How gullible do they think we are? Answer: Very.
Ignore the premise of the question.
Candidates can't complain about media bias from the moderators in the latest GOP debate, hosted by Fox Business Network. If any, bias was in their favor, with questions reflecting conservative views. Even so, the contestants often were non-responsive, as they switched to their prepared talking points.
Many of the questions were highly selective, slanted against the economic progress of the past six years under the Democratic administration of President Barack Obama. Example: The first question of the evening cited the number of people out of work in America, rather than job growth -- 571,000 jobs were added in October, as the unemployment rate dipped again, to 5 percent.
Candidates continued to hammer at the theme that the nation is an economic disaster, despite the reality that recovery remains steady. Political candidates and those out of office have never let the facts get in the way of a good slogan, nor have they paused before spreading a good story about themselves, regardless of petty details like truth.
Consider the slogan, "Make America Great Again." This is based on the idea that the country is no longer great, and only the sloganeer can change that. They warn that disaster is either already here or is about to open an economic abyss and tumble the nation to perdition.
Here are some of the ideas put forth by some of the candidates at the debate:
-- Return to the gold standard in determining money supply.
-- Hobble the Federal Reserve Board, or dismantle the central bank entirely.
-- Impose sharp cuts in social assistance programs.
-- Slash taxes and reduce spending, but boost military and defense spending.
-- Repeal government regulation.
The first two alone are enough to make an economist cringe. Why? Limiting the amount of money in circulation to the amount of gold or silver in hand would stifle wages, and limit purchases, except for the ultra-few who had hard cash, returning society to the Golden Age of the late 19th Century. And abolishing the central bank would cancel any ability to encourage growth and limit inflation, using the supply of currency in circulation, as well as interest rates, as levers.
Failure to help those in need is immoral.
As for slashing taxes and spending, except for boosting large outlays for the military -- you can't do both.
And repealing government regulation of questionable business practices ... you're kidding, right?
As for selective truth-telling, candidate John Kasich claimed credit for balancing the federal budget while he was chairman of a Senate committee. While it is true that he was chairman of the committee at the time, it is also true that the federal budget was balanced during the administration of Democratic President Bill Clinton, who first reduced the deficit inherited from his two predecessors, Republicans Ronald Reagan and George H.W. Bush, and then posted four consecutive balanced budgets and a surplus.
That surplus promptly disappeared and the budget crashed into a major deficit pit under the next president, Republican George W. Bush. Kasich made no mention of that.
It's time for debate moderators to return to the basic journalistic guideline of the Five Ws -- Who, What, Where, When, and Why. Plus the H-word, the one often forgotten, but possibly more important than any of the others: How do you plan to do this?
For too long, candidates have been ignoring journalists' questions, forgetting that reporters are citizens first, and ask tough questions because they need to be asked, and they do it on behalf of all citizens.
Wednesday, November 11, 2015
Saturday, November 7, 2015
Fuzz Words
The issue is not whether politicians lie, but what are they lying about today?
Words can hurt, so to take some of the sting off a word, people use synonyms, often Latin-based phrases rather than Anglo-Saxon based words.
For example, here are some terms used by journalists when challenging claims made by a political candidate: Demonstrably untrue, factually inaccurate, disingenuous, false statement, fabricated, misrepresented, questionable veracity, misleading, doesn't ring true. Meanwhile, an outspoken political opponent may use the more blunt, "He lies."
For a candidate to challenge reporters by demanding that they answer questions, thus sidestepping an issue, is pointless. Reporters do not answer questions, they ask them, and their opinions are not relevant to what they do. A candidate for public office must be able to answer questions truthfully.
Example 1: For a candidate to claim he was offered a full scholarship to the West Point Military Academy, as Republican Ben Carson has done repeatedly, is to mislead others, and exposes a belief that readers and supporters are gullible.
Fact: No one ever gets a scholarship to West Point, since there is no tuition to begin with. Attendance is free to every cadet who manages to pass the strict admittance process.
Example 2: Chris Christie claimed he was named U.S. attorney for New Jersey the day before the 9/11 terrorist attack on what he called "my state."
Fact: his appointment was not announced until December of that year, three months after the attack. Moreover, the targets of two of the planes were the Twin Towers of the World Trade Center, in New York City. A third aircraft struck the Pentagon in Washington, DC, and a fourth crashed in Pennsylvania.
