. . .there will be no new post this week. I started something but decided I didn't like it. There will be next week.
Mount Greylock Books LLC has published my autobiography as an historian, A Life in History. Long-time readers who want to find out how th...
Saturday, November 26, 2022
It's been 59 years and it's not surprising that the November 22 anniversary last Tuesday passed unnoticed. I want to commemorate it by offering up this extraordinary 2013 piece from the Boston Globe on the impact of the assassination in New England. The author was very young, but he had real historical/journalistic talent. I can't remember exactly how he found me but I am very proud to have contributed one paragraph. Do make sure to read to the end. It really captures that very different era.
Click the link to open in Google Docs. You probably can't access the proquest link unless you have proquest access.
Friday, November 18, 2022
The World Cup begins on Sunday. It has been the single biggest event in my sporting calendar since I first had the opportunity to watch one in 1974, and although its award to Qatar was a disgrace, I am thrilled that it will fill up my time for what is always the most depressing month of the year for me because of the early New England sunsets. After nearly 18 years of diligent weekly postings I could use a brief vacation from History Unfolding and I may decide to give myself one--we shall see. I promise to be back for the new year. Meanwhile, I have time for some election commentary, and trust me, you are most unlikely to have seen similar commentary anywhere else.
It is now clear that while the Democrats have definitely held on to the Senate and will probably, in my opinion, increase their majority by one next month, the Republicans have regained control of the House of Representatives by a majority of between one and five. Previously worried about a red wave, the mainstream media are portraying this as a Republican defeat. It isn't--the Republicans are substantially more powerful with one House under their control and this will almost surely make it impossible for the Democrats to pass any major legislation for the next two years. Moreover, as I have just discovered, the aggregate data suggests that this is the most encouraging election for the Republicans to have taken place in many years. Hold on to your hats while I explain why.
In 2016, while Donald Trump was narrowly defeating Hillary Clinton while losing the popular vote, the Republicans won the popular vote in House elections quite narrowly, by 63.2 million votes to 61.8 million, or 49.1 percent to 48 percent. That was good enough for a substantial 241-194 majority in the House, which suggests that Democrats very validly complained about the impact of Republican gerrymandering in various states--I don't know exactly how to do the math, but I don't think that a 1 percent edge in the overall vote should have produced a 47-seat edge. The turnaround two years into the Trump administration was quite astonishing. This time the Democrats polled 60.6 million votes (53.4 percent) to 50.9 million for the Republicans (44.6 percent.) That gave them a 41-seat gain and a 235-200 majority. That also seems to me a somewhat low majority result for a 6 percent edge in the national popular vote.
Gerrymandering also seems to have played a role in the 2020 elections. While Joe Biden was beating Donald Trump with a seven million popular plurality, 51.3 percent to 46.8 percent, the House Democrats did only slightly worse, winning with 77.5 million votes to 72.8 million, and 50.8 percent of the Congressional vote to 47.7 percent. They nonetheless lost 13 seats, leaving their majority at 222-213, which once again looks a bit harrow to me given their 3 percent edge in the popular vote.
Well, brace yourselves, sports fans. In the last midterms the Democrats had won 60.6 million votes for 53.4 percent of the total. This year the incomplete tally shows them with 49.7 million votes and just 47.3 percent of the total. The Republicans, with 53.4 million votes, took 50.8 percent of the total. This means, to begin with, that so far, with votes still being counted in some areas, the turnout was about 7 million votes lower than in the last midterm election. It means that the Republicans did much better in this national vote than in any of the three previous ones. It also looks to me as if gerrymandering didn't help them at all. A 50.8-47.3 percent majority, I would think, would be expected to give them a significantly higher majority than they now project to have.
Now progressives tend to set the tone of Democratic commentary, perhaps because they now rule the nation's newsrooms. They are not only treating this result as a Democratic victory--instead of a warning of impending disaster next time around--but also crediting enthusiastic young voters for it. Some that I know are also crowing that old Republican voters are dying off. Unless the CNN exit polls were many miles off base, that is a fantasy. According those polls, the 18-29 age group was 12 percent of the vote and 63% of it voted Democratic. That was by far the highest Democratic percentage of any demographic slice, but it amounts to just 8 percent of the total vote, or about 17 percent of the total Democratic vote. The 30-44 age group, only 21 percent of the electorate, voted Democratic by only 51 percent, making 11 percent of the total. After that things get much worse for the Democrats. The 45-64s (mostly Xers) were by far the largest bloc, 39 percent of the vote, and they voted Republican 54-44 percent, a landslide. That still makes the Democratic Gen X vote 17 percent of the electorate, that is, a larger share than either their Gen Zs or Millennials. The 65 and overs (basically Boomers with some Silents) were 28 percent of the electorate and 55 percent of them voted Republican--almost the same proportion as for Gen X.
Now David Shor, a very sensible Democratic analyst, has argued that the Democrats did better than expected because many independents and some Republicans voted Democratic because of the abortion issue and the shadow of Donald Trump. The abortion issue clearly had a remarkable impact in Michigan and Minnesota, where the state legislatures flipped Democratic, and I expect there will be some referendums about it next time around, which might help Democratic turnout. Donald Trump also appears to be a big loser in this election as well, perhaps in part because Republicans haven't woken up to how well they actually did, either. Trump's demise, however, stands to hurt the Democrats a lot. Any apparently reasonable Republican candidate, including Ron DeSantis, looks like a good bet for 2024, all the more so since we have no idea who the Democratic candidate will be if Biden, as seems likely, does not run. If the Republicans simply allow local abortion votes to take their course and abandon Trump, their prospects look fairly bright.
I will try to update this post in a few weeks when final numbers are in.
