Does Paul Krugman Really Want to Say Hillary Could Have Won Only by Keeping the Truth from Voters?

Paul Krugman says the election was hacked. He thinks Hillary Clinton would have won the presidency, but for two problems:

I’m talking about the obvious effect of two factors on voting: the steady drumbeat of Russia-contrived leaks about Democrats, and only Democrats, and the dramatic, totally unjustified last-minute intervention by the F.B.I. . .

Does anyone really doubt that these factors moved swing-state ballots by at least 1 percent? If they did, they made the difference in Michigan, Wisconsin and Pennsylvania — and therefore handed Mr. Trump the election, even though he received almost three million fewer total votes. Yes, the election was hacked.

I’m not sure Krugman has any hard statistical evidence to back this up, but he may very well be right. Is so, what is the implication? 

Krugman wants us to focus on the fact that the people who did the hacking were “bad guys.” Vladimir Putin is a devious authoritarian who arguably had no business trying to tilt the US election to his favored candidate. The FBI may really, as he says, “have  become a highly partisan institution, with distinct alt-right sympathies” (although I find that a bit of an overstatement.) 

In my view, though, we should not allow the fact that “bad guys did it” to distract our focus from one key fact: What we learned from the Russian hackers and the FBI was true.

Yes, Clinton really did have a private email server. At a minimum, by her own admission, that showed bad judgement. It seems to have been at least a technical violation of State Department rules, even if the FBI was right to recommend against criminal prosecution. The server, and Clinton’s handling of the issue, really did turn off some voters.

Yes, the DNC, as revealed by Wikileaks, really did put its thumb on the scale in the primaries, contrary to its professed neutrality. Without the DNC’s covert aid—or with a more timely revelation of that aid—a fairer primary process might well have resulted in the nomination of Bernie Sanders.

Yes, Clinton’s paid speeches to banks really did contain material that could have swayed undecided primary voters, had it come out earlier in the year — her embrace of free trade and open borders, her offer to give Wall Street executives a larger role in crafting regulations, her casual willingness to say one thing behind closed doors and another in public.

None of this was false news. It was true news. I agree, it would have been more  palatable if it had been revealed by an earnest, all-American whistle blower within the DNC campaign rather than by the Russians, but that does not change the fact that the material released was true.

So here is my question: When Krugman says that Clinton would have won the presidency of only the election had not been hacked, isn’t that exactly the same as to say that she could have won only if she had been able to keep the truth safely under wraps?

If it is, then the blame for Clinton’s defeat lies with the message, no matter how much effort Krugman makes to shift our focus to the messengers.

Just About Managing: How the "Jams" Elected Donald Trump

Hillary Clinton famously characterized Donald Trump’s voters as a “basket of deplorables,” but she was wrong. Our friends, the British, have figured it out: Trump was elected not by deplorables, but by jams.

“Jams,” short for “Just About Managing,” is the new term has swept British political discourse. They are defined as a social class consisting of people who have jobs and a home, but little by way of savings or discretionary income; people who see themselves as precariously comfortable at best, with nothing to fall back on if adversity strikes.

The instant popularity of the term may have something to do with the way it echoes another typically British political expression, “jam tomorrow,” meaning an often made but never fulfilled promise.

James Frayne of the British think tank Policy Exchange has written a thorough and thoroughly wonky report on jams. For statistical purposes, he equates jams with the middle half of the British class structure, sandwiched between professional and managerial classes above, and unskilled workers and those who live on social benefits, below.

What Frayne says about jams certainly makes them sound a lot like Trump voters. They work hard, pay their taxes, and play by the rules. What they want is to see “society run in a fair way.” American translation: They want to see that the system is not rigged.

This Chart Shows Why the Fed Will Be Tightening Monetary Policy Soon

Will policymakers at the Fed raise interest rates at their December meeting? Wall Street  oddsmakers increasingly think they will. One simple chart shows why.

The chart tracks the economy’s progress toward the central  bank’s target of “stable prices and maximum employment.”  The Fed’s rate-setting Federal Open Market Committee (FOMC) has operated under this so-called  dual mandate since Congress amended the Federal Reserve Act in 1977. In recent years, the Fed has interpreted “stable prices” to mean a rate of inflation close to 2 percent per year, as measured by the annual change in the price index for personal consumption expenditures (PCE). It interprets “maximum employment” to mean the highest level that is consistent with its 2 percent inflation goal, currently thought to be an unemployment rate of about 4.8 percent.

We can use the two components of the dual mandate to draw a bullseye that the Fed is aiming for.  Here is how things are going, seven years into the recovery from the Great Recession. (All data shown in the chart are quarterly, except for the last point, which shows the latest, still-incomplete data for the fourth quarter of 2016—unemployment of 4.6 percent for November 2016 and PCE inflation of 1.5 percent for October.)

As recently as the fourth quarter of last year, the Fed was missing the inflation target by a wide margin on the downside and the unemployment target by a smaller margin on the upside. Small wonder, then, that when the FOMC raised interest rates at its December 2015 meeting, many critics saw such an action as premature. That was especially true for those who hold the orthodox view that 2 percent inflation is a not an unconditional ceiling, but rather, a target that may acceptably be exceeded for a time after a long period of below-normal price increases.