When politicians get defensive and assail news media for what they perceive as negative reports, it's important to remember that a journalist's duty is to report not only what a candidate says, but also to report truth.
Or as a young reporter once asked her editor, "Did you ever get the feeling when working on a story that someone is lying to you?"
The editor replied, "Of course. It happens all the time. But it's not our job to say he or she is lying. It's our job to report both sides of an issue, and the reader decides who's more credible."
Currently, there's been a rash of stories about GOP candidates claiming things that are untrue, false, misleading, etc. That's a sign of good reporting.
This is not to say that Democrats are immune to critical exposes by the news media. Many just have not been caught. Yet.
Audacity in a news reporter is a virtue.
Mendacity masquerading as virtuous outrage is a vice, and journalists have a duty to expose it.
Words can hurt, so to take some of the sting off a word, people use synonyms, often Latin-based phrases rather than Anglo-Saxon based words.
For example, here are some terms used by journalists when challenging claims made by a political candidate: Demonstrably untrue, factually inaccurate, disingenuous, false statement, fabricated, misrepresented, questionable veracity, misleading, doesn't ring true. Meanwhile, an outspoken political opponent may use the more blunt, "He lies."
For a candidate to challenge reporters by demanding that they answer questions, thus sidestepping an issue, is pointless. Reporters do not answer questions, they ask them, and their opinions are not relevant to what they do. A candidate for public office must be able to answer questions truthfully.
Example 1: For a candidate to claim he was offered a full scholarship to the West Point Military Academy, as Republican Ben Carson has done repeatedly, is to mislead others, and exposes a belief that readers and supporters are gullible.
Fact: No one ever gets a scholarship to West Point, since there is no tuition to begin with. Attendance is free to every cadet who manages to pass the strict admittance process.
Example 2: Chris Christie claimed he was named U.S. attorney for New Jersey the day before the 9/11 terrorist attack on what he called "my state."
Fact: his appointment was not announced until December of that year, three months after the attack. Moreover, the targets of two of the planes were the Twin Towers of the World Trade Center, in New York City. A third aircraft struck the Pentagon in Washington, DC, and a fourth crashed in Pennsylvania.
When politicians get defensive and assail news media for what they perceive as negative reports, it's important to remember that a journalist's duty is to report not only what a candidate says, but also to report truth.
Or as a young reporter once asked her editor, "Did you ever get the feeling when working on a story that someone is lying to you?"
The editor replied, "Of course. It happens all the time. But it's not our job to say he or she is lying. It's our job to report both sides of an issue, and the reader decides who's more credible."
Currently, there's been a rash of stories about GOP candidates claiming things that are untrue, false, misleading, etc. That's a sign of good reporting.
This is not to say that Democrats are immune to critical exposes by the news media. Many just have not been caught. Yet.
Audacity in a news reporter is a virtue.
Mendacity masquerading as virtuous outrage is a vice, and journalists have a duty to expose it.
Friday, November 6, 2015
Jobs and Seekers
The unemployment rate in America dropped to 5 percent in October as the nation added 271,000 jobs, the government reported.
Meanwhile, migrants escaping troubles in the Middle East and seeking safety in Europe not only will add to the labor force there but may well boost the economy of nations in the European Union. A prediction by the European Commission said three million newcomers would help to fill the demand for workers and would boost the EU economy. The lift would be small, the commission noted -- about a quarter of a percent over three years -- but government spending to accommodate the refugees would stimulate the regional economy. Moreover, the larger labor force would make more workers available as the economy recovers.
As the European Commission put it in its report, the additional workers would help the economy "provided the right policies are in place to facilitate access to the labor market."
There will be problems, of course, as there always are with a changing population. Cultural differences may cause stress, and worker education and skills will need to match employer needs. But those issues face every nation with a history of immigration, notably the U.S. Over time, America has been the better for it.
Meanwhile, the economy in America continues its recovery. And political rhetoric attacking newcomers and blaming them for any and all ills of society is no more true today than it was in the 19th Century years of the Know Nothing Party, and the employment signs that said, "Help Wanted -- NINA." (No Irish Need Apply.)
