4 Getting Our Priorities Right: What Does Justice Require That We Do? Part 2 1

Notes

4 Getting Our Priorities Right: What Does Justice Require That We Do? Part 2 1 . See generally Adam Smith, “Public Debt,” in The Wealth of Nations (New York: Modern Library, 2000 [1776]), Bk. 5, Ch. 3, pp. 981–1028; David Hume, “Of Public Credit,” in Hume: Political Essays (Cambridge: Cambridge University Press, 1994[1752]), pp. 166–178; J. S. Mill, “Of a National Debt,” in Principles of Political Economy (Amherst, NY: Prometheus Books, 2004[1848]), Bk. 5, Ch. 7; Jean-Baptiste Say, “Of National Debt,” in A Treatise on Political Economy, trans. from the 4th edn. by C. R. Prinsep (Philadelphia, PA: Grigg & Elliot, 5th edn. 1832[1803]), Bk. 3, Ch. 9. 2 . See Walter F. Stettner, “Carl Dietzel, Public Expenditures and the Public Debt,” in Income, Employment and Public Policy: Essays in Honor of Alvin H. Hansen (New York: W.W. Norton & Co., 1948), pp. 276–299. 3 . See Stettner, “Carl Dietzel, Public Expenditures and the Public Debt”; Jesse Burkhead, “The Balanced Budget,” Quarterly Journal of Economics 68 (1954): 191–216. 4 . See, e.g., Burkhead, “The Balanced Budget,” esp. 193–94; John Christian Laursen and Greg Coolidge, “David Hume and Public Debt: Crying Wolf?” Hume Studies 20 (1994): 143–150. 5 . See Alvin H. Hansen, Economic Policy and Full Employment (New York: McGraw- Hill, 1947), pp. 4–5. 6 . See David Ricardo, The Principles of Political Economy and Taxation (London: J.M. Dent & Sons, 1911), pp. 244–249 and “The Funding System” [1820] in The Works and Correspondence of David Ricardo, Vol. 1V Pamphlets and Papers 1815– 1823 (Indianapolis, IN: Liberty Fund); Robert J. Barro, “Are Government Bonds Net Wealth?” Journal of Political Economy 82 (1974): 1095–1117. For critical discussion of this view, see James M. Buchanan, “Barro on the Ricardian Equivalence Theorem,” Journal of Political Economy 84 (1976): 376–342; Robert J. Barro, “The Ricardian Approach to Budget Deficits,” The Journal of Economic Perspectives 3 (1989): 37–54; B. Douglass Bernheim, “A Neoclassical Perspective on Budget Deficits,” The Journal of Economic Perspectives 3 (1989): 55–72, esp. 63–67. 7 . See Samuel Hollander, The Economics of Thomas Robert Malthus (Toronto: University of Toronto Press, 1997), pp. 623–628; Takuo Dome, “Malthus on Taxation and National Debt,” History of Political Economy 29 (1997): 275–294. 132 ● Notes

8 . For an excellent discussion of these issues, see Stettner, “Carl Dietzel, Public Expenditures and the Public Debt” and Alvin H. Hansen, Fiscal Policy and Business Cycles (New York: Norton & Co., 1941), pp. 146–152. 9 . See, e.g., Joseph A. Schumpeter, “Depressions,” in Essays on Entrepreneurs, Innovations, Business Cycles, and the Evolution of Capitalism (New Brunswick, NJ: Transaction Publishers, 1989) at p. 115: “The chief difficulty of [remedies for economic depressions] lies in the fact that depressions are not simply evils, which we might attempt to suppress, but—perhaps undesirable—forms of something which has to be done, namely adjustment to previous economic change. Most of what would be effective in remedying a depression would be equally effective in preventing this adjustment. This is especially true of inflation, which would, if pushed far enough, undoubtedly turn depression into the sham prosperity so familiar from European postwar experience, but which if carried to that point, would, in the end, lead to a collapse worse than the one it was called in to remedy” (emphasis added). 10 . See Mark Blythe, Austerity: The History of a Dangerous Idea (Oxford: Oxford University Press, 2013), p. 224 (noting that the level of debt in the countries with the most severe austerity programs has actually increased rather than decreased); Eduardo Porter, “Local Politics Are Fracturing European Unity,” The New York Times (February 3, 2015) (despite all the pain of austerity, “debt-to-GDP ratios are nevertheless much higher than before the crisis,” according to Jeffrey Frankel of Harvard’s Kennedy School); Liz Alderman, “Banks Take on European Debt, Despite Underlying Problems,” The New York Times (January 21, 2014) (austerity has choked growth so much that rather than falling, debt as a percentage of GDP has instead risen in Greece, Ireland, Spain, Italy, and Portugal); J. Bradford DeLong, “‘Liquidation’ Cycles and the Great Depression” (Cambridge: Harvard University Xerox, June 1991) (noting the same was true during the Great Depression); Floyd Norris, “Inflation? Deflation Is the New Risk,” The New York Times (October 30, 2014) (noting that between 2012 and 2013, after years of strict austerity measures, the collective national debt of the 18-nation euro zone rose 7.8%, and their collective debt-to-GDP ratio rose 5.2%). 11 . McKinsey & Company, “Debt and (Not Much) Deleveraging,” McKinsey Global Institute (February 2015) (http://www.mckinsey.com/insights/economic_studies/ debt_and_not_much_deleveraging). 12 . See Lawrence H. White, The Clash of Economic Ideas: The Great Policy Experiments of the Last Hundred Years (Cambridge: Cambridge University Press, 2012), p. 386. 13 . Smith, The Wealth of Nations , Bk. 4, Ch. 2, p. 486. 14 . Say, A Treatise on Political Economy , Bk. 3, Ch. 5, p. 402. 15 . See Abba P. Lerner, “The Burden of the National Debt,” in Income, Employment and Public Policy: Essays in Honour of Alvin H. Hansen, ed. Lloyd A. Metzler (New York: W.W. Norton & Co, 1948), pp. 255–275, 256–257. 16 . Indeed, in the face of what I will soon show to be the wreckage austerity has wrought in Greece, various other nations, and even Europe as a whole, the President of Brazil has just offered the family analogy as the reason why Brazil must institute its own austerity program. See Paolo Trevisani and Rogerio Jelmayer, “Brazil’s Dilma Rousseff Defends Austerity Measures in TV Address,” The Wall Street Journal (March 8, 2015) (“You who are a housewife or the father of a family know what it is . . . Sometimes we have to rein in expenses to keep our budget form going out of control . . . to ensure our future”). Notes ● 133

17 . See Paul Krugman, A Country Is Not a Company (Boston: Harvard Business Press, 2009); “The Austerity Agenda,” The New York Times (May 31, 2012) (discussing why “an economy is not like an indebted family”); “Nobody Understands Debt,” The New York Times (February 9, 2015). 18 . See Eduardo Porter, “At the Polls, Choose Your Capitalism,” The New York Times (October 30, 2012) (the United States is much less globalized than most other rich countries—foreign trade peaked at about 31% of GDP in 2008; in contrast it amounted to 69% in Canada that year). 19 . See, e.g., Hiroko Tabuchi, “In Reversal of Earlier Quarters, Data Suggests Japan Is Near Recession,” The New York Times (November 11, 2012) (Japanese economy “hurt by a slump in exports amid economic woes in Europe,” a major trading partner, at least in part); Reuters, “Poll-British Economy to Limp through 2013, No More QE,” The New York Times (November 15, 2012) (“Demand for UK exports from the euro zone, Britain’s main trading partner, is also withering, in part because of austerity there. That leaves little hope for an export-driven rebound, no matter how weak the pound may be”); Floyd Norris, “Production Sags, and Even Germany Is Affected,” The New York Times (November 16, 2012) (“Germany has slowed because weak global demand, particularly for the major machinery that Germany exports, is creating lower demand for Germany’s exports”). 20 . See David Jolly, “Daimler Abandons Forecast amid Dismal Market,” The New York Times (April 24, 2013) (quoting Daimler corporate press release in which Daimler revised down its profit estimates). 21 . See Paul Krugman, “Dwindling Deficit Disorder” (March 10, 2013); “Keynes Was Right,” The New York Times (December 29, 2011); and “Friedrich Hayek, Zombie,” The New York Times (March 29, 2011). 22 . See generally Mark Blythe, Austerity: The History of a Dangerous Idea (Oxford: Oxford University Press, 2013), pp. 178–204 (discussing various examples of states that tired austerity in response to the Great Depression and the disastrous results such an approach had); Fabian Linder, “European Austerity—Is This 1931 All over Again? Social Europe (November 23, 2011) (describing the uncanny parallels between the attitude of Germany and the major European institutions toward Greece and other “peripheral” members of the euro zone now and the attitude of the United States and the other Allied powers toward Germany in 1931) (http://www.socialeurope.eu/2011/11/european-austerity-is-this-1931-all- over-again/ ). 23 . See, e.g., Smith, Wealth of Nations , Bk. 5, Ch. 3, pp. 1002–1003; Mill, Principles of Political Economy , Bk. 5, Ch. 7, Sec. 1, p. 797. 24 . See Ministry of Labour, Memoranda on Certain Proposals Relating to Unemployment (London: Stationary Office, 1929), esp. pp. 43–54. The Treasury View was a response to the Liberal Party’s plan for public works projects that were designed to put the United Kingdom back to work in the wake of the Great Depression and set forth in the pamphlet We Can Conquer Unemployment: Mr. Lloyd George’s Pledge (London: Cassell and Company, 1929). The Liberal Pledge was supported by Keynes in Can Lloyd George Do It? (London: Nation and Athenaeum, 1929). 25 . See Janet L. Yellen, “Symposium on the Budget Deficit,” The Journal of Economic Perspectives 3 (1989): 17–21, 18. 26 . See Josh Bivens, “GDP Growth Is Unlikely to Spur Real Improvements in the Labor Market,” Economic Policy Institute (November 7, 2013). 27 . James Tobin, “Who Is Crowding out What?” in Policies for Prosperity (Cambridge: MIT Press, 1987), pp. 215–217, 215. 134 ● Notes

28 . See, e.g., Roger W. Spencer and William F. Yohe, “The ‘Crowding Out’ of Private Expenditures by Fiscal Policy Actions,” Federal Reserve Bank of St. Louis, Reprint No. 60 (October 1970) ( http://research.stlouisfed.org/publications/review/70/10/ Expenditures_Oct1970.pdf ), p. 24. 29 . See generally John Maynard Keynes, The General Theory of Employment, Interest, and Money (San Diego, CA: Harvest/Harcourt edition, 1964[1936], at p. 168ff; Paul Krugman, “Liquidity Preference, Loanable Funds, and Naill Ferguson (Wonkish),” The New York Times (May 2, 2009). 30 . See White, The Clash of Economic Ideas , pp. 387–391. 31 . Phillip Inman, “Bank Lending Falls by £ 2.7bn in Final Quarter of 2012, Says Bank of England,” The Guardian (March 5, 2013). 32 . See Jack Ewing, “European Central Bank Chief Tamps down Optimism,” The New York Times (September 6, 2013) (“Bank lending [by European Banks], which is usually considered a precondition for economic growth, continues to decline”); Jack Ewing, “Europe’s Bank Takes Step to Ease Lending,” The New York Times (July 16, 2013); Floyd Norris, “Loan Survey Illustrates a Banking Divide in Europe,” The New York Times (July 27, 2012); Norma Cohen, “Bank Lending Shows Further Contraction,” Financial Times (August 30, 2012) and “Business Investment Drops,” Financial Times (August 24, 2012); Floyd Norris, “Euro Survives, but Future Is in Doubt,” The New York Times (October 25, 2012). 33 . Indeed, in Europe, some critics think many banks, including some of the biggest and most important, still maintain far too limited reserves. See Landon Thomas Jr., “Europe Fears Banks Lack Cash Cushion to Cover Bad Loans,” The New York Times (August 21, 2014). 34 . See Associated Press, “Consumers Keep Credit Card in the Wallet,” The New York Times (October 7, 2013) and “Credit Card Use Falls; Borrowing for Cars and School Rises,” The New York Times (September 9, 2013) (credit card debt down 17% from peak in July 2008); Reuters, “Consumer Debt in U.S. Fell by 0.7% Last Quarter,” The New York Times (August 14, 2013) (credit card debt declined $208 million in August); Associated Press, “Borrowing by Consumers Rose $13.5 Billion in August,” The New York Times (October 7, 2014). See also Stephanie Clifford, “Grim Picture of Recovery in Forecasts by Retailers,” The New York Times (August 15, 2013) (noting that consumer spending by younger and poorer customers continues to disappoint, and those are the customers with the highest marginal propensity to consume) and Associated Press, “Student Loans and Car Sales Contribute to a Rise in Consumer Debt,” The New York Times (January 8, 2015) (noting that while consumer debt has finally started to rise, this is mostly being driven by increases in student loans and auto sales, not credit card debt) and “Borrowing Increased by $14.8 Billion in December,” The New York Times (February 6, 2015) (same). 35 . See Tom Petruno, “5 Years after Financial Crash, Many Losers—and Some Big Winners,” Los Angeles Times (September 14, 2013). 36 . Shaila Dewan, “An Ambiguous Omen, U.S. Household Debt Begins to Rise Again,” The New York Times (February 18, 2014). 37 . See Associated Press, “Loans for Cars and Tuition Push Borrowing to Record High,” The New York Times (April 7, 2015). 38 . Credit card debt stopped declining in March 2015, and rose again in April 2015, but it is not clear yet whether this represents a new trend. See Associated Press, “Consumer Borrowing Rises by $20.5 Billion, Biggest Jump Since April 2014,” The New York Times (May 7, 2015); Federal Reserve, “Consumer Credit—G. 19” (June 5, 2105) ( http://www.federalreserve.gov/releases/g19/current/g19.pdf ). Notes ● 135

39 . See Paul Krugman, “The Market Speaks,” The New York Times (March 7, 2013) and “Money for Nothing,” The New York Times (July 26, 2012). 40 . See Gretchen Morgenson, “Smothered by a Boom in Banking,” The New York Times (February 28, 2015). 41 . See Stephen G. Cecchetti and Enisse Kharoubi, “Why Does Financial Sector Growth Crowd out Real Economic Growth,” BIS Working Papers No. 490 (Bank of International Settlements, February 2015) ( http://www.bis.org/publ/work490. pdf) and “Reassessing the Impact of Finance on Growth,” BIS Working Papers No. 381 (Bank for International Settlements, July 2012) ( http://www.bis.org/publ/ work381.pdf). 42 . Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” NBER Working Paper No. 15639 (National Bureau of Economic Research, January 2010), p. 7. 43 . This includes nearly $5 trillion in debt that the US government owes to itself. These are largely obligations of the US Treasury to US government trust funds such as Social Security. If these amounts were not included in the calculation, the US debt-to-GDP ratio would be only 66.7%. See Matt Phillips, “The Long Story of U.S. Debt, from 1790 to 2011, in 1 Little Chart,” The Atlantic (November 2012). The reason why counting these debts is controversial is that they would not show up on a US government consolidated financial statement, for they are both an asset and a liability of the US government and therefore would cancel each other out. For our purposes, however, I have assumed that it is indeed proper to count these in determining whether the United States has gone over the 90% threshold because Reinhart and Rogoff do. 44 . This problem, of course, has been noted many times before. See, e.g., Vikas Bajaj, “Does High Debt Cause Slow Growth?” The New York Times (April 17, 2013). 45 . See Justin Fox, “The Comeback Keynes,” Time Magazine (October 23, 2008) (quoting Robert Lucas, a University of Chicago economist who won a Nobel Prize in 1995 for theories criticizing Keynes). For more criticism of the 2010 Reinhart and Rogoff paper, including its glossing over of the causation question, see John Irons and Josh Bivens, “Government Debt and Economic Growth: Overreaching Claims of Debt ‘Threshold’ Suffer from Theoretical and Empirical Flaws,” EPI Briefing Paper #271 (Economic Policy Institute, July 26, 2010); Paul Krugman, “Fiscal Fever Breaks,” The New York Times (December 29, 2013). 46 . See Carmen M. Reinhart and Kenneth S. Rogoff, “Debt, Growth and the Austerity Debate,” The New York Times (April 25, 2013) 47 . See, e.g., Carmen Reinhart and Kenneth Rogoff, “Why We Should Expect Low Growth Amid Debt,” Financial Times (January 27, 2010); Carmen M. Reinhart, Vincent R. Reinhart, and Kenneth S. Rogoff, “Public Debt Overhangs: Advanced- Economy Episodes since 1800,” Journal of Economic Perspectives 26 (2012): 69–86, at 81–82; Carmen M. Reinhart and Kenneth S. Rogoff, “Reinhart and Rogoff: Responding to Our Critics,” The New York Times (April 25, 2013). 48 . For example, the Reinhart and Rogoff study was the only evidence cited by Representative Ryan in his argument for the austerity approach. See Paul Ryan, “The Path to Prosperity: A Blueprint for American Renewal,” Fiscal Year 2013 Budget Resolution, House Budget Committee, March 20, 2012, p. 78. The Reinhart and Rogoff study was also cited by Olli Rehn, the vice-president of the European Commission, in a February 2013 letter to European finance ministers and IMF and ECB officials as a reason to press on with European fiscal cuts. See Letter from Ollie Rehn, February 13, 2013 ( http://ec.europa.eu/commission_2010-2014/ 136 ● Notes

rehn/documents/cab20130213_en.pdf). See also Annie Lowrey, “A Study that Set the Tone for Austerity Is Challenged,” The New York Times (April 16, 2013). 49 . See Robert Pollin and Michael Ash, “Austerity after Reinhart and Rogoff,” Financial Times (April 17, 2013). 50 . Thomas Herndon, Michael Ash, and Robert Pollin, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Cambridge Journal of Economics 38 (2014): 257–279, esp. 266–277. See also J. Bradford DeLong and Laura D. Tyson, “Discretionary Fiscal Policy as a Stabilization Tool: What Do We Know Now that We Did Not Think in 2007?” U.C. Berkeley (April 5, 2013) ( http://www.imf.org/external/np/seminars/eng/2013/ fiscal/pdf/tyson.pdf ), pp. 27–30 (finding no threshold of debt-to-GDP at which growth drops precipitously). 51 . See Josh Bivens, “(Final?) Notes on the Reinhart/Rogoff Saga,” Economic Policy Institute (April 26, 2013) ( http://www.epi.org/blog/final-notes-reinhartrogoff- saga/). 52 . See Reinhart et al., “Public Debt Overhangs,” 69–86, at 70. 53 . Indeed, Rogoff is known to have spent many hours with George Osborne, Britain’s chancellor, and “Rogoff’s advice—that heavily indebted governments had to get serious about cutting their deficits—strongly influenced the British government’s decision to make controlling spending its priority.” Gideon Rachman, “Lunch with the FT: Kenneth Rogoff,” Financial Times (February 3, 2012). For more examples of Rogoff’s efforts to encourage government austerity, see Emily Peck, “Reinhart and Rogoff in NYT Op-Ed Aggressively Defend Error-Plagued Research,” The Huffington Post (April 26, 2013). 54 . Reinhart and Rogoff, “Debt, Growth, and the Austerity Debate.” 55 . See Kenneth Rogoff, “Britain Should Not Take Its Credit Status for Granted,” Financial Times (October 2, 2013). (“When decisions were made, we did not know the country could have borrowed more.”) 56 . For a discussion of the degree to which the austerity movement relied on Alesina’s work, see Peter Coy, “Keynes vs. Alesina. Alesina Who?’ Bloomberg Businessweek (June 29, 2010). 57 . See Alberto Alesina and Roberto Perotti, “Fiscal Expansions and Fiscal Adjustments in OECD Countries,” NBER Working Paper No. 5214 (National Bureau of Economic Research, August 1995) and “Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects,” International Monetary Fund Staff Papers 44 (1997): 210–248; Alberto Alesina, and Silvia Ardagna, 1998, “Tales of Fiscal Adjustment,” Economic Policy 13 (1998): 487–545 and “Large Changes in Fiscal Policy: Taxes versus Spending,” Tax Policy and the Economy 24 (2010): 35–68; Alberto Alesina, Carlo Favero, and Francesco Giavazzi, “The Output Effect of Fiscal Consolidations,” IGIER (2013). 58 . Mill, Principles of Political Economy , Bk. 3, Ch. 14, Sec. 4, p. 525. 59 . See Alfred Marshall, Principles of Economics (London: Macmillan, 7th ed. [1890]), p. 710 60 . See Alvin H. Hansen, A Guide to Keynes (New York: McGraw-Hill, 1953), pp. 13–14. 61 . See, e.g., Paul Krugman, “Expectations and the Confidence Fairy,” The New York Times (September 23, 2012) and “The Confidence Fairy, the Expectations Imp, and the Rate-Hike Obsession,” The New York Times (June 9, 2013). 62 . See also Paul Krugman, “Phantom Crisis (Wonkish),” The New York Times (October 3, 2013) and “Addicted to the Apocalypse,” The New York Times (October 24, 2013) (questioning how high debt is supposed to lead to financial collapse and how Notes ● 137

austerity is supposed to protect much less be a necessary or the best way to protect an economy that has its own currency and does not have a lot of foreign-currency denominated debt). 63 . To review the (as yet unpublished but nevertheless widely cited) academic paper in which this economic policy uncertainty index was created and applied, see Scott R. Baker, Nicholas Bloom, and Steven J. Davis, “Measuring Economic Policy Uncertainty” (June 4, 2012) ( http://www.policyuncertainty.com/media/ BakerBloomDavis_Old.pdf). The original paper has since been updated and revised, but not in ways that address any of the criticisms that have been leveled against it. See Scott R. Baker, Nicholas Bloom, and Steven J. Davis, “Measuring Economic Policy Uncertainty” (April 29, 2013) (http://www.policyuncertainty. com/media/BakerBloomDavis.pdf). 64 . For a blow by blow rebuttal of the significance of the economic policy uncertainty index, see Mike Konczal, “What Is the Economic Policy Uncertainty Index Really Telling Us,” Next New Deal (Roosevelt Institute, August 8, 2012) (http://www. nextnewdeal.net/rortybomb/what-economic-policy-uncertainty-index-really- telling-us). 65 . See Congressional Budget Office, “An Update to the Budget and Economic Outlook: 2014 to 2024” (August 2014) (http://www.cbo.gov/sites/default/files/cbofiles/ attachments/45653-OutlookUpdate_2014_Aug.pdf?action=click&contentCollec tion=Politics&module=RelatedCoverage®ion=Marginalia&pgtype=article), at p. 8; “Monthly Budget Review for September 2014” (October 8, 2014) ( http:// www.cbo.gov/sites/default/files/cbofiles/attachments/49450-MBR.pdf). 66 . See Neil Irwin, “The Deficit Is Falling Fast. Can Washington Accept Victory?” The Washington Post (April 23, 2013); Annie Lowrey, “Federal Budget Deficit Falls to Smallest Level since 2008,” The New York Times (February 27, 2014). 67 . See Reuters, “Consumer Confidence Ebbs, and Home Price Gains Slow,” The New York Times (February 25, 2014); Associated Press, “Federal Deficit up Slightly in First Fiscal Quarter,” The New York Times (January 13, 2015). 68 . See Paul Krugman, “Moment of Truthiness,” The New York Times (August 15, 2013) (citing surveys showing that only 12% of population correctly recognized that the deficit has come down a lot since 2010) and “Secret Deficit Lovers,” The New York Times (October 9, 2014) (more than half those polled thought that deficit had gone up; only 19% correctly recognized that deficit had gone down). 69 . See Reuters, “Consumer Confidence Falls, as U.S. Economy Hits Bump,” The New York Times (September 30, 2014). See also Nelson D. Schwartz, “Saving Big on Energy Bills, People Take It to the Bank,” The New York Times (March 2, 2015) (despite a huge drop in gasoline prices during the last six months of 2014, consumers have been banking this money, not spending it). 70 . See Roberto Perotti, “The ‘Austerity Myth’: Gain without Pain?” in Fiscal Policy after the Financial Crisis, ed. Alberto Alesina and Francesco Giavazzi (Chicago, IL: University of Chicago Press, 2013) and “The Sovereign Debt Crisis in Europe: Lessons from the Past, Questions for the Future,” Academic Consultants Meeting, Federal Reserve Board, Washington, DC, May 6, 2013. 71 . See, e.g., Arjun Jayadev and Mike Konczal, “The Boom Not the Slump: The Right Time for Austerity,” The Roosevelt Institute (August 23, 2010) ( http://www.nextnewdeal.net/wp-content/uploads/2010/08/not_the_time_for_austerity.pdf). 72 . Ò scar Jordà and Alan M. Taylor, “The Time for Austerity: Estimating the Average Treatment Effect of Fiscal Policy,” NBER Working Paper No. 19414 (National Bureau of Economic Research, September 2013), p. 24. 138 ● Notes

