Fiscal Policy and the 1938 Recession

Paul Krugman has a few economic history lessons for the President-elect and the rest of us:

Everybody’s talking new New Deal these days - and, predictably, the FDR-haters are out in force, with all the usual claims about FDR having actually made the Great Depression worse.

These rightwing FDR-haters also seem to think that the General Theory written by Lord Keynes is one of the most evil books of all time. Paul notes, however, that real GDP rose impressively relative to potential GDP from 1933 to 1941. But wasn’t there a recession in 1938? Paul continues:

you might say that the incomplete recovery shows that “pump-priming”, Keynesian fiscal policy doesn’t work. Except that the New Deal didn’t pursue Keynesian policies. Properly measured, that is, by using the cyclically adjusted deficit, fiscal policy was only modestly expansionary, at least compared with the depth of the slump.

Today Paul adds this:

there’s a whole intellectual industry, mainly operating out of right-wing think tanks, devoted to propagating the idea that F.D.R. actually made the Depression worse. So it’s important to know that most of what you hear along those lines is based on deliberate misrepresentation of the facts. The New Deal brought real relief to most Americans. That said, F.D.R. did not, in fact, manage to engineer a full economic recovery during his first two terms. This failure is often cited as evidence against Keynesian economics, which says that increased public spending can get a stalled economy moving. But the definitive study of fiscal policy in the ’30s, by the M.I.T. economist E. Cary Brown, reached a very different conclusion: fiscal stimulus was unsuccessful “not because it does not work, but because it was not tried.” ... F.D.R. wasn’t just reluctant to pursue an all-out fiscal expansion - he was eager to return to conservative budget principles. That eagerness almost destroyed his legacy. After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits and led to a major defeat in the 1938 midterm elections. What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.

In other words, that 1938 recession cited by rightwingers as evidence that fiscal stimulus is bad, bad is actually evidence that we should not turn to fiscal discipline just now. Let’s just hope the 2009 fiscal stimulus package does not come at the point of a gun – just as another idiotic invasion of a Middle East nation.

The Financial Meltdown and the “Meltdown Meltdown”

Bill McKibben reminds us that we can’t put climate change on hold until we think it’s economically convenient; the natural world has its own priorities, and we don’t get to vote. If you understand why putting a lid on carbon emissions is urgent, you know why it can’t be pushed back to the middle of the to-do list.

But there is another point to be made, crucially. In the end, there is only one resource constraint the government faces in its effort to contain the financial crisis and prevent recession from morphing into depression: the requirement that external deficits be financed. The Fed can wave its wand and create finance out of thin air—so long as this doesn’t lead to a panicked flight from the dollar. As it was in the beginning of the crisis, so it shall be in its long unfolding: dollars going out must find their way back in.

This constraint is invisible at the moment, because treasuries are seen as the safest asset in an unsafe world. In fact, money is flowing in at such a pace that the Fed has had to set up a network of currency swaps to make sure other central banks have enough dollars. But that sentiment will change at some point, perhaps suddenly, and when it does the feasibility of the current free-spending bailout will be in question.

There is no single solution to this problem (although I’ve argued in the past that bailing out the private sector’s old losses to generate new finance makes it worse). One significant step, however, is to push down the US oil import bill as far as it can go. A carbon cap along the lines Obama the candidate advocated last winter would be just the ticket. If we jack up the price of oil through a hard-nosed cap, imports will fall. And, as I also argued in an earlier post, households would benefit if the auction revenues were returned to them more or less in full. Rather than paying out to oil companies and petrostates and never seeing their money again, their payments would be captured by the auctions and handed back to them. Importance for the financial crisis: less oil imports mean a lower current account deficit, and therefore less reliance on external financing. It pushes the resource constraint out.