Meanwhile, migrants escaping troubles in the Middle East and seeking safety in Europe not only will add to the labor force there but may well boost the economy of nations in the European Union. A prediction by the European Commission said three million newcomers would help to fill the demand for workers and would boost the EU economy. The lift would be small, the commission noted -- about a quarter of a percent over three years -- but government spending to accommodate the refugees would stimulate the regional economy. Moreover, the larger labor force would make more workers available as the economy recovers.
As the European Commission put it in its report, the additional workers would help the economy "provided the right policies are in place to facilitate access to the labor market."
There will be problems, of course, as there always are with a changing population. Cultural differences may cause stress, and worker education and skills will need to match employer needs. But those issues face every nation with a history of immigration, notably the U.S. Over time, America has been the better for it.
Meanwhile, the economy in America continues its recovery. And political rhetoric attacking newcomers and blaming them for any and all ills of society is no more true today than it was in the 19th Century years of the Know Nothing Party, and the employment signs that said, "Help Wanted -- NINA." (No Irish Need Apply.)
Wednesday, November 4, 2015
Prosperity and Politics
Political candidates promise to bring jobs back to America from other countries, but they don't specify what kind of jobs they would bring back, even as they imply they would do it single-handedly.
Landscaping and construction jobs, for example, cannot be exported, much less brought back, since they are by definition local.
Manufacturing jobs can be relocated, but bringing them back to America would require paying higher, U.S.-level wages. In many cases, that's why the manufacturers left in the first place. Meanwhile, higher wages is what attracts many newcomers, and always has. If jobs were available at home, along with safety, security and opportunity, there would be little reason to leave. That's why America has long been called the Land of Opportunity.
So for those with a gut-level fear of newcomers, the best way to resolve that fear is to help other nations achieve peace and prosperity through good jobs, healthy trade and political stability.
Competition is a wonderful thing, but if the goal is to win, even by reducing other competitors to beggary, both sides lose. Political candidates sometimes spout the rhetoric of win, win, win, and accuse all others of being low-energy losers. This is counterproductive at best and destructive at worst.
There's nothing really new here. The danger of such behavior was well established by Adam Smith in the first and most important book on modern economics, "The Wealth of Nations," published in 1776.
As for creating jobs, skill levels, prevailing wages and the cost of living must also be considered, as well as location.
Construction jobs, which are often touted as nearly magical cures by politicians seeking votes, are by nature temporary and local. When a construction project is complete, the jobs go away. In a flourishing economy, construction workers move on to a new project. Without new projects, however, unemployment rises, income falls, sales and purchases decline and the downward economic spiral continues.
The question, then, becomes one of how to stop the downward spiral of economic recession.
The most effective answer -- a basic principle of Economics 101 and well known to any practical thinker -- is to spend money, which is the lifeblood of any modern economy. That's easy to say as long as workers have jobs, and wages to support their families. In times of mass unemployment, however, consumers cannot make purchases with money they don't have. This is where government steps in, sponsoring construction projects that hire workers and give them wages for food, clothing, shelter and other necessities, as well as a few luxuries.
To claim that austerity is the solution defies logic.
Meanwhile, the claim that the American economy is tottering is demonstrably untrue, and political candidates who obsess on that claim ignore reality.
On an international level, the U.S. trade deficit continues to decline as the trade gap closes. The dollar is strong relative to other currencies, which is good news for tourists. The employment level is slowly growing as the unemployment rate subsides. Overall, the American economy continues to recover, albeit it slowly and despite rantings by opposition candidates.
On a wider level, economic conditions throughout the Western Hemisphere continue to slow down, according to the International Monetary Fund, even as the U.S. economy "regained momentum after a slow start" earlier this year.
So why bring back jobs from other nations, if that means fewer jobs in other countries, leading to less money and worsening conditions for workers there, who would be unable to buy American products? And if the jobs do come back, what will be the wages? Will they be lower than they had been, which would hurt the American workers, or will they match other U.S. pay levels, which would result in higher consumer prices?
Better to encourage job growth in other countries, especially in lower-wage countries, so they could buy more stuff made in America by skilled workers who deservedly earn higher wages.
This way, both sides win, and there are no losers.
Maybe it's time the candidates read up on Economics 101, and Adam Smith's principle of comparative advantage.
Landscaping and construction jobs, for example, cannot be exported, much less brought back, since they are by definition local.