Sunday, November 13, 2022
To begin with, I always say that if you are really smart, you are never afraid to say "I don't know" or "I was wrong." And I was wrong two weeks ago (along with everyone else) about what was going to happen in the election, and I'm glad that I was. Nate Silver seems to agree with me about this and I'm looking forward to his explanation of why their House forecast was significantly off. Meanwhile, it seems quite possible, though not probable, that the Democrats will even keep control of the House. I would also not rule out the possibility that enough Republicans might defect from their party to swing control to the Democrats, if they initially emerge with a narrow majority and McCarthy is voted down for Speaker by the Trumpers, as seems quite possible. I will defer any election analysis for later.
Meanwhile, over the last few days, I relived what remains the most exciting night of my life: November 8, 1960, when the nation barely elected John F. Kennedy over Richard Nixon. Youtube is a wonderful thing, and the entire CBS broadcast of that night is available there in three chunks. I watched the whole last chunk, from about 11:30, when a Kennedy victory seemed certain, to about 5:00 AM, when they signed off having called a majority of electoral votes (including Illinois) for Kennedy. This wasn't exactly reliving that night because I watched Huntley, Brinkley and the rest on NBC then. (A very edited version of their coverage is also available.) I was 13 then and this was the first election that I ever followed closely. My father was working in the campaign and had brought me to the DNC headquarters on a couple of Saturdays, where I actually met Robert Kennedy for the only time. I don't think, though, that I had given any thought to the possibility of his getting an administration job if JFK won, and I was very unpleasantly shocked a few months later when I found out that I would be spending the next two years in West Africa as a result. That, however, is another story.
Walter Cronkite anchored the broadcast, of course, and four correspondents covered the East, the South, the Midwest and the Far West, respectively. The East, beginning with Connecticut--perhaps the only fully automated voting state--broke quickly for Kennedy, with Connecticut and New York joining Massachusetts and Rhode Island, and Pennsylvania following suit thanks in part to a very big Catholic vote for him in the Philadelphia area. Northern New England however remained solidly Republican. The South was one of the big stories because Kennedy did so well there. While Mississippi chose an unpledged state of electors as a protest against the pro-civil rights platforms of both major parties and Alabama added a few of those as well, Nixon carried only Florida, Virginia, Tennessee and Kentucky, while Kennedy took Georgia, the Carolinas, Louisiana, Arkansas, and above all Texas, his running mate's home state. The broadcast featured a late night interview with Elmo Roper--the second-leading pollster in the country at that time after George Gallup--who claimed that Texas had appeared to be going for Nixon, as it had twice for Eisenhower, until right-wingers roughed up Johnson and Mrs. Johnson at a Dallas campaign event. I had forgotten that incident. Kennedy carried Texas by 46,000 votes, far more than have ever been stolen in any US election that I know of, and far more than the half-dozen Rio Grande Valley counties that gave him margins of 80 percent or more.
The dramatic action took place in the Midwest and to a lesser extent in the Far West. Nixon surprisingly took Ohio, probably because of anti-Catholic prejudice in much of the state, while Kennedy rapidly secured a substantial lead in larger Illinois, of which more later. CBS News had given Kennedy Illinois, and with it a narrow electoral majority, by the time they signed off, although they did not "call" the election. The midwestern cliffhangers that night were Michigan and Minnesota, which no one dared to call until the next morning, when Kennedy turned out to have taken Michigan by 67,000 votes and Minnesota by 22,000. The network gave Kennedy New Jersey and Missouri early in the evening, but rural votes eventually reduced his margins in those states to 10,000 and a mere 4,000. The western states, meanwhile, went almost entirely for Nixon--but California, the big prize with 32 electoral votes (New York then had 45) looked to be Kennedy country for hours after it began reporting in the middle of the night. Kennedy jumped off to a big lead, and the commentators, who had plenty of sophisticated historical data at their command, reported that no Democrat had never lost such a lead in a California election. CBS had not given the state to Kennedy when it signed off. I went to bed around 3:00 AM, and woke up around 7:00, when NBC was signing off after having called California for Kennedy and called the election for him on that basis. Within an hour or so, they had changed their minds. Kennedy remained ahead when all the election day votes were counted, but eventually lost the state to Nixon by a margin of 36,000 votes after all the absentee ballots were counted. Only Nevada and New Mexico, and eventually Hawaii went Democratic among the western states. It was a shock to me to realize yesterday that California had voted for only one Democrat, Lyndon Johnson, in all the presidential elections from 1952 until 1992.
As for Illinois, it has become a Republican myth that Mayor Richard J. Daley stole the 1960 vote for JFK, with the false implication that Nixon would otherwise have won. Kennedy wound up with 303 electoral votes and would have had 276 and a majority without it. Forty years ago, as I pointed out in The Road to Dallas, a political scientist named Kallina effectively debunked that myth with a very careful analysis of the Cook County vote. What I realized watching the broadcast was that the sequence of events during the night did not support that myth either, and indeed suggested that if anyone was manipulating the vote late at night it was downstate Republicans. When CBS signed off around 5:00 AM that night, the count showed JFK ahead by 101,000 votes. As it turned out, Nixon won 55 percent of the 877,000 votes that remained to be counted--most of them downstate--and the margin narrowed to just under 9,000 votes.
