Will the Inflation Reduction Act (IRA) Reduce Intlation?

 Probably not, but it also will probably not increase it either. This is the judgment of the Congressional Budget Office and also the Penn Wharton Budget Model, as well as libertarian economist Tyler Cowen of George Mason, who is critical of much of its content.  It has inflationary and disinflationary elements, and it looks that they about balance out, although in the longer run it is hard to know.

The obvious immediate issue is its impact from its aggregate character.  So it increases spending on various things, although some of its health parts should lead to lower spending in the future.  But it also increases taxes on corporations and through its funding of the IRS should lead to greater tax collections from wealthy individuals. Indeed, it is projected to lower the budget deficit. These elements are clearly offsetting to some extent.

In terms of its components, the most important are probably those related to climate.  Certainly the subsidies for moving off fossil fuels are inflationary in the short run.  But reducing external costs from global warming, as well as encouraging the development of more efficient clean technologies should be disinflationary in the longer run. This is not so clear cut.

Then we have the health front. Here it seems to be mostly disinflationary.  Besides caps on how much people must pay for certain things, probably the most important item is allowing Medicare to negotiate with pharmaceutical companies over drug prices. This is something that should have been done long ago, especially given how high medical care costs are in the US.

I note that while many are pleased with the contents of the IRA, on many fronts it is much more limited than widely known. Thus it subsidizes electric cars only if they are fully produced in the US, this applying to only about 30 percent of them.  Also, apparently Medicare can negotiate with drug companies about only 10 drugs.  Obviously this law could have gone much further than it does.

Barkley Rosser

Are Supporter Of Putin's Invasion Of Ukraine Suffering From A Neo-McCarthyism?

 Recently I have seen claims made on some blogs that those who support the invasion of Ukraine by Russia under orders of its president, V.V. Putin, are experiencing suppression and discrimination that resembles the McCarthyism of the late 1940s and early 1950s in the US. This is also supposedly applying not only to those who fully support the invasion, but also to those who merely oppose the US assisting Ukraine in resisting the invasion, with the US supposedly not justified in doing so because of all its own past bad behaviors from the War in Vietnam to the invasion of Iraq, to its supposed expanding NATO with a goal of supposedly adding Ukraine to that alliance.

It is certainly true that feelings are running high on this issue, and many who make these arguments are getting very strong pushback and even perfervid denunciations of their morality, much less their logic.  However, there are circles, especially among some of the stronger followers of Donald Trump, including quite a few GOP members of Congress, where such views are accepted and supported to varying degrees. But the question must be faced, not in terms of some whataboutism regarding past bad US behaviors in foreign affairs of which there have been many. But rather more directly this matter of a possible neo-McCarthyism.  Are at least some of those taking the side of Putin suffering egregiously for their views in ways that resemble the old McCarthyism? At least one similarity is that those who suffered under the old McCarthyism were accused of being pro-Soviet/Russian, and those supposedly suffering now are also accused of being pro-Russian, if not necessarily pro-Soviet.

I think, however, that if one goes back to look at what was involved in the old McCarthyism, what is going on now does not live up to the awfulness of that period. People suffered substantially more back then who faced accusations than do those now who are being criticized for supporting the invasion.

We must first recognize that McCarthyism, per se, what came about due to the activities of the late Senator Joseph McCarthy (WI-R) were a special subset appearing a few years after the initiation of a broader phenomenon. This was the general development of an intense anti-Soviet communism in the late 1940a in connection with the beginning of the Cold War between the US and USSR after the ending of their WW II alliance against the Axis powers. This initially came out of the House Unamerican Activities Committee (HUAC) along with the FBI, with Sen. McCarthy only getting in on the action in the early 1950s, although the dramatic nature of his activities became the driving force of the movement and basically took it over and drove it once he got going.

The initial HUAC hearings emphasized the matter of outright spying by alleged Soviet agents, this not having been viewed as much of a problem during the WW II alliance.  One of the most (in)famous cases was that of Alger Hiss of the State Department, with Richard Nixon initiating his national political career by going after Hiss.  At the time, most on the liberal/left viewed Hiss as innocent and Nixon as nasty bad guy.  Well, Nixon was a nasty bad guy, but it turns out that almost certainly Hiss really was a Soviet agent, this becoming clear after the declassification of the Venona transcripts in the 1980s. These were decryptions of Soviet messages sent during WW II that were made by the Army Signals Intelligence Service, a predecessor to the National Security Agency (NSA).