73 . See, e.g., Danielle Ivory, “Federal Contracts Plunge, Squeezing Private Companies,” The New York Times (January 15, 2014); Suzanne Daley, “Wave of Evictions Leads to Homeless Crisis in Spain,” The New York Times (November 11, 2012). 74 . Paul Krugman, “We Don’t Need No Education,” The New York Times (June 14, 2012). See also Elise Gould, “The Economy Continues to Pay the Price for Austerity,” Working Economics Blog (April 3, 2015) ( http://www.epi.org/blog/the-economy- continues-to-pay-the-price-for-austerity/ ) (giving updated figures showing the economy is now short 1.8 million public sector jobs); Shaila Dewan and Motoko Rich, “Public Workers Face Continued Layoffs, Hurting the Recovery,” The New York Times (June 10, 2012); Michael Greenstone and Adam Looney, “A Record Decline in Government Jobs: Implications for the Economy and America’s Workforce,” The Hamilton Project (August 3, 2012) (http://www.hamiltonproject.org/files/down- loads_and_links/0803_jobs_government_employment.pdf ); Matthew O’Brien, “Our Historic Austerity—In 1 Crazy Chart,” The Atlantic (December 2013) (showing that public employment after the Great Recession has fallen more than 600,000 during the recovery alone, while public employment actually increased after the previous recession by 400,000). And the same thing is happening in the United Kingdom. See David Jolly, “British Employment Defies Weak Economy,” The New York Times (August 15, 2012) (austerity drive will probably result in loss of 700,000 public sector jobs in the United Kingdom by 2015); Julia Kollewe, “UK Unemployment Falls Due to Temporary Olympics Jobs Boost,” The Guardian (August 15, 2012) (same). Note that this does not mean we are impliedly recognizing that the unemployed have a right to a government job—only that government downsizing has especially negative economic effects if done when unemployment is high and the economy is weak, and therefore these effects must be taken into account even when government downsizing may be driven by ideological rather than economic reasons. 75 . See Floyd Norris, “Four Years Later, 28,000 More Jobs,” The New York Time (January 4, 2013). See also Floyd Norris, “Private Employment Slowly Reclaims Pre-Downturn Peak,” The New York Times (March 14, 2014). 76 . Note that the employment multiplier is simply another way of measuring the impact of public spending. In other words, you would not use both and total the employment gains from each; they are simply different ways of measuring the indirect effects of, in one case, public employment, and in the other case, total public spending. See generally Hansen, A Guide to Keynes, p. 88 (discussing the connec- tion between employment and overall spending multiplier). 77 . See Josh Bivens and Heidi Shierholz, “Three Years into Recovery, Just How Much Has State and Local Austerity Hurt Job Growth?” Economic Policy Institute (July 6, 2012) (http://www.epi.org/blog/years-recovery-state-local-austerity-hurt/ ). 78 . See Heidi Shierholz, “At a Time of Persistent Economic Weakness, Today’s Jobs Report Represents an Ongoing Disaster,” Press Release (Economic Policy Institute, May 3, 2013) (noting that since recovery began in June 2009 the public sector has lost 741,000 jobs); Floyd Norris, “The Lagging Public Sector,” The New York Times (July 5, 2013). 79 . For a similar view, See Remarks by Janet L. Yellen, Vice Chair, Board of Governors of the Federal Reserve System at “A Trans-Atlantic Agenda for Shared Prosperity,” Washington, DC, February 11, 2013, at pp. 4–5. 80 . Associated Press, “Unemployment Rates Fall in Nearly All US Cities,” The New York Times (May 29, 2013). 81 . See Heidi Shierholz, “U.S. Labor Market Starts 2012 with Solid Positive Signs but Fewer Jobs than It Had 11 Years Ago,” Economic Policy Institute (February Notes ● 139

3, 2012) and “The U.S. Jobs Deficit Is 9 Million,” Economic Policy Institute (November 8, 2012). 82 . See Alina Tugend, “Unemployed and Older, and Facing a Jobless Future,” The New York Times (July 26, 2013); Michael Winerip, “Three Men, Three Ages. Which Do You Like?” The New York Times (July 22, 2013). 83 . See Michael Winerip, “For Laid-Off Older Workers, Age Bias Is Pervasive,” The New York Times (August 26, 2013); Catherine Rampell, “In Hard Economy for All Ages, Older Isn’t Better . . . It’s Brutal,” The New York Times (February 2, 2013) and “The Stranded Unemployed,” The New York Times (August 24, 2012) (most older people who lose their jobs are not finding reemployment, and when they do, they’re taking major pay cuts). 84 . See Floyd Norris, “Gender Gaps Appear as Employment Recovers from the Recession,” The New York Times (July 12, 2013) and “By Gender and Age, an Unequal Recovery,” The New York Times (February 8, 2013); David Cooper, Mary Gable, and Algernon Austin, “The Public-Sector Job Crisis: Women and African Americans Hit Hardest by Job Losses in State and Local Governments,” EPI Briefing Paper #339 (Washington, DC: Economic Policy Institute, May 2, 2012). See also Patricia Cohen, “Public-Sector Jobs Vanish, Hitting Blacks Hard,” The New York Times (May 24, 2015); Timothy Williams, “As Public Sector Sheds Jobs, Blacks Are Hit Hardest,” The New York Times (November 28, 2011); Catherine Rampell, “Employed Women, Dropping out of Labor Force,” The New York Times (December 6, 2011); Tara Siegel Bernard, “Laid Off, with Retirement Almost in Sight,” The New York Times (January 6, 2012); Patrick McGeehan, “Blacks Miss out as Jobs Rebound in New York City,” The New York Times (June 20, 2012). For more statistics on this, see Lawrence Mishel et al., The State of Working America , 12th edn. (Economic Policy Institute: Cornell University Press, 2012), Ch. 5 and Council of Economic Advisors, 2015 Annual Report (Washington, DC: February 19, 2015), Ch. 3, esp. pp. 108–109 (http://www.whitehouse.gov/sites/default/ files/docs/2015_erp_chapter_3.pdf). 85 . See Josh Bivens and Valerie Wilson, “Estimates of Unemployment Rates by Race and Ethnicity at the MSA Level for the Third Quarter of 2014” (Economic Policy Institute: November 12, 2014) ( http://www.epi.org/publication/fed-unemployment-race/?utm_source=Economic+Policy+Institute&utm_campaign=a8d51eda5e- Fed_11_18_1411_18_2014&utm_medium=email&utm_term=0_e7c5826c50- a8d51eda5e-55957733). See also Connie M. Raza, “Wall Street, Main Street, and Martin Luther King Jr. Boulevard” (Center for Popular Democracy, March 2015) ( http://populardemocracy.org/sites/default/files/FedUp%20Report%2003022015 %20web.pdf). 86 . See Paul Krugman, “Stranded by Sprawl,” The New York Times (July 29, 2013); Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, The Equality of Opportunity Project (http://www.equality-of-opportunity.org/index.php/the-team ) (showing high correlation between lack of economic mobility and economic residential segregation). 87 . See George Packer, “All the Angry People,” The New Yorker (December 5, 2011). Indeed, in December, 2013, a month of incredibly anemic job growth, all the job gains went to women—men actually lost 1,000 jobs. See Catherine Rampell, “All December Job Gains Went to Women,” The New York Times (January 10, 2014). See also Josh Mitchell, “Who Are the Long-Term Unemployed?” (The Urban Institute, July 2013) ( http://www.urban.org/uploadedpdf/412885-who-are-the- long-term-unemployed.pdf) (college graduates are less likely to lose their jobs than 140 ● Notes

workers with less education, but once they do, they are slightly more likely than others to become members of the long-term unemployed). 88 . See Catherine Rampell, “The Help-Wanted Sign Comes with a Frustrating Asterisk,” The New York Times (July 25, 2011). 89 . See Winnie Hu, “When Being Jobless Is a Barrier to Finding a Job,” The New York Times (February 17, 2013). 90 . See generally Peter Baker, “Big Companies Join Obama in Initiative to Help Long- Term Unemployed,” The New York Times (January 31, 2014). 91 . See Rachel L. Swarns, “Bumpy Road for Bill to Ban Credit Checks for Job Applicants,” The New York Times (March 29, 2015). 92 . Gary Rivlin, “The Long Shadow of Bad Credit in a Job Search,” The New York Times (May 11, 2013). 93 . See, e.g., Benjamin Friedman, Day of Reckoning: The Consequences of American Economic Policy (New York: Random House, 1988), p. 4: “We are living well by running up our debt and selling off our assets. America has thrown itself a party and billed the tab to the future. The costs, which are only beginning to come due, will include a lower standard of living for individual Americans and reduced American influence and importance in world affairs.” 94 . For those who haven’t been reading the newspapers and whose personal experience over the last five years has not otherwise brought them in touch with this devastation, I recommend having a look at Chris Hedges and Joe Sacco, Day of Destruction and Revolt (New York: Nation Books, 2012). For a look at the devastation experienced by just one American town, see Robert D. Putnam, “Crumbling American Dreams,” The New York Times (August 3, 2013). For the results of a recent study surveying the unemployed, see Cliff Zukin, Carl E. Van Horn, and Charley Stone, “Categorizing the Unemployed by the Impact of the Recession,” John J. Heldrich Center for Workplace Development Working Paper (Rutgers University, December 2011) (http://www. heldrich.rutgers.edu/sites/default/files/content/Categorizing_Impact_Recession_ Revised_0.pdf). See also Melena Ryzik, “‘I, Too, Am America,’ Shares Snapshots from Workers Living on the Edge,” The New York Times (May 1, 2015). 95 . See Teresa Tritch, “How the Deficit Got This Big,” The New York Times (July 23, 2011); Bruce Bartlett, “The Fiscal Legacy of George W. Bush,” The New York Times (June 12, 2012) and “Republican Deficit Hypocrisy,” Forbes (November 20, 2009); David Leonhardt, “America’s Sea of Red Ink Was Years in the Making,” The New York Times (June 10, 2009); “How Trillion-Dollar Deficits Were Created,” The New York Times (June 10, 2009) (analysis of Congressional Budget Office Data). 96 . Abba P. Lerner, ““The Burden of the National Debt,” in Income, Employment and Public Policy: Essays in Honour of Alvin H. Hansen, ed. Lloyd A. Metzler (New York: W.W. Norton & Co, 1948), pp. 255–275, 256. 97 . Lerner, “The Burden of the National Debt,” p. 257. 98 . See Congressional Budget Office, Federal Debt and Interest Costs (December 2010), pp. viii and 13. 99 . See also Simon Johnson, “Sizing up the Fiscal Future,” The New York Times (November 14, 2013) (questioning the wisdom of relying on what often prove to be highly inaccurate long-term economic forecasts to make sweeping antisocial fiscal changes now). 100 . Indeed, this is the whole basis of John Rawls’s argument for justice as fairness. See Rawls, A Theory of Justice (Cambridge: Harvard University Press, 1999[1971]) and Justice as Fairness: A Restatement (Cambridge: Harvard University Press, 2001). Notes ● 141

101 . See Interview with F. A. Hayek, “Business People; A Nobel Winner Assesses Reagan,” The New York Times (December 1, 1982) (“The only way you can finance a deficit is by inflation. You cannot raise this amount of money by genuine borrowing. You borrow from Banks, which create credit for the purpose. A large government deficit is a certain way to inflation”). This Hayekian attitude is, not surprisingly, particularly popular in Germany, and therefore helps explain why Germany remains intent on practicing fiscal austerity even though the interest rate on German bonds has been at historical lows for some time and in 2015 actually slipped into negative territory— that’s right, Germany can now sell bonds even though it is agreeing to pay back less than it borrows. See Jack Ewing, “Germany Resists Europe’s Pleas to Spend More,” The New York Times (January 8, 2012); Chad Bray, “Germany Sells Five-Year Debt at Negative Yield,” The New York Times (February 25, 2015). Germany could be using this cheap money to invest in education and infrastructure and otherwise stimulate demand and long-term growth, which would help not only itself but also the rest of Europe get back on the road to economic recovery, but it isn’t. This is mysterious enough, but why this Hayekian attitude is also so popular in non-Germanic countries, especially in the United Kingdom, however, is even more mysterious. 102 . See, e.g., Burkhead, “The Balanced Budget,” 191–216, esp. 212–213. 103 . See M. Kalecki, “Three Ways to Full Employment,” in The Economics of Full Employment: Six Studies in Applied Economics, ed. The Oxford University Institute of Statistics (Oxford: Basil Blackwell, 1944), pp. 39–58, at p. 43; Michał Kalecki, “The Impact of Armaments on the Business Cycle after the Second World War” [1955], in The Collected Works of Michał Kalecki: Volume II: Capitalism: Economic Dynamics (Oxford: Oxford University Press, 1991), pp. 351–373, 359 (“I must admit that I do not know why a budget deficit must cause inflation, if overcoming a crisis is being considered, that is, a situation in which we have unemployment and underutilized capital equipment”). 104 . See Rainer Strack, Jens Baier, Mathew Marchingo, and Shailesh Sharda, “The Global Workforce Crisis: $10 Trillion at Risk,” Boston Consulting Group (June 2014) (https://www.bcgperspectives.com/Images/The_Global_Workforce_Crisis_ Jun_2014_tcm80-173241.pdf). 105 . For a detailed discussion of Killingsworth’s arguments and those made by his oppo- nents, see Gregory R. Woirol, The Technological Unemployment and Structural Unemployment Debates (Westport, CT: Greenwood Press, 1996), pp. 93–142. 106 . For some current anecdotal evidence of this, see, e.g., Darren Dahl, “A Sea of Job-Seekers, but Some Companies Aren’t Getting Any Bites,” The New York Times (June 27, 2012). For more systematic evidence, see Manpower Group, “2012 Talent Shortage Survey,” available online at http://files.shareholder.com/downloads/MAN/1950828155x0x571882/ac2b52c1-55d8- 4aaa-b99e-583bd8a82d0c/2012%20Talent%20Shortage%20Survey%20 Res_US_FINAL%20(2).pdf (showing 49% of US employers claim they cannot find the right talent to fill their employee needs); Kimiko De Freytas-Tamura, “Britain Scrambles to Fill Skills Gap,” The New York Times (January 17, 2014). 107 . Killingsworth’s mismatch argument was also subsequently endorsed by Hayek. See Hayek, “The Campaign against Keynesian Inflation,” in New Studies in Philosophy, Politics, Economics and the History of Ideas (London: Routledge & Kegan Paul, 1978), pp. 191–231, 200: “The older, and to me convincing, explanation of extensive unemployment ascribes it to a discrepancy between the distribution of labour (and the other factors of production) between the different industries (and localities) and the distribution of demand among their products.” 142 ● Notes

108 . See, e.g., Narayana Kocherlakota, President, Federal Reserve Bank of Minneapolis, “Inside the FOMC,” Speech at Marquette, Michigan (August 17, 2010), at p. 5. Interestingly, however, even Kocherlakota is now calling for measures to increase inflation, meaning he must be less convinced by the mismatch argument then he once was. See Reuters, “President of Minneapolis Fed Calls for Higher Inflation,” The New York Times (September 4, 2014). 109 . See, e.g., Paul Krugman, “Jobs and Skills and Zombies,” The New York Times (March 30, 2014); Binyamin Appelbaum, “Fed Minutes Show Disappointment with Growth,” The New York Times (July 11, 2012) (“Some Fed Officials opposed additional action [to stimulate the economy] because they were concerned that it would raise the pace of inflation. They saw evidence that the unemployment rate cannot quickly return to normal levels because many people looking for jobs lack the skills sought by companies looking for workers. On this view, efforts to increase growth would simply raise wages and prices, without reducing unemployment.”). See also Liz Alderman, “Unemployed in Europe Stymied by Lack of Technology Skills,” The New York Times (January 3, 2014) (European Commission warns that “about 900,000 information and technology vacancies may go unfilled in the European Union” by 2015 as a result of “skills gap”). But see Daniel Costa, “STEM Labor Shortages? Microsoft Report Distorts Reality about Computing Occupations,” EPI Policy Memorandum #195, Economic Policy Institute (November 19, 2012) (noting errors in Microsoft report claiming qualified workers are in short supply). 110 . See Peter Cappelli, Why Good People Can’t Find Jobs: The Skills Gap and What Companies Can Do about It (Philadelphia, PA: Wharton Digital Press, 2012). Cappelli tells the story of one employer who advertised a standard engineering position and received 25,000 applications but found no one qualified (p. 10). Even if the number of applicants here has been grossly overstated, however, it seems unlikely that a lack of suitably qualified candidates is the best explanation in this case for what was really going on. 111 . Laura D’Andrea Tyson, “Why the Unemployment Rate Is So High,” The New York Times (January 11, 2013) (Tyson is a professor at the Haas School of Business at the University of California, Berkeley, and was chair of the Council of Economic Advisors under President Clinton). See also OECD, “OECD Employment Outlook 2014” (OECD Publishing, 2014) (http://dx.doi.org/10.1787/empl_out- look-2014-en ), pp. 36–37 (“there is little indication so far that structural changes in the industry mix have given rise to a persistent misalignment of job vacancies and unemployed jobseekers across sectors and that this has induced a substantial increase in structural unemployment”); Jared Bernstein, “It’s Not a Skills Gap That’s Holding Wages Down: It’s the Weak Economy, among Other Things,” The American Prospect (October 7, 2014); Paul Osterman and Andrew Weaver, “Why Claims of Skills Shortages in Manufacturing Are Overblown,” EPI Issue Brief #376 (Economic Policy Institute, March 26, 2014) ( http://www.epi.org/publication/claims-skills-shortages-manufacturing-overblown/ ); Boston Consulting Group, “Skills Gap in U.S. Manufacturing Is Less Pervasive than Many Believe,” Press Release (October 15, 2012) ( http://www.bcg.com/media/PressReleaseDetails. aspx?id=tcm%3A12-118945); Edward P. Lazear and James R. Spletzer, “The United States Labor Market: Status Quo or a New Normal?” NBER Working Paper Series 18386 (Cambridge, MA: National Bureau of Economic Research, September 2012); Jessie Rothstein, “The Labor Market Four Years into the Crisis: Assessing Structural Explanations,” Industrial and Labor Relations Review 65 (2012): 467– 500, 496; Hal Salzman, Daniel Kuehn, and B. Lindsay Lowell, “Guestworkers Notes ● 143

in the High-Skill U.S. Labor Market: An Analysis of Supply, Employment, and Wage Trends,” EPI Briefing Paper #359 (Economic Policy Institute, April 24, 2013) (http://s3.epi.org/files/2013/bp359-guestworkers-high-skill-labor-market- analysis.pdf) (showing there is little reason to believe that United States is not producing enough highly skilled STEM workers). 112 . See Julia Preston, “Pink Slips at Disney. But First, Training Foreign Replacements,” The New York Times (June 3, 2015). Something similar seems to have happened to 540 workers at Southern California Edison. See Shan Li and Matt Morrison, “Edison’s Plans to Cut Jobs, Hire Foreign Workers Is Assailed,” Los Angeles Times (February 10, 2015). 113 . See Julia Preston, “In Turnabout, Disney Cancels Tech Worker Layoffs,” The New York Times (June 16, 2015). 114 . This is the thrust of a recent study conducted by Accenture and Burning Glass and the Harvard Business School. See Jennifer Burrowes, Alexis Young, Dan Restuccia, Joseph Fuller, and Manjari Raman, Bridge the Gap: Rebuilding America’s Middle Skills (November 10, 2014) (http://www.hbs.edu/competitiveness/Documents/ bridge-the-gap.pdf). 115 . For further discussion of this issue, see Freytas-Tamura, “Britain Scrambles to Fill Skills Gap.” 116 . Catherine Rampell, “With Positions to Fill, Employers Wait for Perfection,” The New York Times (March 6, 2013); James Surowiecki, “Mind the Gap,” The New Yorker (July 9 and 16, 2012); Robert W. Goldfarb, “How to Bridge the Hiring Gap,” The New York Times (November 10, 2012). 117 . See Adam Davidson, “Skills Don’t Pay the Bills,” The New York Times (November 20, 2012) (citing various examples of employers who are encountering a shortage of workers not because workers with the required skills are not out there but because these employers are unwilling to pay workers with these expensive-to-acquire skills more than unskilled workers can get working in the fast-food industry). 118 . See generally Barry Schwartz, The Paradox of Choice: Why More Is Less (New York: Harper Perennial, 2004); Benjamin Scheibehenne, Rainer Greifeneder, and Peter M. Todd, “Can There Ever Be Too Many Options? A Meta-Analytic Review of Choice Overload,” Journal of Consumer Research 37 (2010): 409–425. The principle of decision-making that seems to be at work here is minimax regret. For a discussion of that principle and how it might be operating here, see Mark R. Reiff, “The Politics of Masochism,” Inquiry 46 (2003): 29–63 119 . See Robert J. Shiller, “How National Belt-Tightening Goes Awry,” The New York Times (May 19, 2012). 120 . See John Steele Gordon, Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt (New York: Walker & Co., 2010). 121 . See Paul Krugman, “The Chutzpah Caucus,” The New York Times (May 5, 2013). 122 . See Duncan Weldon, “The UK’s Government Debt since WW2,” Touchstone (TUC: June 13, 2013) (http://touchstoneblog.org.uk/2013/06/the-uks-government-debt- since-ww2/). 123 . See, e.g., Landon Thomas Jr., “Burned by Losses on Portuguese Bank Bonds, Hedge Funds Ponder Next Steps,” The New York Times (August 8, 2014); Matthew Goldstein, “Delinquent Mortgages Attracting Investors,” The New York Times (August 13, 2014) (unrated bonds backed by nonperforming loans selling despite offering just 4% return). 124 . There is one other possible concern not as important as those I have listed above that I will nevertheless go ahead and mention here: unless we expect to never have 144 ● Notes

to engage in borrowing again, maintaining a nation’s credit rating requires maintaining a certain degree of debt. This, after all, was the argument that Alexander Hamilton successfully made in favor of maintaining a national debt in the first place. See generally Gordon, Hamilton’s Blessing. While this probably is not a problem for the United States any longer even if it were to pay off its debt, losing the ability to maintain a credit rating could be a problem for certain other economies were they to pay down their debt completely and not attempt to borrow again for some time. 125 . See Council of Economic Advisors, “Life after Debt” (Second Interagency Draft, November 3, 2000) (http://media.npr.org/assets/img/2011/10/20/LifeAfterDebt. pdf). 126 . Especially, although certainly not exclusively, advocates of what has come to be known as “Modern Monetary Theory” or “MMT.” Those who embrace MMT are fierce advocates of deficit-financed fiscal stimulus during periods of high unemployment, but they are also generally less concerned about running deficits even in the best of times. See, e.g., Dylan Mathews, “Modern Monetary Theory Is an Unconventional Take on Economic Strategy,” Washington Post (February 18, 2012); Annie Lowrey, “Warren Mosler, a Deficit Lover with a Following,” The New York Times (July 4, 2013). And while many conservative economists have distanced themselves from MMT now that there is a reason to be running deficits, when we were running surpluses it was hard to tell the advocates of M and these conservatives apart. 127 . See The Paydown of the Federal Debt, Remarks by Chairman Alan Greenspan before the Bond Market Association, White Sulphur Springs, West Virginia (April 27, 2001). See also “The National Debt: Imagine if It Disappeared,” The Economist (March 15, 2001). For a particularly acute discussion of the history and advantages of public debt from the last time that reducing public debt seemed to be all the rage, when we had also just finished fighting an expensive war, see Hansen, Fiscal Policy and Business Cycles, pp. 152–175 (explaining why “The assumption that a large public debt is inherently and necessarily under all circumstances an evil is not warranted”). 128 . See Federal Reserve Board, “Testimony of Chairman Alan Greenspan before the Committee on the Budget” (U.S. Senate, January 25, 2001) ( http://www.federalreserve.gov/boarddocs/testimony/2001/20010125/ ); Frank Pellegrini, “Greenspan’s Brave New World Has Room for Bush’s Tax Cut,” Time Magazine (January 25, 2001); Peggy Noonan, “Now He Tells Us,” The Wall Street Journal (September 21, 2007); Paul Krugman, “Sad Alan’s Lament,” The New York Times (September 17, 2007). 129 . See Mark R. Reiff, “The Difference Principle, Rising Inequality, and Supply- Side Economics: How Rawls Got Hijacked by the Right,” Revue de Philosophie É conomique/Review of Economic Philosophy 13:2 (2012): 119–173, 128; David Cay Johnston, “Big Gain for Rich Seen in Tax Cuts for Investments,” The New York Times (April 5, 2006). 130 . See US Department of the Treasury, “The U.S. Economy in Charts” (February 2012), Chart 9: Causes of Deficits since 2001 (showing Bush administration responsible for 59% of budget deficit, while Obama administration responsible for just 12%) (http://www.treasury.gov/resource-center/data-chart-center/documents/20120229_essentialecon.pdf ). See also Phillips, “The Long Story of U.S. Debt.” 131 . See Sarah O’Connor, “UK Unemployment Hits 17-Year High,” The Financial Times (December 14, 2011); Heather Stewart, “UK Unemployment Stuck at Notes ● 145