Manufacturing jobs can be relocated, but bringing them back to America would require paying higher, U.S.-level wages. In many cases, that's why the manufacturers left in the first place. Meanwhile, higher wages is what attracts many newcomers, and always has. If jobs were available at home, along with safety, security and opportunity, there would be little reason to leave. That's why America has long been called the Land of Opportunity.
So for those with a gut-level fear of newcomers, the best way to resolve that fear is to help other nations achieve peace and prosperity through good jobs, healthy trade and political stability.
Competition is a wonderful thing, but if the goal is to win, even by reducing other competitors to beggary, both sides lose. Political candidates sometimes spout the rhetoric of win, win, win, and accuse all others of being low-energy losers. This is counterproductive at best and destructive at worst.
There's nothing really new here. The danger of such behavior was well established by Adam Smith in the first and most important book on modern economics, "The Wealth of Nations," published in 1776.
As for creating jobs, skill levels, prevailing wages and the cost of living must also be considered, as well as location.
Construction jobs, which are often touted as nearly magical cures by politicians seeking votes, are by nature temporary and local. When a construction project is complete, the jobs go away. In a flourishing economy, construction workers move on to a new project. Without new projects, however, unemployment rises, income falls, sales and purchases decline and the downward economic spiral continues.
The question, then, becomes one of how to stop the downward spiral of economic recession.
The most effective answer -- a basic principle of Economics 101 and well known to any practical thinker -- is to spend money, which is the lifeblood of any modern economy. That's easy to say as long as workers have jobs, and wages to support their families. In times of mass unemployment, however, consumers cannot make purchases with money they don't have. This is where government steps in, sponsoring construction projects that hire workers and give them wages for food, clothing, shelter and other necessities, as well as a few luxuries.
To claim that austerity is the solution defies logic.
Meanwhile, the claim that the American economy is tottering is demonstrably untrue, and political candidates who obsess on that claim ignore reality.
On an international level, the U.S. trade deficit continues to decline as the trade gap closes. The dollar is strong relative to other currencies, which is good news for tourists. The employment level is slowly growing as the unemployment rate subsides. Overall, the American economy continues to recover, albeit it slowly and despite rantings by opposition candidates.
On a wider level, economic conditions throughout the Western Hemisphere continue to slow down, according to the International Monetary Fund, even as the U.S. economy "regained momentum after a slow start" earlier this year.
So why bring back jobs from other nations, if that means fewer jobs in other countries, leading to less money and worsening conditions for workers there, who would be unable to buy American products? And if the jobs do come back, what will be the wages? Will they be lower than they had been, which would hurt the American workers, or will they match other U.S. pay levels, which would result in higher consumer prices?
Better to encourage job growth in other countries, especially in lower-wage countries, so they could buy more stuff made in America by skilled workers who deservedly earn higher wages.
This way, both sides win, and there are no losers.
Maybe it's time the candidates read up on Economics 101, and Adam Smith's principle of comparative advantage.
Monday, November 2, 2015
Gotcha
Republicans don't like journalists because they can't control them.
"If you don't like the heat, get out of the kitchen." -- Harry S. Truman
Presidential candidates and Republican Party operatives have renewed their attack on what they call the "lamestream media" after disappointing --- dare we say failing? -- performances at the most recent televised "debate."
Their major complaint seems to be against what they call "gotcha" questions from the journalist-moderators. They charge that the prime goal of the moderators was to ask "gotcha" questions intended solely to embarrass the candidates, and not to obtain substantive responses to serious questions.
A major irony was the proposal by Sen. Ted Cruz that the next Republican debate be moderated by Rush Limbaugh, Sean Hannity and Michael Levin. "Now that would be a debate," Sen. Cruz proclaimed.
Our resident cynic, Pug Mahoney, noted that it would be less a debate than a propaganda session, since the three proposed moderators -- all ultra-conservative broadcast commentators -- likely don't even know the meaning of the word "neutral."
That, however, is what journalists and debate moderators should be -- neutral. As noted here previously, reporters ask tough questions because they need to be asked. To brand a reporter or moderator as an adversary who asks "mean spirited" questions in an attempt to embarrass the candidate shows first a lack of understanding of the reporter's role. Secondly, and more important, it reveals an attempt to control the message by controlling the questioner, and in a larger sense to control the news media.