Another case from that period, which was aggravated during the McCarthy period, involved Julius and Ethel Rosenberg. They were convicted and executed for being "atom spies." As with Hiss, many defended them and argued and believed they were innocent. This included their two sons, one of whom I know and received a PhD in economics from the University of Wisconsin-Madison when I did, Michael Meeropol. He and his older brother, Robert, had to face that indeed their father was an atom spy for the Soviets once the Venona transcripts came out, although how important a spy hw was remains a matter of debate. But it remains clear that their mother was wrongly convicted, with her brother, David Greenglass, falsely testifying against her, claiming she typed materials for Julius that were typed by Greenglass's wife.  Many years later, Greenglass admitted doing this, saying, "you do not sleep with your sister." At most Ethel was aware to some extent of what her husband was doing, but it now appears she was not actively involved in it at all.

That they were convicted at the height of full McCarthyism in the early 1950s is certainly responsible for that they ended up being executed, not simply jailed.  Much more serious atom spy, Klaus Fuchs, was jailed and then traded sometime later to the Soviets, dying in East Germany eventually. It is not just that Ethel was outright innocent almost certainly, and they should not have been executed, but their execution was a botch, especially that of Ethel, one of those electrocutions that went awry and on and on in a horrible way. This was a horrible travesty, and their sons are fully justified in continuing to call for undoing the conviction of their late mother.

Another case that came out of HUAC before McCarthy got going involved the Hollywood Ten. They were not accused of spying for the Soviets, but it was viewed that as Communists, or "comsymps" close to Communists, they represented a noxious cultural influence that should be suppressed.  They ended up being blacklisted and prevented from working in Hollywood for an extended period, although eventually most of them would come to be rehabilitated.  We must note that at this time it became illegal to actually belong to the US Communist Party, although there was no obvious reason why that should be the case. Spying for a foreign power is one thing, but simply belonging to a party or saying things that people do not like is quite another. But this set the model that McCarthy would follow later: those accused of being Communists or comsymps would lose their jobs and otherwise be prevented from expressing themselves. I note that a major informant for HUAC in the Hollywood Ten case was Ronald Reagan.

McCarthy added some particularly obnoxious elements to all this, along with a much heightened publicity to all of it, with the atmosphere worsened during the Korean War of the early 1950s. Another element he added was outright falsification, accusing people who were not at all Communists or even particularly friendly to communism, some of them outright anti-communists, but who somehow or other knew or were associated with somebody who supposedly was.  His falsifications began with the event that first got him a lot of publicity, a speech he gave in West Virginia in which he claimed to have a piece of paper in his pocket with 44 names of Soviet agents in the State Department. He had no such list, and beyond Hiss only two more people there would be found to have been such spies.

In any case, McCarthy held long hearings in his Senate committee, making regular accusations against all sorts of people, with many of them indeed losing their jobs and otherwise facing ostracism and broader mistreatment. This was bad enough against people who merely held leftist views, but it extended to people who did not even do so.  Many suffered during this period until McCarthy was stopped and denounced by his fellow senators. He went to far when he went after the US Army.

So is what is going on now with those who support Putin's invasion equivalent to what I have just described? I do not think so. I am unaware of any of the defenders of Putin losing their jobs for doing so. I am unaware of any of them being prevented from expressing their views, although there may be some venues that have refused to publish or allow them to express them.  And within some circles they are receiving praise. They are simply not facing anything remotely resembling what happened back then.

Now there are people who are arguably suffering unreasonably at this time for all this. This is ethnic Russians, especially in the arts, who have been disallowed from performing and removed from positions, symphony conductors, musical peformers, and the like, although some prominent Russian sports figures seem to have escaped losing their positions.  One can argue that maybe those supporting the invasion deserve to lose their positions, but in some cases this has happened to ones who have publicly criticized the invasion.  Not enough.

A prominent example is Anna Netrebko, considerd by many to be the leading opera soprano in the world at the present time.  She is actually an ethnic Moldovan, not a Russian, but she first became famous performing in Russian opera companies. Furthermore, V.V. Putin himself is known to have been a great fan of hers. Nevertheless, she criticized the invasion after it happened. But that was not enough, and she has been effectively banned from performing in western opera performances, which leaves her in a full limbo as she is now also unable to perform in Russia.

I find this development to be unfortunate. But rather than McCarthyism, what it resembles is the anti-German hysteria that swept both US nd UK during WW I. That led to many families and organizations to Anglicize their German names to avoid persecution. Probably the most prominent such family was the Battenbergs in Britain who became the Mountbattens, the family of the late Prince Philip.

Barkley Rosser

Russian Central Bank Head May Be Out (But Apparently Probably Not)

 This is the first English language report of this, as near as I can tell after some serious googling, but it is all over a lot of pretty serious Russian sources.