17-Year High as Economy Falters,” The Guardian (February 15, 2012); Phillip Inman, “UK Unemployment at Five-Year Low amid Jobs Boom,” The Guardian (May 14, 2014) (number of self-employed people now back at 1970s levels, and plenty of slack in the labor market remains). 132 . See Larry Elliott, “George Osborne’s Autumn Statement: I’m Afraid There Is No Money,” The Guardian (November 30, 2014) (the actual effect of the government’s deficit reduction plan has been weaker growth, lower than expected tax revenues, and higher than expected borrowing); Press Association, “UK Government Borrowing Rises in June,” The Guardian (July 19, 2013) (noting that “public sector net borrowing . . . increased in June to £ 12.4bn from £ 11.9bn in June last year”); New Statesman, “After Cable’s Intervention, the Austerity Consensus Is Crumbling,” New Statesman (March 15–21, 2013) (deficit now 5.4 percent higher than it was last year); Larry Elliott, “IFS Warns UK Will Borrow £ 64bn More than Expected By 2015,” The Guardian (February 6, 2013); Phillip Inman, “Rise in Government Borrowing Adds to George Osborne’s Woes,” The Guardian (July 20, 2012); Norma Cohen and Clare Jones, “Outlook Uncertain as Economy Goes into Reverse,” Financial Times (January 25, 2012) (UK economy contracted by 0.2% in last quarter of 2011 making this its slowest recovery from recession since the 1930s); Simon Bowers, “UK Growth for 2011 Revised down to 0.8%,” The Guardian (February 24, 2012); George Parker and Elizabeth Rigby, “UK Growth Review: On a Perilous Path,” Financial Times (November 27, 2011); Sarah O’Connor, “UK Growth for Final Quarter Revised Down,” Financial Times (March 28, 2012) (estimates of growth now down to –.03% for the final quarter of 2011 and an anemic 0.7% for the year); Stephen Castle, “British Central Bank Cuts Growth Forecast,” The New York Times (August 8, 2012) (growth forecast as 0 for 2012); Paul Krugman, “Britain’s Self-Inflicted Misery,” The New York Times (October 14, 2011), “The Path Not Taken,” The New York Times (October 27, 2011), “Bleeding Britain,” The New York Times (November 30, 2011), “The Austerity Debacle,” The New York Times (January 29, 2012), and “The Austerity Agenda” (May 31, 2012); Datablog, “Deficit, National Debt and Government Borrowing—How Has It Changed since 1946?” The Guardian (October 18, 2010). The same thing is happening in other European countries too. See, e.g., Stephen Castle, “Spain Adjusts Deficit-Reduction Target at European Summit,” The New York Times (March 2, 2012). 133 . See Julia Werdigier and Jack Ewing, “Double-Dip Recession in Britain,” The New York Times (April 25, 2012); Norma Cohen, Sarah O’Connor, and Jim Pickard, “Britain Slides Back into Recession,” Financial Times (April 25, 2012). Britain finally broke free of its ninth month of recession in the third quarter of 2012, but figures for that quarter may have been artificially inflated by the one-time boost to the economy resulting from the Olympics, so it remains to be seen whether this is the beginning of a real recovery and, of course, how strong of a recovery it may be. See David Jolly, “Britain Pulls out of Recession in Third Quarter,” The New York Times (October 25, 2012). 134 . See Phillip Inman, “Britain Halfway to Triple-Dip Recession as Manufacturing Sector Stalls,” The Guardian (January 25, 2013); Julia Werdigier, “Central Bank Projects More Slow Growth for Britain,” The New York Times (November 14, 2012); Julia Werdigier, “Austerity in Britain Will Stretch to 2018, Osborne Says,” The New York Times (December 5, 2012) (UK economy now expected to shrink 0.1% overall in 2012 as opposed to 0.8% growth). 135 . Landon Thomas Jr., “In Europe, a Risk-Filled Choice for Britain,” The New York Times (February 12, 2013). 146 ● Notes

136 . See Hillary Osborne, “Real Wages Fall Back to 2003 Levels in UK,” The Guardian (February 13, 2013). 137 . See Stephen Castle, “British Government Seeks Lift from Economic Data,” The New York Times (April 16, 2014). 138 . William Keegan, “When Recovery Follows Austerity, It Is Not Cause and Effect,” The Observer (May 3, 2014). 139 . See Council of Economic Advisors, 2015 Annual Report. 140 . Paul Krugman, “Seriously Bad Ideas,” The New York Times (June 12, 2015). See also Matthew C. Klein, “Banks, Businesses or the Bust? Deeper into the UK Productivity Puzzle,” Financial Times (June 8, 2015) (showing figures). 141 . See Mark King, “Underemployment Affects 1 in 10 Workers, ONS Says,” The Guardian (November 28, 2012). 142 . See Ian Mulheirn, “The Truth about Welfare: The System Is Broken and the Government Is Making it Worse,” New Statesman (May 17–23, 2013). 143 . See Patrick Wintour, “Squeezed Middle Must Wait another Decade for Rise in Living Standards,” The Guardian (February 13, 2013). See also Phillip Inman, “OECD Cuts UK Economic Growth Forecasts for 2014,” The Guardian (May 29, 2013). 144 . Marcus Miller and Robert Skidelsky, “Across Europe, Austerity Policies Have Caused Stagnation and Despair,” New Statesman (June 21–27, 2013). 145 . See Sarah O’Connor, “UK Economy Returns to Pre-Crisis Level,” Financial Times (July 25, 2014); Sarah O’Connor and Norma Cohen, “UK Economy Smaller than When Cameron Took Office,” Financial Times (July 25, 2012). 146 . See Josephine Moulds, “UK Government Borrowing Rises to Record August High,” The Guardian (September 21, 2012) (deficit has widened 22% so far this year); Chris Giles, “Bad News Forecast for Chancellor,” Financial Times (October 7, 2012) (debt burden will not begin to fall for one and possibly two years more than previously forecast); Landon Thomas Jr., “Britain’s Economic Malaise Brought Ratings Downgrade,” The New York Times (February 24, 2013) (“despite presiding over one of the longest- and highest-profile austerity campaigns, the British government will end this year with a primary deficit . . . that is by far the highest such fig- ure in Europe”). For more historical figures, see Datablog, “Deficit, National Debt and Government Borrowing—How Has It Changed since 1946?” The Guardian (September 21, 2012) (http://www.guardian.co.uk/news/datablog/2010/oct/18/ deficit-debt-government-borrowing-data ); David Blanchflower, “This Budget Was the Chancellor’s Last Hurrah—and Now He Can Only Hope for Good Times,” New Statesman (March 22–28, 2013) (“Lack of growth has resulted in more—not less—borrowing to pay for the costs of economic failure”). 147 . See Angela Monaghan, “UK Business Investment Falls at Fastest Rate since Financial Crisis,” The Guardian (February 26, 2015). 148 . Quoted in Hansen, Fiscal Policy and Business Cycles , p. 98–99. 149 . Emily Cadman, “UK Productivity Still Abysmal, Report Says,” Financial Times (August 5, 2014). 150 . Danny Hakim, “Diverse Views on Reasons and Prospects for British Recovery,” The New York Times (December 23, 2013). See also Paul Krugman, “Osborne and the Stooges,” The New York Times (December 19, 2013). 151 . See Larry Elliott, “UK Economy Finally Set for Sustained Growth, Says Bank of England Deputy,” The Guardian (October 22, 2013). 152 . See Steven Erlanger, “Cameron Promises another Dose of Austerity as British Elections Near,” The New York Times (March 16, 2015); Heather Stewart and Notes ● 147

Nicholas Watt, “Osborne Offers Tax Cuts and Help-to-Buy Isas in Highly Political 2015 Budget,” The Guardian (March 18, 2015). 153 . See Larry Elliott, “George Osborne Calls Emergency July Budget to Reveal Next Wave of Austerity,” The Guardian (May 16, 2015); Nick Robinson, “Osborne Confirms Budget Surplus Law,” BBC News (June 10, 2015); Rowena Mason, “Osborne to Proceed with £ 12bn Welfare Cuts Despite Anti-Austerity Protests,” The Guardian (June 21, 2015). 154 . See Jenny Anderson, “Bank of England to Hold Rates Steady,” The New York Times (May 11, 2015). 155 . Jord à and Taylor, “The Time for Austerity.” 156 . See Paul De Grauwe and Yuemei Ji, “Panic-Driven Austerity in the Eurozone and Its Implications,” Vox (February 21, 2013) (http://www.voxeu.org/article/panic- driven-austerity-eurozone-and-its-implications); International Monetary Fund, “Taking Stock: A Progress Report on Fiscal Adjustment,” Fiscal Monitor (October 2012). For a handy summary of the IMF report, see Landon Thomas Jr. and David Jolly, “Despite Push for Austerity, European Debt Has Soared,” The New York Times (October 22, 2012). See also David Jolly, “Deficits Fall in Europe, but Debt Rises,” The New York Times (April 22, 2013). 157 . See Landon Thomas Jr., “Portugal’s Debt Efforts May Be Warning for Greece,” The New York Times (February 14, 2012). And instead of being allowed to reject the austerity approach, the Portuguese government is now being forced to double down and raise taxes to make up for lost revenue, a move that threatens to push unemployment to further record highs and drive the country even deeper into recession. See Reuters, “Portugal Raises Taxes at ‘Critical Moment’ to Meet Bailout Conditions,” The Guardian (October 3, 2012). Not surprisingly, these relentless austerity measures are now producing a substantial degree of social unrest. See Raphael Minder, “Austerity Protests Are Rude Awakening in Portugal,” The New York Times (October 14, 2012). 158 . Raphael Minder, “Buoyed by Exports, Portugal Chooses Clean Exit from Bailout,” The New York Times (May 4, 2014). 159 . See George Hay and Neil Unmack, “What to Do about Banco Espí rito Santo of Portugal,” The New York Times (July 10, 2014); Raphael Minder, “Back from the Brink, Portugal Still Has a Long Way to Go,” The New York Times (July 14, 2014); Reuters, “Portuguese Holding Company Seeks Protection,” The New York Times (July 18, 2014); Raphael Minder, “Banco Esp í rito Santo Posts $4.8 Billion Loss,” The New York Times (July 30, 2014); Jack Ewing and Chad Bray, “Banco Esp í rito Santo to Be Split Up in Rescue by Portugal,” The New York Times (August 3, 2014); Chad Bray, “Espí rito Santo Financial to File for Bankruptcy,” The New York Times (October 9, 2014). The collapse of Banco Espí rito Santo is causing losses to mount in other countries too. See Chad Bray, “Cr é dit Agricole Takes $950 Million Charge on Portuguese Bank,” The New York Times (August 5, 2014). 160 . Raphael Minder, “Crowding and Austerity Strain Portugal’s Prisons,” The New York Times (November 20, 2012). 161 . For a particularly vivid illustration of the pain that the Spanish austerity program has caused, see the photographs of Samuel Aranda in “In Spain, Austerity and Hunger,” The New York Times (http://www.nytimes.com/slideshow/2012/09/12/world/ europe/20120913-SPAIN.html?src=ISMR_AP_LO_MST_FB#4) and Suzanne Daley, “Spain Recoils as Its Hungry Forage Trash Bins for a Next Meal,” The New York Times (September 24, 2012). See also Giles Tremlett, “More Pain in Spain as Unemployment Benefit Payments Rise,” The Guardian (September 4, 148 ● Notes

2012) (increased benefit payments could add billions to budget deficit); Suzanne Daley, “As Bank Loans Dry up in Spain, Small and Medium Businesses Fight for Life” The New York Times (May 31, 2012); James Kanter and Raphael Minder, “European Warning over Spanish Deficit,” The New York Times (May 11, 2012) (“austerity is failing Spain,” says managing director of consulting firm that specializes in sovereign credit risk); Landon Thomas Jr., “Spain Is Still Awaiting the Payoff from Austerity,” The New York Times (April 27, 2012) (noting that Spain’s unemployment rate is now 24.4%); Raphael Minder, “Protestors Take to Street in Madrid,” The New York Times (September 25, 2012). And unlike Greece, Spain’s economic problems are not the result of pre-recession profligate spending—its financial problems are an effect of the economic crisis, not a cause of it. See Paul Krugman, “Europe’s Economic Suicide,” The New York Times (April 15, 2012) and “Europe’s Austerity Madness,” The New York Times (September 27, 2012). Nevertheless, rather than providing money directly to Spain’s troubled banks, the providers of the only available emergency credit (especially Germany) are insisting that this money go to the Spanish government, which could then lend it out to the banks, thereby turning private debt into public debt, exactly what Ireland did so disastrously at the beginning of the financial crisis. In other words, as a condition of emergency relief, the Spanish government is being asked to make the Spanish poor bail out the European (and primarily German) rich, something that the government is understandably reluctant to do. See James Kanter, “German Refusal on Bank Aid Mars End of Europe Summit,” The New York Times (October 19, 2012). 162 . See Raphael Minder, “New Spanish Budget Free of Austerity Measures,” The New York Times (September 26, 2013). 163 . See OECD, “Quarterly Growth Rates of Real GDP,” StatExtracts (https://stats. oecd.org/index.aspx?queryid=350 ) (June 23, 2015). 164 . See Trading Economics, “Spain Government Debt to GDP” ( http://www.tradingeconomics.com/spain/government-debt-to-gdp ) (July 2, 2015). 165 . See Eurostat, “April 2015 Euro Unemployment Rate at 11.1%,” New Release (June 3, 2015) (http://ec.europa.eu/eurostat/documents/2995521/6862104/3- 03062015-BP-EN.pdf/efc97561-fad1-4e10-b6c1-e1c80e2bb582 ); Paul Krugman “Europe’s Many Economic Disasters,” The New York Times (July 3, 2015). 166 . See Liz Alderman, “On the Brink in Italy,” The New York Times (March 11, 2013); Paul Krugman, “Austerity, Italian Style,” The New York Times (February 24, 2013). 167 . See Jack Ewing and Gaia Pianigiani, “Italy Falls Back into Recession, Raising Concerns for Eurozone Economy,” The New York Times (August 6, 2014). 168 . See Jack Ewing, “Monte dei Paschi Reports nearly $1 Billion Loss in Third Quarter,” The New York Times (November 12, 2014). 169 . See OECD, “Quarterly Growth Rates of Real GDP.” 170 . See Trading Economics, “Italy Government Debt-to GDP” (http://www.tradingeconomics.com/italy/government-debt-to-gdp ) (July 2, 1015). 171 . See David Jolly, “Greek Economy Shrank 6.2% in Second Quarter,” The New York Times (August 13, 2012) and “Contraction Shows Signs of Slowing for Greece,” The New York Times (August 12, 2013); Niki Kitsantonis, “Seeing Just One Way for Greece to Go: Up,” The New York Times (August 29, 2014). 172 . See Eurostat figures for May 2013. 173 . See James K. Galbraith, “The IMF’s ‘Tough Choices’ on Greece,” Project Syndicate (June 16, 2015); Niki Kitsantonis, “Greek Budget Forecasts Growth, but Creditors Notes ● 149

Are Skeptical on Deficit,” The New York Times (November 21, 2014); James Kanter, “European Finance Ministers and I.M.F. Reach Deal on Greek Bailout Terms,” The New York Times (November 26, 2012). 174 . See Ian Traynor, “Eurozone Demands Six-Day Week for Greece,” The Guardian (September 4, 2012). 175 . See Niki Kitsantonis, “Greece Reaches a Deal for More Bailout Money,” The New York Times (April 15, 2013) (Greece agrees to dismiss another 15,000 civil servants); Liz Alderman, “Once again, Lenders Ask Greece for Additional Cuts,” The New York Times (March 14, 2013) (lenders demand that Greece lay off another 25,000 civil servants); Rachel Donadio and Niki Kitsantonis, “Greek Government Proposes Deep Cuts in Bid to Please Foreign Lenders,” The New York Times (October 1, 2012). 176 . See Liz Alderman, “Privatizing Greece, Slowly but Not Surely,” The New York Times (November 17, 2012). 177 . See James Kanter, “Europe Tells Greece to Speed up Economic Reform,” The New York Times (October 8, 2012). 178 . See Suzanne Daley, “Pensions in Greece Feel the Pinch of Debt Negotiations,” The New York Times (June 8, 2015); Niki Kitsantonis, “A Promise to Protect Pensions Will Test Greece’s Red Line on Austerity,” The New York Times (September 18, 2013). 179 . See European Commission, “Adequacy and Sustainability of Pensions” (March 1, 2013) ( http://ec.europa.eu/europe2020/pdf/themes/04_pensions.pdf ), p. 9. 180 . See Erik Olsen, “Pressed by Debt Crisis, Doctors Leave Greece in Droves,” The New York Times (July 1, 2015) (“Greece is in the midst of the worst brain drain in modern history, experts say”). 181 . See Niki Kitsantonis, “Greece Resumes Talks with Lenders over Budget Gap,” The New York Times (November 5, 2013); Editorial, “What Greece Cannot Afford,” The New York Times (November 8, 2013); Kitsantonis, “Seeing Just One Way for Greece to Go: Up.” In a report issued June 26, 2015, the IMF even admits now that Greece needs at least $55 billion in further debt relief (i.e. debt write offs), see International Monetary Fund, “Greece—Preliminary Draft Debt Sustainability Analysis,” IMF Country Report No. 15/165 (June 26, 2015), but this has not yet changed the Troika’s official unwillingness to make any such concessions. 182 . See Jack Ewing and Alison Smale, “Merkel Hints at Economic Policy Shift in Germany,” The New York Times (October 9, 2014) (with the German economy beginning to stall, Chancellor Angela Merkel expressed a growing willingness to use government spending to stimulate growth); Alison Smale, “A Fiscal Scold, Merkel Softens Tone at Home,” The New York Times (November 1, 2013); Melissa Eddy, “Changes Are Approved to Ease Germans’ Costs for Welfare Programs,” The New York Times (November 6, 2012). 183 . See Floyd Norris, “Government Holds Firm in Germany in Face of Weakening Economy, The New York Times (October 17, 2014). 184 . See Liz Alderman and Rachel Donadio, “Greece to Vote on $23 Billion in New Cuts,” The New York Times (November 6, 2012) (Greek government seeking further “toxic” cuts in order to secure international financing); Rachel Donadio and Liz Alderman, “Fragile Coalition in Greece Narrowly Backs Austerity,” The New York Times (November 7, 2012) (prime minister acknowledges new cuts to pensions and salaries are “unfair” but “Greece [is] bound by the terms of its agreement with creditors” if it is to unblock aid country needs to meet expenses). 185 . See Liz Alderman, “Greek Government and Public at Odds over New Cuts, “ The New York Times (September 5, 2012); Liz Alderman and Landon Thomas Jr., 150 ● Notes

“I.M.F.’s Call for More Cuts Irks Greece,” The New York Times (September 24, 2012); Liz Alderman and Niki Kitsantonis, “Violence Erupts as Greeks Strike to Protest Austerity,” The New York Times (September 26, 2012); Niki Kitsantonis, “Greek Workers Walk out in Fresh Austerity Protest,” The New York Times (February 20, 2013). 186 . See Liz Alderman, “Gunmen in Greece Attack German Ambassador’s Residence,” The New York Times (December 20, 2013). 187 . See Suzanne Daley, “As Germans Push Austerity, Greeks Press Nazi-Era Claims,” The New York Times (October 5, 2013). 188 . See Fabian Linder, “Greece Deserves German Support,” Social Europe (February 11, 2015) (http://www.socialeurope.eu/2015/02/greece-deserves-german-support/ ). 189 . See Annie Lowrey, “I.M.F. Concedes Major Missteps in Bailout of Greece,” The New York Times (June 5, 2013); Andrew Higgins, “Splits Appear in Policy ‘Troika’ Addressing Europe’s Financial Crisis,” The New York Times (June 7, 2013). 190 . See Liz Alderman, “Eurozone Eked out Growth in Third Quarter,” The New York Times (November 14, 2014). 191 . See OECD, “Quarterly Growth Rates of Real GDP.” 192 . See Suzanne Daley, “Greeks Reject Bailout Terms in Rebuff to European Leaders,” The New York Times (July 5, 2015). 193 . See Heiner Flassbeck and Costas Lapavitsas, Against the Troika: Crisis and Austerity in the Eurozone (London: Verso, 2015), chs. 10 and 11; Steven Erlanger and James Kanter, “Optimism for an Agreement on Greek Debt, but Not for Long-Term Stability,” The New York Times (June 22, 2015). 194 . See Odysseas Christou, Christine Ioannou, and Anthos I. Shekeris, “Social Cohesion and the State in Times of Austerity: Cyprus,” Friedrich Ebert Stiftung (September 2013). See also Nicholas Kulish, “Ahead of Election in Cyprus, Gloom and Voter Apathy Tied to Financial Woes,” The New York Times (February 23, 2013); James Kanter, “I.M.F. and Europe Set Tough Terms for Cyprus Bailout,” The New York Times (April 3, 2013); Landon Thomas Jr., “In Cyprus, Big Losses Expected on Deposits,” The New York Times (March 26, 2013) and “A Secret in Cyprus Bank Bailout Stirs Resentment,” The New York Times (July 24, 2014). 195 . See Andrew Higgins, “Currency Controls in Cyprus Increase Worry about Euro System,” The New York Times (July 9, 2013); Landon Thomas Jr., “Some Savers in Cyprus May Lose 60 Percent,” The New York Times (March 29, 2013); Liz Alderman, “Cyprus Sets up Tight Controls as Banks Prepare to Reopen,” The New York Times (March 27, 2013); James Kanter, “After Negotiations, Cyprus Agrees to a Euro Zone Bailout Package,” The New York Times (March 16, 2013); Liz Alderman, “Facing Bailout Tax, Cypriots Try to Get Cash out of Banks,” The New York Times (March 16, 2013); Liz Alderman and Landon Thomas Jr., “Turmoil in Cyprus over a Bailout Rattles Europe,” The New York Times (March 17, 2013). For figures on the huge amount of deposit funds that have since left Cypriot banks, see “Deposits Shrink,” incyprus.co.cy (August 30, 2013) (http://incyprus.philenews. com/en-gb/Local/4332/36859/deposits-shrink ). But see also Andrew Ross Sorkin, “A Bank Levy in Cyprus, and Why Not to Worry,” The New York Times (March 18, 2013) (arguing that Cyprus is too small and its uninsured deposits are too predominantly the proceeds of illegal activity for what was done there to set a prec- edent for anywhere else). 196 . See Kulish, “Ahead of Election in Cyprus, Gloom and Voter Apathy Tied to Financial Woes”; Kanter, “I.M.F. and Europe Set Tough Terms for Cyprus Bailout”; Thomas, “In Cyprus, Big Losses Expected on Deposits” and “A Secret in Cyprus Bank Bailout Notes ● 151