Missing: the strange disappearance of S. J. Chapman’s theory of the hours of labour (6)

...now you don't? Part IV

For Hicks, then, thinking back his argument to a "more cumbrous but more realistic form" involved making an unexplained leap from the observation in Chapter V, consistent with Chapman's theory and historical evidence, that "[p]robably it had never entered the heads of most employers that it was at all conceivable that hours could be shortened and output maintained" (p. 107) to the claim in Chapter XI that, "[a] very moderate degree of rationality on the part of employers will thus lead them to reduce hours to the output optimum as soon as Trade Unionism has to be reckoned with at all seriously" (p. 218). It is not a question of whether Hicks's assertion was right or wrong. His claim simply didn't follow from his own premises and, in key respects, contradicted them.


Although Hicks's non sequitur feat of "realism" may be one element in the disappearance of Chapman's theory, surely it can't be held solely responsible for its eclipse. For an explanation of that, we need to turn to a subsequent general shift in formal economic analysis (in which Hicks was deeply involved) that took place in the 1930s. This shift inherited some of its fundamental premises from the thought of Leon Walras, Vilfredo Pareto and Enrico Barone, proponents of the Lausanne school of economics.

Next

Abstract: Sidney Chapman's theory of the hours of labour, published in 1909 in The Economic Journal, was acknowledged as authoritative by the leading economists of the day. It provided important insights into the prospects for market rationality with respect to work time arrangements and hinted at a profound immanent critique of economists' excessive concern with external wealth. Chapman's theory was consigned to obscurity by mathematical analyses that reverted heedlessly to outdated and naïve assumptions about the connection between hours and output. The Sandwichman is serializing "Missing: the strange disappearance of S. J. Chapman's theory of the hours of labour" on EconoSpeak in celebration of the centenary of publication of Chapman's theory. (To download the entire article in a pdf file, click on the article title.)

Johnathan Swift on The Bubble

No commentary needed:

The Bubble
Ye wise Philosophers explain
What Magick makes our Money rise,
When dropt into the Southern Main;
Or do these Juglers cheat our Eyes?

Angels and Pins

Sandwichman asks Dr. Reich: So, just how many stimulus angels can dance on the head of a fiscal pin?

Shorter Work Time Jubilee

by the Sandwichman

An American Moment: Your Vision
Start right now. Share your vision for what America can be, where President-Elect Obama should lead this country. Where should we start together?

Here's Sandwichman's Vision:

On November 2, 1865 – one month before the adoption of the Thirteenth Amendment to the US Constitution, abolishing slavery – the great antislavery activist and orator, Wendell Phillips, proclaimed his American vision from the platform of Faneuil Hall in Boston:

"Today one of your sons is born. He lies in his cradle as the child of a man without means, with a little education, and with less leisure. The favored child of the capitalist is borne up by every circumstance, as on the eagle's wings. The problem of today is how to make the chances of the two as equal as possible; and before this movement stops, every child born in America must have an equal chance in life."

The election of President Obama symbolizes progress that has been made in a century and a half toward fulfilling that vision. There is still far to go, though, before every child born in America has that equal chance in life. Wendell Phillips's devotion to the cause of labor shows the way – the "more American way."

In his Boston speech, Phillips addressed the Boston Eight-Hour League, which advocated adoption of an eight-hour working day. Seventy-three years later, the Fair Labor Standards Act of 1938 made the eight-hour day and the 40-hour workweek the law of the land. Another 70 years have passed since passage of the FLSA but the standard workweek remains frozen at 40 hours despite immense improvements in productivity and profound demographic shifts in labor-force participation.

The great eight-hour movement didn't aspire to an eight-hour day merely for its own sake or as the ultimate goal. Eight hours was envisioned as a step on the path to a higher ideal. More leisure would allow for education and uplift, which would lead to more effective citizenship and political participation. Through higher wages and lower unemployment, eight hours would bring about a more equitable distribution of the products of industry. Achievement of the eight hour day would inspire a movement for the six-hour day and, eventually, to industrial co-operation: "In this final arrangement, every man will combine in his own person the laborer and the capitalist." (While Phillips's usage conformed with the old convention of "men" and "sons" his colleagues in the Anti-Slavery Society and the Eight-Hour League included the women's rights pioneers, Susan B. Anthony and Elizabeth Cady Stanton).

