Wednesday, February 1, 2023

The Unbearable Tightness of Peaking

Sandwichman came across a fascinating and disconcerting new dissertation, titled "Carbon Purgatory: The Dysfunctional Political Economy of Oil During the Renewable Energy Transition" by Gabe Eckhouse. An adaptation of one of the chapters, dealing with fracking, was published in Geoforum in 2021

As some of you may know, the specter of Peak Oil was allegedly "vanquished" by the invention of methods for extracting "unconventional oil" from shale formations (or "tight oil"), bitumen sands, and deep ocean drilling. A large part of that story was artificially low interest rates in response to the stock market crash of 2008 and subsequent recession. 

What Eckhouse's dissertation and article explain is the flexibility advantage that fracking provides because the investment required for a well is two orders of magnitude less than for exploiting a conventional field and the payback time is much shorter. The downside is that the cost per barrel of the oil is much higher. Until now loose monetary policy has buffered that cost differential.

The strategic advantage of fracking, combined with the volatility of oil prices over the past two decades and uncertainty about possible future government decarbonization policies (what oil industry figures are ironically calling "peak oil demand") are making large, long-term investments in conventional oil extraction -- investments of the order of, say, $20 trillion over the next quarter century -- less attractive. 

Although the latter might sound like a good thing, what it implies is a full-blown energy crisis occurring much earlier than any purported transition to renewable non-carbon energy sources. I wouldn't be surprised to see reactionary politicians and media agitate a "populist" movement to scapegoat "climate-woke" activists and scientists as saboteurs responsible for "cancelling" long-term investment in a cheap oil economy.

I had forgotten the oil price rise of 2007-08 when a barrel of West Texas Intermediate crude rose from $85 in January 2007 to $125 in November to $156 in April 2008 to $190 in June. Now I remember my sense of awe at the time and dread that something really, really bad was soon going to happen to "the economy." But then nothing happened. Nothing, that is, but the collapse of Bear Stearns and Lehman Brothers, a stock market crash, emergency bank bailouts, and subsequent central bank monetary policy of low, low interest rates. But "the fundamentals were sound."

It scrambles my brain trying to distinguish cause from effect. Did the ultra-low post 2008 crash low interest rates incidentally drive the subsequent fracking boom? Or was specifically a fracking boom one of the core objectives of the low interest rate regime?

Whither "peak oil"? According to Laherrère, Hall, and Bentley in How much oil remains for the world to produce? (2022) "the end of cheap oil" did not go away when the oil can was kicked down the road:

Our results suggest that global production of conventional oil, which has been at a resource-limited plateau since 2005, is now in decline, or will decline soon. This switch from production plateau to decline is expected to place increasing strains on the global economy, exacerbated by the generally lower energy returns of the non-conventional oils and other liquids on which the global economy is increasingly dependent.

If we add to conventional oil production that of light-tight (‘fracked’) oil, our analysis suggests that the corresponding resource-limited production peak will occur soon, between perhaps 2022 to 2025.

Including "all liquids" pushes that horizon out to 2040. In short, we overshot peak oil by a couple decades with the aid of loose money and tight oil, with a little additional help from the Covid pandemic. Those of us with a memory longer than the news cycle may recall that the current round of interest rate hikes by the Fed was initiated in response to inflation, which reached a 40-year high in June of last year due to record gasoline prices. Lower demand for gasoline brings down gas prices while higher interest rates may discourage new investment in fracking posing the specter of an oil supply crunch a couple of years down the road.

The cartoon below illustrates the loose money/tight oil -- tight money/peak oil dilemma:

Sunday, January 29, 2023

No More Noma

Eating is a necessity and can be a great pleasure.  It also has a symbolic dimension in every culture.  In the long history of European civilization, going back at least to the Romans, it has been a form of status distinction, allowing the elites at the top to display their separation from the masses below.

For many centuries elite food was set apart by its ingredients, like caviar, choice cuts of meat, difficult to procure spices and rich dairy products.  Restaurants in times past would announce their status appeal not only through their prices, but also menus that advertised rarity and bounty.

Today this emphasis on ingredients is not enough.  A general increase in prosperity and the rise of a large middle-to-upper class that can afford them means that status distinction must now rest on much greater inputs of human labor, both the highly skilled labor of innovator-chefs and the line labor of dozens of underlings who precisely execute each minute twist of preparation or presentation.  Add to this the aura of world-transforming inventiveness claimed by the tech industry, and you have Noma and restaurants like it.