Stirs Resentment”; and “Jobs Gloom,” incyprus.com.cy (August 7, 2013) ( http:// incyprus.philenews.com/en-gb/Local/4332/36420/jobs-gloom ); Liz Alderman, “Russians Return to Cyprus, a Favorite Tax Haven,” The New York Times (February 17, 2014); Thomas, “A Secret in Cyprus Bank Bailout Stirs Resentment.” 197 . See Trading Economics, “Cyprus GDP Growth Rate” (July 1, 2015) (http://www. tradingeconomics.com/cyprus/gdp-growth); Eurostat, “Harmonized Unemployment Rate.” 198 . See Liz Alderman and Landon Thomas Jr., “With or without Bailout, Cypriots Lose Trust in Banks,” The New York Times (March 25, 2013); David Jolly, “Official Europe’s Reaction to Cyprus Deal Is Mixed,” The New York Times (March 25, 2013); Steven Erlanger and James Kanter, “Stricter Rules but Signs of Disarray in Cyprus Deal,” The New York Times (March 25, 2013). It is also important to note that the difficulties in which Cyprus now finds itself are not entirely of its own making: indeed, its financial fate was arguably sealed when the same European Troika engineered a 50% write down of Greek government bonds, many of which had been purchased by the then cash-rich Greek-speaking banks of Cyprus, and simultaneously increased the amount of reserves European banks were expected to maintain, meaning that all of a sudden the Cypriots found themselves with half the assets they thought they had and less reserves than they thought they needed. See Andrew Higgins and Liz Alderman, “Europeans Planted Seeds of Crisis in Cyprus,” The New York Times (March 26, 2013). 199 . See Associated Press, “France Unveils a Budget Heavy on Taxes,” The New York Times (September 28, 2012); Jack Ewing, “European Economy Shrank for a Second Quarter,” The New York Times (November 15, 2012) (French economy grew only 0.2% in third quarter of 2012). 200 . See David Jolly, “Euro Zone Politics Hinder Response as Slump Persists,” The New York Times (May 15, 2013). 201 . See Liz Alderman, “Full Recovery Still Years Away for Many in the Euro Zone,” The New York Times (May 15, 2014); David Jolly, “Eurozone Recovery Stalls, with Weakness in Germany and France,” The New York Times (August 14, 2014). 202 . See OECD, “Quarterly Growth Rates of Real GDP.” 203 . See Oxfam, “The True Cost of Austerity and Inequality: France Case Study” (September 2013) ( https://www.oxfam.org/sites/www.oxfam.org/files/cs-true- cost-austerity-inequality-france-120913-en.pdf ); Mathieu Plane, “Austerity and Purchasing Power in France,” OCFE (January 5, 2015) (http://www.ofce.sciences- po.fr/blog/austerity-purchasing-power-france/). 204 . See Oxfam, “The True Cost of Austerity and Inequality: France Case Study; AFP, “French Public Debt over 2.0 Trillion Euros for First Time,” Business Insider (September 30, 2014); Trading Economics, “France Government Debt to GDP” (http://www.tradingeconomics.com/france/government-debt-to-gdp ) (July 1, 2015). 205 . See Oxfam, “The True Cost of Austerity and Inequality”; Eurostat, “Harmonized Unemployment Rate.” 206 . See Jack Ewing and David Jolly, “Euro Zone Economy Shrank in Fourth Quarter of 2011,” The New York Times (February 16, 2012); Paul Krugman, “Pain without Gain,” The New York Times (February 19, 2012). Indeed, Germany itself was expected to fall into recession in the second half of 2012. See Stephen Castle, “O.E.C.D. Warns of Recession in Germany,” The New York Times (September 6, 2012); Jack Ewing, “Survey Signals that Euro Zone Has Entered Recession,” The New York Times (October 3, 2012); David Jolly, “German Central Bank Cuts Economic Growth Forecast,” The New York Times (December 7, 2012). And these 152 ● Notes

predictions of problems to come with the German economy seem to be coming true—the German economy shrank in the fourth quarter of 2012 and only man- aged 0.7 percent growth for the entire year. See Jack Ewing, “German Economy Shrank in Fourth Quarter,” The New York Times (January 15, 2013.) 207 . See Jack Ewing, “European Economy Shrank for a Second Quarter,” The New York Times (November 15, 2012). 208 . See Jack Ewing, “Economy in Europe Contracts More than Expected,” The New York Times (February 14, 2013); James Kanter, “Renewed Signs of Europe’s Economic Weakness,” The New York Times (February 22, 2013). 209 . Floyd Norris, “In the Developed World, Growth Contracts,” The New York Times (February 22, 2013). 210 . See Jack Ewing, “Risk of Bank Failures Is Rising in Europe, E.C.B. Warns,” The New York Times (May 29, 2013). 211 . See James Kanter, “European Commission Offers Grim Prediction for Economy,” The New York Times (February 22, 2013). 212 . See David Jolly, “Unemployment in Euro Zone Reaches a Record High,” The New York Times (April 2, 2013). 213 . David Jolly and Alison Smale, “Euro Zone’s Recession End, at Least for Now,” The New York Times (August 14, 2013) (showing euro zone grew 0.3% during second quarter of 2013 for a modest annualized growth rate of 1.2%). 214 . See David Jolly, “S.&P. Cuts European Unions’ Credit Rating,” The New York Times (December 28, 2013). 215 . See David Jolly, “Eurozone Recovery Stalls, with Weakness in Germany and France,” The New York Times (August 14, 2014). Even Germany is now on the brink of falling into a recession. See Jack Ewing, “In Germany, Business Indicator Falls, Raising Specter of Recession,” The New York Times (September 24, 2014); Gavyn Davis, “Germany Is Stalling,” Financial Times (October 7, 2014). 216 . See Eurostat, “Flash Estimate for the Fourth Quarter of 2014,” News Release (February 13, 2015) ( http://ec.europa.eu/eurostat/documents/2995521/6625198/2- 13022015-AP-EN.pdf/6f7a18eb-0b2a-466b-b444-4d240889a723 ). See also David Jolly, “Eurozone Growth Exceeds Expectations,” The New York Times (February 13, 2015) (but still lags far behind the United States); James Kanter, “European Union Lowers Growth Forecasts as Business Confidence Sags,” The New York Times (November 4, 2014); Phillip Inman, “Global Economy Hovering between Growth and Stagnation,” The Guardian (November 17, 2014). 217 . See Paul Krugman, “Japan the Model,” The New York Times (May 23, 2013); Jack Ewing, “Down So Long, It Looks Like up to the Euro Zone,” The New York Times (June 5, 2013). 218 . See Liz Alderman, “Full Recovery Still Years Away for Many in the Euro Zone,” The New York Times (May 15, 2014). And this remains true even though by the end of 2014, the German economy had recovered somewhat. See Jack Ewing, “German Economy Expanded 1.5% in 2014,” The New York Times (January 15, 2015); Paul Krugman, “That Old-Time Economics,” The New York Times (April 17, 2015). 219 . See Norris, “Production Sags, and Even Germany Is Affected,” The New York Times (November 16, 2012) and “Off the Charts: World Production Stagnates,” The New York Times (November 16, 2012); Jack Ewing, “Factory Output Plummets in Europe, Dogging Recovery,” The New York Times (July 14, 2014); David Jolly, “Eurozone Growth Is Slowing, Survey of Purchasing Managers Suggests,” The New York Times (September 23, 2014); Richard Barley, “Germany’s Industrial Engines Takes an Awkward Holiday,” The Wall Street Journal (October 7, 2014); Stefan Notes ● 153

Wagstyl and James Chisholm, “Plunge in Industrial Production Stokes German Recession Fears,” Financial Times (October 7, 2014); David Jolly, “Economic Activity Slows in Eurozone, Survey Shows,” The New York Times (November 20, 2014). 220 . See David Jolly, “Car Market Shows Signs of Revival for Europe,” The New York Times (January 16, 2015), “European Car Sales Strengthen on Manufacturer Incentives,” The New York Times (April 17, 2014), and, “European Car Sales Hit Lowest Level in 20 years,” The New York Times (June 18, 2013); Jack Ewing, “Weak European Auto Market in 2013 Sapped Volkswagen Earnings,” The New York Times (March 13, 2014); David Jolly, “Auto Sales in Europe Lose Momentum in August,” The New York Times (September 17, 2014) and “Auto Sales in Europe Rise for 14th Consecutive Month,” The New York Times (November 18, 2014); Laurie Fourquet and David Jolly, “Auto Sales Inch Higher in Europe,” The New York Times (December 16, 2014) (noting that annualized increase in November was weakest of the year and market remains far weaker than before 2008 financial crisis). 221 . See Phillip Inman, “No Recovery until 2018, IMF Warns,” The Guardian (October 3, 2012); Annie Lowrey, “I.M.F. Lowers Its Forecast for Global Growth,” The New York Times (October 8, 2012), “I.M.F. Cuts Forecasts for Global Expansion, and Warns U.S. on Its Stalemate,” The New York Times (October 8, 2013). 222 . See Larry Elliott, “IMF Says Economic Growth May Never Return to Pre-Crisis Levels,” The Guardian (October 7, 2014). 223 . See Stephen Castle, “O.E.C.D., Slashing Growth Outlook, Warns of Global Recession,” The New York Times (November 27, 2012); Landon Thomas Jr. and Liz Alderman, “I.M.F. Asks Rich Nations for Support,” The New York Times (October 7, 2014). 224 . See David Jolly, “O.E.C.D. Sees Slow Recovery Worldwide,” The New York Times (June 3, 2015). 225 . See Laurence M. Ball, Davide Furceri, Daniel Leigh, and Prakash Loungani, The Distributional Effects of Fiscal Consolidation (International Monetary Fund, Paper No-13–151, 2013). 226 . Spain, e.g., has recently emerged from a two-year recession, although growth is still very, very weak—estimated to be about 0.4%. See Jack Ewing and Raphael Minder, “Signs of Life in Euro Zone Could Point to Recovery,” The New York Times (October 23, 2013). And after six years of recession, the Greek government is now projecting growth of 0.6% in 2014, although many Greek economists are skeptical. See Niki Kitsantonis, “After Years of Pain, Greece Expects a Budget Surplus,” The New York Times (October 7, 2013). As it turns out, such skepticism has proved prophetic, as two of Greece’s four main banks have since asked for emergency aid from the ECB. See Niki Kitsantonis, “In Greece, Banks Ask E.C.B. for Access to Emergency Aid,” The New York Times (January 16, 2015). 227 . See, e.g., Reuters, “Osborne, Eyeing 2015 Election, to Stress Job Not Done on Budget,” The New York Times (January 5, 2014). 228 . See Erlanger, “Cameron Promises another Dose of Austerity as British Elections Near.” 229 . See Larry Elliott, “Welcome to George’s Hyperbole Britain,” The Guardian (March 18, 2015). See also Katrin Bennhold, “As Europe’s Economy Stumbles, Britain Offers Some Glimmer of Hope,” The New York Times (August 15, 2014). 230 . Hakim, “Diverse Views on Reasons and Prospects for British Recovery.” See also Krugman, “Osborne and the Stooges.” 154 ● Notes

231 . See Floyd Norris, “Global Industrial Production Shakes off 2007 Doldrums,” The New York Times (July 18, 2014 (showing that overall global industrial production has increased—despite large deceases in almost all the advanced economies— because of the huge gains enjoyed by many emerging economies). 232 . See Blythe, Austerity: The History of a Dangerous Idea, pp. 122ff; Simon Wren-Lewis, “Austerity and Living Standards,” Mainly Macro (September 8, 2013) (http://mainlymacro.blogspot.com/2013/09/austerity-and-living-standards. html ); Paul Krugman, “The Obama Recovery,” The New York Times (December 28, 2014) (pointing out that if you stop hitting yourself on the head with a baseball bat you will suddenly feel better, but this doesn’t prove that hitting yourself was good for you). 233 . See Robert Skidelsky, “Osborne May Gloat about Recovery, but His ‘Hard Slog’ Will Leave Britain Worse Off,” New Statesmen (September 27-Ocotber 3, 2013). 234 . “Firing on One Cylinder,” The Economist (November 30, 2013). 235 . See Hakim, “Diverse Views on Reasons and Prospects for British Recovery.” 236 . See Floyd Norris, “U.S. and European Job Markets Take Different Paths,” The New York Times (June 6, 2014). See also Council of Economic Advisors, 2015 Annual Report , Ch. 3, esp. p. 109 (comparing US, euro zone, and Non-US OECD unemployment). 237 . See Eduardo Porter, “Why Europe’s Job Picture Looks Different,” The New York Times (February 7, 2014); Thomas Klitgaard and Richard Peck, “Comparing U.S. and Euro Area Unemployment Rates,” Liberty Street Economics (Federal Reserve Bank of New York, February 5, 2014) (http://libertystreeteconomics.newyorkfed. org/2014/02/comparing-us-and-euro-area-unemployment-rates.html). 238 . For a book-length defense of this argument, see Barry Eichengreen, Hall of Mirrors: The Great Depression—the Great Recession, and the Uses—and Misuses—of History (Oxford: Oxford University Press, 2015). See also Neil Irwin, “The Depression’s Unheeded Lessons,” The New York Times (January 10, 2015); Editorial, “What the Stimulus Accomplished,” The New York Times (February 22, 2014) (the federal stimulus program in the United States “created or saved an average of 1.6 million jobs a year for four years” but “could have done more good had it been bigger and more carefully constructed”); Michael Hiltzik, “Once again: Yes, the Stimulus Worked,” Los Angeles Times (February 28, 2014); Paul Krugman, “The Stimulus Tragedy,” The New York Times (February 20, 2014). 239 . See Justin Wolfers, “Italy’s Lost Decade,” The New York Times (August 6, 2014). 240 . See Eurostat, Bureau of Labor Statistics (http://epp.eurostat.ec.europa.eu/portal/ page/portal/eurostat/home). 241 . See Associated Press, “Bank of England’s Governor to Keep Interest Rates Low,” The New York Times (August 28, 2013) (referring to comment on comparative growth rates by Mark Carney, the Bank of England’s new governor). 242 . See David Jolly and Jack Ewing, “Euro Zone Economy Stalls as Germany and France Backtrack,” The New York Times (November 14, 2013). See also Matthew O’Brien, “What’s the Matter with the Global Economy? Europe’s Recession Finally Ends Just as China Fades,” The Atlantic (August 2013) (comparing growth in the United States to growth in Europe and finding European growth faltered as soon as austerity policies kicked in); Annie Lowrey, “Lew’s Visit to Europe Reveals a Wide Policy Divide,” The New York Times (April 9, 2013); Floyd Norris, “In a 5-Year Comparison, the U.S. Recovery Fares Well,” The New York Times (December 28, 2012) and “Weak Recovery, but Comparatively Good,” The New York Times (December 20, 2013); Christina D. Romer, “The Fiscal Stimulus, Notes ● 155

Flawed but Valuable,” The New York Times (October 20, 2012) (citing recent studies); Eduardo Porter, “Stimulus Is Maligned, but Options Were Few,” The New York Times (February 28, 2012); Paul Krugman, “What Greece Means,” The New York Times (March 11, 2012); J. Bradford DeLong and Lawrence H. Summers, “Fiscal Policy in a Depressed Economy,” Brookings Papers on Economic Activity (March 20, 2012). In fairness, I should note that Japan subsequently fell back into a recession, apparently because at the same time as adopting accommodating monetary policies and some modest fiscal stimulus the government raised sales taxes steeply in an attempt to begin paying down Japan’s massive debt. See Jonathan Soble, “Defying Expectations, Japan’s Economy Falls into Recession,” The New York Times (November 16, 2014); Liz Alderman and Jonathan Soble, “As Japan Falls into Recession, Europe Looks to Avoid It,” The New York Times (November 17, 2014). But after two quarters of contraction the Japanese economy began to grow again, and is now growing much more rapidly than Europe’s, where austerity is the policy of the day. See Jonathan Soble, “Japan’s Economy Expands, but Less than Expected,” The New York Times (February 15, 2015) and “Japanese Economy Grows at Fastest Pace in a Year,” The New York Times (May 19, 2015). In any event, the temporary setback here should not be interpreted as suggesting that stimulus does not work—it simply demonstrates that stimulus is less likely to be effective when a government undermines it with regressive tax increases and relies primarily on monetary policy rather than fiscal policy to do the work. 243 . See Floyd Norris, “Free to Spend, Developing Economies Recover Quicker,” The New York Times (April 19, 2013); Paul Krugman, “Key Stimulus Graphs,” The New York Times (February 20, 2014). 244 . See David Jolly, “Unemployment in Euro Zone Reaches a Record 12%,” The New York Times (April 2, 2013) (“Europe is pursuing a policy that is self-evidently failing”) (quoting Mark Cliffe, chief economist at ING Group); Adam Davidson, “God Save the British Economy,” The New York Times (December 19, 2012); Editorial, “An Overdose of Pain,” The New York Times (April 12, 2012); Christina D. Romer, “What Do We Know about the Effects of Fiscal Policy? Separating Evidence from Ideology” (Hamilton College, November 7, 2011), pp. 17–19; International Monetary Fund, “Will It Hurt? Macroeconomic Effects of Fiscal Contraction,” in World Economic Outlook: Recovery, Risk, and Rebalancing (Washington, DC: International Monetary Fund, October 2010), pp. 93–124 (showing that a fiscal contraction of 1% of GDP leads on average to a 0.5% decline in GDP and to an increase in the unemployment rate of 0.3 percentage points). For a helpful summary of the IMF report’s conclusions, see Economic Focus, “Cutting Edge: Does Fiscal Austerity Boost Short-Term Growth? A New IMF Paper Thinks Not,” The Economist (September 30, 2010). See also Oliver Blanchard and Daniel Leigh, “Growth Forecast Errors and Fiscal Multipliers,” International Monetary Fund (January 2013); Neil Irwin, “An Amazing Mea Culpa from the IMF’s Chief Economist on Austerity,” Washington Post (January 3, 2013). For a discussion of the continuing rise in unemployment within the euro zone and the inability of states adopting austerity measure to actually chip away at their deficits, see Paul Geitner and Stephen Castle, “European Leaders Challenged by Rise in Joblessness,” The New York Times (March 1, 2012). 245 . Paul Krugman, “Kick that Can,” The New York Times (February 7, 2013). See also Paul Krugman, “Much too Responsible,” New York Times (January 22, 2015). For a book-length history of austerity and its consistent failure as an economic policy, see Blythe, Austerity: The History of a Dangerous Idea . 156 ● Notes

246 . See Paul Krugman, “Looking for Mister Goodpain,” The New York Times (January 31, 2013); International Monetary Fund, Republic of Latvia: Ex Post Evaluation of Exceptional Access under the 2008 Stand-by Arrangement, IMF Country Report No. 13/30 (December 19, 2012), esp. at p. 10. More than two years later the Latvian rate is still almost 11%, while it was just 5.4% before the crisis began. See Trading Economics, “Latvia Unemployment Rate” ( http://www.tradingeconomics. com/latvia/unemployment-rate ) (July 1, 2015). 247 . See Andrew Higgins, “Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases,” The New York Times (January 1, 2013). 248 . See Trading Economics, “Latvia Unemployment Rate.” 249 . See Trading Economics, “Latvia Government Debt to GDP” ( http://www.tradingeconomics.com/latvia/government-debt-to-gdp ) and “Latvia GDP Growth Rate” ( http://www.tradingeconomics.com/latvia/gdp-growth ) (July 2, 2015). 250 . For more on what actually happened in Latvia and the other Baltic Republics and why these economies do not show that austerity can be expansionary, see Blyth, Austerity, pp. 216–226. 251 . See James Kanter, “European Finance Ministers Support Investment Program,” The New York Times (September 14, 2014); Alison Smale and Liz Alderman, “Germany’s Insistence on Austerity Meets With Revolt in the Eurozone,” The New York Times (October 7, 2014); Jim Yardley and Jack Ewing, “Bloc in Europe Starts to Balk over Austerity,” The New York Times (October 16, 2014); Liz Alderman, “Germany and France Aim to Avert a ‘Lost Decade,’” The New York Times (November 27, 2014). 252 . See Andrew Higgins and James Kanter, “Greek Election Reflects a Deep Divide in Europe,” The New York Times (January 26, 2015); James Kanter, “E.U. Officials Urge France and Italy to Accelerate Reforms,” The New York Times (June 2, 2014) (reporting that top EU officials were pressuring France and Italy—the number two and three economies in the euro zone—to accelerate their austerity programs). 253 . See Floyd Norris, “Total Taxes on Wages Are Rising,” The New York Times (April 11, 2014). 254 . See, e.g., Dan Bilefsky and Liz Alderman, “French Cabinet Is Dissolved, a Victim of Austerity Battles,” The New York Times (August 25, 2014); Liz Alderman and Alison Smale, “Divisions Grow as a Downturn Rocks Europe,” The New York Times (August 29, 2014); Patrick Wintour, Larry Elliott, and Katie Allen, “Vince Cable Undermines Chancellor with ‘Wrong Sort of Recovery’ Message,” The Guardian (January 27, 2014); Phillip Inman, “The OECD’s Deficit Fetishism Will Stunt Growth—When All We Need Is Houses,” The Guardian (May 29, 2013); Jack Ewing, “In Europe, a Fed President Urges Quantitative Easing,” The New York Times (May 21, 2013); Andrew Higgins, “Europe Facing More Pressure to Reconsider Cuts as a Cure,” The New York Times (April 26, 2013); Chris Giles, “IMF Hardens Line on UK Austerity Drive,” Financial Times (April 16, 2013); Larry Elliott, Patrick Wintour, and Phillip Inman, “George Osborne under Pressure to Tear up Austerity Program,” The Guardian (January 25, 2013); Larry Elliott, “Austerity Plan Is Failing, IMF Tells Osborne,” The Guardian (January 24, 2013); Editorial, “Osborne’s Depression,” The Guardian (January 25, 2013); Elisabeth Malkin, “G-20 Leaders Urge Balance for Growth,” The New York Times (November 6, 2012); Malcolm Sawyer, “The Tragedy of UK Fiscal Policy in the Aftermath of the Financial Crisis,” Cambridge Journal of Economics 36 (2012): 205–221; Robert Skidelsky, “An Economy in Crisis, A Coalition in Denial,” The New Statesman (September 20, 2012); Lawrence Summers, “Britain Risks a Lost Decade Unless It Changes Course,” The Financial Notes ● 157