The eight-hour theory articulated by Ira Steward, also an antislavery activist, was a uniquely American theory of social economy. It provided the philosophical foundation for the American Federation of Labor during its formative years. In the Depression of the 1930s, economist Dorothy W. Douglas considered the theory to be "strangely apposite" to the economic problems of that time. Historian Lawrence Glickman credited the eight-hour theorists with establishing the concepts of a living wage and a high standard of living for working people.

Ironically, in the 1930s big-business opponents of the Roosevelt New Deal hijacked Wendell Phillips's terminology of the better, nobler, "more American way." On 60,000 billboards erected across the country, the National Association of Manufacturers claimed credit for the "World's Highest Standard of Living", "World's Highest Wages" and "World's Shortest Hours of Work." A decade later, their Republican allies in Congress passed the Taft-Hartley Act to enable rolling back those higher wages and shorter hours.

A century ago, Sydney J. Chapman, a star pupil of Alfred Marshall, the "father" of modern neoclassical economics, presented his theory of the hours of labor. That theory overturned what Lionel Robbins called "the naïve assumption that the connection between hours and output is one of direct variation." Coincidentally, it confirmed key elements of the theory proposed by the Boston machinist, Ira Steward. In the 1940s, economist John Maynard Keynes argued that reducing the hours of work was one of three ingredients of a cure for unemployment and, furthermore, that it was the "ultimate" cure.

Economists today, though, shun discussion of shorter hours like the plague. They disparage policies for reduced working time as being based on an imaginary "lump-of-labor fallacy." Few of them have heard of Ira Steward's theory or have any idea that respected economists like Sydney Chapman, John Maynard Keynes or John R. Commons also supported progressively reducing the hours of work. A veil of ignorance and arrogance has descended in textbook economics over the issue of the hours of work. Is it any wonder then, that in the face of the greatest economic challenge since the depression, economists can think of nothing better than to call for yet another fiscal stimulus package, yet another interest rate cut and yet more bailouts of banks and corporations?

It is unrealistic to think that the Obama administration would consider implementing a policy of reducing the hours of work in the absence of strong popular support for such an action. It would be my hope, though, that the new administration could at least research the notion and review, with an open mind, the historical and economic case for shorter working time. Then, as the same-old, same-old economic policies of fiscal stimulus, interest rate cuts and bailouts prove their futility – which they will – and as unemployment continues to mount month after month, an in-depth understanding of the "strangely apposite" theories of Ira Steward and Sydney Chapman might ultimately prove useful in formulating substantive, innovative responses to the economic emergency.

Inscribed on the Liberty Bell in Philadelphia is the Bible verse, "Proclaim LIBERTY throughout all the Land unto all the inhabitants thereof." The phrase comes from Leviticus 25:10 in the Old Testament and refers to the ancient custom of the Jubilee year in which slaves were freed and land returned to former occupants who had lost it through indebtedness. Abolitionists in the 1830s adopted it as their slogan and gave the bell its current name. In 1868, when Congress passed a law establishing an eight-hour day for laborers, mechanics and other workers in federal government employment, it was hailed a a "Jubilee of Labor."

My American vision foresees resuming the progressive reduction of the hours of work – with its associated increases in leisure and wages and decreases in unemployment and insecurity, as the surest way to "Proclaim LIBERTY throughout all the Land unto all the inhabitants thereof" and to ensure that "every child born in America must have an equal chance in life."