At the same time, however, the moderator of a political debate should be able to control the proceedings. Unfortunately, that was something the journalist-moderators at last week's debate failed to do. They lost control within the first five minutes of the program, and the "debate" collapsed into a competitive quagmire of attempts by the various candidates to take control. None did, so for the remainder of the two-hour program, contestants continued to talk even as the moderator reminded them that their time had expired.
A result of all the night's confusion was that there was very little substantive discussion of issues expected in a debate sponsored by CNBC, the television network devoted to business and the economy.
In short, it is a reporter's job to ask tough questions.
As presidential candidate Chris Christie, Republican governor of New Jersey and a participant in the recent debate, put it, anyone who aspires to be President of the United States should be able to handle tough questions.
Ultimately, the issue is this: Do reporters set out to embarrass politicians by asking "gotcha" questions? Perhaps. But at root, journalists ask questions to get at the truth, and to establish whether the contestant knows the topic and can speak knowledgeably about it. If the candidate suffers embarrassment for failing the test, that's on him or her.
Or to put it another way, embarrassment is the only weapon news reporters have.
"If you don't like the heat, get out of the kitchen." -- Harry S. Truman
Presidential candidates and Republican Party operatives have renewed their attack on what they call the "lamestream media" after disappointing --- dare we say failing? -- performances at the most recent televised "debate."
Their major complaint seems to be against what they call "gotcha" questions from the journalist-moderators. They charge that the prime goal of the moderators was to ask "gotcha" questions intended solely to embarrass the candidates, and not to obtain substantive responses to serious questions.
A major irony was the proposal by Sen. Ted Cruz that the next Republican debate be moderated by Rush Limbaugh, Sean Hannity and Michael Levin. "Now that would be a debate," Sen. Cruz proclaimed.
Our resident cynic, Pug Mahoney, noted that it would be less a debate than a propaganda session, since the three proposed moderators -- all ultra-conservative broadcast commentators -- likely don't even know the meaning of the word "neutral."
That, however, is what journalists and debate moderators should be -- neutral. As noted here previously, reporters ask tough questions because they need to be asked. To brand a reporter or moderator as an adversary who asks "mean spirited" questions in an attempt to embarrass the candidate shows first a lack of understanding of the reporter's role. Secondly, and more important, it reveals an attempt to control the message by controlling the questioner, and in a larger sense to control the news media.
At the same time, however, the moderator of a political debate should be able to control the proceedings. Unfortunately, that was something the journalist-moderators at last week's debate failed to do. They lost control within the first five minutes of the program, and the "debate" collapsed into a competitive quagmire of attempts by the various candidates to take control. None did, so for the remainder of the two-hour program, contestants continued to talk even as the moderator reminded them that their time had expired.
A result of all the night's confusion was that there was very little substantive discussion of issues expected in a debate sponsored by CNBC, the television network devoted to business and the economy.
In short, it is a reporter's job to ask tough questions.
As presidential candidate Chris Christie, Republican governor of New Jersey and a participant in the recent debate, put it, anyone who aspires to be President of the United States should be able to handle tough questions.
Ultimately, the issue is this: Do reporters set out to embarrass politicians by asking "gotcha" questions? Perhaps. But at root, journalists ask questions to get at the truth, and to establish whether the contestant knows the topic and can speak knowledgeably about it. If the candidate suffers embarrassment for failing the test, that's on him or her.
Or to put it another way, embarrassment is the only weapon news reporters have.
Friday, October 30, 2015
Audit the Fed?
Prevailing whims can blow down monetary policy.
Be careful what you wish for. You may get it.
There's been a lot of talk from conservatives about auditing the Federal Reserve, and monitoring more closely the central bank's activities in attempting to stabilize the economy.
"Audit the Fed!" is the chant. The reality is that the central bank's financial activities are already audited by several independent as well as government agencies, and the new campaign is a political attempt by Congress to control the Fed's policy activities.
In effect, such a political audit would stop the Fed from helping in a timely fashion those who need help, not only curtailing critical Fed movements to control inflation and ease unemployment, but could well put the central bank out of business entirely.
Without a central bank, financial institutions would fail, there would be no agency to bail them out, unemployment would soar, inflation would be out of control, and the entire economy would crash, much as it did repeatedly in the 19th Century. And yes, there was the Great Depression in the 20th Century, and the Great Recession more recently, and the central bank could have done a better job in the 1930s. At the time, however, it was constrained by prevailing political beliefs that in the long run, the business climate would improve and the economy would heal itself. It took strong government intervention to ease the burdens and promote recovery.