Reportedly, Elvira Naibiullina, Head of the Russian Central Bank, left her position this past Tuesday or thereabouts.  It is unclear if she resigned or was fired, although the hints seem to be the latter. The buzz is that she is going to be made a scapegoat for mounting problems in the Russian economy.  She had been very successful at propping up the value of the Russian ruble after it initially collapsed following the Feb. 24 invasion of Ukraine and initial imposition of financial and economic sanctions on Russia.  This involved a lot of capital controls in particular.  It was also helped by the price of oil rising, with Russia managing to expand sales in various markets, although reportedly at discount prices.

Well, crude oil prices have fallen quite a bit in the last two months, with Brent crude now trading at below $100 per barrel. Russia did miss an interest payment on foreign debts not too long ago, its first formal default since the days of the Russian Revolution, although not too much was made in the media at the time when this happened.  But while the ruble is officially at 63 per USD, a better that at the time of the invasion, reportedly the black market rate has fallen to 200 per USD, and things are very tight.

Of course, the irony is that in late March it was reported, including in western media, that Naibiullina had tried to resign from her position following the invasion, but she remained in her position on the orders of V.V. Putin, with her then carrying out her rescue mission of the ruble. There is little doubt that she has been an incredibly capable central bank head, pulling off something extremely difficult and challenging under ectremely difficult circumstances. I have the utmost respect for her capabilities and hope that she is not or will not be in trouble. It is my uncderstanding that her husband was removed or stepped down last year from his position as Rector of the Higher Economic School in Moscow.  I wish them both all the best.

Again, I note that as near as I can tell this is the first report of this matter in the English language media.  It may not be true, but there are multiple serious sources in Russian reporting on it and discussing it.  It is not true, it is a massive rumor.

Barkley Rosser

Addendum at 3:16: I have just been told that all the sites that had this report have had it removed.  It is now being claimed on these sites that this rumor was the work of "foreign agents" and that Naibiullina is still in office. Reportedly a strong supporter of hers is German Gref, head of Russia's largest bank, Sperbank. So there you have it, probably a big rumor from who knows where.

Further Addendum: What also strikes me as a possibility is that indeed she was out, ot about to be out, but that there was a backlash, perhaps from people like Gref, and the decision got reversed, with the sensitivity of this, especially in light of today's NY Times report on the Russian economy sharply contracting, that it became clear removing her would be very unwise.

Further Addendum: I think we shall not know. It might be foreign agents, most likely Ukrainian, wanting to mess with Russian markets. And they have been volatile in the past week. But then, given that unpleasant news was coming out about the economy, one would expect such market volatility.  As it is, I can imagine that if indeed it is that there was a move to get rid of her, and she has been publicly criticized for some time by people upset about Russia's high inflation, once it got crushed I can imagine authorities wanting to cover it up, given that indeed her leaving might well damage support for Russian financial markets.

Basques In America

 This is a bit of travelogue, as I mentioned previously I am on the road now at south end of Lake Tahoe on the Nevada side for the annual conference of the Society for the Advancement of Behavioral Economics (SABE). Earlier today I traveled east from the Tahoe area to Gardnerville, NV just east of the Sierra Nevada in the narrow area of the state where the first European settlers came in, a narrow strip that is not desert although pretty dry.  It is where Reno and the state capital, Carson City are, along with Genoa, the oldest town in the state. Gardnerville is near Genoa, just south of Carson City, along with Minden.  This is an agricultural area, green, but mostly given to grazing, cattle and sheep, with hay being grown.

The sheepherding brought Basque people from Spain and France in the late 19th century, and this little part of Nevada is one of the most intense concentrations of their population in the entire country, with Idaho, especially around Boise, its main rival. In Garnerville, where there is a monthly Basque picnic, I ate at what is considered to be the best Basque restaurant in Nevada and one of the best in the US, the J.T. Basque Bar and Dining Room. For $34.95 I had a family style lunch with soup, salad, beef stew with baked beans, sweetbreads, a small bottle of red Cal table wine, ice cream and coffee, and might good. This is a real country place, with dollar bills on the ceiling and cowboy hats on the walls along with all the pictures of Basque people wearing berets (they invented them) and pictures from the Basque lands. 

It is a super local place with local color. Most of the people who came in shook hands with most of the people who were there. I know a peculiarity about Basques: they almost all have straight noses, and everyone working there had those. The Basque language is distinct, unrelated to any other European languages, and they have nearly zero B blood type, showing little input from invaders out of Central Asia over the last 3000 years or so.

There are only about 57,000 Basques in the US officially  with 20,000 in California, but with Idaho and Nevada following and with greater concentrations. Downtown Boise has a "Basque block" with a museum and a cultural center. Winnemucca, NV has the highest percentage at 4.2%. In those two states the Basques are among the earliest of European settlers and certain families have become prominent, the Secretary of State of Idaho and the prominent Laxalt family in Nevada who have produced a governor and senator and the current GOP candidate for senate, Adam Laxalt. 