The economic, demographic and political decline of the American Northeast and Midwest is perhaps the most striking impression left by watching the broadcast. Pennsylvania that night had 32 electoral votes, tied with California, and Ohio, Illinois, and Michigan had 25, 27, and 20. Florida had 10 and Texas 24. In 2024 New York will have 28, Pennsylvania 19, Ohio 17, Illinois 19, and Michigan 15, while the three largest are California (54), Texas (40), and Florida (30). The broadcast's figures on the Middle West and the West illustrate other changes: Democrats and Republicans are competitive throughout those regions, although most of the South, then as now, is one-party territory. Yet there is also an extraordinary difference in the tone of the coverage. It is resolutely impartial. Again and again Cronkhite points out that either Kennedy or Nixon will be the first president born in the 20th century, and European correspondent David Schoenbrun adds that they will be decades younger than any European leader with whom they will have to deal. The commentators play down the issue of religion in the campaign, noting correctly that it might have helped Kennedy more than it hurt him, but ignoring that it clearly did determine the votes of millions of Americans on both sides. Cronkhite remarks at one point that probably no president has ever been elected at a more dangerous moment in the history of the the nation and the world--a clear reference to the Cold War, then at its height--but he says that calmly, as he does everything else. Nixon and Kennedy belonged to his generation--as do all the correspondents, I believe--and they had fought in or covered the Second World War and seen the nation emerge victorious from it. This election for them and for me at 13 was a critical episode in the great adventure that was the history of the United States. I recommend at least a few minutes of the broadcast to all my readers as an artifact of a lost world.
Friday, November 04, 2022
I began writing this blog eighteen years ago at a rather dark moment in US history. George W. Bush's re-election campaign was in full swing, and the nation was mired in his Iraq War and a mad attempt to police the entire globe to halt international terrorism. And while I have often in subsequent years been quite pessimistic about where the country was going, I know that many posts have been written in the hope that they might improve. Now I am not so sure. Not only are the Republicans almost certain to win control of the House of Representatives next Tuesday, they also have a 50-50 chance of regaining control of the Senate as well. That means another round of budget fights, government shutdowns, and endless Republican investigations of Democratic wrongdoing. And that is not all. Today news reports announce that if the Republicans are successful, Donald Trump will immediately announce his candidacy for a second term. He leads Ron DeSantis, his closest rival for the Republican nomination, by a 2-1 margin. Worse yet, I doubt very much that either Joe Biden or Kamala Harris, now the obvious heir apparent, could beat him. I do not think that Trump really embodies the passions and the views of all Republicans, but it seems clear that his presence at the top of the ticket has not been, and probably will not be, enough to disrupt the normal rhythm of modern American politics, in which an unhappy electorate--and the electorate is very unhappy these days--takes out its anger on the party in power. The Democrats have in many ways staked their future on the idea that Trump's re-election would be a catastrophe. They are right, but I am not convinced that that position will ever have enough electoral appeal.
"Every epoch is immediate to God," wrote Leopold von Ranke, the founder of modern history, in the nineteenth century. I am not religious enough to use language like that, but I agree that every epoch manifests certain aspects of human nature. My most important political values--free speech, representative government, the idea that reason can drive policy, and most of all a concept of equal citizenship--have actually held sway for relatively small portions of modern history, in relatively restricted areas. They first emerged in the ancient world, but were overthrown in the late Roman empire by corruption and Christianity, as I discovered reading a remarkable book by Charles Freeman, The Closing of the Western Mind. It took about 1000 years for the Renaissance to re-establish the classical values, and that began about four centuries in which they steadily gained ground in Europe and spread elsewhere. Now they are in retreat, above all in the academy, which has abandoned its responsibility to maintain them. Literally anything could happen, I think, in the next fifty years.
My inspiration George Orwell entertained some terrifying visions of the future, most notably in 1984, but he died, very young, in 1950, while civilization still seemed to be advancing. I don't feel that it is now, for many reasons. So the question arises: without a great deal of hope about our future, how do we sustain our interest in life for how long is left us? Both history and literature, I think, offer some answers.
I have actually spent a good deal of my life living in the more or less distant past with the help of primary and secondary sources. I have written about some great human catastrophes, most notably those of the two world wars to which I devoted one section of Politics and War. So far, while history sometimes goes in the wrong direction for a long time, it does eventually take a big turn for the better. I am more and more doubtful that I will live to see the next one--but that doesn't mean that it will not take place. And when it does, to judge from the past, the great human achievements of earlier eras will come to life again--including the first two hundred years of the history of the United States. People may rediscover some of my favorite books. Even my own might survive.
Meanwhile I have been thinking of a favorite poem by one of my favorite poets, William Butler Yeats. Entitled Lapis Lazuli, it was written in the 1930s in the shadow of an impending war, to which the opening stanza explicitly refers. In one respect this poem is a challenge to 21st century readers because it repeatedly uses a three-letter word that has now acquired a new meaning. I am sure there are critics out there now who would argue that Yeats was consciously or unconsciously using the modern meaning, but trust me, he wasn't. In a remarkably short space, Yeats draws on both history and art to express eternal hope while the world teeters on the edge of a catastrophe. The poem also reminds me how much my own favorite works of art, literature, music and history have meant to me throughout my life, including, or especially in difficult times. I will end by reproducing it in full.
Friday, October 28, 2022
This morning fivethirtyeight.com shows the Republicans with an 81 percent chance of winning control of the House of Representatives and a very nearly 50-50 chance of controlling the Senate. They might actually outpoll the Democrats in the national popular vote for the House. Even if they win only the House and not the Senate, Donald Trump will immediately become the favorite for the 2024 presidential election, and gridlock, shutdowns, and investigations of Hunter Biden and various Democratic officials will dominate the next two years. The January 6 investigation will shut down at once. I regret to say that the Democratic Party will bear a lot of responsibility for these results.