“A global jobs crisis of mammoth proportions…”

Before this calamitous global economic unwinding, economists at the World Economic Forum in Davos in early 2006 expressed major concern about the growing crisis of unemployment around the world. “Growth of the past many years has not been translated into enough jobs in many countries…. Despite a robust growth of 4.3 per cent in 2005, the world economy did not deliver the 40 million jobs needed annually over the next decade for people entering the workforce.” The ILO report showed that in 2005, of the more than 2.8 billion workers in the world, 1.4 billion still did not earn enough to lift themselves and their families above the $2-a-day poverty line - just as many as 10 years ago…."Economic growth alone isn't adequately addressing global employment needs," said [the International Labour Organisation's director general Juan] Somavia. "We are facing a global jobs crisis of mammoth proportions. We need new policies." [1]

Two years previously Luke Exilarch wrote on the growing unemployment in the US associated with national economic ‘growth’:

"The number of men between 16 and 64 [in the US], ... was 93 million. . . Of those 93 million men, the government admits that 4.4 million of them are unemployed. And when I say unemployed, I mean utterly and completely inactive. The government considers someone “employed” if they work as little as one hour a week. People who do not even work one hour a week are still considered “employed” if they are “temporarily absent” from work.

But in addition to the 4.4 million men who are officially “unemployed” the government admits that 28.7 million men over 16 are “not in the labor force.” Subtracting from this 28.7 million the estimated 11.9 million men 65 and over belonging to that group, results in 16.8 million men between the ages of 16 and 64 who are “not in the labor force.” Adding the 4.4 million officially unemployed to the 16.8 million who are factually unemployed yields a total of 21.2 million unemployed men between the ages of 16 and 64...." [2]

Why is this happening?

How much of this loss of global opportunity can be attributed to the alarming degradation and depletion of the world’s biosphere over the last few decades. The economic consequences of this wholesale rape were hidden from public scrutiny by fraudulent forms of cost-benefit analysis, worthy only of "a damning indictment” [3] and performed by mainstream economists.

Other factors:

Higher energy prices.

Global corporate conglomerates were able to use capital far more intensively.

The emergence and dominance of uneconomic forms of profit seeking such as the excessively-leveraged (private equity) buyouts of public corporations followed by the associated asset-stripping and rationalization of the workforce that are now unfolding into predictable bankruptcy or taxpayer-funded bailout. [4]

To what extent did the ‘recruitment’(often forced and incorporating land eviction [5], [6], [7], [8], [9] ) of an extra billion people into the global workforce have on rising global unemployment. [10]

It's hard to see this social crisis being addressed by a simple reduction in working hours. I agree with the sentiments of Mikhail Gorbachev as he expressed them this last month. We need "a serious reconsideration of the very foundations of our socio-economic model of modern industrial society"[11]...but that is another article.



[1] Global Trends by Martin Khor
Thursday 2 February 2006
Problem of “jobless growth” highlighted
http://www.twnside.org.sg/title2/gtrends90.htm

[2] The Real Unemployment Rate is 23%: How and Why Jobs are Vanishing from America
Luke Exilarch. March 20, 2005
http://www.exilemm.com/e-sub-realunemployment.shtml

[3] Rober F Kennedy Jr’s commentary on the book ‘Priceless: On Knowing the Price of Everything and the Value of Nothing’by Frank Ackerman and Lisa Heinzerling.

[4] The Bust of the Private Equity and LBO Bubble
Nouriel Roubini | Feb 22, 2008
http://www.rgemonitor.com/blog/roubini/245686#readcomments

[5] ‘Abahlali baseMjondolo: The South African Shack Dwellers Movement’
May/June 2008. The Body, the complete HIV/AIDS resource website
http://www.thebody.com/content/art47450.html

[6] Human Rights Watch 2006 Report on Indonesia, III. Background
http://www.hrw.org/reports/2006/indonesia0906/3.htm

[7] Special Exploitation Zones [India]
By Tejal Kanitkar & Puru Kulkarni. 18 October, 2006
http://www.countercurrents.org/ind-kanitkar181006.htm

[8] Inside China Today
Archive for the 'Forced Eviction' Category
http://insidechinatoday.net/category/forced-eviction/

[9] SOHNews Archive for the 'Forced Eviction' Category
http://sohnews.com/category/forced-eviction/

[10] This process was stepped up heavily in the 1980s in India, China and South America (in particular) and continues to present day.

[11] 'Mr Capitalism, tear down that immorality' Australian Financial Review, page 65. 31st October 2008.

Who Abroad is Challenging Obama First?

