Krugman and Keynes and climate

I've been thinking about the American dream lately, about what climate and energy difficulties mean for this, and how today's economic system is so very difficult for so many Americans.

Today there was more food for thought: The NYT's (and Princeton's) Paul Krugman has a new opinion piece on the need for more stimulus and how the Democratic consensus that seems to be emerging is that, politically, this isn't possible.

Austerity, the new byword.

One casualty, it turns out, is Obama's green jobs program. This according to a different item from Revkin. The money for the program was in the climate bill, which is now shelved.

I'm not certain that there isn't quite a bit of green jobs money still in the pipeline, particularly in the stimulus package. Although the deadline is theoretically up soon, a lot of funding is for contracts whose date exceeds the ARRA timing.

That's not my point though. And even if I'm right, delayed ARRA dollars won't be anything like the several million green jobs we need.

The main casualty of all this austerity, according to Krugman, is employment.

Shouldn't we be doing more to encourage green job development?

The key, unstated point in Krugman's piece is really that Keynesian theory and history both are being ignored here. History shows that employment is a "lagging indicator." Sometimes the lag is acute. It took a decade, and WW2, for employment to return to "normal" after the depression of the 1930s. What's a government to do? Keynes' usual response was that "demand-side" measures that put cash in the hands of people who would spend it were best. This would enter the economy, stimulate aggregate demand, and we'd climb out of the business cycle bust. The CCC, the WPA, TVA, BPA, all these New Deal alphabet soup agencies met with lordly approval from Maynard.

In WW2, it was all those Rosie the Riveter's that did the socioeconomic climbing, of course, and after the war the GI bill, particularly the home finance package, did much of the same. I tend to think that having a better educated workforce as a result of the education package was also important.

But conservatives always opposed demand-side notions that look anything like social programs, preferring tax breaks instead, and of course talking up a storm about "fiscal responsibility." This would pass muster if the tax breaks that get passed were for the middle class, but somehow with both the Reagan and the Bush tax cuts, they turned out to be primarily for the wealthy, while both presidents presided over massive growth in the federal budget and deficit. Any reasonable person reviewing the fiscal record from 1980 to 2008 would have to admit a major disconnect between stated theory and actual practice.

From this vantage point, green jobs just looks like welfare for hippies. But that's bigoted, as well as untrue. There are plenty of conservatives in the green energy business.

And although the danger we pick technological losers not winners is actually quite real, I think we have enough obvious winners to back. Insulation, for instance. Or solar hot water.

Not that the current Democratic congress seems more able or likely to walk its talk, or even deliver an incoherent program, especially with their climate bill failure. I'm sure they could have come to some agreement with Collins and Snowe if they were willing to strong-arm their own coal state senators. But they don't have what it takes. There's no Lyndon B. Johnson in today's senate.

Make a decision, the trainers on my military leadership courses used to say: "Any decision will do." Moving is better than staying still and getting shot.

We should just say it out loud: Neither party, and no economist, really understands how the economy works. We never did. The simplified model, the so-called circular flow model on which Keynesian theory rests, suspiciously simple in the first place, has been superseded by all kinds of sneaky back channels and hidden loops whereby investors and governments both hedge and hedge and hedge.

Certainly no-one knows it well enough to grasp the levers and strings, and, with the quiet confidence of, say, "Sully" Sullenberger, pull us away from the pyre in one clean motion. Not even the sainted Obama. Roosevelt couldn't do it in the 30s. Reagan couldn't do it in the 80s. Bush didn't get anywhere near in the early 2000s, and 2008 was the result.

Meanwhile, though, the Chinese are untrammeled by any mere theoretical difficulties. Having navigated the recession with little discernible difficulty, they now proceed to sink billions into green transportation technology. This coming hard on the heels of their billions sunk into wind energy, and their continuing billions spent in household solar.

How on earth are we mere westerners supposed to be able to explain this with our blind gropings in economic theory!

Demand side, supply side, which strings or levers are the Chinese pulling!

Someone tell us, please, how they do it!

Or maybe they just never read any of these guys, Keynes or Friedman...

...and do what seems to work instead. They make a decision.

When you look at the scale of some of the New Deal monuments, the BPA and TVA and all that massive government architecture that surrounds the National Mall, the massive scale of it all, in comparison to the weak and modest notions of our day, the Chinese seem to be the new New Dealers of our time, and possibly even the new Americans.

I'm re-reading Simon Schama's The American Future: A History.

Seemed like good timing, given the "widening gyre." Prosac for the geo-politically depressed.

Schama, another ex-pat, and a self-admitted apologist for the Anglosphere way of life, is an easy pick for me to read, reflecting all my personal biases. But there's what seems to me a lot of realism in some of his otherwise very rosy and cherry-picked version of history.

Schama advances Kevin Philips's point that the liberties which Americans take for granted were first fought for by Britons, and that there's a direct line of inheritance from Magna Carta through the New Model Army and the 1688 Bill of Rights to the Revolution, the Constitution, the Emancipation Proclamation, and on to Barrack Obama.

Obviously, with the recent vote-grabbing, Know-Nothingist shenanigans about the Ground Zero mosque, these liberties come with the price of constant vigilance and constant reminders, lest our own tribal instincts get the better of our vaunted freedoms.

But Schama's America, and the Anglosphere in general, remains the worldwide bastion of free speech, religious freedom, and political freedom. China is not. No persecuted minority wants to escape to Beijing or even Shanghai.

They would all much prefer New York, Sidney, Auckland, or even poor old Bradford.

The proof of the pudding.

Can we keep it up? I hope so. But we'll have to extricate ourselves from this funk soon and put our minds to energy and climate at least as urgently as the Chinese are doing, or we'll add further severe weather complications to our current Keynesian and geopolitical puzzles.