There has always been a tension between elite appeal and nourishment in cuisine.  The excessively rich foods of the uppermost stratum are unhealthy, which may be one reason the humbler fare of the peasantry was sometimes gussied up and given a place on the menus of the rich, like gustatory Eliza Doolittle’s.  We will see whether the chem lab restaurant ethos can find a middle ground by absorbing some of the foods people used to eat before eating was “disrupted”.

Saturday, January 21, 2023

Extending Capital to Nature, Reducing Nature to Capital

The Biden administration has announced it is inaugurating a program to incorporate the value of natural resources and ecological services into national income accounts.  The New York Times article reporting this development predictably portrays the response as divided between two camps: on the one side are environmentalists, who think this will lead to more informed decision-making, and on the other Republicans and business interests who fear it is just a stalking horse for more regulation.

For the record, here is one environmentalist (me) who thinks it’s a bad idea—not completely, but mostly.

Are the quality of our environment and the availability of natural resources crucial to our well-being?  Certainly.  Can these effects be captured by economic measurement?  Mostly no.  The monetary economy is, almost by definition, the realm of the fungible.  Money is what allows us to have more of one thing at the cost of less of another, and then to change our minds and switch back to what we had before.  Pizzas can be bought and sold for money.  School buildings can built for money.  So as a society we face a choice between different consumption categories, one that is reversible if attitudes shift.

What is fundamental about most natural resources is that they are not fungible.  If you destroy an old growth forest and use the proceeds to construct a highway—not to mention a high-end housing development in Sun Valley—you can’t turn around and liquidate the road to get the forest back.  And ecological services, critical as they are (they are often have literal life and death consequences), are not produced or consumed for money, which means they are outside the chain of exchange that generates the fungibility of the goods inside it.  The monetary value attached to them by economists is strictly notional, and it matters that no one will actually pay for their provision or receive income from it.

The wiser approach is to have parallel accounts, many of them, and measure the impacts on our well-being in units meaningful to them.  Let the fungible money economy be recorded as is, and keep close track of resource depletion, the loss of ecological services and pollution in easily understood metrics of their own.  Reducing nature to measures of monetary gains and losses drains it of what makes it different and intrinsically valuable. 

PS: I’ve written two books that develop this argument in different contexts, Markets and Mortality: Economics, Dangerous Work and the Value of Human Life (1996) and Alligators in the Arctic and How to Avoid Them: Science, Economics and the Challenge of Catastrophic Climate Change (2022).

Wednesday, January 11, 2023

Herb and then Barkley: we will try to sing your song right

 They are falling all around me

They are falling all around me
They are falling all around me
The strongest leaves of my tree

Every paper brings the news that
Every paper brings the news that
Every paper brings the news that
The teachers of my sound are movin’ on

Death it comes and rests so heavy
Death it comes and rests so heavy
Death comes and rests so heavy
Your face I’ll never see no more

But you’re not really going to leave me
You’re not really going to leave me
You’re not really going to leave me

It is your path I walk
It is your song I sing
It is your load I take on
It is your air that I breathe
It’s the record you set
That makes me go on
It’s your strength that helps me stand
You’re not really
You’re not really going to leave me

And I have tried to sing my song right
I have tried to sing my song right
I will try to sing my song right
Be sure to let me hear from you

--Bernice Johnson Regan

Barkley Rosser, 1948-2023

I've just learned that Barkley Rosser, the mainstay of this blog, died yesterday.  I'd crossed paths with him in Madison, WI in the early 70s and then reconnected in the late 1980s, even coauthoring a paper with his wife Marina in 1990 (I think).

Barkley and I would get together for a meal most years during the economics meetings.  He was a human tornado, quick and vociferous, backed up by a vault of reading, study and thinking.  He was uncommonly wide-ranging: although his reputation rested primarily on his work in complexity theory and nonlinear dynamics, he was a textbook coauthor in comparative systems and served as editor of the Journal of Economic Behavior and Organization.  Of course, if you read his blog posts here, you would know how wide his horizons were.

Bark had a great sense of humor, loved to laugh, and was optimistic despite his cynicism.  He went out of his way to help others.  Given his never-ending intensity, I'm glad his heart held out for this long.

One of the sadder parts of aging is having to say final goodbye's to so many people who have meant so much.  Bye Bark.

Saturday, January 7, 2023

Memo to Janet Yellen

 Mint the Coin!