Lots of people, including Joe Biden, have said that some foreigners would be challenging Obama early on. I see two candidates at the front of the pack, one a nominal ally. The first is Russia, which has arguably already done so with its announcement of moving missiles next to the Polish border in response to Poland accepting an anti-missile shield. It could be that they did not mean this as a challenge to Obama, but rather had been waiting until after the election to do this so as not to influence the election. However, this looks all too much like the half-baked thinking of Putin who somehow thinks that threatening others will make things go Russia's way. Obama had long expressed reservations about the shield, and the Poles had been resisting Bush's pressure to install it. Obama also initially had a nuanced view of the Georgian-Russian conflict. But then, Putin invaded Georgia proper. This pushed Obama to support Shaakashvili unreservedly, and also triggered Poland to accept the anti-missile shield. Putin (or more likely, Medvedev) might have been able to negotiate with Obama to withdraw the shield or put it on hold, but with this missile move there will be no way that Obama can do that. He will have to show that he can stand up to the Russian bear and support the shield. Just plain dumb on Putin's part.

The other likely challenge may come from Israel, which has been very weak in its congratulating Obama. This may be the flip side of all the enthusiasm for Obama in the Arab and Muslim world, with even President Ahmadinejad of Iran sending congratulations. The Israelis are nervous about Obama's middle name and his family background, and although he has spoken unreservedly about supporting Israel, they may feel a need to test him on this, to do something unpleasant and provocative to get him to show more openly his support and to weaken the enthusiasm for him in the Arab and Muslim worlds. The obvious move would be a strike against Iran, although there are other possibilities out there. Maybe they will not pull something like this, but at the moment, the signs look worrisome to me.

Lame-Duck Pâté

by the Sandwichman

Robert Reich wrote, "For now, focus on the unemployed."

Sandwichman focuses:

Samuel Gompers said,

"The answer to all opponents to the reduction of the hours of labor could well be given in these words: 'That so long as there is one man who seeks employment and cannot obtain it, the hours of labor are too long.'"

Behind that statement is a theory of working time and wages -- Ira Steward's eight-hour theory. It is a distinctly American theory of social economy. Dorothy W. Douglas wrote during the Depression that it was "strangely apposite" to the economic problems of the day. It is again today "strangely apposite."

Steward's theory finds unexpected (and unaware) support in Sydney J. Chapman's theory of the "Hours of Labour," which was the established orthodoxy in neoclassical analysis until it was simply forgotten about by mathematically-fixated model builders in a hurry. Even Alan Greenspan knows there's a flaw in his model of how the world works. He just doesn't know where that flaw is. Hint: look at hours of work and Chapman's theory, Al. Go back and study Ira Steward's eight-hour theory.

But, you may object, folks are barely getting by with their current hours, how are they going to live on even less??!! Mary Steward (Ira's wife) had the answer: "Whether you work by the piece or work by the day; decreasing the hours increases the pay."

Man, it all sounds too good to be true. It's counter-intuitive! Like the theory the earth revolves around the sun rather than the other way 'round?

Yes, indeed the slogans do sound hard to believe. That is until you go back and read what Steward's theory and Chapman's theory actually had to say and what economists have conveniently (for their mathematical model building) forgotten. Then you can begin to realize that our contemporary economics makes a lot of assumptions that just aren't so and that aren't even backed up by coherent arguments. A lot of what passes for untheoretical "common sense" makes those same assumptions without actually saying so.

For a century economists have ridiculed the 'lump-of-labor' fallacy made by people who think, along with Gompers, that "so long as there is one man who seeks employment and cannot obtain it, the hours of labor are too long." And you know what? Turns out that lump-of-labor fallacy is a figment of those economists' imagination.

Do you want to fight unemployment? Don't bother with lame-duck stimulus hocus-pocus. Reduce the hours of work. LOTS. NOW.

Not One... Not Two...

by the Sandwichman

But three! Three! Three mints in one!

Krugman says, "It’s time to raise Keynes: we need big fiscal stimulus, now now now."

What part of the word three(3) don't these stimulus addicts understand?

