump is an easy-money guy who wants the Fed to keep interest rates low. But he keeps appointing deflationists — men who opposed any attempt to rescue the economy from the financial crisis, who bitterly attacked the Fed for keeping rates low and demanded tight money even when we had very high unemployment.
Why does he do this? I’ll get there in a minute. First, let’s talk about who’s on the Trump team.
At the top of the list is Larry Kudlow, director of the National Economic Council. He has quite a track record; as one commentator .. http://nymag.com/intelligencer/2015/02/gop-economist-bush-tax-cuts-worked-brilliantly.html?gtm=top>m=bottom .. put it, he “has elevated flamboyant wrongness into a form of performance art.”
Kudlow may be best known for his unflagging faith, in the teeth of the evidence, in the magic of tax cuts, as well as his dismissal of “bubbleheads .. https://www.nytimes.com/2018/03/15/business/larry-kudlows-not-so-on-the-money-predictions.html?module=inline ” who predicted a housing crash. Less known is his 2008 praise for Bush officials .. https://www.cnsnews.com/blog/larry-kudlow/paulsons-courageous-action-no-more-federal-bailouts .. for having the courage not to bail out Lehman Brothers. Just hours after his encomiums, Lehman’s fall had plunged the whole world into financial meltdown.
Kevin Hassett, chairman of the Council of Economic Advisers, is another bubble denier .. http://economicsofcontempt.blogspot.com/2008/07/official-list-of-punditsexperts-who.html , although his most famous prediction was in his 1999 book “Dow 36,000 .. http://web.mit.edu/krugman/www/dow36K.html ” (which, adjusted for inflation, would mean roughly Dow 55,000 today). More relevant to current policy, Hassett was among those who kept predicting, wrongly, that Ben Bernanke’s efforts to fight unemployment would cause runaway inflation .. https://economics21.org/html/open-letter-ben-bernanke-287.html .
And then there’s David Malpass, also both a bubble denier and a Bernanke-basher. Much press commentary has noted his 2007 insistence, as chief economist at Bear Stearns .. https://www.vox.com/2017/3/15/14596938/david-malpass-treasury , that there was no reason to be worried about the financial system. A few months later his own firm imploded.
But I think his most revealing piece of commentary was a 2011 screed .. https://uneasymoney.com/2019/02/05/there-they-go-again/ .. against low interest rates and what he considered a “weak dollar” policy. A low rate policy, he declared, hurts the economy because it “discourages thrift,” while the weak dollar was bad for confidence, or something.
This was really bad economics. At the time, America had 9 percent unemployment, entirely because of inadequate private spending; to the extent that low interest rates were discouraging thrift and making people spend rather than save, that would have been a good thing, not a problem. And Malpass’s argument about the dollar was just incoherent.
What’s really striking, however, is that the policies Malpass attacked were precisely the policies Donald Trump now demands: low rates and a weaker dollar. So why would Trump want to promote him, and people like him?
Here’s how I understand it: The first thing Trump looks for in an appointee is someone who shares his values — above all, his absolute lack of compassion for those less fortunate than himself. And if you want an economic official who doesn’t care about the poor or the unlucky, you must perforce go for a right-winger.
But Trump also has another criterion: He wants people who will be personally dependent on him, who don’t have any kind of professional reputation to defend and therefore won’t take a stand on principle. That is, he only wants hacks.
And here’s the thing: Right-wing hack economists are, with hardly any exceptions, hard-money, hyperinflation-is-around-the-corner types. So Trump ends up with officials whose past views are diametrically opposed to what he says now.
Sign up for Frank Bruni's newsletter
Get a more personal, less conventional take on political developments, newsmakers, cultural milestones and more with Frank Bruni’s exclusive commentary every week.
Does this mean that the men he has chosen will stand in the way of his policies? No, not at all. They are hacks, after all, and will tell Trump whatever he wants to hear.
But it does mean that Trumpian economic policy is being made by men who, almost by definition, don’t know what they’re doing. To have gotten their jobs, they not only had to have track records of talking nonsense, but to have suddenly started talking completely different nonsense — reversing their long-held positions to curry favor with the Very Stable Genius.
So what will happen if and when this economic team has to deal with real problems, like a global slump? Somehow, I’m not optimistic.
Related
More from Paul Krugman.
Opinion | Paul Krugman
Donald Trump and His Team of Morons
Jan. 14, 2019
https://www.nytimes.com/2019/01/14/opinion/government-shutdown-trump.html
.. posted here Jan. ..
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146127097
Opinion | Paul Krugman
Bad Faith, Pathos and G.O.P. Economics
Dec. 27, 2018
https://www.nytimes.com/2018/12/27/opinion/republican-economists-bad-faith.html
Opinion | Paul Krugman
Hard-Money Men, Suddenly Going Soft
Dec. 20, 2018
https://www.nytimes.com/2018/12/20/opinion/conservative-economics-trump.html
Opinion | Paul Krugman
Springtime for Sycophants
March 12, 2018
https://www.nytimes.com/2018/03/12/opinion/trump-trade-peter-navarro.html
.. posted here Mar. 2018 ..