(There are, of course, deposit insurance agencies that help protect bank customers, but a massive collapse of the system would quickly drain those agencies, worsening the overall crisis.)
But to return to "those golden days of yesteryear," which would include a return to the hard money years of the gold standard -- also advocated by some conservatives -- only means widespread economic disaster for the many as the micro-few take advantage of the disadvantaged.
The hue and cry for more control over the Federal Reserve Board goes back months, prompting the central bank to emphasize that it is indeed accountable, and is regularly audited by several independent as well as government agencies.
For example, the Fed reports to Congress twice a year on its plans for monetary policy, its chair -- currently Janet Yellen -- testifies regularly before congressional committees, its Federal Open Market Committee publicizes its views and actions regarding monetary policy and interest rate decisions regularly, there is an annual report, and the financial statements of the central bank as well as the twelve regional banks are audited annually by an independent outside auditor. Then there is the Government Accountability Office (GAO) and the Office of Inspector General that audit the Fed's activities. And every week, the Fed publishes a financial balance sheet.
Despite all that, conservatives are demanding still closer monitoring and control of the Fed's activities.
In a speech as far back as last February, Jerome Powell, a member of the Fed's Board of Governors, noted three major parts to the effort to "subject monetary policy to undue political pressure." One, under what Powell called a "misleading name," the "Audit the Fed" plan would bring the central bank's monetary decisions to "unlimited congressional policy audits (not to be confused with financial audits, which are already conducted regularly.)"
The second, Powell noted, would force the Fed to follow a specific path when making monetary decisions, and face "immediate" congressional hearings and investigations if it should ever deviate from that path.
Thirdly, Fed monitors want new limits on how and whether it acts during a financial crisis.
All of which are based on beliefs that the Fed is secretive and unaccountable, and that no one is watching what they do.
There is, and should be, some secrecy about what the central bank plans to do and when it plans to intervene in the credit market and in the money supply. Otherwise, some players in the financial markets would have an unfair advantage.
But the Federal Reserve is already accountable to Congress. It reports regularly on its status and decisions, and deservedly has flexibility in how it operates to stabilize inflation and encourage employment and the economy in general.
To demand more congressional oversight is a political attempt to control the central bank and limit its ability to act. This would only lead to the chaos so common in the 19th Century, when banks failed regularly and shut down, with no one to rescue them and restore customer deposits.
Be careful what you wish for. You may get it.
There's been a lot of talk from conservatives about auditing the Federal Reserve, and monitoring more closely the central bank's activities in attempting to stabilize the economy.
"Audit the Fed!" is the chant. The reality is that the central bank's financial activities are already audited by several independent as well as government agencies, and the new campaign is a political attempt by Congress to control the Fed's policy activities.
In effect, such a political audit would stop the Fed from helping in a timely fashion those who need help, not only curtailing critical Fed movements to control inflation and ease unemployment, but could well put the central bank out of business entirely.
Without a central bank, financial institutions would fail, there would be no agency to bail them out, unemployment would soar, inflation would be out of control, and the entire economy would crash, much as it did repeatedly in the 19th Century. And yes, there was the Great Depression in the 20th Century, and the Great Recession more recently, and the central bank could have done a better job in the 1930s. At the time, however, it was constrained by prevailing political beliefs that in the long run, the business climate would improve and the economy would heal itself. It took strong government intervention to ease the burdens and promote recovery.
(There are, of course, deposit insurance agencies that help protect bank customers, but a massive collapse of the system would quickly drain those agencies, worsening the overall crisis.)
But to return to "those golden days of yesteryear," which would include a return to the hard money years of the gold standard -- also advocated by some conservatives -- only means widespread economic disaster for the many as the micro-few take advantage of the disadvantaged.
The hue and cry for more control over the Federal Reserve Board goes back months, prompting the central bank to emphasize that it is indeed accountable, and is regularly audited by several independent as well as government agencies.
For example, the Fed reports to Congress twice a year on its plans for monetary policy, its chair -- currently Janet Yellen -- testifies regularly before congressional committees, its Federal Open Market Committee publicizes its views and actions regarding monetary policy and interest rate decisions regularly, there is an annual report, and the financial statements of the central bank as well as the twelve regional banks are audited annually by an independent outside auditor. Then there is the Government Accountability Office (GAO) and the Office of Inspector General that audit the Fed's activities. And every week, the Fed publishes a financial balance sheet.