Times (September 16, 2012); George Eaton, “Osborne’s Supporters Turn on Him: Leading Conservative Economists Who Formerly Backed Osborne Urge Him to Change Course,” The New Statesman (August 15, 2012); Larry Elliott, “George Osborne Faces Calls for Leading Economists for U-Turn on Austerity,” The Guardian (August 12, 2012); Landon Thomas Jr., “Economic Thinkers Try to Solve the Euro Puzzle,” The New York Times (July 31, 2012); Norma Cohen and Sarah O’Connor, “GDP Data Trigger Debate on Economy,” Financial Times (July 25, 2012); Liz Alderman, “In Europe, Arguing to Apply Some Stimulus along with the Austerity,” The New York Times (January 23, 2012) and “Summers Urges Europeans Not to Neglect Growth,” The New York Times (March 9, 2012); Peter Spiegel, “Eurozone crisis: Markets Fret that Austerity Medicine Will Kill Patient,” Financial Times (May 8, 2012); Nicholas Kulish, “Call for Growth Rises to Counter German Push for Austerity,” The New York Times (April 23, 2012): Alan Cowell and Nicholas Kulish, “Austerity Faces Sharper Debate after European Elections,” The New York Times (May 7, 2012); Liz Alderman, “In Greece, Restlessness amid a Push for Cuts,” The New York Times (September 17, 2012). 255 . See, e.g., Eduardo Porter, “A Keynesian Victory, but Austerity Stands Firm,” The New York Times (May 21, 2013); Annie Lowrey, “In Effort to ‘Rebalance,’ Europe Appears Committed to Austerity Plan,” The New York Times (April 8, 2013); James Kanter and Andrew Higgins, “European Leaders Stick to Austerity Course,” The New York Times (March 14, 2013); Raphael Minder, “Despite Public Protests, Spain’s 2013 Budget Plan Includes More Austerity,” The New York Times (September 27, 2012); Raphael Minder and Stephen Castle, “Spain Announces Tough New Austerity Measures,” The New York Times (July 11, 2012); Julia Werdigier and Landon Thomas Jr., “British Budget Adheres to Austerity While It Cuts the Top Tax Rate,” The New York Times (March 21, 2012); Nelson D. Schwartz, “Austerity Reigns over Euro Zone as Crisis Deepens,” The New York Times (January 1, 2012); Reuters, “Spain Says Deficit Bigger than Expected, Hikes Taxes,” The New York Times (December 30, 2011). 256 . Chris Giles, “UK Austerity Squeeze Set to Run until 2018,” Financial Times (October 7, 2012) and “Osborne’s Economic Pain Drags On,” Financial Times (October 3, 2012). 257 . Stephen Castle, “That Debt from 1720? Britain’s Payment Is Coming,” The New York Times (December 27, 2014) (quoting Gary Shea, Head of the School of Economics and Finance at the University of St. Andrews). 258 . George Eaton, “Osborne’s Economic Strategy Remains Self-Defeating,” New Statesman (December 4, 2012). 259 . See Liz Alderman and David Jolly, “For Ireland, a Setback on the Road to Recovery,” The New York Times (June 27, 2013). 260 . Liz Alderman, “As Bailout Chapter Closes, Hardships Linger for Irish,” The New York Times (December 11, 2013). 261 . See Fintan O’Toole, “Ireland’s Rebound Is European Blarney,” The New York Times (January 10, 2014). For the April 2015 figures, see Eurostat, “Harmonized Unemployment Rate” (http://ec.europa.eu/eurostat/tgm/refreshTableAction.do?ta b=table&plugin=1&pcode=teilm020&language=en). 262 . Quoted in O’Toole, “Ireland’s Rebound Is European Blarney.” 263 . See Nicholas Kulish, “Revival of European Economy Falls to German Leader,” The New York Times (May 3, 2013). 264 . See Jack Ewing, “Europe Crisis Is Resistant to Medicine of Low Rates,” The New York Times (September 2, 2014); Market Data Center, “Global Government 158 ● Notes

Bonds,” Wall Street Journal (February 26, 2015) (showing that France can borrow for five years at negative 0.002). And France is not the only European nation that can now borrow at negative interest rates. By the beginning of 2015, Bonds issued by Germany, Switzerland, Holland, Belgium, Finland, Austria, and even fiscally challenged Italy were offering negative yields. See Danny Hakim and Peter Eavis, “In Europe, Bond Yields and Interest Rates Go through the Looking Glass,” The New York Times (February 27, 2015); Bray, “Germany Sells Five-Year Debt at Negative Yield.” 265 . See James Kanter, “E.U. and France Are on Collision Course over Budget,” The New York Times (October 13, 2014); Liz Alderman, “France Acknowledges Economic Malaise, Blaming Austerity,” The New York Times (August 20, 2014) and “France Won’t Meet Budget Target until 2017, Government Warns,” The New York Times (September 10, 2014). Before this, France had been attempting to reduce its deficit by using spending cuts and tax increases, rather than spending cuts alone. See Associated Press, “France Unveils a Budget Heavy on Taxes.” But the centerpiece of the French government’s effort to get the rich to pay more was an increase in the marginal tax rate on incomes over one million euros from 41% to 75%, and this was declared unconstitutional by the courts, see Scott Sayre, “French Council Strikes down 75% Tax Rate,” The New York Times (December 29, 2012), and various other efforts to use both taxes and budget cuts to bring down the deficit instead of cuts alone also provoked vicious attacks by the ideological right. See Paul Krugman, “The Plot against France,” The New York Times (November 10, 2013). The result was the French tax hikes turned into tax cuts for businesses, to be funded by even further spending cuts—in other words, even under a nominally socialist government the French approach became no different than that of its neighbors, even though these neighbors were ruled by more right-leaning governments. See Paul Krugman, “Scandal in France,” The New York Times (January 16, 2014). 266 . Indeed, instead of a significant amount of fiscal stimulus, the centerpiece of the supposedly socialist Franҫ cois Hollande’s proposals was to allow more retail stores to open on Sundays. See Liz Alderman, “France Is Forced to Face Political Facts in Effort to Stoke Economy,” The New York Times (December 10, 2014). 267 . See David Jolly, “Italy and France Blink in Budget Battle with European Union,” The New York Times (October 28, 2014). 268 . See Liz Alderman, “France Produces ‘No Austerity’ Budget, Defying E.U. Rules,” The New York Times (October 1, 2014). 269 . See James Kanter, “E.U. Budget Clearance for France and Italy Comes with an Asterisk,” The New York Times (October 29, 2014) and “European Union Gives Belgium, France, and Italy Time to Comply on Budget Rules,” The New York Times (November 28, 2014); Reuters, “EU Gives France until 2017 to Cut Deficit; Italy, Belgium in Clear” (February 25, 2015) ( http://www.reuters.com/ article/2015/02/25/eu-budgets-idUSL5N0VZ51L20150225). 270 . See Jack Ewing and Liz Alderman, “Unity on Eurozone Growth Eludes Germany and France,” The New York Times (October 20, 2014) (noting that Germany and France had merely agreed to “study the issue” and report back in December despite hopes they were finally ready to endorse a switch from austerity to stimulus). 271 . Compare Elisabetta Povoledo, “Italy’s New Premier Puts Stimulus First,” The New York Times (April 29, 2013) with David Jolly, “Italy and France Blink in Budget Battle with European Union,” and Kanter, “E.U. Budget Clearance for France and Italy Comes with an Asterisk.” Notes ● 159

272 . Matt O’Brien, “Worse than the 1930s: Europe’s Recession Is Really a Depression,” Washington Post (August 20, 2014). 273 . G. D. H. Cole, The Means to Full Employment (London: Victor Gollancz, 1943), p. 8. 274 . Reuters, “Berlin Says Nothing Changes with France after Government Change,” The New York Times (August 25, 2014). See also Brian Blackstone and Hans Bentzein, “Bundesbank’s Weidmann Criticizes ECB’s Stimulus Measures,” The Wall Street Journal (October 7, 2014); Krista Hughes, “Germany’s Schaeuble Says ‘Writing Checks’ Won’t Fix Europe,” Reuters (October 9, 2014) (Schaeuble is the current German finance minister); Neil Irwin, “The Conflict between Germany and the E.C.B. that Threatens Europe,” The New York Times (October 24, 2014); Noah Berlin, Eva Taylor, and Paul Taylor, “Mario Draghi’s German Problem,” Reuters (October 23, 2014); Associated Press, “German Bank Chief Weidmann Calls for Economic Changes,” The New York Times (November 24, 2014) (noting that Weidmann continues to criticize Draghi’s promises of ECB action). 275 . See Jackie Calmes, “Lines Blur in the U.S.-Europe Debate on Austerity,” The New York Times (June 16, 2013). 276 . See Jeff Sommer, “Elastic Numbers Make It Hard to Get a Handle on the Economy,” The New York Times (August 3, 2013) (noting that the latest revised numbers “would still classify [the current] recession as the worst since World War II, and the recovery as the weakest”). 277 . See Robert J. Shiller, “Businessmen as Presidents: A Historical Circle,” The New York Times (November 3, 2012) (“The weight of evidence from studies of fiscal austerity indicates that, at least in times like these, it is very costly to economic activity. Big cuts now [in the United States] could easily plunge the country back into recession.”); Paul Krugman, “Hawks and Hypocrites,” The New York Times (November 11, 2012); Nelson D. Schwartz, “U.S. Growth Halted as Federal Spending Fell in 4th Quarter,” The New York Times (January 30, 2013) (US economy contracted at an annual rate of 0.1% in last three months of 2012 as a result of large cuts in federal spending); Binyamin Appelbaum and Anne Lowrey, “Budget Cuts Seen as Risk to Growth of U.S. Economy,” The New York Times (February 20, 2013). 278 . See Blythe, Austerity: The History of a Dangerous Idea , p. 121. 279 . Binyamin Appelbaum, “Austerity Kills Government Jobs as Cuts to Budgets Loom,” The New York Times (February 26, 2013). 280 . See Jackie Calmes, “Cuts to Achieve Goal for Deficit, but Toll Is High,” The New York Times (March 2, 2013); Appelbaum, “Austerity Kills Government Jobs as Cuts to Budget Loom”; Nelson D. Schwartz, “U.S. Spending Cuts Seen as Key in Slowing Growth,” The New York Times (May 2, 2013); Jackie Calmes and Jonathan Weisman, “Economists See Deficit Emphasis as Impeding Recovery,” The New York Times (May 8, 2013); Catherine Rampell, “Yes, the Sequester Is Affecting the Job Market,” The New York Times (July 5, 2013); Letter from Douglas E. Elmendorf, Director, Congressional Budget Office, to the Honorable Chris Van Hollen, Ranking Member, Committee on the Budget, U.S. House of Representatives (July 25, 2013) (stating that CBO estimates cancelation of sequestration would increase GDP by 0.7% and increase employment by 900,000 by the end of the third quarter of 2014 alone) (https://www.cbo.gov/sites/default/files/ cbofiles/attachments/44445-SpendReductions_1.pdf). 281 . See Catherine Rampell, “Mandatory Federal Cuts Hurt Private Sector, Too,” The New York Times (June 26, 2013); Jackie Calmes and Catherine Rampell, “U.S. Cuts Take Increasing Toll on Job Growth,” The New York Times (August 2, 2013). 160 ● Notes

282 . See Nelson D. Schwartz, “U.S. Economy’s Growth Was Slower in Fourth Quarter,” The New York Times (February 28, 2014). 283 . See Binyamin Appelbaum, “Fed, in Shift, Expects Slower Increase in Interest Rates,” The New York Times (June 17, 2015). 284 . See Patricia Cohen, “U.S. Economy Grew at 3.5% Annual Pace in Third Quarter,” The New York Times (October 30, 2014) (most recent growth was largely the result of 10% increase in federal spending and 16% increase in military spending). 285 . See International Monetary Fund, “Ease off Spending Cuts to Boost U.S. Recovery,” IMF Survey Magazine (June 14, 2013) (http://www.imf.org/external/pubs/ft/ survey/so/2013/CAR061413A.htm); International Monetary Fund, Concluding Statement of the 2013 Article IV Mission to The United States of America (June 14, 2013) (http://www.imf.org/external/np/ms/2013/061413.htm ). Lately, the IMF has begun to become more outspoken with regard to austerity being a mistaken approach in Europe too. See Landon Thomas Jr., “I.M.F. Shifts Its Approach to Bailouts,” The New York Times (November 26, 2013); Thomas and Alderman, “I.M.F. Asks Rich Nations for Support”; International Monetary Fund, World Economic Outlook (October 14, 2014) (http://www.imf.org/external/pubs/ft/ weo/2014/02/pdf/text.pdf ) (urging advanced economies to aggressively pursue debt-financed infrastructure projects). 286 . Statement by Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve System before the Committee on Banking, Housing, and Urban Affairs, February 26, 2013, pp. 7–8 ( http://www.federalreserve.gov/newsevents/testimony/ bernanke20130226a.pdf). 287 . See Annie Lowrey, “As Automatic Budget Cuts Go into Effect, Poor May Be Hit Particularly Hard,” The New York Times (March 3, 2013) and “Pain on the Reservation,” The New York Times (July 12, 2013). 288 . See Andrew Fieldhouse and Rebecca Thiess, “The ‘Back to Work’ Budget: Analysis of the Congressional Progressive Caucus Budget for Fiscal Year 2014,” Economic Policy Institute Policy Center (March 13, 2013), p. 12 (“the combined effect of lower cyclical deficits and higher GDP from deficit-financed stimulus would actually lower the debt ratio in the near term, while government spending cuts—notably discretionary spending caps and sequestration—will have the effect of increasing the debt ratio”). See also Jackie Calmes, “Budget Office Warns that Deficits Will Rise Again Because Cuts Are Misdirected,” The New York Times (September 17, 2013) (noting that budget areas most curtailed by sequestration are not in fact the areas responsible for projections of mounting debt). 289 . See Josh Bivens, “Deal or No Deal on Shutdown and Debt Ceiling, Biggest Fiscal Policy Crisis Remains Unaddressed,” Economic Snapshot (Economic Policy Institute, October 16, 2013) (http://www.epi.org/publication/deal-deal-shutdown-debt- ceiling-biggest/ ): Paul Krugman, “Unprecedented Austerity,” The New York Times (December 12, 2013) (adjusted for inflation, government spending in the US is now lower than it has been in 50 years). And the fact that it began to pick up again at the end of 2014, albeit ever so slightly, is part of the explanation for why the economy has finally begun to improve. See Dionne Searcey, “Government Spending, Edging up, Is a Stimulus,” The New York Times (January 1, 2014). 290 . See Michael Hiltzik, “Flash: Shutdown Ending, Austerity Still the Rage,” Los Angeles Times (October 16, 2013). 291 . See Annie Lowrey, Nathaniel Popper, and Nelson D. Schwartz, “Gridlock Has Cost U.S. Billions, and the Meter is Still Running,” The New York Times (October 16, 2013). There is also evidence that the economy was again slowing down even before Notes ● 161

the government shut down. See Reuters, “Reports on Manufacturing and Housing Point to a Weakening Economy,” The New York Times (October 28, 2013). 292 . See Jack Ewing, “U.S. Budget Battles Seen as a Global Drag on Growth,” The New York Times (November 18, 2013); Jonathan Weisman, “Uncertainty in Washington Poses Long List of Economic Perils,” The New York Times (December 2, 2014) (noting that last round of budget brinkmanship may have shaved as much as 1 percent off economic growth). 293 . See Congressional Budget Office, “An Update to the Budget and Economic Outlook: 2014 to 2024” (August 2014) (http://www.cbo.gov/sites/default/files/ cbofiles/attachments/45653-OutlookUpdate_2014_Aug.pdf?action=click&content Collection=Politics&module=RelatedCoverage®ion=Marginalia&pgtype= article ), p. 1. 294 . Floyd Norris, “Government Shows Growth, After Years of Shrinking,” The New York Times (November 7, 2014). 295 . See Norris, “Government Shows Growth, After Years of Shrinking” 296 . See Nicholas Wapshott, Keynes/Hayek (New York: Norton, 2011), pp. 133–35; Robert Skidelsky, “An Economy in Crisis, A Coalition in Denial,” New Statesman (September 20, 2012). 297 . See, e.g., James Tobin, National Economic Policy (New Haven: Yale University Press, 1966), p. 14: “Fiscal conservatism is also self-defeating. It does not even achieve its own aim, the avoidance of government deficits.” See also James Tobin, “Thinking Straight about Fiscal Stimulus and Deficit Reduction,” in Full Employment and Growth (Cheltenham, UK: Edward Elgar, 1996), pp. 157–168. 298 . James Tobin, “Macroeconomics,” in Economics , ed. Nancy Ruggles (Englewood Cliffs, NJ: Prentice Hall, 1970), pp. 44–54, 48. 299 . This may finally be beginning to change: at the most recent meeting of finance ministers of the G-20 countries, the group issued a joint statement emphasizing that government spending and growth, not austerity, should be each member’s number one priority. See Andrew E. Kramer, “G-20 Ministers Aim for More Job Growth,” The New York Times (July 20, 2013). But we have yet to see this apparent change in sentiment translated into action, and it is not clear that we ever will. 300 . The one exception to this is the Federal Reserve. Under Ben Bernanke, the Federal Reserve has been determined to avoid the mistakes it made back in the 1930s, and has mostly done so. This has not occurred, however, without an internal struggle and much external criticism. See Floyd Norris, “The Time Bernanke Got It Wrong,” The New York Times (July 18, 2013). And now that Bernanke’s term has come to its natural end, it was not clear that Bernanke’s view will continue to rule the day. See Binyamin Appelbaum, “Same Script by Bernanke, but Like a Farewell Scene,” The New York Times (July 18, 2013). Indeed, while Bernanke’s successor, Janet Yellen, appears to share his view that inflation continues to be too low and unemployment too high, she has already given some indication that she thinks this view may be approaching its limit. See Nelson D. Schwartz, “At Last Recovery Heads Where the Fed Wants It,” The New York Times (May 15, 2014); Reuters, “Fed Seen Likely to Raise Rates in Second Quarter of 2015: Reuters Poll,” The New York Times (July 17, 2014); Binyamin Appelbaum, “Fed Maintains Monetary Course but Emphasizes Job Weakness,” The New York Times (July 30, 2014). And regardless of what she thinks about the relative risks to the economy from inflation and unemployment, the pressure on the Fed from House Republicans to pay attention only to inflation is mounting. See Binyamin Appelbaum, “House Republicans Resume Efforts to Reduce Fed’s Power,” The New York Times (July 10, 2014) and 162 ● Notes

“House Republicans Intensify Attacks on Federal Reserve,” The New York Times (February 25, 2015). Internal pressure from what remains for now a minority of the Fed’s Board of Governors is increasing too, see Binyamin Appelbaum, “Fed Dissenters Increasingly Vocal About Inflation Fears,” The New York Times (August 20, 2014), although that pressure may let up soon as a result of some upcom- ing retirements. See Binyamin Appelbaum, “Charles Plosser and Richard Fisher, Both Dissenters, to Retire from Fed,” The New York Times (September 22, 2014). Narayana Kocherlakota, the most vociferous advocate of keeping interest rates low until inflation actually reaches its target rate, however, is also about to step down, so it seems more and more likely that the Fed will indeed begin to raise interest rates sometime in the middle of 2015, as Chairwoman Yellen and the majority of the board currently intend. See Binyamin Appelbaum, “Fed Official Warns of Risk from Hasty Rate Increase,” The New York Times (December 19, 2014). 301 . See Laurence Ball, Daniel Leigh, and Prakash Loungani, “Painful Medicine,” Finance & Development (International Monetary Fund: September 2011) (refut- ing, among other works, the arguments made by Alberto Alesina and Silvia Ardagna in “Tales of Fiscal Adjustment,” Economic Policy 13 (1998): 487–545). See also, International Monetary Fund, World Economic Outlook: Coping with High Debt and Sluggish Growth (October 2012), esp. at p. 43 (blaming fiscal austerity for sluggish growth among European nations); Eduardo Porter, “Perils in Philosophy of Austerity in the U.S.,” The New York Times (October 20, 2013) (“a host of economic analyses over the last three years . . . have concluded almost invariably that budget cutting in a depressed economy is counterproductive”). 302 . See International Monetary Fund, World Economic Outlook (October 14 2014) ( http://www.imf.org/external/pubs/ft/weo/2014/02/pdf/text.pdf ), p. 89. 303 . See Porter, “A Keynesian Victory, but Austerity Stands Firm”; Ryan Avent, “On the Meaning of Inflation,” The Economist (September 11, 2013). 304 . Dependent relative revocation is a concept from the law of wills. Under this doctrine, an old will that has been revoked can sometimes be revived if the more recent will that revoked it is found to be invalid. 305 . See generally Roger E. A. Farmer, How the Economy Works (Oxford: Oxford University Press, 2010), pp. 52–54. 306 . I am not, of course, the first to express this view. See, e.g., James Tobin, “Monetary Policies in the 1980s and Beyond,” in Full Employment and Growth (Cheltenham: Edward Elgar, 1996), pp. 110–118, 111–112. 307 . See generally Kevin D. Hoover, “Does Macroeconomics Need Microfoundations?” in The Philosophy of Economics, ed. Daniel M. Hausman (Cambridge: Cambridge University Press, 3rd edn. 2008), pp. 315–333. 308 . Kenneth J. Arrow, Social Choice and Individual Values (New Haven, CT: Yale University Press, 2nd edn., 1963). 309 . See G. E. M. Anscombe, “Modern Moral Philosophy,” Philosophy 33 (1958): 1–19, 1: “It is not profitable at present for us to do moral philosophy; that should be laid aside at any rate until we have an adequate philosophy of psychology, in which we are conspicuously lacking.” 310 . See John Maynard Keynes, The General Theory of Employment, Interest, and Money (San Diego, CA: Harvest/Harcourt edition, 1964[1936]), pp. 156, 161–162 311 . See Mark R. Reiff, Exploitation and Economic Justice in the Liberal Capitalist State (Oxford: Oxford University Press), pp. 3–10. 312 . Eduardo Porter, “Goodbye, Government, under Either Fiscal Plan,” The New York Times (December 18, 2012). Notes ● 163