Friday, January 6, 2023

Herb Gintis, 1940-2023

My dissertation chair, Herb Gintis, died yesterday in Northampton, Mass.  We didn’t stay in touch after I graduated—our interests and perspectives diverged—but I will always appreciate what he gave of himself at a difficult time in my life.

After my first dissertation went awry (don’t ask!), Herb, who had been on my committee, stepped in and helped me identify a new topic.  I had to learn a new set of tools, and he was patient as I stumbled through what I now recognize as elementary technical hurdles.  He even watched my kid on a couple of occasions, so I could have a few hours of freedom.  I’ve heard dissertation advisors don’t always do this!

I confess that our final session together was rocky.  At my dissertation defense I attacked my own work, and it was Herb who defended it.  He even had to convince me to publish the game theoretic modeling in a journal—I had become so embarrassed by it.  It was a terrible closure to a relationship for which I remain deeply grateful.  In recent years I had thought about contacting him again just to let him know how much his generosity meant to me, but I delayed....and now it’s too late.

So I’m taking this opportunity to say that, although Herb could be crusty—he had a reputation for this—he was also a true mensch.  He had an open mind and bottomless curiosity.  He rose to the top ranks in a field, evolutionary game theory, he didn’t take up seriously until middle age.  His intellectual partnership with Sam Bowles resulted in one of the most productive twosomes in the history of economics.  (Can you name any others?)

Here is Herb’s Wikipedia entry, and here is his website.  An impressive guy.

Wednesday, January 4, 2023

Why the Battle over Electing a House Speaker

I don’t know how this will turn out, and maybe what I’m about to say will be disproved by events, but here goes:

I think the Republicans face a difficulty in electing a Speaker that the Democrats wouldn’t have, and it will be hard to overcome.  Democrats may disagree intensely, but they all have legislative agendas to pursue, and in the end they are likely to compromise in order to get at least some of what they want.  Republicans have little to no agenda.  In the last presidential election they didn’t even have a party platform.  Thus there is no incentive to compromise.  If you’re a Republican congressman eager to cement your brand as a “patriot” who won’t settle for RINO’s like Kevin McCarthy, what would motivate you to vote for him?

True, representatives, even very right wing ones, still want federal money for their districts and to win favors for friends and donors.  But these things usually take the form of riders to bills for other purposes or fine print in legislative language.  The whole point of the process is that it occurs out of public purview and is therefore difficult to use to break highly visible logjams like the speakership.  The IRA compromise among the Dems did involve side payments to West Virginia but primarily took the form of substantial trims to programs most Democratic senators supported.

What will a compromise that assembles a working Republican majority in the House look like?

Friday, December 30, 2022

A New Wellbeing Rankings Study

 David G. Blanchflower of Dartmouth and Alex Bryson of University College in London have just published a paper at NBER 30759 "Wellbeing Rankings," which provides some provocative ideas and data on various possible measures of well-being in societies. This reflects dissatisfaction with the tendency to use a single measure, "life satisfaction" on finds in the happiness literature, with ranks of nations widely publicized based on these. Traditionally Nordic nations such as Finland and Denmark come out on top of these.

This study argues one should consider not just a positive measure, but consider negatives that detract from well being as well.  So, drawing Gallup and some other organizations that actually daily track people in many nations, they look at four positive affects: life satisfaction, enjoyment, smiling, and feeling well-rested along with four negative affects: pain, sadness, worry, and anger. Clearly there are major cultural differences across nations regarding some of these, such as smiling, but these are what they go with.

They also consider individual US states as "political units" and throw them into the mix. This leads to one of the larger unanswered question mbekiarks for this study. When they rank entities on their net well beings, US states generally do well, in fact provide 9 out of the top 10 entries, with only Taiwan at 8th not one, and in the top 20, only Austria, the Netherlands, and Iceland manage to get in as well.  But somehow the US as a nation performs much more poorly, at 150th lower than the lowest state, West Virginia at 122. The lack of explanation of this is a serious problem.

There is much not to expect in all this. China is 30th, Denmark 38th, Finland 51st, Russia 87th, UK 111th, US 150th Ukraine 185th. The top 10 are Hawaii, Minnesota, North Dakota, South Dakota, Iowa, Nebraska, Kansas, Taiwan, Alaska, and Wisconsin. The bottom three are Palestine, South Sudan, and Iraq at 215 (Iran is at 205).