One: investment.
Two: expanded consumption.
Three: working less.

What John Maynard Keynes wrote. In May 1943. "The Long-Term Problem of Full Employment."

In the final phase of post-war economic performance,

"It becomes necessary to encourage wise consumption and discourage saving,--and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours."

But talking about shorter hours is anathema to post-Samuelson Anglo-American economists. Why? You need to talk about ingredient three, Paul. NOW NOW NOW.

Going down the U-tubes

by the Sandwichman

Last night, the Sandwichman was tempted to predict that the BLS unemployment report coming out this morning would be higher than economists' expectations. It was. But my unpublished prediction was just a hunch based on skepticism about the perpetual rosy scenario projections of the usual gang of idiots.

I should explain that everything the Sandwichman writes is based on a very different philosophy of unemployment than that which prevails at the Bureau of Labor Statistics, in the economics academy and on the business pages of the newspaper.

The mainstream view was nicely summarized by Ira Steward as being that there is a Goldilocks amount of unemployment -- just enough to keep workers dimly aware of the lash of hunger. Sandwichman's position is that a lot of what gets counted as employment is actually a mislabeled form of under-employment. The job of sandwich-man epitomizes (albeit anachronistically) those precarious occupations filled by people unable to obtain adequate employment. The Sandwichman embodies the idea of systemic underemployment.

Let this mornings news be notice that the unemployment crisis has arrived. Actually, it has been around for decades, nicely covered up. Over the months and years ahead it will become increasingly difficult to sweep it under the rug. My colleague, PGL, says we need "aggregate demand stimulus" and, although I applaud the sentiment, I have to ask "demand for WHAT?" Demand for more barrels of oil? Demand for tanks and missiles? Demand for arcane financial instruments? The problem with "aggregate demand" is precisely its imprecision. When the path of the economy have been so rutted by decades of aggregate demand stimulus, more stimulus is just going to follow those same ruts.

I forget how many times I've mentioned Keynes's "three ingredients of a cure" for unemployment. But I remember exactly how many times my colleague, PGL, has taken the bait and replied. Zero. My question is: what is it about today's "aggregate demand stimulus" that exempts it from Keynes's explicit acknowledgment of its limitations?

How Bad is the Labor Market?

BLS reports:

Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent

While a 240 thousand drop in just one month for the payroll survey measure of employment is quite significant, how on earth did the unemployment rate increase this much? Only a small part of the story comes from the labor force participation rate, which rose from 66.0% to 66.1%. The household survey shows that measured employment dropped by 297 thousand, which lowered the employment-population ratio from 62.0% to 61.8%. This compares to an employment-population ratio of 63.4% as of December 2006 and an employment-population ratio of 64.4% as of December 2000. The need for aggregate demand stimulus is clear and it is good to see that President-elect Obama is quickly assembling his economic team.

Missing: the strange disappearance of S. J. Chapman’s theory of the hours of labour (5)

...now you don't? Part III

Although Hicks didn't explicitly introduce a simplifying assumption, that isn't the end of the story. Hicks discussed Chapman's theory and the optimal length of the working day in his chapter on the theory of individual labour supply (Ch. V). Later on in the book, though, Hicks turned his attention to the regulation of hours and working conditions (Ch. XI). Here Hicks no longer dealt with pure theory but with "reality" – at least with reality as Hicks perceived it. He announced at the beginning of Part II that it was, "now time for us to take a further step towards actuality" (p. 136). This was the moment Hicks had anticipated when he referred to "think[ing] back our arguments into a more cumbrous but more realistic form." Chapter XI was intended to present that 'more realistic' discussion of hours and working conditions than the purely theoretical discussion of Chapter V! But was it more realistic?