313 . See, e.g., J. E. Meade, “The Control of Inflation,” in The Intelligent Radical’s Guide to Economic Policy (London: George Allen & Unwin, 1975), pp. 18–41. 314 . I take this definition from James Tobin. See James Tobin, “Inflation,” in Policies for Prosperity (Cambridge: MIT Press, 1987), pp. 301–319, 301. 315 . Keynes, The General Theory, p. 303. 316 . John Maynard Keynes, “Employment Policy,” in The Collected Writings of John Maynard Keynes, Volume 27 (Cambridge: Cambridge University Press, 1980, 2013), pp. 264–419, at p. 267. 317 . For example, according to Micha ł Kalecki, “inflation in the broadest sense of the term is the creation of purchasing power not based on a contribution to current social income,” Kalecki, “Is a ‘Capitalist’ Overcoming of the Crisis Possible?” [1932], in Kalecki, Collected Works: Volume I, pp. 48–53, 5, but “though expansion of credit by the bank of issue or commercial banks.” Kalecki, “The Business Cycle and Inflation” [1932], in Collected Works: Volume I , pp. 147–155, 148. “Social income” for Kalecki is equal to the value of consumption plus investment. See Kalecki, “Some Remarks on Keynes’s Theory” [1936], in Kalecki, Collected Works: Volume I , pp. 223–232, 225. 318 . See, e.g., Bruce Bartlett, “Inflationphobia, Part I,” The New York Times (July 9, 2013); Avent, “On the Meaning of Inflation.” 319 . See, e.g., Interview with F. A. Hayek, “Business People; A Nobel Winner Assesses Reagan (“The only way you can finance a deficit is by inflation. You cannot raise this amount of money by genuine borrowing. You borrow from Banks, which create credit for the purpose. A large government deficit is a certain way to inflation.”). 320 . See, e.g., Michał Kalecki, “What Is Inflation?” [1941], in The Collected Works of Michael Kalecki: Volume VII: Studies in Applied Economic 1940–1967 (Oxford: Oxford University Press, 1997), pp. 83–88, esp. pp. 83–85. 321 . See The Paydown of the Federal Debt, Remarks by Chairman Alan Greenspan before the Bond Market Association, White Sulphur Springs, West Virginia (April 27, 2001). See also “The National Debt: Imagine if It Disappeared.” 322 . See Kalecki, “What Is Inflation?” for the proof for this. 323 . See Jenny Anderson, “Bank of England Expects Prices to Continue Falling in 2015,” The New York Times (February 12, 2015); Binyamin Appelbaum, “Low Inflation Replaces Joblessness as Reason Fed Won’t Raise Rates,” The New York Times (November 19, 2014). 324 . See Sarah Butler and Zoe Wood, “UK Grocery Sales in Decline for First Time in 20 Years,” The Guardian (November 18, 2014); Larry Elliott, “UK Retail Sales Prove the Customer Is King,” The Guardian (November 20, 2014); Anderson, “Bank of England Expects Prices to Continue Falling in 2015.” 325 . See Jonathan Soble, “In Japan, Moves to Stimulate Economy Reach a Critical Stage,” The New York Times (November 5, 2014) (noting that current effect of government efforts to increase rate of inflation is that prices have increased but not wages, growth, living standards, or employment). 326 . See Keynes, The General Theory, Ch. 19; Joan Robinson, “Kalecki and Keynes,” in Contributions to Modern Economics (New York: Academic Press, 1978), pp. 53–60, 55. 327 . See Porter, “Local Politics Are Fracturing European Unity” (voters in Germany are still conditioned by memories of hyperinflation after World War I). 328 . Treaty article 105.1, e.g., provides: “without prejudice to the objective of price stability, the [ECB] shall support the general economic policies in the [European] Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2.” And according to Article 2 of the Treaty on 164 ● Notes

European Union, the objectives of the Union are a high level of employment and sustainable and non-inflationary growth. So while it is often said that the ECB is charged only with maintaining price stability, a literal reading of its charge makes this not so clear. See European Central Bank, Organization and Objectives (http:// www.ecb.int/ecb/orga/tasks/html/index.en.html ). Indeed, the ECB now seems to be giving a rather expansive reading to its charge, for it has just announced it will begin buying the bonds of troubled governments in an effort to keep down the interest rates these governments would otherwise face as they attempt to get their debts under control and stabilize their economies. See Jack Ewing and Melissa Eddy, “Central Bank Sets Bond Plan Meant to Ease Euro Debt Peril,” The New York Times (September 6, 2012). But there still seem to be substantial limits on how far the ECB is prepared to go to discourage cash hoarding or otherwise stimulate economic activity. See Jack Ewing, “A Rate Cut in Europe, and a Hint of Limits,” The New York Times (May 2, 2013). 329 . See Jack Ewing, “European Central Bank Expands Mandate as It Struggles to Keep Zone Intact,” The New York Times (May 24, 2015). 330 . See Binyamin Appelbaum, “Inflation Is Miserable. Unemployment Is Worse,” The New York Times (April 12, 2013). Indeed, even on the eve of the Great Recession, the day after Lehman Brothers filed for protection under the bankruptcy laws, the Fed was more worried about inflation than an economic collapse. See Paul Krugman, “The Inflation Obsession,” The New York Times (March 2, 2014); Binyamin Appelbaum, “Fed Misread Crisis in 2008, Records Show,” The New York Times (February 21, 2014). See also Paul Krugman, “The Inflation Cult,” The New York Times (September 11, 2014). 331 . See David G. Blanchflower, David N. F. Bell, Alberto Montagnoli, and Mirko Moro, “The Effects of Macroeconomic Shocks on Well-Being” (March 18, 2013) (http:// www.bos.frb.org/employment2013/papers/Blanchflower_Session5%20.pdf). 332 . David Stuckler and Sanjay Basu, “How Austerity Kills,” The New York Times (May 12, 2013). 333 . When there is hyperinflation, increases in wages will typically lag behind increases in prices because increases in wages have to be negotiated while increases in prices do not; thus, real wages will be falling. See Michał Kalecki, “A Model of Hyperinflation,” in The Collected Works of Michał Kalecki: Volume II: Capitalism: Economic Dynamics (Oxford: Oxford University Press, 1991), pp. 90–95, at pp. 94–95. Take, for example, Argentine, where prices rose nearly 30% by one measure in 2013. See Jonathan Gilbert, “Soaring Prices Fuel Frustrations among Weary Argentines,” The New York Times (March 13, 2014). 334 . See John Maynard Keynes, “Social Consequences of Changes in the Value of Money” [1923], in Essays in Persuasion (London: Palgrave Macmillan, 2010), pp. 59–75, 59. 335 . See, e.g., the argument made by Ludwig von Mises in his “Wages, Unemployment, and Inflation,” in Planning for Freedom: Let the Market System Work (Indianapolis, IN: Liberty Fund, 2008), pp. 68–75. See also Paul Krugman, “Fear of Wages,” The New York Times (March 13, 2014). 336 . See Federal Reserve Board, “What Are the Federal Reserve’s Objectives in Conducting Monetary Policy?” (http://www.federalreserve.gov/faqs/money_12848.htm ). After all, if maintaining maximum employment and stable prices is the dual mandate of the Federal Reserve as indeed it is, see Section 2A, Federal Reserve Act, 12 USC § 225A (1977), why should there not be a target rate for unemployment just as Notes ● 165

there is a target rate for inflation, and why should the latter be any lower than the former? 337 . See Paul Krugman, “Who Wants a Depression?” The New York Times (July 10, 2014). 338 . One other “cost” often associated with inflation is the tax penalty that ensues when selling assets whose real value has not changed but whose nominal value has changed substantially as a result of inflation, thereby producing a phantom but taxable capital gain. But the most sensible way to cure this is to adjust the tax code so that it taxes only increases in the real (inflation-adjusted) value of capital assets as a capital gain. Dedicating whatever power we have to managing our economy to prevent inflation is not only a much more indirect solution, it is also much more difficult and comes with serious side-effects in terms of both economic efficiency and justice, and therefore is clearly a second-best approach. 339 . Even the risk of disintegration of the euro zone can be priced into agreements that might be affected by this, see Jack Ewing and Melissa Eddy, “German at European Central Bank at Odds with Country’s Policy Makers,” The New York Times (August 27, 2012), showing that the market is quite capable of handling unforeseeable as well as foreseeable risks—in other words, while the precise nature or mechanics of a particular risk may be unforeseeable, the existence of unforeseeable risks overall is not. 340 . See Binyamin Appelbaum, “Yes, We Have No Inflation,” The New York Times (June 27, 2013). 341 . See, e.g., Associated Press, “As U.S. Trade Deficit Grows, Some Growth Forecasts Drop,” The New York Times (July 3, 2013); Steven M. Davidoff, “‘Currency War’ Is Less a Battle than a Debate on Economic Policy,” The New York Times (February 19, 2013). Which is why the United States has been criticized recently by some for allowing other currencies to fall against the dollar, although the thinking appears to be that the Japanese, Chinese, and European economies need more help right now from currency fluctuations than the United States does. See Binyamin Appelbaum, Jack Ewing, and Neil Gough, “Overseas Stimulus Moves Drive Yen, Euro and Renminbi down against the Dollar,” The New York Times (October 2, 2014); Neil Irwin, “What the Dollar’s Rise Tells Us about the Global Economy,” The New York Times (October 8, 2014). Regardless of whether the government should view the recent rise in the value of the dollar as a good thing, however, this much is clear: it is hard to contend that inflation is right around the corner in the United States when the value of the dollar is skyrocketing. 342 . For discussion of the data showing that those at the top of the income distribution secure much higher returns on capital than the rest of us, see Piketty, Capital in the Twenty-First Century , pp. 208–209, 375–376, 430 ff., esp. 452–454. 343 . Kenneth Rogoff argues that inflation should be pushed as high as 6% if necessary to get the economy going again. See Binyamin Appelbaum, “In Fed and Out, Many Now Think Inflation Helps,” The New York Times (October 26, 2013). Yes, that Kenneth Rogoff. 344 . T. E. Gregory, F. A. von Hayek, Arnold Plant, and Lionel Robbins, Letter to the Editor, “Spending and Saving,” The Times (London, October 19, 1932), p. 10. See also Leaders, “The Perils of Falling Inflation,” The Economist (November 9, 2013). 345 . See, e.g., Federal Open Market Committee, Press Release (January 25, 2012) (US Federal Reserve); Federal Reserve Bank of Chicago, “The Federal Reserve’s Dual Mandate,” Dual Mandate Homepage (updated June 19, 2014) ( http://www.chicagofed.org/webpages/publications/speeches/our_dual_mandate_background.cfm). 166 ● Notes

See also Binyamin Appelbaum, “The Impact (if any) of the Fed’s Dual Mandate,” The New York Times (April 12, 2013). 346 . See Neil Irwin, “Of Kiwis and Currencies: How a 2% Inflation Target Became Global Economic Gospel,” The New York Times (December 19, 2014). 347 . See Catherine Rampell, “Little Cause for Inflation Worries,” The New York Times (May 31, 2013); Binyamin Appelbaum, “More Forceful Fed Stands by Stimulus,” The New York Times (May 1, 2013). See also Floyd Norris, “In Eurozone, Deflation: In U.S., Mild Inflation,” The New York Times (October 24, 2014). 348 . See Binyamin Appelbaum, “Volatility Unlikely to Alter Fed’s Policy Course,” The New York Times (October 19, 2014). 349 . See Bureau of Labor Statistics, “Consumer Price Index—December 2014,” News Release (January 16, 2015) ( http://www.bls.gov/news.release/pdf/cpi.pdf ); Binyamin Appelbaum, “Slow Rise in Consumer Prices May Stymie the Fed,” The New York Times (January 16, 2015); Associated Press, “Consumer Prices Drop, Primarily Because of Falling Gas Prices,” The New York Times (February 26, 2015). 350 . See Reuters, “U.S. Consumer Prices Post Largest Gain in More Than 2 Years,” The New York Times (June 18, 2015). 351 . See David Leonhardt, “The Great Wage Slowdown of the 21st Century,” The New York Times (October 7, 2014); Elise Gould, “2014 Continues a 35-Year Trend of Broad-Based Wage Stagnation,” Issue Brief #393 (Economic Policy Institute, February 19, 2015) ( http://www.epi.org/publication/stagnant-wages-in-2014/ ). 352 . See Irwin, “What the Dollar’s Rise Tells Us about the Global Economy.” 353 . See Neil Irwin, “The Depressing Signals the Markets Are Sending about the Global Economy,” The New York Times (October 15, 2014) and “Five Surprising Economic Trends in 2014, and What They Mean for 2015,” The New York Times (January 1, 2015) (charting consistent drop in expected annual inflation implied by bond prices); Justin Wolfers, “A Prediction Market for Inflation, or Deflation,” The New York Times (March 6, 2015) (derivatives market indicates investors think it more likely than not that inflation will be below 2% for the next five years). 354 . See Charles Evans, “Q. and A. with Charles Evans of the Fed: Low Inflation Is the Primary Concern,” The New York Times (December 3, 2014); Appelbaum, “Low Inflation Replaces Joblessness as Reason Fed Won’t Raise Rates”; Norris, “Inflation? Deflation Is the New Risk.” Prices are already going down for produc- ers. See Reuters, “Biggest Decline since 2009 for Producer Price Index,” The New York Times (February 18, 2015). While not a direct measure of inflation (the PPI takes the point of view of the producer not the consumer), a dropping PPI does suggest that deflation and not inflation is the greater danger. For further explanation of the PPI, see Bureau of Labor Statistics, “How Does the PPI differ from the CPI?” BLS Information (http://www.bls.gov/dolfaq/bls_ques16.htm ). 355 . In the United Kingdom, inflation was 2.2% at the end of 2012, then rose slightly to 2.7% as of August 2013, but has been dropping since, and is now at a mere 0.5%. See George Eaton, “The Inflation Hawks Were Wrong,” New Statesman (October 16, 2012); Reuters, “Slower Inflation Eases Pressure over Rates Pledge,” The New York Times (September 17, 2013); Jenny Andersen, “Inflation in Britain Falls to Lowest Rate in 15 Years,” The New York Times (January 13, 2015). 356 . See Associated Press, “British Inflation Slows to Record Low Pace,” The New York Times (February 17, 2015). 357 . See Anderson, “Bank of England Expects Prices to Continue Falling in 2015.” 358 . See Jack Ewing, “I.M.F. Warns of ‘Sizable Risk’ of Deflation in Euro Zone,” The New York Times (July 16, 2012). See also Editorial, “Europe Flirts with Deflation,” Notes ● 167

The New York Times (February 17, 2014); Buttonwood, “The Disinflation Phenomenon,” The Economist (November 1, 2013); Floyd Norris, “Around the World, Inflation Is Falling to Levels Not Seen for Years,” The New York Times (November 15, 2013); Jack Ewing, “Tepid Data from Euro Zone Leaves Open Debate on Price Downdraft,” The New York Times (November 29, 2013); David Jolly, “Europe’s Central Bank, Defying Doomsayers, Holds Rate Steady,” The New York Times (February 6, 2014) (“Economists have been increasingly worried that Europe may be nearing the sort of economic sinkhole that has gripped Japan for much of the last two decades”). 359 . See David Jolly, “Low Inflation Worries the Euro Zone,” The New York Times (January 7, 2014), “Inflation in Euro Zone Falls, and a 12% Jobless Rate Doesn’t Budge,” The New York Times (January 31, 2014), “Euro Zone Inflation Stays Low; Joblessness Remains High,” The New York Times (February 28, 2014). 360 . See David Jolly, “Eurozone Consumer Prices Stopped Falling in April,” The New York Times (April 30, 2015); “Consumer Prices in Europe Decline Again, but So Does Unemployment,” The New York Times (March 31, 2015): and “Eurozone Prices Continue to Fall, Fueling Concerns,” The New York Times (March 2, 2015); Floyd Norris, “Where Prices Don’t Want to Rise,” The New York Times (September 5, 2014); Jack Ewing, “Another Worrisome Drop in Euro Zone Inflation,” The New York Times (March 31, 2014) Liz Alderman, “Europe Struggles to Avoid Deflation’s Grip,” The New York Times (June 3, 2014); David Jolly, “Euro Zone Edges Closer to Dreaded Deflation,” The New York Times (June 3, 2014); Jack Ewing, “Inflation Continues Its Slide,” The New York Times (July 31, 2014). 361 . See David Jolly, “Price Fall and Worry Escalates in the Eurozone,” The New York Times (January 7, 2015) and “Eurozone Inflation Rate Dips, Stirring Deflation Fears,” The New York Times (November 28, 2014); Alderman, “Eurozone Eked out Growth in Third Quarter”; Neil Irwin, “Deflation Threatens Europe. Policy Makers Wait,” The New York Times (May 8, 2014); Melissa Eddy and Jack Ewing, “European Central Bank Cuts Growth Forecast and Leaves Rates Unchanged,” The New York Times (December 5, 2012); Jack Ewing, “Central Bank Takes Step as Europe’s Downturn Drags On,” The New York Times (May 2, 2013); Danny Hakim, “Skeptics See Euro Eroding European Unity,” The New York Times (November 11, 2013); Jack Ewing, “European Central Bank Cuts Main Rate,” The New York Times (November 7, 2013). 362 . See Norris, “In Eurozone, Deflation: In U.S., Mild Inflation”; Institut national de la statistique et des é tudes é conomiques, “Prices Index—January 2015,” Informations Rapides (February 19, 2015) (noting that CPI in France dropped by 1% from December 2014 to January 2015 and by 4% from a year earlier) ( http://www.insee. fr/en/indicateurs/ind29/20150219/IR_01_15_English.pdf). 363 . See David Jolly, “Eurozone Consumer Prices Rise for First Time in Six Months,” The New York Times (June 2, 2015). See Eurostat, “HICP Inflation Rate,” ( http:// ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tec0 0118&plugin=1 ), for the most up to date figures on this. 364 . See, e.g., Appelbaum, “In Fed and Out, Many Now Think Inflation Helps”; Eduardo Porter, “Making the Case for a Rise in Inflation,” The New York Times (June 15, 2013); Christina D. Romer, “It’s Time for the Fed to Lead the Fight,” The New York Times (June 9, 2012); Paul Krugman, “The Fed to the Rescue?” The New York Times (August 9, 2011) and “Not Enough Inflation,” The New York Times (April 5, 2012) and (May 2, 2013) and “Oligarchs and Money,” The New York Times (April 6, 2014); Rich Miller, “U.S. Needs More Inflation to Speed Recovery, Say Mankiw, 168 ● Notes

Rogoff,” Bloomberg (May 19, 2009); Oliver Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro, “Rethinking Macroeconomic Policy,” IMF Staff Position Note SPN/10/03 (International Monetary Fund: February 12, 2010) ( http://www.imf. org/external/pubs/ft/spn/2010/spn1003.pdf) (arguing that central banks should increase their target rate for inflation from 2% to 4%). In a sense, allowing modest increases in inflation operates like a tax on idle wealth, a method of working toward full employment when people and institutions are hoarding cash that goes way back. See, e.g., Hansen, Economic Policy and Full Employment , pp. 222–230. 365 . See Peter Lattman, “Confidence on Upswing, Mergers Make Comeback,” The New York Times (February 14, 2013); David Gelles, “Markets Buoyant, Merger Activity Picks Up,” The New York Times (January 1, 2014); Steven Davidoff Solomon, “New Buying Strategy as Facebook and Google Transform Into Web Conglomerates,” The New York Times (August 5, 2013); Peter Eavis and David Gelles, “Stampede of Mergers Could Mean Growth, or Irrationality, Ahead,” The New York Times (August 7, 2014). For an example of just how little this kind of economic activity can contribute to the general welfare, consider William Ackman, the hedge fund manager who recently made $2.2 billion by losing out in a bidding war for Allergan, the maker of Botox. Andrew Ross Sorkin, “Ackman Has Luck of a Loser, to the Tune of $2.2 Billion,” The New York Times (November 17, 2014); Steven Davidoff Solomon, “One Day, Two Deals and a Changed Calculus of Deal- Making,” The New York Times (November 17, 2014) 366 . See Michael J. de la Merced, “Deal Makers Notched Nearly $3.5 Trillion Worth in ‘14, Best in 7 Years,” The New York Times (January 1, 2014); Julie Creswell, “Buyout Firms Combing U.S. for Sky-High Sums to Invest,” The New York Times (October 14, 2013); Michael J. de la Merced, “Mergers Hit a 7-Year High, Propelled by a Series of Blockbuster Deals,” The New York Times (June 30, 2014); Steven Davidoff Solomon, “Changing Old Antitrust Thinking for a New Gilded Age,” The New York Times (July 22, 2014); Dana Mattioli, “M&A Boom Gets a Twist: Predators Become Prey,” The Wall Street Journal (October 2, 2014): David Gelles, “Glencoe’s Chief Pursues Rio Tinto, Seeking to Create Largest Mining Company,” The New York Times (October 7, 2014) (move driven in part by the fact that Glencoe is flush with cash). 367 . See Michael J. de la Merced, “On Wall Street, Cautious Optimism as Merger Deals Near Peak Level,” The New York Times (June 30, 2015). 368 . See David Gelles, “Mega-Mergers Popular again on Wall Street,” The New York Times (November 17, 2014). 369 . See David Gelles, “Cash-Stuffed German Companies on a Global Buying Spree,” The New York Times (September 22, 2014). 370 . David Gelles, “A Scramble to Acquire for Drug Companies,” The New York Times (October 3, 2014). And this wave of corporate acquisitions continues. See, e.g., David Gelles, “Merck in $8.4 Billion Deal for Cubist, Big Maker of Antibiotics,” The New York Times (December 8, 2014); David Gelles, “Shire to Buy NPS Pharmaceuticals for $5.2 Billion,” The New York Times (January 11, 2015); Dealbook, “AmerisourceBergen to Buy MWI Veterinary Supply,” The New York Times (January 12, 2015) (for $2.5 billion); Reuters, “Tekmira to Buy Oncore and Develop Hepatitis B Drugs,” The New York Times (January 12, 2015); David Gelles and Katie Thomas, “Pfizer Bets $15 Billion on New Class of Generic Drugs,” The New York Times (February 5, 2014) (Pfizer offering to acquire Hospira, a maker of generic drugs, for $17 billion including debt): David Gelles, “Rite Aid to Buy Pharmacy Benefit Manager EnvisionRX,” The New York Times (February Notes ● 169