They are not, to be sure, solely to blame. A lot of people like to claim nowadays that racism lies at the root of Republican success, but I do not agree. Looking at the last 40 years, it seems to me that Ronald Reagan's insistence that government was the problem, not the solution, has remained part of the fabric of American politics. We have seen this political movie before, twice. Bill Clinton was elected in 1992 with a Democratic Congress. He had only one major legislative accomplishment in his first term, his economic plan, whose tax increases allowed him to begin balancing budgets six years later. It passed by a single vote in both the House and the Senate, and it led to a devastating defeat in his first midterm election, in which he lost both Houses of Congress. Barack Obama was elected by a far more decisive margin in 2008 and brought veto-proof majorities in Congress along with him. He too passed just one important piece of legislation, the Affordable Care Act, without a single Republican vote, and he too suffered a devastating loss in the midterms, in which the Republicans won the House of Representatives. Four years later they added the Senate, and Obama had no more legislative accomplishments to boast of for the rest of his term. Joe Biden got some bipartisan support for a big COVID relief passage, and also for an infrastructure plan, but none for the Build Back Better Act, which some Democratic lunatic--I'd like to know who--disastrously renamed the Inflation Reduction Act. (It had nothing to do with inflation and hasn't reduced it.) Now his house majority appears to be doomed, and with it any hope of future legislative progress. The swing voters in the American electorate appear to react instinctively against any attempt to mobilize economic resources to solve national problems.
Yet the Democrats have their own problems as well. After 2008, strategists like James Carville argued that they had created a new long-term majority of women, black voters, and Hispanic voters--an argument, in effect, that they could rely entirely on identity politics. That view tallied with the feelings of many party activists, who learned postmodern theory in college and had come to believe that greater representation for those groups was in itself a critical political goal. In the long run, however, it has been a political disadvantage in my opinion, because it encourages--and in some cases even requires--Democrats to select candidates from those groups, who may appeal to parts of the Democratic base but whose demographic characteristics will not help them among swing voters. In addition, Hispanic voters in particular have remained far more diverse politically that Carville assumed, and increasing numbers have apparently decided that cultural and economic issues--such as inflation--matter a lot more than solidarity among nonwhites. They are significantly trending Republican.
And this Democratic disease, in a different but related form, may well cost them control of the Senate--which will make it impossible to put any Democrats on the federal bench for two years. John Fetterman, Pennsylvania's lieutenant governor, suffered a fairly serous stroke just before he defeated Representative Conor Lamb in this year's Senate Democratic primary contest. It turns out that he had had some heart-related problems for years. I have nothing against Fetterman personally, but party leaders should have made clear to him that the party simply could not take the risk of fielding a candidate with serious health issues in this critical election and forced him to step down in favor of Lamb. Ill or disabled people, however, are among the "marginalized groups" that Democrats are now taught to favor, and they did not. Fetterman in his one debate with Mehmet Oz this week showed very clearly that he has not recovered his ability to understand quickly and communicate clearly. These are skills that ordinary voters very reasonably expect their elected officials to have. Yesterday a new poll showed Oz leading Fetterman 48-45.
Educated Democrats tend to believe that voters today owe their votes to Democrats because the Republican Party has become an irresponsible personality cult. Voters however are clinging to the eternal American right to vote against the party in power when they are unhappy. That is the dynamic, as I tried to show a few weeks ago, that has dominated American politics since 1992. And if they do lose Congress, the Democrats will have to overcome another structural failure of theirs--their reliance on vice presidents and family members as presidential candidates. They are already suffering from this right now. No one ever took Joe Biden seriously as presidential timber for his 36 years in the Senate, and his two attempts to win the Democratic nomination went nowhere. When Barack Obama chose him as running mate, however, he got the name recognition and access to key donors that candidates depend on. He yielded the field in 2016 to another candidate who had become a national figure thanks to her marriage, but returned to win the nomination in 2020 with the help of the party establishment. Then he attempted (on frankly identity politics grounds) to bring Kamala Harris into the charmed circle, even though her presidential campaign had not made it to the first primary vote. Neither Biden nor Harris, in my opinion, will be a strong candidate against Trump or Ron DeSantis in the next presidential election. I can't see now who the alternative will be either.
Another disastrous aspect of the new American politics is also on display. The Watergate investigation dealt with terrible political and legal abuses and justly secured Nixon's resignation, but it became a terrible precedent. Investigations have replaced policy initiatives as political weapons ever since. The Democrats tried and failed to use Iran-Contra to bring down Reagan and Bush. The Republicans used Whitewater--a non-issue--and Bill Clinton's sex life to try to bring him down, but impeachment failed. They revived this tactic against Hillary Clinton in the run-up to the 2016 election and it may have worked then. Now the Democrats seem to be relying on various investigations, rather than policy victories, to remove the threat of Donald Trump from our politics. The Deep State is in fact their main weapon in this battle, as it was when Trump was first elected. It's another symptom of the failure of our democracy.
Sunday, October 23, 2022
I needed a day off yesterday, and I went to see the one performance of the new German film version of All Quiet on the Western Front at one of our three surviving local arthouses. It was 2:00 PM and there were about eight patrons in the audience. I still have the paperback of the original book that I bought in college for $.50 [sic] on my shelf, and I remembered much of it vividly. I have of course seen the earlier film version but I remember it less well. This film recreates the combat of the First World War with reasonable accuracy, but it failed completely, in my opinion, to capture the spirit of the book or the generation to which the author Erich Maria Remarque, himself a veteran, belonged. Warning: I can't write this analysis without a lot of spoilers about both the book and movie.
The Paul Baumer who narrates the book joined, apparently, right of high school, but he seems to have joined quite early in the four-year war, when enthusiasm had swept Germany and grown with big early successes on both the western and eastern fronts. By the time the book begins in 1917 or 1918 he is a seasoned veteran who speaks with the authority of having seen everything, including the deaths of many of his friends. He and his fellow soldiers have become masters of their craft, knowing how to find cover behind a one-foot rise in the ground, to distinguish various different types of shells and to use all their weapons with maximum effectiveness. Their superiors alternate their time in the trenches with more relaxing weeks in the rear area, when they eat, drink, smoke, and one one occasion, arrange an assignation with some French girls--an incident left entirely out of the movie. The movie delays Baumer's enlistment until the last year of the war, and he never seems to lose his innocence, which in the book did not even survive rigorous boot camp. He has the frightened, traumatized look that the Baumer of the book identifies in new, undertrained recruits, most of whom fall in battle almost at once.