At the beginning of Chapter XI, Hicks credited Robbins with having conducted the "general study of the economics of hours-regulation" and declared that there was "no need for us to go over yet again ground which is by now sufficiently well trodden" (p. 217). After stating (without further explanation) that there was no material difference between the situations created by union demands for reduced hours and that created by demands for increased wages, Hicks surmised that it was "true that if the working day has previously been fixed at a length which is greater than the 'output optimum' the Union will not usually need to exert any considerable pressure in order to bring about a reduction" (p. 217). On the sole basis of that assertion, then, Hicks limited the rest of his discussion to a situation where union demands would reduce the hours of work below the hypothetical output optimum. If such a limitation had been proposed in a theoretical discussion, it would indeed have represented a simplifying assumption. As Hicks presented it, however, it was an alleged, but unverified 'fact' – a fact, moveover, that contradicted what theory would predict.

Next.

Abstract: Sidney Chapman's theory of the hours of labour, published in 1909 in The Economic Journal, was acknowledged as authoritative by the leading economists of the day. It provided important insights into the prospects for market rationality with respect to work time arrangements and hinted at a profound immanent critique of economists' excessive concern with external wealth. Chapman's theory was consigned to obscurity by mathematical analyses that reverted heedlessly to outdated and naïve assumptions about the connection between hours and output. The Sandwichman is serializing "Missing: the strange disappearance of S. J. Chapman's theory of the hours of labour" on EconoSpeak in celebration of the centenary of publication of Chapman's theory. (To download the entire article in a pdf file, click on the article title.)

Election Followup in the Shenandoah Valley

I hear this evening that the inner core of elite Republican conservatives are meeting at Brent Bozell's estate in the Shenandoah Valley of Virginia to plot their comeback after their defeat in the US presidential election of 2008. As it is, for the first time since 1964, Virginia voted for a Democrat for president, the victorious Barack Obama (and as someone who was in actual civil rights demonstrations back in the early to mid 1960s and saw Martin Luther King, Jr. speak, this is an immensely satisfying outcome). It was 52% to 47%, only slightly more pro-McCain than the overall national outcome of 52% to 46%, fitting the forecast of Virginia as the ultimate marginal state, now reflecting average national views (sorry that the results were so slow coming in, but there were major ballot box issues here, leftover suppression, including a major scandal here in Harrisonburg where Obama's top operative was not allowed to vote, among other nonsense coming out of the registrar's office, something occurring elsewhere in the commonwealth as desperate Republicans tried to hold on to power).

While the rural Shenandoah Valley continues to be very Republican (Rockingham County around Harrisonburg went 68% for McCain, compared with 73% for Bush in 2004), the city of Harrisonburg broke its past pattern of matching closely Virginia statewide averages. It went 58% for Obama, but then we had a visit from Obama a week before the election, which definitely fired up his supporters, who came out big time. On a personal level, local Democrats who happen to be friends of mine swept the city council races, with the founder of the internationally known Orange Band Initiative, Kai Degner, a former James Madison University student, coming in on the top, and the father of my daughter's longtime boyfriend, Richard Baugh, coming in second, with one of them probably going to become mayor of the city (my daughter put together his campaign website, :-)).

Greg Mankiw ClaimsYoung Voters Are Supply-Siders

Greg Mankiw must not be happy with the choice of Sarah Palin as McCain’s running mate:

I am not enough of a political scientist to be sure, but recent conversations I have had with some Harvard undergrads have led me to a conjecture: It was largely noneconomic issues. These particular students told me they preferred the lower tax, more limited government, freer trade views of McCain, but they were voting for Obama on the basis of foreign policy and especially social issues like abortion. The choice of a social conservative like Palin as veep really turned them off McCain. So what does the Republican Party need to do to get the youth vote back? If these Harvard students are typical (and perhaps they are not, as Harvard students are hardly a random sample), the party needs to scale back its social conservatism. Put simply, it needs to become a party for moderate and mainstream libertarians.

I agree that the new GOP should move away from the theocrats known as social conservatives but let’s be honest – George W. Bush and the 2008 vintage of John McCain were NOT pushing a serious agenda of less government spending. They did push the agenda of the free lunch – tax deferrals disguised as tax “cuts”. Why would a college student vote for anyone who is shifting the long-run tax burden away from old farts like me and towards them?