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=139300519
https://www.nytimes.com/2019/02/14/opinion/trump-david-malpass.html
See also:
Trump Versus the Socialist Menace
[...]
What Americans who support “socialism” actually want is what the rest of the world calls social democracy: A market economy, but with extreme hardship limited by a strong social safety net and extreme inequality limited by progressive taxation. They want us to look like Denmark or Norway, not Venezuela.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146794552
Vanity Fair: Everyone inside the White House hates Trump
[...]
Economic adviser Larry Kudlow has told people he’s probably got six months left. “Larry’s really tired of it all,” a source close to Kudlow said.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146708721
Have We Had Enough of the Imperial Presidency Yet?
Even a feeble president can impose his will on the nation if he lacks
any sense of restraint or respect for political norms and guardrails.
[...]
ndeed, the line between the Trump White House and conservative media outlets has become blurred beyond recognition. The former CNBC host Larry Kudlow now serves as head of the National Economic Council, while the former “Fox & Friends” host Heather Nauert has been nominated to serve as ambassador to the United Nations. Bill Shine, a former executive at Fox News, now runs the White House Communications Office.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146062099
What not Ivanka? At least she will sit on Trumpty’s lap.
[...]
After Ayers turned the job down, Trump tried to recruit Treasury Secretary Steven Mnuchin, United States Trade Representative Robert Lighthizer, top economic adviser Larry Kudlow and North Carolina Republican Congressman Mark Meadows, all of whom declined, one source said.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=145443712
Trump’s Potemkin Economy
[...]
And the early phase of the trade war that was supposed to be “good, and easy to win” isn’t generating the kinds of headlines Trump wanted. Instead, we’re hearing about production shifting overseas to escape both U.S. tariffs on imported inputs and foreign retaliation against U.S. products. It’s really worth reading the submission by General Motors .. https://www.regulations.gov/document?D=DOC-2018-0002-1991 .. to the Commerce Department, urging a reconsideration of a tariff policy that “risks undermining GM’s competitiveness against foreign auto producers” and “will be detrimental to the future industrial strength and readiness of manufacturing operations in the United States.” In other words, “Don’t you understand global supply chains, you idiot?”
[...]
Meanwhile, reports say .. https://www.nytimes.com/2018/06/07/us/politics/white-house-tariffs-growth.html .. that the Council of Economic Advisers did an internal report concluding that Trump trade policy will cost jobs, not create them; Kevin Hassett, the chairman, pressed on these reports, said that he could neither confirm nor deny them .. https://www.cnn.com/2018/06/29/politics/hassett-report-trump-tariffs-cnntv/index.html ; in other words, they’re true. But meanwhile Hassett is declaring that last year’s corporate tax cut has led to a “massive amount of activity coming home .. https://www.marketwatch.com/story/white-house-advisor-foreign-investment-is-skyrocketing-even-with-harley-davidsons-move-overseas-2018-06-26 ” — which is just false. Some companies are rearranging their accounting, producing what looks on paper like money coming back to the U.S., but this has no real effect on investment or employment.
P - But the most Potemkinesque story of the past week was the declaration by Larry Kudlow, the administration’s top economic official, that the budget deficit is “coming down rapidly” as “those revenues come rolling in .. https://www.marketwatch.com/story/this-is-how-larry-kudlow-defines-a-falling-deficit-2018-06-29 .”
P - Actually, the deficit is rising fast, mainly because of a plunge in corporate tax receipts — the direct result of the tax cut:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=143311261
A Quisling and His Enablers
[...]
This is not a column about whether Donald Trump is a quisling — a politician who serves the interests of foreign masters at his own country’s expense. Any reasonable doubts about that reality were put to rest by the events of the past few days, when he defended Russia while attacking our closest allies.
[...]
But that’s Trump, a man whose presidency has been marked by around seven false statements per day .. https://www.washingtonpost.com/news/fact-checker/wp/2018/05/01/president-trump-has-made-3001-false-or-misleading-claims-so-far/?utm_term=.b3b67761901c .. in office. What about his officials?
P - Well, they have been acting like the courtiers in the old story about the emperor’s new clothes. (The emperor’s new hairpiece?) If the boss says something whose falsity is obvious to anyone with eyes to see, they’ll claim to believe his version.
P - So Larry Kudlow, the administration’s chief economist (actually “economist,” but that’s another story) went on TV to declare that Trudeau “stabbed us in the back .. https://www.nytimes.com/2018/06/10/us/politics/trump-trudeau-summit-g7-north-korea.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=a-lede-package-region®ion=top-news&WT.nav=top-news .” Peter Navarro, the administration’s chief trade expert (“expert”) went even further, repeating the stab-in-the-back line and declaring that Trudeau faces a “special place in hell.”
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=141581336
It was Plato who said, “He, O men, is the wisest, who like Socrates, knows that his wisdom is in truth worth nothing”
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