The film's writer and director Edward Berger, it turns out, is 52, but I think the change in tone from the book reflects the sensibilities of today's younger generation both in Germany and elsewhere. Very few of them have known war first hand and they probably know little military history. They cannot imagine battle as anything but a traumatizing catastrophe. Don't get me wrong--battle is a traumatizing catastrophe, but soldiers only get through war by finding ways to cope--led by black humor and camaraderie.
The film also attempts to incorporate high-level history, but winds up using it to cheapen the basic plot. It includes scenes of the armistice talks between a civilian-led German delegation and allied Supreme Commander Marshal Foch, and a right-wing German general who appears to be based on Erich Ludendorff, even though he is a battlefield commander whereas Ludendorff had effectively ruled at German Army headquarters and had in fact been dismissed by the Emperor more than two weeks before the end of the war. This anonymous general becomes the cause of hero Paul Baumer's death. In the book, Baumer dies randomly and anonymously like so many of his fellows, with a few weeks left in the war. Berger insists on making him literally the last casualty of the conflict, killed at the exact moment the armistice took effect because the aforementioned general insisted on a last-minute attack to salvage German honor. I have been reading about this war for more than half a century and I have never heard of such a German attack. In a further historical inaccuracy, the film's closing credits inform us that from the time the western front first stabilized in 1914, it hardly moved at all. That was largely though not entirely true until March 1918, but from then until November--roughly the period covered by the movie--the opposite was true. First, Ludendorff's last great offensive brought the Germans nearly in sight of Paris again by July. Then, beginning in early August, an allied counteroffensive made dramatic gains as the German Army began to collapse, leading to the armistice negotiations that began in late September.
It was my own generation--including most, though not all, of my own generation of historians--that decided, in effect, that the past need not be taken seriously, since it was simply a record of the evil follies of the ruling class. It had been taken very seriously in western civilization since the French and American Revolutions because most (including even many Marxists) saw it as a story of human progress. Such a view gave historians the incentive to get it right. Now, as James Sweet wrote some weeks ago as president of the AHA before pressure forced him to recant, history has become the slave of present-day sensibility and present-day politics. Bad politics breed bad history.
Sunday, October 16, 2022
Matt Taibbi recently interviewed journalist Christopher Leonard about his new book, The Lords of Easy Money, which tells the story of the Federal Reserve Bank's response to the Great Recession and its consequences. I decided to read it. I am glad that I did.
Let me make one thing clear to potential readers at the outset: while the book tells a very important story makes very convincing arguments about its significance, its execution is a bit erratic. Leonard has to talk about a lot of complex financial instruments and transactions, and I often felt that he failed to explain them adequately to laymen, or even to convince me that he completely understood them himself. "Leveraged loans," which have become very important in corporate America, were an excellent example of this. Yet he often makes up for this by emphasizing a few basic facts and figures, and his account of the impact of Fed policy in the last fifteen years and earlier opened my eyes to various key developments of which I was not aware. I finished the book quite convinced that the foundations of our economy are now very unsound, that some kind of new collapse is almost inevitable, and that our economic powers that be remain in denial about these issues.
Most newspaper readers understand that when the big banks and our whole financial system nearly collapsed because of the subprime crisis of 2007-8, the Fed, led by Ben Bernake, embarked on a program called "quantitative easing." Essentially, it created more than $1 trillion within a few months to purchase worthless assets from the big banks to save them from collapse. Leonard gives the impression that the Fed has the legal power to create as much new wealth as it wants, any time that it wants. If that is true--and it seems to be--I couldn't help wondering when it became true. I had the impression that when the Fed was founded in 1914 or so it was capitalized by existing financial institutions and that the size of its capital put some limit on its ability to make transactions. If that was true, then the law must have changed at some point, and I am very curious as to when it was. There is, however, no dispute about the magnitude of what the Fed did beginning in the last quarter of 2008 when the crisis became dire. The Fed's balance sheet $910 billion at that moment increased to $2.1 trillion in one month. It held fairly steady for about two years, but at that point, with unemployment still peaking, it began to increase fairly steadily and went from $2.31 trillion in November 2010 to $4.5 trillion in 2015, where it remained for about three more years. Meanwhile, the Fed's open-market operations kept interest rates at or near zero, in an attempt to force financial institutions to lend money to stimulate enterprise, instead of keeping it in treasury obligations that would not turn any profit. It is here that I want to leave Leonard's argument behind for a minute and reflect on these developments from my own perspective.
In 1933, faced with an even more serious financial collapse and 25 percent unemployment, the New Deal had consciously attempted to increase the purchasing power of farmers and workers to get the economy moving again and stop the decline of GDP. While those policies didn't cure the Depression until we began mobilizng for the Second World War, they did help, and they did increase economic equality within the United States. This time, however, Bernanke, Tim Geithner, Larry Summers and the rest of the policy makers decided to increase the purchasing power and the lending power of our richest class. Leonard does not make this analogy, but it occurred to me that quantitative easing was a new form of supply-side economics. The Reagan tax cuts--the application of supply-side economics--were supposed to unleash a torrent of productive investment and set up a new round of dramatic economic growth. Instead, they began increasing the wealth gap, and although the country slowly came out of the 1980-82 recession, the average American stopped making any serious economic gains. In subsequent years much of corporate wealth and corporate borrowing went into new factories overseas, while high-paying jobs in the US became scarcer.