Something that happens is that some places do well on the positives but not on the negatives and vice versa. Thus Bhutan is 9th on overall positives, but lots of pain there and it ends up 99th overall.  The top four just on positives are Paraguay, Indonesia, Laos, Hawaii. The top four on negatives (least harm) are Taiwan, Somaliland, Uzbekistan, China, 

So, what is putting China and Taiwan so high on reducing negatives? China is 8th on avoiding pain and 2nd on avoiding sadness. Who is ahead of it on avoiding sadness? Taiwan. Hong Kong is well behind both of them at 79th. 

And Russia? It has traditionally done poorly on positives on these, with mid-range life satisfaction, they are 160th in smiling (which they tend to sneer at publicly doing). But like China it does well on two negatives, coming in at 11th on worrying and 8th on anger. This raises the question of whether correspondents in authoritarian nations are willing to be honest about certain questions.

There is much to chew over this, and I think we shall be hearing more about this study in the future, despite its flaws.

Barkley Rosser

Sunday, December 25, 2022

Goodbye 117th Congress

 Merry Christmas, you all.

So, the 117th Congress is done, and Nancy Pelosi is ending her historic run as Speaker of the House.  It passed more legislation than we have seen happen in a congress in a very long time.  While Joe Biden did not get all he wanted, much less the progressive caucus, a great deal as passed, some of it, like the infrastructure bill, that has been languishing for decades. At the tail end we got the right to marry confirmed, reform of the electoral act to prevent a VP from messing with countng votes, the CHIPs act and the Inflation Reduction Act, with inflation actually declining right now, if not due to that act particularly.

Also managed to get a spending bill passed under the wire to cover the next nine months, and the J6 comm released its report and Ways and Means got Trump's taxes.

What did not get through? An immigration bill. It looked that a modest one that would please large numbers of people on both sides was put forward by Synema and Tillis, legalising the DACA dreamers while increasing security at the border. But in the end it just could not get through. Politicians love to browbeat this issue too much to actually do anything useful about it.

The other biggie is no debt ceiling increase. I read that this would take "too much time," although I do not see why. But it did not pass, so this will become a chief playting for the GOP in the House this coming year.

There is also the problem that the green stuff in the IRA is very protectionist, violating WTO rules, and really angering European allies of the US. But I guess Biden just has Pennsylvania, Michigan, and Wisconsin on his mind.

Barkley Rosser

Saturday, December 17, 2022

This Life: faith, work, and free time, part two

At the beginning of this year, I posted a response to Martin Hägglund's This Life: Secular faith and spiritual freedom. In October I learned of a conference next May in Belgium at which Hägglund will be one of the keynote speakers. So I submitted an abstract to present a paper.

When it came time to start working on a draft for the conference, I remembered my blog post and it formed the core for the rest of the draft. In that earlier post, I wrote about Marx's identification in the Grundrisse of the inversion between necessary labour time and superfluous labour time. During editing of a first draft of the conference presentation I took a break and went for a walk. There it struck me that the inversion of necessary and superfluous labour time was a parallel to the inversion of this life and the supernatural that Ludwig Feuerbach had criticized. The following is an excerpt from my draft:

Thursday, December 15, 2022

The Political Economy of Effective Altruism

 Back in the day, I used to give talks on child labor.  I would always begin by saying that boycotts and shaming of corporations, while understandable as an emotional response, were unlikely to do much for the world’s children.  This was because very little child labor is employed in making internationally tradeable products.  Moreover, simple prohibitions don’t get at the root causes, which need to be identified and addressed with national and international policies.  Most of the talk would be about those causes, and I would end with a call for people in the audience to get involved politically, so that US policy would at least not reinforce the conditions that impose poverty and insecurity on much of the world’s population.  I would give a list of specific demands.

Feeling like I had communicated a complex topic persuasively and provided a motivating political spin at the end, I would ask for questions.  Inevitably, the first would be some variation on “What should(n’t) I buy?”  People were so enclosed in a worldview in which only individuals could take action, and “collective action” meant lots of individuals were doing the same thing, that my argument simply couldn’t get through.

Effective altruism is a variation on the same theme, only substitute philanthropy for shopping.  If “what should I buy?” springs from the consumption portion of income, “how should I give?” pertains to  the portion not dedicated to current or future consumption.  The first question would be asked by a citizen of the 99%, the second by a one-percenter.