Anyway, this was a curious and most interesting in-depth run to Old Nevada and its roots, far from the gambling dens of Vegas or even Reno or Tahoe, to find remnants of an obscure group still persisting here in America. Oh, and the food at J.T. Basque is plenty good, especially for that price.

Barkley Rosser

Pelosi's Visit To Taiwan

 I wish to present a view of Nancy Pelosi's visit to Taiwan that is different from what I have seen from others. Most commentary I have seen is either very for or very against her visiting there.  On the favorable side has been wide praise from across the political spectrum, with many Republicans joining in who almost never praise her for anything.  Many people support providing a positive message of support for Taiwan. There is also the matter of personal courage on her part.  There was an actual threat from the Chinese government that her plane might be shot down. Obviously it was not, but with this threat, it obviously did take some courage on her part to go ahead and do it.  For all that she is to be applauded.

On the negative are several views. There are those who strongly support the Chinese government's claim on Taiwan, which is widely recognized diplomatically and officially, even though since 1895 the only time the mainland government has ruled Taiwan was 1945-49, and the regime still ruling it is the extension of that government that fled to Taiwan when it lost control of the mainland to the Communist Party under Mao. Unsurprisingly strong supporters of the PRC taking control of Taiwan would not and do not support her visit. There are also various people in the US on the farther right and left who either want the US to withdraw from any or much activity in the rest of the world, either out of viewing such activity as violating an America First position or because they view US activities outside the US as being inherently or likely imperialistic, including supporting Taiwan. The pro-PRC people are likely also to take this latter position or some version of it.

So, my position is a bit more complicated. I note that i have been to Taiwan several times and have friends there.  Of the three Chinas, PRC, Hong Kong, and Taiwan, the latter seems to me the best governed and best in broader social terms. Hong Kong has a higher per capita income and also a higher life expectancy, as well as for those who admire such things, still greater identified economic freedom, although that is being cut back as PRC direct control increases in Hong Kong.  But on some other measures Taiwan looks better than Hong Kong, more democratic, more income and wealth equality, and also greater social freedoms, such as allowing gay marriage.  Indeed it is better than PRC as well on all those, as well as having higher per capita income and higher life expectancy than PRC. There is much to admire about Taiwan, with much of this likely to be lost if the PRC takes control of it.  

The PRC has long offered a "one country, two systems" model that is what supposedly is in place in Hong Kong. That had some credibility for quite some time. But the recent crackdown on dissent in Hong Kong and the imposition of more direct control on education and public expression in Hong Kong by the PRC government has seriously damaged the credibility of that model. Support for the more pro-independence party in Taiwan has increased since that crackdown, unsurprisingly.

What are my complications then?  Well, I am unhappy about the major increase in tension that has occurred, which I think serves no good purpose at all.  I think Pelosi should have realized this would happen, and I understand that the Biden administration tried to talk her out of going, even as they publicly supported her right to go, which was a reasonable position.  I know that she has long promised to go and has had a hawkish position towards the PRC. But it also seems to me that this has been motivated by a constituency within her Congressional district, many Chinese Americans who strongly support Taiwan.  I think this is a case where she should have thought about the broader national interest rather than fulfilling a longstanding promise to some voters in her district.  This is especially the case as we already have a major conflict going on in Ukraine, with the Chinese supporting Russia to some degree.

Now I get it that the Chinese should not be making such a fuss about it. Quite recently a bipartisan group of US senators quietly visited Taiwan, and there were no problems, no threats from China, no reactions.  If Pelosi could have snuck in and out without any publicity, that would have been fine. But somehow the fact that she was thinking about visiting, indeed apparently had planned to visit in April, but got delayed due to Covid or something, got publicized.  Then China began demanding that she not go.  It looked like maybe she would not after the Biden administration apparently appealed to her not to. But with China making these threats, well then it became a matter of principle, that she would not cave to these threats, something I understand. So, she and five other Dem House members (GOP members were invited to join her group, but all declined), did visit for 18 hours. It seems they were largely very well received, with a few negative protestors. But now we have the PRC making some very serious military responses that have fallen short of invading or taking an island, but that amount to a temporary blockade.  I hope that they end this soon and pull back.

Something that concerns me more broadly here is that we see warlike moves being politically popular.  Pelosi is now being highly praised.  The other example much on my mind is what is going on in Russia, which is especially why I think she should have just quietly shelved this trip before it turned into this big public confrontation.  It is in Russia. Putin's invasion is horrible and massively damaging the Russian economy, with many other negative effects, politically and socially. But all reports have Putin's popularity up. All of this worries me greatly.  I wish this had turned out differently, even as once the threats were made, I understand Pelosi felt she had to follow through.

Barkley Rosser