Quantitative easing, Leonard shows, had a similar effect. The loans it and zero-interest encouraged lenders to make did not create new factories or new infrastructure. They simply increased the price of assets like stocks which rich people can buy. That is why, as many have noticed, the movements of the stock market have become quite disconnected from the state of the economy, so that the Dow and other industries reached new highs during the recession that the pandemic triggered. I would go further and blame the same trends for the explosion of the housing market in major metropolitan areas, where those connected to the financial community and a few other growing sectors like health care have bid up the price of single-family homes until they are out of the reach of young couples.
I strongly suspect that there is another dimension to all this as well, involving the ethos of our financial sector. That sector, which the New Deal reforms like Glass-Steagall and the SEC put under significant control, regained much more freedom under the deregulation of the 1990s, which Bill Clinton, I had discovered, allowed without ever discussing it at any length with the American people. These reforms and fed easy money policies allowed financial interests to accustom themselves to dramatic and continuing increases in their income. That, I believe, is what led them into disastrous financial experiments such as the new derivatives market and subprime mortgages--bubbles that were bound to burst. Quantitative easing ensured that they would not pay the price of having the bubbles burst, and encouraged them to create new ones, and that is what they have been doing ever since. And over the last 30 years at least, Wall Street has become the leading destination of our brightest young men and women, trained in our elite educational institutions. There they become committed to the new model and devote their tremendous ambition, energy, and intelligence to maintaining it and the wealth that it gives them.
Leonard's book relies very heavily on interviews with Thomas Koenig, the one-time chief of the Federal Reserve Bank of Kansas City and a long-time member of the Fed's policy-making board. Koenig, who was born in 1946 and thus grew up (as I did) in a very different time, opposed quantitative easing from the beginning because he thought it would create bubbles and, crucially, because he thought that it would be very hard to reverse when the economy became overheated or when financial interests became over-extended again. Events have proven him right. Jerome Powell replaced Bernanke as Fed Chairman in 2018. He too had been somewhat doubtful about quantitative easing, and he initially decided that the time had come to raise interest rates, sell assets, and reduce the Fed's balance sheet. It fell from $4.41 trillion in February 2018 to $3.82 trillion in July 2019. That, however, as Leonard shows in detail, triggered a serious crisis in short-term money markets comparable to what had happened in 2008 and brought down Lehman Brothers. This time Powell reversed course, stepped in, and refunded the short-term money market that many hedge funds depended on on a massive scale. The Fed's balance sheet was already rising again when the pandemic struck in the early spring of 2020. It roes from $3.78 trillion in August 2019 to $7.17 trillion in June 2020--and it has continued to rise up to $8.96 trillion in late April of this year.
Until the last two years, the Fed took comfort from low rates of inflation. Now, a combination of factors including supply chain problems, the Ukraine war and its impact on energy prices, labor shortages in the US, and the huge deficits the federal government ran during the pandemic has returned inflation almost to the levels of the late 1970s, and Powell is rapidly raising interest rates to try to halt it. Orthodox economic authorities seem to agree that we need a new round of unemployment to control inflation. German authorities made a similar calculation in 1930-2, cutting government spending in the midst of a depression--and the result was the electoral advance of Nazis and Communists and the end of the Weimar Republic. The United States stands at a similarly perilous political moment and our establishment really can't afford to alienate the working class, but they don't seem to understand this.
The rise in interest rates has already reversed the steady increase of the stock market. If Leonard's argument is correct, it seems almost certain to trigger some kind of new financial crisis as well, since our whole system has come to depend on easy money. That might lead the Fed to reverse course again as it did in 2019. Thomas Koenig was right: it has become impossible not only to undo quantitative easing (now known under new names) but also to even halt it. The Obama Administration in 2009 missed its chance to revive New Deal principles, and the bill for that decision may now be coming due.
Occasionally a lifelong newspaper reader like myself reads or hears a news item that is so unsettling that he immediately goes into denial. One such moment occurred in the winter of 2008-9 when I read that Barack Obama had appointed Larry Summers as his chief economic adviser. A second occurred a few days ago when I was nearing the end of Leonard's book, and read that Ben Bernanke had been awarded a share of the Nobel Prize. When disastrous policies receive the highest imprimatur that our civilization offers, we are in real trouble.
Friday, October 07, 2022
Saturday, October 01, 2022
I am now on the last lap (if not the home stretch) of my political history of the United States based on presidential addresses, having finished the draft chapter on Ronald Reagan and George Bush I and begun researching Bill Clinton. Reagan's rule, I concluded, marked a turning point in American politics comparable to Franklin Roosevelt's, albeit in a very different direction. Our economic and political elites have been very comfortable with the changes he made, but they left large segments of our population behind. Those segments became the swing votes in a series of presidential and midterm elections that enabled dissatisfied voters to express their anger, but not to change the country's direction. Eventually, in 2016, a whole party turned against the establishment completely, and we are still living with the consequences of that shock.