But it’s worse than that.  Conscious consumerism’s only fault is that it occupies the ethical place that should be the seat of politics; conscious philanthropy adds the additional problem that the surplus income it channels is itself the consequence of choices that can make the world a better or worse place.  To put it bluntly, effective altruism allows people to exploit or even defraud others to become rich, so long as they expiate themselves by giving away the surplus portion of their riches in accordance with an approved set of criteria.  Its ideological function is cemented by the criteria themselves, which call for discrete interventions with measurable outcomes; these can be applied to philanthropic donations but not to the more systemic interventions addressable by politics.

So we come to the fact that Samuel Bankman-Fried gave enormous sums of money to politicians, think tanks and other receptacles whose purpose was to enable him to make yet more money, for instance by expanding the pool of potential investors in his crypto exchange to pension funds.  He gave more or less equally to Democrats and Republicans.  (The official donations to the Dems were slightly greater, but by his own admission Bankman-Fried channeled more of the dark money to Republicans.)  The favored Dems were, not surprisingly, corporate-friendly third-wayists, like the Center for American Progress.  Objectively, no matter how brilliantly he might divide his philanthropy between malaria bednets and techie projects to avert an AI singularity, his contribution to world betterment was more than offset by shoring up the global order via the political arm of his investments.  Effective Altruism exists to foreground the first and obscure the second.

The prominence of both consumerist and philanthropic strategies to fix what’s wrong with the world are reflections of an immense political vacuum.  Somehow, and quickly, politics needs to be rebuilt from the ground up: a vision of genuine change that can grapple with the extreme challenges that face us, political movements organized around elements of that vision, and a few victories along the way to give us strength and spirit.  The goal would be to live in a world in which “what should I buy?” and “how should I give?” were no longer regarded as important political questions.

What Is The Bielefeld School Of Economics?

 This is about a paper I have just written for a special issue to appear in a journal I used to edit about the late economist, Peter Flaschal. Who most of you are probably thinking, although maybe not all of you? He was a heterodox macroeconomist located for his entire career at Bielefeld University in Germany.  He coauthored a lot with a group of economists who either were on the faculty there, at least for some time, or visited there frequently. Some of the other members of this group are the also now late Carl Chiarella of the University of Technology in Sydney, Australia, Willi Semmler of the New School in New York, Peter Skott of U-Mass Amherst, Toichiro Asada of Chuo University in Tokyo, Reiner Franke of Bremen University in Germany. They have tended to work on fairly mathematical nonlinear dynamics models that can show both growth and endogenous cycles, including complex ones such as chaotic, so, unsurprisingly, up my alley. 

Their most important influence was models of this sort by the late Richard Goodwin, who had a Marx-influenced predator-orey model of class struggle syclical fluations. Their early models were labeled as Kynes-Wicksell-Goodwin (KWG) models, But then they picked up invnentory adjustment models from Metzler, leading them to label their models Keynes-Metzler (KMG) models.  Around 2009 Flaschel in particular, sort of following Goodwin on this, put more emphasis on both Marx and Schumpeter, relabeling their models as Keynes-Marx-Schumpeter (KMS) models. Their models differ both from the New Keynesian models that assume rational expectations and dominate much of academic macroeconomics nnd are paid attention to by central bankers, and also Post Keynesian models, that tend to be less mathematical, although both have also been influenced by Kalecki and Kaldor. Partly because they have had trouble publishing in to journals and have never created any of their own like the Post Keynesians have, they have done a lot of book writing, with Flaschel an author of coauthor on 17, not counting even more he edited or coedited, mostly with people named above.

Flaschel and several of them also advocating somewhat leftish policies for government intervention in economies to stabilize the endogenous fluctuations their models show to be prevalent, with these largely driven by real effects involving wage-price dynamics and inventory adjustments rather than financieal fluctuations, although they have well-developed financial sectors in their models, and some of them have done a lot of financial modeling, notably the late Chiarella, who wss a coeditor of the Journal of Economic Dynamics and Control for a while. 

Anyway, the policy angle that Flaschel especially came to advocate, along with Proano and Asada has been flexicurity, an approach inspired by policy in Denmark. It combines having a flexible labor market on both sides, free hirigin and firing with strong labor organizing, and a strong social safety net with government serving as an "employer of first resort." They have also advocated educational reforms to enhance all this as well as the use of pension funds for financing real capital investment, again with an idea to help smooth out business cycles. This approach has many supporters in the EU, where Flashel's writings on this have gotten some attention, although critics have called them "naive."