17, 2015) (for $2 billion in cash and stock); Michael J. de la Merced and Andrew Pollack, “AbbVie to Pay $21 Billion for Pharmacyclics, Maker of a Promising Cancer Drug,” The New York Times (March 4, 2015); Michael J. de la Merced, “Mallinckrodt to Buy Drug Maker Ikaria for $2.3 Billion,” The New York Times (March 5, 2015). 371 . See Andrew Ross Sorkin, “Mergers Might Not Signal Optimism,” The New York Times (June 8, 2015). 372 . See Michael Corkery and Jessica Silver-Greenberg, “Many Buyers for Subprime Auto Loan Bundle,” The New York Times (March 15, 2015) (describing continuing high demand for risky subprime auto loan paper); Jessica Silver-Greenberg and Michael Corkery, “Surge in Subprime Loans Linked to Cars Draws Regulatory Scrutiny,” The New York Times (January 30, 2015) (noting that these loans can provide for up to 300% interest); Center for Responsible Lending, “‘Reckless Driving’: Implications of Recent Subprime Auto Finance Growth,” CRL Issue Brief (January 2015) (linking increase in subprime auto loans with increase in rates of default) ( http://www.responsiblelending.org/other-consumer-loans/auto- financing/research-analysis/recklessdriving_implications_subprime_autofinance_ growth.pdf ); Michael Corkery and Jessica Silver-Greenberg, “Investment Riches Built on Subprime Auto Loans to Poor,” The New York Times (January 26, 2015); Neil Irwin, “Welcome to the Everything Boom, or Maybe the Everything Bubble,” The New York Times (July 7, 2014). Contributing to the danger here is the fact that central bankers once again seem determined to ignore this problem—probably because the only thing they think they could do about it is raise interest rates, which would be disastrous for different reasons. See Jessie Eisinger, “Central Bankers Find Bubbles, but Are Cautious on Deflating Them,” The New York Times (September 10, 2014); Jack Ewing, “Draghi Sees No Risk of Eurozone Bubbles,” The New York Times (July 14, 2014); James B. Stewart, “Fears of Renewed Instability as Fed Ends Stimulus,” The New York Times (August 15, 2014) (noting that interest rates should be going up and bond prices should be going down now that the Fed is ending quantitative easing, but they are not—interest rates keep going down and bond prices keep going up, mystifying economists); Robert J. Shiller, “The Mystery of Lofty Stock Market Elevations,” The New York Times (August 16, 2014). But they could take regulatory instead of monetary action—indeed the risks entailed by the securitization of subprime auto loans at least has now become so great and so obvious that some banks are beginning to worry about this behavior themselves. See Michael Corkery and Jessica Silver-Greenberg, “Wells Fargo Puts a Ceiling on Subprime Auto Loans,” The New York Times (March 1, 2015). 373 . See Tobin, “Inflation,” pp. 301–319, 301. 374 . Note that the Fed recently did something like this—provide what in Fed-speak is known as “forward guidance”—when it adopted the so-called Evans Rule (named after Charles Evans, president of the Chicago Fed) and announced it would (or perhaps more accurately might) allow inflation to rise to 2.5% if unemployment remained below 6.5% (which it now is) and “longer term inflation expectations continue to be well-anchored,” see Charles L. Evans, “Monetary Policy in Challenging Times,” Speech to C. D. Howe Institute (Toronto, Canada, November 27, 2012) ( http:// www.chicagofed.org/webpages/publications/speeches/2012/11_27_12_cdhowe. cfm ); Joe Weisenthal, “The Fed Announces ‘Evans Rule’—A Historic Change in Monetary Policy,” Business Insider (December 12, 2012). This announcement certainly did not hurt, but it was too tentative and small to discourage the continued hoarding of cash and drive the kind of reinvestment necessary to take down the 170 ● Notes

unemployment rate by a significant extent. But there may be hope here yet, for they are some indications that the Fed might be thinking of raising the official target rate more significantly when it begins to raise interest rates. See Binyamin Appelbaum, “2% Inflation Rate Target Is Questioned as Fed Policy Panel Prepares to Meet,” The New York Times (April 28, 2015). 375 . If there was any doubt that the Fed has the ability to influence economic activity merely by announcing its intentions long before it actually ever has to put those intentions into effect, consider the reaction when Federal Reserve Chairman Ben Bernanke announced in June of 2013 that the Fed might begin “tapering” its quantitative easing program at the end of the year. See Andrew Ross Sorkin, “Economists Are Asking: Did Bernanke Tip Fed’s Hand?” The New York Times (June 24, 2013). Quite a lot of effort was subsequently required to rein in the effect of this announcement. See Binyamin Appelbaum, “Fed Officials Try to Ease Concern of Stimulus End,” The New York Times (June 27, 2013). Ultimately, the Fed was able to stabilize markets, but not reverse the damage that had already been done. See Binyamin Appelbaum, “Diverging Debate at Fed on When to End Stimulus,” The New York Times (July 10, 2013); Reuters, “Consumer Confidence Slips from 6-Year High,” The New York Times (August 16, 2013). 376 . See Binyamin Appelbaum, “Growth Slow, but Fed Says More Easing Is Not Likely,” The New York Times (February 15, 2012) and “G.O.P. Says Fed Action Could Hurt Economy” The New York Times (July 16, 2013 (quoting Federal Reserve Chairman Ben Bernanke as rejecting the idea that the Fed could bolster growth by temporar- ily encouraging higher rate of inflation); Jeff Madrick, “Stuck on Inflation,” The New York Review of Books (September 16, 2014) (detailing the continuing and steadfast arguments by three members of the Federal Reserve that the Fed should be taking steps to ensure against inflation, not stimulate the economy, no matter how low inflation gets and how high unemployment remains). 377 . See Binyamin Appelbaum, “Fed Ties New Aid to Jobs Recovery in Forceful Move,” The New York Times (September 13, 2012); Paul Krugman, “Hating On Ben Bernanke,” The New York Times (September 16, 2012). 378 . See Reuters, “With Energy Cost Lower, Producer Prices Were Flat in July, Evidence of Little Inflation,” The New York Times (August 14, 2013); Appelbaum, “More Forceful Fed Stands by Stimulus.” 379 . See Anna Bernasek, “What the Nation Got for $800 Billion,” The New York Times (August 3, 2013). 380 . See Binyamin Appelbaum, “As U.S. Growth Lags, Some Press the Fed to Do Still More,” The New York Times (February 1, 2013); Bernasek, “What the Nation Got for $800 Billion” (contemplating what the Fed could have accomplished if instead of spending $800 billion on buying bonds, it had spent that money be giving every homeowner in America an interest-free loan of $10,000). 381 . See Leah Schnurr, “Fed Stimulus Plan Poses Inflation Threat, Lacker Says,” Reuters (September 18, 2012) (quoting a dissenting member of the Fed Board); Binyamin Appelbaum, “Fed Meeting Shows Dissent on Measures to Lift Job Growth,” The New York Times (February 20, 2013) (noting dissent may be growing); Binyamin Appelbaum, “Fed Officials Debate Bank’s Losses Once Economy Mends,” The New York Times (February 22, 2013). 382 . See Binyamin Appelbaum, “Fed’s Janet Yellen, in Testimony, Counsels Patience on Interest Rate Increase,” The New York Time (February 24, 2015), “Fed Recognized Change in Unemployment Goal Could Be Misunderstood,” The New York Times Notes ● 171

(April 9, 2014), “Fed Ties Rates to Joblessness, with Target of 6.5%,” The New York Times (December 12, 2013). 383 . See Jeff Sommer, “Plenty of Noise, but Not Much Guidance from Fed or Company Reports,” The New York Times (February 28, 2015). 384 . See Neil Irwin, “The New Jobs Report Shows Janet Yellen’s Quandary in a Nutshell,” The New York Times (March 6, 2015). 385 . See Associated Press, “Bank of England Votes to Keep Interest Rates Steady,” ABC News (March 5, 2015) (http://abcnews.go.com/Business/wireStory/bank-england- votes-interest-rates-steady-29405007 ); Phillip Inman, “Who Is the Bank of England Kidding? Interest Rates Are Going Nowhere,” The Guardian (March 1, 2015); BBC News, “UK Interest Rates Held at 0.5% by Bank of England” (January 8, 2015) (http://www.bbc.com/news/business-30726535 ); Julia Werdigier, “Bank of England Ties Interest Rate to Employment,” The New York Times (August 7, 2013). 386 . See Binyamin Appelbaum, “Central Bankers’ New Gospel: Spur Jobs, Wages and Inflation,” The New York Times (August 24, 2014). 387 . See Binyamin Appelbaum, “E.C.B. Chief Seeks Tax Cuts and State Spending,” The New York Times (August 22, 2014). 388 . See Binyamin Appelbaum, “Fed Responds to Grim Reality,” The New York Times (September 14, 2012). At the very least, the Fed and the executive branch should coordinate their activities better. By purchasing large quantities of long-term Treasury securities, the Fed has been trying to force investors to buy other kinds of debt and, by providing competition to these other investors, force interest rates on these other kinds of debt down. But at the same time, the Treasury has been greatly increasing the amount of long-term debt it issued. One recent study coauthored by Lawrence Summers among others argues that the Fed’s campaign reduced long- term rates by 1.37 percentage points but that Treasury’s actions put them back up 0.48 percentage points. See Robin Greenwood, Samuel G. Hanson, Joshua S. Rudolph, and Lawrence H. Summers, “Government Debt Management at the Zero Lower Bound,” Hutchins Center in Fiscal & Monetary Policy, Working Paper #5 (Brookings Institution, September 30, 2014) ( http://www.brookings.edu/~/media/ research/files/papers/2014/09/30_government_debt_management_zlb/30_gov- ernment_debt_management_zlb.pdf). 389 . The reverse is also true—Europe and Japan need help from the Fed too. See, e.g., Jack Ewing, “Federal Reserve’s Easing of Stimulus Could Hamper a European Recovery,” The New York Times (July 10, 2013). 390 . See, European Central Bank, “Introductory Statement to the Press Conference by Mario Draghi, President of the ECB,” Press Release (January 22, 2015) (https:// www.ecb.europa.eu/press/pressconf/2015/html/is150122.en.html?action=click&c ontentCollection=International%20Business&module=RelatedCoverage®ion= Marginalia&pgtype=article ); David Jolly and Jack Ewing, “E.C.B. Stimulus Calls for 60 Billion Euros in Monthly Bond-Buying,” The New York Times (January 22, 2015); Landon Thomas Jr., “European Central Bank Bets Big on Curing the Economy,” The New York Times (January 22, 2015); Heather Stewart, “ECB Unveils € 1.1tn QE Plan to Stimulate Eurozone Economy,” The Guardian (January 22, 2015). 391 . For further discussion of some of the problems the ECB faced in designing its own program for quantitative easing, see Jack Ewing, “Bond-Buying Programs: Simple in Theory but Complex in Eurozone,” The New York Times (January 21, 2015); Philippe Legrain, “The ECB’s Damned-If-You-Do QE Moment,” Foreign Policy 172 ● Notes

(January 21, 2015) ( https://foreignpolicy.com/2015/01/21/the-ecbs-damned- if-you-do-qe-moment/?utm_source=Sailthru&utm_medium=email&utm_ term=Flashpoints&utm_campaign=2014_FlashPoints%20RS1%2F21 ); Jack Ewing, “Compromise and Persuasion Won Grudging Support for E.C.B. Bond Buying,” The New York Times (January 23, 2015). 392 . See James Kanter and Jack Ewing, “E.C.B.’s Bond Buying Program Is Legal, Advisor to Appeals Court Says,” The New York Times (January 14, 2015). 393 . See Eddy and Ewing, “European Central Bank Cuts Growth Forecast and Leaves Rates Unchanged”; Ewing, “Central Bank Takes Step as Europe’s Downturn Drags On.” 394 . See Irwin, “Deflation Threatens Europe. Policy Makers Wait.” 395 . See Jack Ewing, “European Central Bank Takes Radical Step,” The New York Times (June 5, 2014). See also Neil Irwin, “Europe Gets Negative Interest Rates. What Does that Even Mean?” The New York Times (June 4, 2014); Ewing, “Europe Crisis Is Resistant to Medicine of Low Rates.” 396 . See Jack Ewing, “Mario Draghi of E.C.B. Predicts an Improved Economy When Stimulus Program Begins Monday,” The New York Times (March 5, 2015). 397 . Indeed, Mario Draghi, president of the ECB, may have hoped that announcing his intentions would be enough by itself to have the desired effect without him ever having to actually carry through. See Jack Ewing, “For Draghi, Promises Are Still His Main Policy Option,” The New York Times (November 6, 2014) and “Draghi Sounds Hopeful Note on Europe’s Economy, but Reassures that E.C.B. Is Ready to Act,” The New York Times (November 17, 2014); David Jolly, “Mario Draghi Says E.C.B. Will ‘Do What We Must’ to Stoke Inflation,” The New York Times (November 21, 2014); Landon Thomas Jr. and Jack Ewing, “Euro Falls Lower as Central Bank Hints at Increase in Stimulus Plan,” The New York Times (January 2, 2015). See also European Central Bank, “Translation of Interview with Peter Praet, Member of the Executive Board of the ECB” Press Release (December 31, 2014) ( https://www.ecb.europa.eu/press/inter/date/2014/html/sp141231. en.html); Jack Ewing, “Peter Praet of E.C.B. Says More Eurozone Stimulus May Be Needed,” The New York Times (December 31, 2014). Of course, at some point one has to act or one loses credibility. See Associated Press, “Europe’s Stimulus Delay Weights on U.S. Markets,” The New York Times (December 4, 2014) (noting that the ECB, despite its rhetoric, has once again failed to act); Jack Ewing, “E.C.B.’s Draghi Hints at More Stimulus in Future for Europe,” The New York Times (December 4, 2014) (despite continuing failure to act, Draghi issues more promises of decisive action in the future); Jack Ewing and Binyamin Appelbaum, “A Stress Test for Mario Draghi and the European Central Bank,” The New York Times (January 2, 2015) (“A central bank claiming that it will do ‘whatever it takes’ while not delivering with actions eventually loses its credibility,” says an MIT professor and former ECB board member); Jack Ewing, “E.C.B., Despite Mounting Pressure, May Wait and See,” The New York Times (September 4, 2014). See also Neil Irwin, “Europe’s Big Push for Growth Is More about Trust than Anything,” The New York Times (September 4, 2014) (“Draghi and ECB need credibility to rise even more than inflation”). The EU itself also seems to have been employing a similar strategy of big talk but little action. See Jack Ewing, “E.U. Investment Plan Aims for Billions to Spur Economy,” The New York Times (November 25, 2014) (but no new money has actually been promised—instead, the money is assumed to come from private sources). Lifting expectations is also dangerous in another way—big talk sometimes requires such dramatic action that it is unsustainable. This appears to be what happened to the Swiss Central Bank’s statement that Notes ● 173

it would do whatever it takes to maintain a 1.2 exchange rate between the Swiss Franc and the Euro. See Paul Krugman, “Francs, Fear, and Folly,” The New York Times (January 15, 2015) (suggesting that the Swiss gave up trying to maintain this rate because they just could not buy enough Euros fast enough); Neil Irwin, “Economic Lessons from Switzerland’s One-Day, 18 Percent Currency Rise,” The New York Times (January 15, 2015) (same). 398 . See Jack Ewing, “E.C.B. Begins Its Bond-Buying Program for the Eurozone,” The New York Times (March 9, 2015) (noting that the market reaction to the actual commencement of the bond-buying program was “muted”). 399 . See Neil Irwin, “Stimulus for Eurozone, but It May Be Too Little or Too Late,” The New York Times (January 22, 2015); Julia Kollewe, “What the Experts Say about the ECB’s Latest Round of QE,” The Guardian (January 22, 2015); Jenny Anderson, “The Powers, and Limits, of E.C.B. Stimulus, as Viewed from Davos,” The New York Times (January 22, 2015); Neil Irwin, “Mario Draghi’s Bombshell Is Europe’s Last, Best Hope to Return to Growth,” The New York Times (January 22, 2015); Jack Ewing, “E.C.B. Says Impact of Asset-Buying Plan Will Be ‘Significant,’ but Does Not Detail Size,” The New York Times (October 2, 2014); Jack Ewing and Neil Irwin, “Europe’s Bank Takes Aggressive Steps,” The New York Times (September 4, 2014) 400 . See Phillip Inman, “Bank of Japan Bows to Pressure with ‘Epoch-Making’ Financial Stimulus,” The Guardian (January 22, 2013). 401 . See Associated Press, “Japanese Economy Shrinks and Remains in Recession,” The New York Times (February 13, 2013). 402 . See Hiroko Tabuchi, “Japan Initiates Bold Bid to End Years of Tumbling Prices,” The New York Times (April 4, 2013). But see Bettina Wassener, “After a Run of Growth, Concern over Japan’s Next Moves,” The New York Times (October 31, 2013); Hiroko Tabuchi, “After Strong Growth in First Half of 2013, the Japanese Economy Hits a Snag,” The New York Times (November 13, 2013). 403 . See Reuters, “Household Spending Soars in Japan, Fastest in 9 Years,” The New York Times (April 30, 2013); Hiroko Tabuchi and Graham Bowley, “Pro-Inflation Policies Show Signs of Helping Japanese Economy,” The New York Times (May 10, 2013); Hiroko Tabuchi, “Japan’s Economy Growing at 3.5% Annualized Rate,” The New York Times (May 15, 2013), “Japan’s Economic Stimulus Gets Its Second Wind,” The New York Times (June 10, 2013), “In Japan, Prices Stabilize for the First Time in Months,” The New York Times (June 27, 2013) (in other words, deflation may finally be ending); Reuters, “Encouraging Signs in Japan’s Drive against Deflation,” The New York Times (January 31, 2014); Associated Press, “Growth in Japan Rises at Fastest Rate in Two Years,” The New York Times (May 14, 2014). 404 . See Jonathan Soble, “Japan’s Central Bank Unexpectedly Moves to Stimulate Economy,” The New York Times (October 31, 2014). 405 . See Jack Ewing, “Eurozone Nations Face Stronger Pressures to Lift Economies,” The New York Times (January 22, 2015); Binyamin Appelbaum, “Fed Chief Calls Congress Biggest Obstacle to Growth,” The New York Times (July 17, 2013); Binyamin Appelbaum, Jack Ewing, Hiroko Tabuchi, and Landon Thomas Jr., “Central Banks Act with a New Boldness to Revitalize Economies,” The New York Times (May 29, 2013); Jack Ewing and James Kanter, “Central Banks Criticize Europe for Political Gridlock on Economy,” The New York Times (June 22, 2013). 406 . See Associated Press, “Japan Plans $29 Billion Stimulus to Fight Recession,” The New York Times (December 26, 2014); Jonathan Soble, “In Budget Plan, Japan 174 ● Notes

Proposes More Spending and Aims to Borrow Less,” The New York Times (January 14, 2015). 407 . See Hiroko Tabuchi, “A Public Works Boom in Japan Has Echoes from the Lost Decade,” The New York Times (December 8, 2013). But see Jack Ewing, Neil Gough, and David Jolly, “Global Optimism for 2014, with an Eye on Dormant Risks,” The New York Times (December 31, 2013) (Tokyo’s Nikkei average up 56.7% in 2013 thanks in large part to Shinzo Abe’s stimulus policies); Floyd Norris, “Government Stimulus Lifts Japan,” The New York Times (January 10, 2014). 408 . See Reuters, “Contraction in Japan Is Largest since 2011,” The New York Times (August 12, 2014). This recession, luckily, proved to be short—Japan pulled out of it by the end of 2014, although less robustly than had been anticipated. See Jonathan Soble, “Japan Makes a Quick Exit from Its Latest Recession,” The New York Times (February 16, 2015). See also Reuters, “Japan’s Household Spending and Retail Sales Decline,” The New York Times (February 26, 2015). 409 . See, e.g., Milton Friedman, “The Role of Monetary Policy,” American Economic Review 58 (1968): 1–17 and “Inflation and Unemployment,” Journal of Political Economy 85 (1977): 451–472, 458. 410 . See, e.g., James Buchanan and Richard E. Wagner, Democracy in Deficit (New York: Academic Press, 1977). 411 . For a more detailed discussion of Friedman’s “expectations explanation” of inflation, see my Exploitation and Economic Justice in the Liberal Capitalist State, pp. 221–224. 412 . Buchanan and Wagner, Democracy in Deficit, p. 65. For a similar argument, see F. A. Hayek, Full Employment at Any Price? (London: Institute of Economic Analysis, 1975). 413 . See John F. Muth, “Rational Expectations and the Theory of Price Movements,” Econometrica 29 (1961): 315–335; Steven M. Sheffrin, Rational Expectations (Cambridge: Cambridge University Press, 2nd edn., 1996). Unfortunately, if one looks at the historical record, this theory turns out to have little predictive power: (1) what people expect inflation to be and what it actually turns out to be can be wildly different; and (2) even when this is the case, people do not then necessarily or even routinely adjust their expectations. Indeed, people have been expecting inflation to be around 3.5% since January 2013 and still do, yet throughout this period inflation has been actually hovering around 1.5%. Compare Federal Reserve Bank of New York, “Survey of Consumer Expectations—March 2015” ( http:// www.newyorkfed.org/microeconomics/sce/#indicators/inflation-expectations/g1 ) with Bureau of Labor Statistics, “Consumer Price Index,” Department of Labor (http://www.bls.gov/cpi/cpi_dr.htm#2013 ). 414 . Evidence for this can be in the TIPS market. TIPS are Treasury Inflation Protected Securities. These are government bonds that pay a small rate of interest but guarantee the return of principal in the stated face amount of the bond or the inflation-adjusted face amount, whichever is higher. TIPS have been extremely popular investments since the Great Recession, showing that people expected inflation to outpace the return that was available on other kinds of bonds. But they have done extremely poorly, for inflation has not in fact outpaced even the meager return available on non-inflation protected investments. See Reuters, “U.S. Inflation-Linked Bonds Roiled, Pose Dilemma for Fed,” The New York Times (June 25, 2013). If inflation was always what people expected it to be, TIPS should never have gone down in these circumstances. But they did. In other words, if we use TIPS to measure people’s expectations (and why wouldn’t we—they are as good a measure of this Notes ● 175

as anything else), it is clear that inflation does not always or even often turn out to be what people expect it to be—that’s why TIPS rise and fall in value, and why they can be good investments or bad. 415 . See Hayek, Full Employment at Any Price? 416 . For further argument against Friedman’s natural rate hypothesis, see my Exploitation and Economic Justice at pp. 216–225. 417 . See Hiroko Tabuchi, “Yen-Pinching Undercuts Japan’s Push against Years of Deflation,” The New York Times (March 10, 2014). Nor does this debt-to-GDP ratio seem to be discouraging people for lending money to Japan—as of December 2014, interest rates on Japanese government bonds had dropped to an almost non- existent 0.28%. See Peter Eavis, “Soaring Bond Prices May Sound an Economic Warning,” The New York Times (January 6, 2015). 418 . Take the United States, where for a long time the unemployment rate seemed to be creeping up: “The unemployment rate was 3 percent at the end of the Korean War (with 0.37 inflation), 4 percent at the peak of the boom in the mid-1950s when the Fed applied the brakes, and 5 percent at the next cyclical peak in 1960 (with just under 2 percent inflation). The Kennedy-Johnson administration offi- cially adopted a full employment goal of 4 percent unemployment, achieved it in 1965 (at 2 percent inflation), and overachieved it during the Vietnam War. During the 1970s operational unemployment targets were not made explicit, but policy moves revealed implicit targets of 5 percent, then 6 percent (with inflation mostly rising), now [1981] probably 7 percent or more (and 10.35 percent inflation).” James Tobin, “The Conservative Counter-Revolution in Economic Policy,” in Policies for Prosperity (Cambridge: MIT Press, 1987), pp. 89–99, 95 (inflation figures added). But after hitting a high of 10.8% in December 1982 (with 6.2% inflation) the unemployment rate started creeping down. It was down to 8.3% a year later (and 3.2% inflation), 7.3 a year after that (4.3 inflation), 6.3 in May 1987 (3.9), 5.0 in March 1989 (5.0) and again in June 1997 (2.3) after bumping up a bit for a while, and eventually dropped to 3.9 in December 2000 (3.4). After bumping up a bit again, it was in the mid-4s for most of 2006 and 2007 and was at just 5% in April 2008 (3.9), just before the Great Recession. See Bureau of Labor Statistics, “Unemployment Rate 1980–2014” (http://data.bls.gov/pdq/ SurveyOutputServlet); US Inflation Calculator, “Historical Inflation Rates: 1914– 2014” (http://www.usinflationcalculator.com/inflation/historical-inflation-rates/ ). See also Tim McMahon, “Historical Inflation Rate” at http://inflationdata.com/ Inflation/Inflation_Rate/HistoricalInflation.aspx#table. 419 . Hayek, Full Employment at Any Price? p. 11. 420 . Ibid., p. 15. 421 . Ibid., p. 16. 422 . Indeed, in the same essay, Hayek walks back his predictions of the doom and gloom to come and emphasizes, “although I regard a period of some months, perhaps even more than a year, of considerable unemployment as inevitable, this does not mean we must expect another long period of unemployment comparable to the Great Depression of the 1930s.” Ibid,. p. 25. But if this is the extent of the cost of following policies that delivered a 25-year period of Great Prosperity, the comparative calculation that Hayek urges us to make looks even less likely to go in his favor. 423 . See, e.g., F. A. Hayek, “Symposium on Keynes: Why?” in Contra Keynes and Cambridge: The Collected Works of F. A. Hayek, Volume 9 (New York: Routledge, 1995), pp. 237–239, at p. 238. This view was expressed by Pigou as well, although he at least conceded that increasing demand might have a short-term effect on 176 ● Notes