Although Ronald Reagan and Paul Volcker did stop the inflationary spiral of the years 1965-82, they were never all that successful against unemployment, which remained at 5.3 percent when Reagan left office. The Bush I administration showed that the nation remained vulnerable to recession, and after unemployment reached 7.4 percent, Bush's vote percentage fell from 53 percent in 1988 to 37.5 percent in 1992, with Bill Clinton winning 43 percent and Ross Perot 19 percent. Clinton's victory did not however change the direction of the country. He did raise income taxes on the highest bracket from 31 percent to 39.6 percent, but he also focused on cutting the size of the federal government, getting tougher on crime, "ending welfare as we know it," and moving forward on NAFTA, which he had refused to endorse as a candidate. He warned that health care costs might rise from 14 percent of GDP to almost 20 percent by 2019 without a major reform, but Congress refused to act. And in the 1994 midterms the Republicans won the popular vote for Congress handily and gained 54 House seats for a 230-204 majority. They also gained 8 seats in the Senate and emerged with a 54-46 majority after two Democrats switched parties. The economy grew during the remainder of his term and he defeated Bob Dole handily in 1996 with 49 percent of the vote, as Perot's vote fell to 8 percent, but neither then nor in 1998 did the Democrats seriously challenge the Republican hold on Congress. And in 2000, eight years of economic growth and the achievement of a balanced budget only allowed Al Gore to defeat George W. Bush in the popular vote by 48.4 percent to 47.9 percent. Florida, which a post-election recount indicated that Gore might actually have won, was awarded to Bush without a recount by Republican officials and a Republican Supreme Court majority, giving Bush the election. The Republicans maintained their House majority but lost control of the Senate 51-49 because of another party switch early in 2001.
The reaction to 9/11 and the Republican exploitation of social issues led by gay marriage allowed the Republicans to narrowly regain control of the Senate and increase their majority in the House in 2002, and Bush managed to win another narrow victory in his 2004 re-election campaign, with a 51-48 percent margin in the popular vote and 286-251 in the Electoral College. Bush also reversed fiscal policy with two rounds of tax cuts to go with a new series of wars, and the deficit ballooned again. The unpopular war in Iraq led to another popular revolt in 2006, when the Democrats regained control of the House for the first time since 1992, winning 31 seats, and secured a narrow majority in the Senate with 5 new seats. Then came the housing market bust and the onset of a very severe recession in 2008. Hillary Clinton, the candidate of the Democratic establishment, had been the overwhelming favorite for the Democratic nomination, but a new face, Barack Obama, excited the nation and defeated her in the primary campaign. Obama won the biggest Democratic victory since Lyndon Johnson over John McCain, winning the popular vote 53-46 percent and the Electoral College 365-173. The Democrats also scored another big win in Congress and emerged with majorities of 60-40 and 254-181. Many believed that a new Democratic era was at hand.
Unfortunately, Barack Obama proved even before he took office that he would not depart from the new post-Reagan economic and foreign policy orthodoxy, appointing Larry Summers as his chief economic adviser and Hillary Clinton as his Secretary of State. His economic team reacted to the crisis by bailing out the big banks, rather than directly assisting the ordinary Americans who were losing their houses and jobs, and he failed to mobilize the anger in the country against financial interests, as Franklin Roosevelt had done. Meanwhile, he withdrew troops from Iraq, but increased them in Afghanistan, and orchestrated another disastrous change of regime in Libya. The Affordable Care Act--a very controversial measure--was his only major legislative achievement, and the Republicans regained the House with 63 new seats, 257-178, and wiped out most of the Democratic majority in the Senate with 6 more seats there in 2010. Obama nonetheless managed to win re-election over Mitt Romney with a 51-47 popular vote margin and 332-206 in the electoral vote, but the Democrats regained only 13 House seats, cutting the Republican edge to 234-201, while increasing their Senate majority to a still-narrow 53-47. Those margins made any new legislative achievements impossible, and in 2014 the Republicans regained control of the Senate, 54-46, with nine victories, and gained 13 more seats in the House for a margin of 247-188.
Dynasties had become fashionable in this era of American politics, and pundits in 2015 expected Hillary Clinton--Obama's annointed successor--to contest the presidential election against Jeb Bush. Clinton as it turned out faced a surprisingly serious challenge from another outsider, socialist Bernie Sanders, but defeated him for the nomination. Neither Bush nor any other elected Republican official, however, stood a chance against the real estate mogul and reality TV star Donald Trump, who not only ran explicitly against the establishment's policy positions but reveled in violating various taboos of elite American politics and culture. As I have pointed out here in previous analyses, neither Trump nor Clinton really excited the voters, and neither did as well in the polls as Romney and Obama in 2012. Clinton won the popular vote 48-46 percent with huge popular majorities in the northeast and on the west coast, but Trump flipped six key states to his side and won the electoral vote 304-227. The Republicans also won the nationwide popular vote for the House and retained a 241-194 majority, and held on to the Senate, 52-48.
Trump's main legislative achievement--parallel to George W. Bush and Ronald Reagan--was another round of tax cuts for corporations and the rich, and he was no more successful than Obama in winning the nation to his side. Two years into his term the Democrats won the popular vote for the House by a whopping 9 percent, gained 41 seats, and emerged with a majority of 235-200, their first since 2008. The Republicans, however, completed their takeover of several red states and gained 2 net seats in the Senate, increasing their majority to 54-46.
Trump proved in dozens of ways that he was utterly unfit to serve as president, and he was less successful than Bush II or Obama in winning the American people over to his side, particularly after the COVID epidemic struck. Although in 2020 a number of key states were quite close, Joe Biden--another establishment Democrat--defeated him solidly, 51-47 percent in the popular vote, and 306-232 in the Electoral College. Yet nationwide--thanks in part to Republican gerrymandering in several states--the deadlock continued. The Democrats did manage to tie the Senate 50-50, winning control thanks to the Vice President's vote, but they lost 15 House seats, reducing their majority to 220-215. Biden and the Democrats managed to pass a trillion-dollar infrastructure bill and an important measure focusing on climate change, but neither one has as yet had any real impact in the country. Meanwhile, inflation has returned with a vengeance after remaining under control for 40 years, and as I write, Republicans and Democrats are estimated to have 68 percent chances of regaining the House and keeping the Senate, respectively. Social issues, led by abortion and education, have become more important than ever.