Anyway, I gave them this label of "Bielefeld School" in a Foreword I wrote for one of their books in 2995, Foundations for a Disequilibrium Theory of the Business Cycle: Qualitative Analysis and Quantittative Assessment, by Chiarella, Flaschel, and Franke our of Cambridge University Press. The label has not caught on much, and they have not gotten as much attention as I think they deserve. My paper compares them in more detail to Post Keynesians, who are perhaps more combative about their heterodox relations with mainstream economics and only barely aware of these people, who sometimes put them down for their sometimes lack of mathematical rigor. I suggest that their common admiration for Kalecki and Kaldor and Goodwin whose models can generate complex dynamics is a possible opening for them to communicate and support each other, especially given that they are generally in the same neck of the ideological and policy woods, with the modern monetary theorists full emploiyment ideas looking somewhat like those of this flexicurity approach that does not get talke about in the US.

Barkley Rosser

Saturday, December 3, 2022

Mourning The Late Jiang Zemin?

Former Chinese leader Jiang Zemin died at age 96 on Nov. 30, curiously just as the worst outbreak of demonstrations to happen in China since 1989 happened, probably now come to an end, as China both suppresses them, arresting some people based on phones and visual surveillance, as well as some loosening in certain locations of the zero covid policy. Jiang came to power initially in the immediate wake of Tienanman Square in 1989, reportedly pulled up the ranks by retired elders, the unofficial but powerful "Sitting Committee" of the Politburo. Someone with a record as a somewhat opportunistic technocrat, it was initially thought he would be weak, but he remained in power until 2002, and continued to hold the Chairmanship of the Military Commission until 2004, while somewhat weaker Hu Jintao had become General Secretary of the Party and also President. 

Indeed, in his efforts to centralize power totally on himself, the networks of those linked to other powerful figures he needed to put down were probably more allied to Jiang than to Hu. If there was a serious alternative to Xi, it was probably Jiang more than Hu, although obviously Jiang had become very old and ill. 

But his death does pose a difficult moment for Xi. Apparently the state funeral will be this coming Tuesday, Dec. 6. There has been a history of political trouble following the deaths of former leaders, with the Tienanman Square uprising following the death of former leader Hu Yubang. It is not that Jiang was all that liberal, indeed was probably less so than his successor, Hu. But many are indeed making unfavorable comparisons between him and Xi, with his regime being remembered for being more open and free and tied to the rest of the world, with China joining the WTO during his time, as well at the period experiencing solid and unbroken economic growth. China has become very isolated, even more so with the covid locdowns that have become the focus of recent demonstrations.

Probably Xi will be able to get through this without too much upheaval, especially with the demonstrations against the lockdowns apparently shut down.  Nevertheless, it is reported that this funeral has many people talking more openly about unhappiness with the current regime.

Barkley Rosser

Friday, December 2, 2022

Economic Policy After The Midterm Elecions

 Will economic policy change much aa a result of the midterm elecrtions? After all, the GOP has taken the House of Representatives, if only narrowly, with inflation and the economy supposedly the top issue, especially for those supporting the GOP. Will this reappearance of "divided government" have an impact on economic policy? My bottom line is probably not too much, although there is the serious possibility of some major drama and damage happening during this coming year.

On the matter of having "divided government," I must note that we already have been having that, if not in the way this is usually posed. While Dems nominally controlled both the White House and Congress, although only partially so in the Senate given the need for 60 votes to win on any issue not tied to the budget and thus able to managed by reconciliation (and even on those not necessarily, given two Dem senators not always supporting Dem budget-related proposals), what has been left out of such discussions has been the Supreme Court. It has been dominated strongly the past two years by serious conservatives appointed by GOP presidents who have taken an aggressive stance on overturning policies accepted by past presidents and Congresses dominated by both parties. An egregious example of this regarding economic policy has been the restricting of the EPA's ability to regulate pollution, a serious matter.

Of course a major reason the change of control of the House will not have all that much effect on inflationary policy is that the Fed is the lead entity on that, and I do not see the Fed changing its policy that much in response to the election, whatever one thinks of the Fed's policy. As it is they have been fairly sharply raising interest rates recently, with the value of the US dollar being quite strong, with this in fact beginning to show some signs of inflation beginning to slow down, if still much higher than most people would like it to be. And we now have hints from Powell that while the Fed is still intent on further interest rate increases, those may also begin to slow down somewhat, maybe only 50 basis points up in December rather than 75. Again, these considerations look disconnected from the election outcome.