Why a Protectionist Shock Would Do More to Harm Than to Help the Job Market

Dramatic promises to restrict international trade were a signature element of Donald Trump’s presidential campaign. So far, he seems to be following through, with an early reaffirmation of his intent to withdraw US participation in the Trans-Pacific Partnership (TPP).

An aggressive stance on trade played a key role in gaining the support of working class voters in Midwestern manufacturing states, where upset wins swept him into the White House.  What is more, trade is one area in which Trump, as President, will have the power to act on his own without action by Congress. As Gary Clyde Hufbauer of the Peterson Institute has explained, both the US Constitution and past acts of Congress give the President ample authority to do things like withdraw from the TPP or NAFTA, label China a currency manipulator, or impose retaliatory tariffs on any country he sees as a threat to US economic security.

But how would American workers actually fare under a protectionist regime, especially older workers, and those with few skills and little education, who voted for Trump by wide margins? Not well. Here is why a protectionist shock could do more to harm than to help the US job market.

Free Trade Under Fire

The recent presidential election was characterized by attacks on free trade from leading candidates in both parties. As I detailed in my earlier post, "The Bipartisan War on Free Trade," eventual winner Donald Trump broke sharply with the traditional free trade position of the Republican party. Populist Democrat Bernie Sanders drove his rival Hillary Clinton to abandon her earlier embrace of trade. Cracks have even appeared in the formerly almost monolithic support of trade among economists.

I have now pulled together the key points from several earlier posts and articles for a new slideshow, "Free Trade under Fire," available for viewing or free download on my Slideshare page. The slideshow is suitable for classroom presentation or for discussion by community groups. Contact me if you would like me to present the slideshow to your class or community group.

Highlights of the slideshow:

Four flawed arguments against free trade:

• Deficits mean we are losers
• Blame it on currency manipulation
• Protectionism will bring back manufacturing jobs
• Don't trade with the poor 

Why the real problem with trade is slow adjustment to trade shocks

Five factors that slow adjustment to trade shocks, with discussion of reforms that could speed adjustment:

• Work disincentives in the social safety net
• Insufficiently portable healthcare
• Ownership bias in housing policy
• Spread of occupational licensing
• Too many people with criminal records

Why protectionism is not the answer

Follow this link to view or download the slideshow

Why Does Big Business Fear Trump?

It is not surprising that there is little love for Donald Trump’s presidential candidacy among the leaders of top US multinational corporations. Why then, asks Andrew Ross Sorkin of the New York Times, do they not speak out? Why do they quickly follow up their private comments with, “I could never say that on the record”? I find some of the views reflected in Sorkin’s article disturbing.

The attitudes of top executives would be more understandable if they centered on the issue of free trade, but they do not. Yes, big business has profited from past trade deals and backs new ones like the TPP and TTIP, which Trump promises to cancel. But Trump’s Democratic opponent and a majority of Congressional candidates from both parties have also joined the anti-trade bandwagon, so trade policy is in for a change no matter who wins this election. As Trump himself would say, there’s something else going on.

Trump the bully is one broader fear of the executive class. Sorkin quotes Reid Hoffman, co-founder of LinkedIn, who was one of the few willing to speak to him on the record:

People are fearful that, especially in a circumstance where he might be in a position of extreme power as a potential presidential candidate, that would be used in a retaliatory way, that would be used in vengeful way. Everyone gets worried about being attacked, and part of the logic and mechanics of bullies is that they cause people to be fearful that they’ll be singled out and attacked.

It’s the same thing like on school grounds, when people won’t go help the kid who is being bullied because they’re worried that the bully will focus on them.

Yes, it is frightening to think about the ways a thin-skinned and vengeful President might misuse the office. The entanglement of corporations with government is such that there would be many opportunities to punish enemies. Taxes, regulations, and government contracts would be some of the most direct, but backdoor methods like planting rumors or leaking documents might be easier, and just as damaging. A President Trump might install a compliant security chief who would give him access to a company’s internal phone and email communications, encrypted or not. The tools at the disposal of a spiteful president would make something like closing a bridge look like a playground prank.

How Hillary Clinton's Social Policies Could Raise Effective Marginal Tax Rates for the Middle Class

Hillary Clinton is often said to be a policy wonk, deeply enmeshed in specifics and details, but that may be a mischaracterization. In some ways, her approach seems disturbingly superficial, skipping one perceived problem to another with little attention to their underlying causes. In some cases, Clinton seems to have paid little attention to the unintended consequences of her proposals, as a real policy expert would do. A look at the tax implications of some of her social policy proposals will illustrate these shortcomings.

How progressive? Nominal vs. effective tax rates

Discussions of by both supporters and critics have characterized Hillary Clinton’s tax policies as progressive. The appearance of progressivity arises from her pledge to raise tax rates and close loopholes for the wealthiest Americans, while leaving nominal tax rates for middle-class families largely unchanged. According to an analysis by the Tax Policy Center, her proposals would increase revenue by $1.1 trillion over the next decade, with nearly all of the tax increases falling on the top 1 percent.

However, the conclusion that Clinton’s policies would have little effect on middle-class families is based on a narrow view of taxes—one that takes into account only the money that taxpayers hand over to the IRS. Economists have long favored a broader concept called the effective marginal tax rate (EMTR), which includes reductions in government benefits that occur as income rises as well as increases in taxes paid. Some little-noticed features of Clinton’s education and healthcare policies would have the unintended consequence of raising effective marginal tax rates on middle-class families to levels far above those that top earners would face.