On the one hand, the failure of either party to reverse the economic trend towards inequality in the last 40 years has kept the electorate swinging back and forth, punishing first one party and then the other and contributing to gridlock. Meanwhile, one party--the Republicans--have completely abandoned modern political traditions, denying the validity of elections, contesting them by various strategies up to and including insurrection, and relying on the Supreme Court to implement much of its agenda. Biden and the Democrats are not simply trying to hold onto power, but to save US politics as we have known them--and so far Biden has been less successful than either Clinton or Obama in forging a real bond with the electorate. Meanwhile, long-term problems such as the status of immigrants and the cost of health care have only gotten worse. Clinton warned in 1993 that health care already cost us 14 percent of our GDP and warned that by 2020 that figure might reach almost 20 percent. He was exactly right: it cost 19.8 percent of GDP in that year. The trend towards greater inequality has continued almost unabated, and the influence of money over politics has grown. With the Federal Reserve Board actively trying to bring about a recession to check inflation, Democratic prospects look dreadful in 2024. A very large, intergenerational mass of voters clearly has little or no faith in our political establishment--and I can't say that I blame them.
Saturday, September 24, 2022
The war in Ukraine and worldwide inflation and its consequences lead the news these days. Many stories note that they are related. The war has led to sanctions against Russia and a retaliatory cutoff of energy exports from there, sending energy prices skyrocketing. Both, in my opinion, are the result of something much bigger: a crisis of globalization and its destructive effect on political authority around the world. I cannot at this point see how we are going to get out of it.
As the world discovered in 1914, economic globalization relies on peace. It encourages nations to depend on other continents for critical materials--food then, food and energy now. When war comes those flows are disrupted. When that happened in the First World War, both Germany and Japan eventually decided to try to create autarkic empires that would not be vulnerable to wars and world economic swings. The United States led the coalition that defeated them and promoted globalization in the non-Communist world--but western governments continued to regulate trade and currencies effectively. The deregulation of the world economy began in the 1970s with the end of the gold-exchange standard, and the gradual opening of Chinese markets and the fall of Soviet Communism spread the new system all over the world.
Like the world of the 1920s, the world of the 2000s had become very financially interconnected. In 2008, as in 1929, a credit crisis in the United States rapidly spread around the world. China alone, as Adam Tooze pointed out in his book Crash--which I reviewed here--decided to fight the crisis with massive government spending on infrastructure, as both Germany and the US had done in the 1930s. In the west, Tooze shown, central bankers, not elected leaders, determined the response, and transferred the burden of the crisis from the bankers who had caused it to ordinary citizens. The pandemic caused the next economic crisis, and massive infusions of capital from central banks appeared to be getting us out of this one. But then inflation struck more than a year ago.
The inflation we are experiencing now replays the years of my young adulthood, from 1965 to 1982 or so, when prices tripled. They had already increased 50 percent by 1973 when the Arab oil embargo struck, and they had doubled by 1978 before further oil shocks raised inflation into double digits again. Twice the US government took significant action to try to stop the inflation. Richard Nixon in 1971 imposed wage and price controls, which cut inflation from nearly 6 percent in 1970 to a little over 3 percent for the next two years and insured his re-election. After the oil shock in 1973 the US froze the price of domestic energy--a step which would have reduced inflation here very significantly today, since we are now energy self-sufficient. Ronald Reagan and then-Fed chair Paul Volcker, however, finally broke the back of inflation with high interest rates leading to nearly 11 percent unemployment in 1982. That was the formative experience for the Boom generation of economists and now the Fed is replaying that scenario. Although many of them won't admit it, most orthodox economists really want a recession to control inflation, and I am not aware of a single western political leader who is trying to challenge that policy. That threatens our political system.
Joe Biden's 60 Minutes interview last weekend illustrated what I mean. Inflation is the nation's leading concern right now and will probably cost the Democrats control of the House, which will paralyze our politics and make it impossible for the Democrats to strengthen their case for re-election over the next two years. Trump meanwhile is running neck and neck with Biden in national trial heats for the 2024 election--and I feel sure that Kamala Harris, who has never establish a real rapport with the American people, would poll significantly worse. Biden in the interview simply bragged that energy prices were down and that things could be worse. He had nothing to offer, because the federal government has turned the care of the nation's economic health over to the Fed. Rather than beating the Trump Republicans by taking big, active measures to restore economic health, the Democratic leadership seems to be counting on prosecutors in New York State and the Justice Department to bring Trump down. They are in other words counting on the Deep State, which plays into Trump's hands politically. That may succeed against Trump, but not against Ron DeSantis.
Similar political situations may be found in other parts of the world. The German government courageously lined up with NATO to sanction Putin but has held back on giving Ukraine its best weapons, and now faces a major energy crisis because of cutoffs of Russian gas. Inflation, as I have just learned, is much more serious in countries like Lebanon and Turkey and may threaten political collapse. Prime Minister Truss of the UK has just announced a new round of high-income tax cuts, panicking financial markets there. The most stable European country by far seems to be France, whose leader was just comfortably re-elected--partly, perhaps, because of de Gaulle's decision to use nuclear power to make France largely energy independent.
A friend of mine, a scholar of China, has just informed me of a further breakdown of globalization. Frightened by the crisis over Taiwan, she says, many foreign companies are pulling out of China so has not to be badly hurt by western sanctions against China if an attack on Taiwan occurs. It seems clear, as Robert Skidelsky argued in his book Money and Government, which I also reviewed here--that western countries should try to become self-sufficient in more key products, or at least make sure that they buy them from friendly states. But are governments actually strong enough nowadays to make those changes? They were from about 1870 until the late twentieth century, when democracy was a relatively new idea and governments had to mobilize resources to face serious foreign threats. They may not be now. We don't know what the consequences will be.