Obviously where the House may be able to change economic policy somewhat involves fiscal policy, given the House role in budgetary policy. And they may in fact make efforts to reduce or eliminate funding for certain Biden admin initiatives, particularly some in the Inflation Reduction Act (IRA). As it is much of Biden's fiscal policy will not be affected. The probably somewhat inflatoinary ARPA is largely over, although there is still some disbursement of funds from it still happening. Also, the infrastructure and CHIPS acts seem to have some GOP support, so will probably be largely left alone.

What seems to be the top target in the IRA is funding for increasing the number of auditors in the IRS, with the GOP having put out all kinds of phony scare stories about these agents to be hired showing up armed at the doors of all kinds of middle class people. As it is, many of those to be hired are supposed to help out with such things as answering telephones, which most of the time now does not happen, with this sort of thing having become a problem due to many funding cuts in recent years for the IRS pushed by the GOP in Congress. In terms of enforcement the new agents are supposed to focus on higher income scofflaws as well as corporate ones, not middle or lower class ones. In any case, if the GOP-run House does succeed in cutting this funding, this will be inflationary due to reducing tax revenues. 

Another fiscal policy matter they might well push, although this is more likely to get blocked by the Senate or Biden veto is again cutting tax rates for higher income and wealthier people. This would also be inflationary if it gets implemented.

Arguably anti-inflationary would be cuts to Social Security and Medicare, although these are less likely to get passed, with I suspect some GOPs in Congress not wanting to get on board such cuts. But in fact cuts to Medicare might lead to higher costs rather than lower ones for recipients, and any changes to Social Security, if they were to happen, would probably take the form of raising the retirement age, only affecting Social Security outlays sometime in the future, not anytime soon.

Probably the only possibly anti-inflationary policy they would push might be for various policies to increase fossil fuel production in the US. These are likely to be blocked by veto if not the Senate, and would only have a fairly small impact some time in the future, given that as of now oil companies are sitting on lots of unused permits for drilling on public land. And one of the items the GOP loves to talk about a lot, the XL pipeline from Canada, would have zero impact on oil production in the US, and probably near zero even on production in Canada, as most of that oil gets out by other means anyway.

What the GOP in the House seems mostly obsessed with is having lots of hearings, with almost none of these having anything to do with economics, much less inflation in particular. Their top priority seems to be to expose the salacious contents of Hunter Biden's laptop, which like the 8 in a row Benghazi hearings will find nothing because there is apparently actually nothing on there about Joe Biden involving anything that actually happened, although that will provide lots of opportunities for GOP Reps to get on Fox News and its crazier cousins to promise that the next day will bring that witness that will surely show how bad Biden was. Hearings on Afghanistan, Fauci, and much else will also be similarly irrelevant to economic policy, although if they have hearings on trying to reduce immigration, well, like cutting funding for the IRS, this will likely be inflationary, not the opposite.

The possibility for drama involves the old saw matter of the debt ceiling, which the newly crazy GOPs in the House may well be willing to resist raising while making unacceptable demands to the point of triggering a default, which could indeed bring crashing financial markets and a global recession, with at least some degree of recession having non-trivial probability of happening anyway this coming year due both to Fed tightening as well as economic slowing in the rest of the world coming from China and the effects of the war in Ukraine. This suggests that a high priority for the Dems in Congress in the remainder of the lame duck session should be to use reconciliation to either substantially raise the debt ceiling or, better yet, just eliminate the darned thing that has been a damaging anachronism since almost the time it was instituted over a century ago, the only such thing on the planet. 

But, unfortunately, it seems that neither Biden nor any leading Dem in Congress, not even Bernie Sanders, seems at all interested in doing anything about this. Why they are so complacent on this I really do not know, although it seems they are all scared of some boogeyman of being viewed as "fiscally irresponsible."  But, as far as I am concerned, it looks to be utterly fiscally irresponsible to allow these incoming lunatics in the House the ability to wreak havoc on this matter. Deals were cut in the past in similar situations, as in 2011, and some Dems may think that the GOP will get blamed for any bad outcome on this.  But blaming GOP for a temporary government partial shutdown is one thing. Blaming them for a major recession is quite another, with blame for that, if it gets really bad and spills into 2024, much more likely to end up on the doorstep of the White House. What are they thinking?

Barkley Rosser