Despite all that, conservatives are demanding still closer monitoring and control of the Fed's activities.
In a speech as far back as last February, Jerome Powell, a member of the Fed's Board of Governors, noted three major parts to the effort to "subject monetary policy to undue political pressure." One, under what Powell called a "misleading name," the "Audit the Fed" plan would bring the central bank's monetary decisions to "unlimited congressional policy audits (not to be confused with financial audits, which are already conducted regularly.)"
The second, Powell noted, would force the Fed to follow a specific path when making monetary decisions, and face "immediate" congressional hearings and investigations if it should ever deviate from that path.
Thirdly, Fed monitors want new limits on how and whether it acts during a financial crisis.
All of which are based on beliefs that the Fed is secretive and unaccountable, and that no one is watching what they do.
There is, and should be, some secrecy about what the central bank plans to do and when it plans to intervene in the credit market and in the money supply. Otherwise, some players in the financial markets would have an unfair advantage.
But the Federal Reserve is already accountable to Congress. It reports regularly on its status and decisions, and deservedly has flexibility in how it operates to stabilize inflation and encourage employment and the economy in general.
To demand more congressional oversight is a political attempt to control the central bank and limit its ability to act. This would only lead to the chaos so common in the 19th Century, when banks failed regularly and shut down, with no one to rescue them and restore customer deposits.
Thursday, October 29, 2015
Social Economics
It ain't what you got, it's the way how'd you use it
Economics is, by its nature, a social science, and any attempt to deal with human behavior by transmuting it into abstract mathematical formulas can only yield a few general patterns of behavior, not immutable laws.
For example, consider the most basic principle of Economics 101, the Law of Supply and Demand. While it does describe the general pattern of behavior as one factor responds to the other, it also relies on that is known as the ceteris paribus assumption -- "other things equal." In the real world, however, other things seldom if ever remain equal for long. Things change. People change. How, how much, whether and why they change can drive a statistician bonkers. Nonetheless, statistics can illustrate a pattern, and on the assumption that the pattern will hold, predictions can be made. Can you say heroic assumption?
Call it the if-then hypothesis: Assuming that if this pattern holds and nothing changes, then such-and-so will result. But this works only so long as the "other things" remain equal and do not change.
Another assumption in formulating and analyzing economic patterns is that people make rational choices. But are people rational? Do all people always behave rationally? Some may be rational some of the time, and there may be enough rationality often enough so that patterns can be detected. But even that measure of rationality changes. That's why economics is a social science.
There was a time when Economics courses were taken out of the Social Studies departments at many colleges and transferred to the School of Business, and treated with mathematical rigor. The study was, in effect, dehumanized, and treated with the same attitudes common to marketing and advertising.
It didn't work out well, and the trend is back toward treating economics as the study of what people do with what's available to them. And that is a social issue, not scientific.
Economics is, by its nature, a social science, and any attempt to deal with human behavior by transmuting it into abstract mathematical formulas can only yield a few general patterns of behavior, not immutable laws.
For example, consider the most basic principle of Economics 101, the Law of Supply and Demand. While it does describe the general pattern of behavior as one factor responds to the other, it also relies on that is known as the ceteris paribus assumption -- "other things equal." In the real world, however, other things seldom if ever remain equal for long. Things change. People change. How, how much, whether and why they change can drive a statistician bonkers. Nonetheless, statistics can illustrate a pattern, and on the assumption that the pattern will hold, predictions can be made. Can you say heroic assumption?
Call it the if-then hypothesis: Assuming that if this pattern holds and nothing changes, then such-and-so will result. But this works only so long as the "other things" remain equal and do not change.
Another assumption in formulating and analyzing economic patterns is that people make rational choices. But are people rational? Do all people always behave rationally? Some may be rational some of the time, and there may be enough rationality often enough so that patterns can be detected. But even that measure of rationality changes. That's why economics is a social science.
There was a time when Economics courses were taken out of the Social Studies departments at many colleges and transferred to the School of Business, and treated with mathematical rigor. The study was, in effect, dehumanized, and treated with the same attitudes common to marketing and advertising.
It didn't work out well, and the trend is back toward treating economics as the study of what people do with what's available to them. And that is a social issue, not scientific.
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