unemployment. See A. C. Pigou, The Theory of Unemployment (London: Frank Cass & Co., 1933), pp. 248–252. 424 . And of course as I have already pointed out but will reemphasize here, causing inflation in the product market but not the labor market and thereby causing real wages to fall was never the solution Keynes advocated for the problem of unemployment. 425 . See Hayek, Full Employment at Any Price? See also Hayek, “The Campaign against Keynesian Inflation,” pp. 191–231. Note that Friedman agrees with Hayek’s (in my view erroneous) characterization of Keynes theory as designed to use inflation to reduce real wages and thereby reduce unemployment. See Milton Friedman, Unemployment versus Inflation: An Evaluation of the Phillips Curve (London: Institute of Economic Affairs, Occasional Paper 44, 1975), p. 17. Of course, Keynes said no such thing. The passages cited by Friedman appear in introductory material where Keynes is simply noting that it might be possible to reduce real wages through inflation in the product market even though it would be impos- sible to do so directly because any attempt at reducing real wages directly is likely to be easily noticed and therefore trigger great resistance. This is presented simply as an observation about human nature; it is not presented as a formula for achiev- ing full employment, whereas stimulating aggregate demand through the use of deficit spending is. Compare Keynes, The General Theory, pp. 9, 14, and 15 with pp. 23–24, 113–131. 426 . This, apparently, is what is currently stopping the Central Bank from taking greater action to stimulate the economy in Europe. See Paul Krugman, “Another Bank Bailout,” The New York Times (June 10, 2012). 427 . See, e.g., Federal Reserve Board of Governors, “Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin 98.2 (June 2012), esp. pp. 24 and 43 (showing percent of US families holding financial and nonfinancial assets by quintile for bottom four quintiles and by decile for top quintile). 428 . See Binyamin Appelbaum, “The Fed Takes Modest Action on Rates as Forecast Dims,” The New York Times (June 20, 2012) (the Fed expects inflation to rise no higher than 1.7% in 2012). In the United Kingdom, inflation was just 2.2%, in September 2012 having fallen from a high of 5.2% a year earlier without anti-inflationary measures being taken, once again proving those who argued that interest rates must be hiked in such a situation despite the contractionary effect this would have on the economy and on job creation wrong. See Eaton, “The Inflation Hawks Were Wrong.” If the United Kingdom can survive a little modest inflation without taking job-killing action, so can the United States. Nevertheless, even in the United Kingdom, where the economy is still barely limping along, there are calls to cease taking action to stimulate the economy for fear of triggering inflation. See Stephen Castle, “Bank of England Is Divided on More Stimulus Measures to Counter Weak Growth,” The New York Times (October 17, 2012) (quoting a member of the bank’s monetary policy committee as saying it was not “self-evident” that “substantial extra support for the economy would be compatible with the inflation target”). 429 . See Franklin Allen and Gary Gorton, “Churning Bubbles,” in New Perspectives on Asset Price Bubbles, ed. Douglass D. Evanoff, George G. Kaufman, and A G. Malliaris (Oxford: Oxford University Press, 2013), pp. 13–40 and Gadi Barlevy, “Rethinking Theoretical Models of Bubbles,” in Evanoff et al., New Perspectives on Asset Price Bubbles , pp. 41–61; Steven Davidoff Solomon, “A Venture Capital Giant Says: Bubble? What Bubble?” The New York Times (July 1, 2015) (noting Notes ● 177

that some venture capitalists think the current sky-high valuations of tech companies are indeed supported by fundamentals). 430 . See generally Neil Irwin, “Quantitative Easing in Ending. Here’s What It Did, in Charts,” The New York Times (October 29, 2014) (noting that a wide range of assets are currently near historical highs); Peter Eavis, “A Recent Surge of Leveraged Loans Rattles Regulators,” The New York Times (November 4, 2014) (“The Fed’s policy of keeping interest rates at record lows has prompted investors to buy riskier and riskier investments to obtain some sort of return.”); Michelle Higgins, “Real Estate in Manhattan Set Sales Records in 2014,” The New York Times (January 6, 2015) (noting that average sales price and average price per square foot both sets record in 2014); Vivian Marino, “$100.4 Million Sale at One57,” The New York Times (January 23, 2014) (setting record for highest price ever paid for a single residence in New York City); Reuters, “European Stocks Reach Highest Point since 2008,” The New York Times (January 19, 2015); Reuters, “Wall Street Little Changed but S&P Hits Record,” The New York Times (December 29, 2014). 431 . Chad Bray, “Bank of England Holds Interest Rates Steady,” The New York Times (November 6, 2014). In turn, asset bubbles in real estate and financial instruments, the bursting of which could have wider and possibly even devastating effects on the larger economy, should be distinguished from bubbles in the prices of luxury goods, although those who are in the market for such items often forget this. Take Paul Singer, the billionaire hedge fund manager who recently seemed to equate what was happening in the market for the things he and his friends like to buy with the things that the ordinary person needs to buy: “check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like,” he recently said in a letter to investors. See Jesse Eisinger, “Fears of Inflation Stem from Worrisome Origins,” The New York Times (November 12, 2014) (quoting Singer). See also Michelle Higgins, “Average Home Price in Manhattan Reaches $1.87 Million, a New High,” The New York Times (July 1, 2015); Scott Reyburn, “Christie’s Has Art World’s First $1 Billion Week,” The New York Times (May 13, 2015); Scott Reyburn and Doreen Carvajal, “Gauguin Painting Is Said to Fetch $300 Million,” The New York Times (February 5, 2015) (one of the highest prices ever paid for an artwork); William Alden, “Art for Money’s Sake,” The New York Times (February 3, 2015) (76% of art buyers viewed their acquisitions as investments in 2014, compared to 53% in 2012). One might also check out the price of yachts, private jumbo jets, diamonds, and other kinds of high-end jewelry, collectable wine, and even ultra-exclusive designer handbags, the prices of which have all been going up, as the super-rich (the top one-hundredth of the top 1%) who have enjoyed almost all the benefit of economic growth in recent years have left the merely rich (the rest of the top 1%) behind. See Robert Frank, “Another Widening Gap: The Haves vs. the Have-Mores,” The New York Times (November 15, 2014); Reuters, “Tiffany Sales in Americas Surge, but Profit Declines,” The New York Times (November 25, 2014) (noting that sales by Tiffany of high-end fashion jewelry increased 10% in the third quarter of 2014 due to strong demand). 432 . There are, of course, other possible reasons for the inflation of asset bubbles that have nothing to do with accommodative monetary policy. One of these involves the possible manipulation of commodity prices by some of our largest investment banks. See United States Senate Permanent Subcommittee on Investigations, “Wall Street Bank Involvement with Physical Commodities” (released in conjunction with November 20 and 21, 2014 hearing) (https://www.documentcloud. 178 ● Notes

org/documents/1363910-senate-report-on-wall-st-s-role-in-commodities.html); Nathaniel Popper, “Senate Spars with Goldman Sachs over Commodities,” The New York Times (November 20, 2014). Indeed, the concerns here are sufficiently serious that it seems like the Federal Reserve is actually about to exercise its regulatory power and act. See Nathaniel Popper, “Federal Reserve Set to Propose Stricter Rules for Banks in Commodities Markets,” The New York Times (November 21, 2014). Another possible reason for the inflation of asset bubbles is the extremely high and still increasing level of inequality we are currently experiencing. See Louise Story and Stephanie Saul, “Towers of Secrecy: Stream of Foreign Wealth Flows to Elite New York Real Estate,” The New York Times (February 7, 2015) (noting that $8 billion is now spent each year for New York City residences that cost more than $5 million each, more than triple the amount of just a decade ago). I should also note that even if an asset bubble is inflating, we have reason to expect that whatever distress results when the bubble bursts, it will be far less than the distress of the Great Recession. This is because a recession caused by the collapse of an asset bubble that was not caused by a credit boom in mortgage lending is significantly less than when such a credit boom is involved. See Ò scar Jordà , Moritz Schularick, and Alan M. Taylor, “The Great Mortgaging: Housing, Finance, Crises, and Business Cycles,” NBER Working Paper 20501 (National Bureau of Economic Research, September 2014); J. Bradford DeLong, “Why Small Booms Cause Big Busts,” Project Syndicate (June 22, 2015). And whatever bubble may be inflating now, at least in the United States, it is not the result of a credit boom in mortgage lending. Indeed, as I will discuss later at great length, banks are currently very reluctant to lend on real estate, and mortgage credit is exceedingly tight. 433 . For extensive discussion of the causes of the 2008 financial crisis, see Reiff, Exploitation and Economic Justice in the Liberal Capitalist State. 434 . Remarks by Chairman Alan Greenspan at the Annual Dinner and Francis Boyer Lecture of the American Enterprise Institute for Public Policy Research, Washington, DC (December 5, 1996) (http://www.federalreserve.gov/boarddocs/ speeches/1996/19961205.htm). 435 . See Ben S. Bernanke, “Monetary Policy and the Housing Bubble,” Speech of the Chairman of the Board of Governors of the Federal Reserve System at the Annual Meeting of the American Economic Association, Atlanta, Georgia , (January 3, 2010) (http://www.federalreserve.gov/newsevents/speech/bernanke20100103a. pdf), p. 8; Ben Bernanke and Mark Gertler, “Monetary Policy and Asset Price Volatility,” in New Perspectives on Asset Price Bubbles , ed. Douglass D. Evenoff, George G. Kaufman, and A. G. Malliaris (Oxford: Oxford University Press, 2012), pp. 173–210; Kenneth N. Kuttner, “Monetary Policy and Asset Price Volatility: Should We Refill the Bernanke-Gertler Prescription?,” in Evenoff et al., New Perspectives on Asset Price Bubbles, pp. 211–239, at pp. 218, 222, 225, and 234; Claudio Borio, “Toward a Macroprudential Framework for Fiscal Supervision and Regulation?,” in Evenoff et al., New Perspectives on Asset Price Bubbles, pp. 243– 270. What this underscores is the importance of not relying on monetary policy alone to deal with the unemployment—fiscal and regulatory intervention in the economy is needed too; when monetary policy is relied on for everything, the for- mation of asset bubbles is more likely and it is difficult to rein these in using monetary policy alone without causing even more severe side-effects in the economy. See Landon Thomas Jr., “I.M.F. Warns of Global Financial Risk from Fiscal Policies,” The New York Times (October 12, 2014). Unfortunately, even the limited efforts at reform enacted in the wake of the Great Recession are now in the process of Notes ● 179

being rolled back. See Gretchen Morgenson, “Kicking Dodd-Frank in the Teeth,” The New York Times (January 10, 2015); Jonathan Weisman and Eric Lipton, “In New Congress, Wall St. Pushes to Undermine Dodd-Frank Reform,” The New York Times (January 13, 2015). 436 . Benjamin M. Friedman, “Struggling to Escape from ‘Assumption 14,’” in Evenoff et al., New Perspectives on Asset Price Bubbles , pp. 341–350, 346. 437 . See Editorial, “The Fed Fights Half the Battle,” The New York Times (December 27, 2014). 438 . See Reiff, Exploitation and Economic Justice in the Liberal Capitalist State (citing sources). 439 . See Piketty, Capital in the Twenty-First Century . 440 . See, e.g., Joseph E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: Norton & Co., 2012). 441 . Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Ricka, and Evridiki Tsounta, “Causes and Consequences of Income Inequality: A Global Perspective,” SDN/15/13 (International Monetary Fund, June 2015) ( http://www. imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf ), p. 4. 442 . See Kalecki, “Three Ways to Full Employment,” pp. 39–58, at pp. 53–57; Malcolm C. Sawyer, The Economics of Michal Kalecki (London: Macmillan, 1985), p. 130. In many ways, Kalecki anticipated Keynes’s insight that what mattered in times of high unemployment was not supply, as per Say’s Law, but demand, and that redis- tributing income into the hands of those with the highest marginal propensity to consume would provide the most direct and effective stimulus. 443 . See Binyamin Appelbaum, “Ben Bernanke Says Fed Can’t Get Caught Up in Inequality Debate,” The New York Times (June 1, 2015). 444 . Ben Bernanke, “Monetary Policy and Inequality,” Ben Bernanke’s Blog (Brookings Institution, June 1, 2015) ( http://www.brookings.edu/blogs/ben-bernanke/ posts/2015/06/01-monetary-policy-and-inequality). 445 . See Josh Bivens, “Gauging the Impact of the Fed on Inequality During the Great Recession,” Working Paper #12 (Hutchins Center on Fiscal & Monetary Policy at Brookings, June 1, 2015) (http://www.brookings.edu/~/media/research/files/ papers/2015/06/01-quantitative-easing-and-inequality/josh_bivens_inequality_ final.pdf). 446 . See Patricia Cohen, “Study Finds Local Taxes Hit Lower Wage Earners Harder,” The New York Times (January 13, 2015). 447 . For the relevant figures for every state, see Carl Davis et al., Who Pays? A Distributional Analysis of the Tax Systems in All 50 States (Institute on Taxation & Economic Policy, 5th edn., January 2015)(http://www.itep.org/pdf/whopaysreport.pdf). 448 . Ibid., p. 4. 449 . Ibid., p. 11. Unfortunately, rather than reduce regressivity in their respective states, Republican governors seem to want to increase it. See Shaila Dewan, “States Consider Increasing Taxes for the Poor and Cutting Them for the Affluent,” The New York Times (February 13, 2015); Adam Nagourney and Shaila Dewan, “Republican Governors Buck Party Line in Raising Taxes,” The New York Times (January 24, 2015) (noting, however, that the taxes they want to raise are over- whelmingly sales and use taxes, which are the most regressive form of taxation there is). 450 . See Warren E. Buffett, “Stop Coddling the Super-Rich,” The New York Times (August 14, 2011). 180 ● Notes

451 . For other more extensive proposals for redistribution, see Robert J. Shiller, “Better Insurance against Inequality,” The New York Times (April 12, 2014), and the works cited therein. 452 . For a similar argument, see Robert H. Frank, “When Low Taxes Don’t Help the Rich,” The New York Times (October 27, 2012). 453 . See Beth Ann Bovino, Gabriel J. Petek, and John B. Chambers, “How Increasing Income Inequality Is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide,” S & P Capital IQ, Global Credit Portal (August 5, 2014) (https:// www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1351366& SctArtId=255732&from=CM&nsl_code=LIME&sourceObjectId=8741033&so urceRevId=1&fee_ind=N&exp_date=20240804-19:41:13 ); Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides, “Redistribution, Inequality, and Growth,” IMF Staff Discussion Note SDN/14/02 (International Monetary Fund, February 2014) ( http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf ). In other words, the tradeoff that Arthur Okun long ago suggested we had to make— a tradeoff that he argued was worth it—is not in fact required. See Arthur M. Okun, Equality and Efficiency: The Big Tradeoff (Washington, D.C.: Brookings, 1975). See also Joseph E. Stiglitz, “Singapore’s Lessons for an Unequal America,” The New York Times (March 18, 2013); John Cassidy, “Does Tackling Inequality Reduce Growth? No,” The New Yorker (February 26, 2014); Andrew G. Berg and Jonathan D. Ostray, “Inequality and Unsustainable Growth: Two Sides of the Same Coin, IMF Staff Discussion Note SDN/11/08 (International Monetary Fund, April 8, 2011) (http://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf ); Tracy McVeigh, “Inequality ‘Costs Britain £ 39bn a Year,’” The Guardian (March 16, 2014); Oxfam, “The Cost of Inequality: How Wealth and Income Extremes Hurt Us All,” Oxfam Media Briefing Ref:02/2012 (January 18, 2014) (http://policy-practice.oxfam.org.uk/publications/the-cost-of-inequality-how-wealth-and- income-extremes-hurt-us-all-266321). 454 . For an extended discussion of the nature and injustice of the trickle-down approach, see Reiff, “The Difference Principle, Rising Inequality, and Supply-Side Economics,” 119–173. 455 . See my Exploitation and Economic Justice in the Liberal Capitalist State. 456 . See Petition, “Help Millions of Workers by Taking a Bold Stance in Addressing Overtime Pay Rules” (Economic Policy Institute/MoveOn.org) (http://petitions. moveon.org/sign/help-millions-of-american?utm_source=Economic+Policy+Institute &utm_campaign=5ad6ae2086-OT_SOTU_01_20_20151_20_2015&utm_medium =email&utm_term=0_e7c5826c50-5ad6ae2086-55957733). 457 . See Ross Eisenberry, “The Number of Salaried Workers Guaranteed Overtime Pay Has Plummeted Since 1979,” Economic Snapshot (Economic Policy Institute, June 11, 2015) and “New Overtime Rules Will Be a Father’s Day Gift to Millions of Dads,” Economic Snapshot (Economic Policy Institute, June 16, 2015). 458 . President Obama has actually just proposed such a change in the applicable overtime rules. While the change is to be made by executive order, it will not become effective until sometime in 2016, so there is still plenty of time for this change to be challenged in court and in Congress. See Noam Scheiber, “Obama Making Millions More Americans Eligible for Overtime,” The New York Times (June 29, 2015). 459 . Samuel Bowles and Robert Boyer, “Wages, Aggregate Demand, and Employment in an Open Economy: An Empirical Investigation,” in Macroeconomic Policy after the Conservative Era: Studies in Investment, Saving and Finance , ed. Gerald A. Notes ● 181

Epstein and Herbert M. Gintis (Cambridge: Cambridge University Press, 1995), pp. 143–171, at p. 165. 460 . See Samuel Bowles, The New Economics of Inequality and Redistribution (Cambridge: Cambridge University Press), Ch. 2. 461 . See, e.g., some of the comments by leading members of the Republican Party quoted in Paul Krugman, “Disdain for Workers,” The New York Times (September 20, 2012), “War on the Unemployed,” The New York Times (June 30, 2013), “Hunger Games, U.S.A.” The New York Times (July 14, 2013), “War on the Poor,” The New York Times (October 31, 2013); Michele Goldberg, “Poverty Denialism: According to the GOP, the Poor Have It Easy,” The Nation (November 25, 2013) and “Right- Wing Author Abandons Cultural Populism, Decries ‘White Trash,’” The Nation (November 21, 2013). 462 . See, e.g., Mehdi Hassan, “Why It’s Misguided to Treat the Eurozone Crisis as a Morality Tale about ‘Lazy’ Southerners,” New Statesman (December 6–12, 2013). 463 . For further discussion of this kind of narcissistic elitism as an element of anti-liberal perfectionist belief, see Mark R. Reiff, “The Attack on Liberalism,” in Law and Philosophy, ed. Michael Freeman and Ross Harrison (Oxford: Oxford University Press, 2007), pp. 173–210. 464 . For similar proposals for setting targets for contingent triggering of certain changes in fiscal and monetary policy, see Lawrence Summers, “How to Ensure Stimulus Today, Austerity Tomorrow,” Financial Times (March 25, 2012). 465 . See David Cay Johnston, “Richest Are Leaving Even the Rich Far Behind,” The New York Times (June 5, 2005). 466 . See Reiff, “The Difference Principle, Rising Inequality, and Supply-Side Economics.” See also Chrystia Freeland, “The Self-Destruction of the 1 Percent,” The New York Times (October 13, 2012) (suggesting that as an empirical matter, unrestrained greed on the part of the oligarchy and the continuing and accelerat- ing degree of economic inequality this produces has been responsible throughout history for the decline of what were once economically powerful states) and Annie Lowrey, “Income Inequality May Take Toll on Economic Growth,” The New York Times (October 16, 2012) (referring to the growing number of economic studies which show that high levels of inequality, rather than being a necessary side-effect of growth and the increases in employment that growth can bring, actually impede both growth and job creation). 467 . On this strategy generally, see, e.g., Bruce Bartlett, “Tax Cuts and ‘Starving the Beast,’” Forbes (May 7, 2010). 468 . Shaila Dewan, “Welcome Relief for Homeowners, then the Tax Bill,” The New York Times (February 4, 2014). 469 . See, e.g., Alan Boyce, Glenn Hubbard, Chris Meyer, and James Witkin, “Streamlined Refinancings for up to 13 Million Borrowers,” Paul Millstein Center for Real Estate (Columbia Business School, June 13, 2014) (http://www8.gsb.columbia.edu/sites/ realestate/files/BHMW-V15-post.pdf). 470 . This is true even when the lender is under a legal obligation to take distinct steps toward renegotiation when a borrower has stopped paying. The widespread failure of anyone in the industry to do this is now the basis for what could turn out to be a whole new series of class actions against big mortgage lenders. See Peter Eavis, “U.S.-Backed Mortgages Put to Test in Innovative Lawsuit,” The New York Times (November 27, 2014). 471 . See Peter Eavis and Jessica Silver-Greenberg, “As Refinancing Wanes, Banks Are Wary of New Loans,” The New York Times (January 14, 2014). 182 ● Notes

472 . Ibid. 473 . See Peter Eavis, “Wells Fargo Still Wary of Home Loans in 3rd Quarter,” The New York Times (October 14, 2014); Associated Press, “Tight Credit and High Prices Slow Home-Buying Plans,” The New York Times (October 27, 2014). 474 . Paul Krugman, “Ideology and Investment,” The New York Times (October 26, 2014). 475 . See Michael Corkery, “Bank of America’s Profits Exceeds Estimates,” The New York Times (January 15, 2014) (Bank of America’s mortgage originations declined 46% in the fourth quarter compared with those in the same period a year earlier, and what new mortgage production there was became less broad-based—about 20% by dollar value came from its wealth-management business). 476 . Dionne Searcey, “No Picket Fence: Younger Adults Opting to Rent,” The New York Times (October 22, 2014). 477 . Associated Press, “Home Sales Decline 6.1% to Slowest Pace in 6 Month,” The New York Times (December 22, 2014). Reuters, “Home Sales Rise, but First-Time Buyers Remain Few,” The New York Times (January 23, 2015) (for all of 2014, sales of existing homes fell 3.1%, the first annual drop in four years); Lisa Prevost, “Renters Are Staying Put,” The New York Times (April 24, 2015) (only 14.7 percent of renters who moved out in the fourth quarter of 2014 did so to buy a home; rate has been flat for over two years). For the decline in the rate of those who felt they could afford a down payment or qualify for a loan, compare Federal Reserve Board, “Report on the Economic Well-Being of U.S. Households in 2014” (May 2015) ( http://www.federalreserve.gov/econresdata/2014-report-economic- well-being-us-households-201505.pdf ), p. 1 with Federal Reserve Board, “Report on the Economic Well-Being of U.S. Households in 2013” (July 2014) (http:// www.federalreserve.gov/econresdata/2013-report-economic-well-being-us-households-201407.pdf ), p. 2. 478 . See Joint Center for Housing Studies, “The State of the Nation’s Housing 2015,” (Harvard University, 2015) ( http://www.jchs.harvard.edu/sites/jchs.harvard.edu/ files/jchs-sonhr-2015-full.pdf); Dionne Searcey, “More Americans Are Renting, and Paying More, as Homeownership Falls,” The New York Times (June 24, 2015). 479 . See Neil Irwin, “Why Ben Bernanke Can’t Refinance His Mortgage,” The New York Times (October 2, 2014). 480 . Binyamin Appelbaum, “Are Subprime Mortgages Coming Back?” The New York Times (September 9, 2014). 481 . See Tara Siegel Bernard, “Years after the Market Collapse, Sidelined Borrowers Return,” The New York Times (October 22, 2014). 482 . See Bank of America v. Caulkett, 135 S.Ct. 674 (June 1, 2015). 483 . Michael Corkery, “Justices Curb Bankruptcy Filers’ Ability to Have Second Mortgages Canceled,” The New York Times (June 1, 2015). 484 . Bernard, “Years after the Market Collapse, Sidelined Borrowers Return.” 485 . This is why statistics on the amount of mortgage relief granted by certain lenders under the National Mortgage Settlement Agreement are deceptive: the settlement counts as relief of the face value of claims given up by the lender, even though it had no chance of ever recovering such amounts. See Shaila Dewan, “Settlement Report Finds Banks Giving Timely Mortgage Relief,” The New York Times (October 16, 2013). Indeed, some lenders are counting giving up claims that were already dis- charged in bankruptcy as part of the “settlement relief” they are providing borrowers, even though these claims are no longer legally enforceable. See Gretchen Morgenson, “Bank of America’s Relief for Mortgage Borrowers Is Questioned,” The New York Times (May 7, 2015). Giving up something you could not obtain in Notes ● 183

any event is not a form of compromise, and lenders deserve no credit for forgoing what would be the futile pursuit of such amounts. True compromise occupies the space between the minimum you could recover if things that could still go badly or well go badly and the maximum you could recover if the things that could still go badly or well go well. In any event, the nation’s three largest lenders have recently been found to have failed to comply even with the provisions of this rather one- sided settlement. See Shaila Dewan, “Banks Fail to Comply with Parts of Mortgage Settlement, Report Says,” The New York Times (December 4, 2013). Individual settlements with mortgage lenders and loan servicers for foreclosure abuses are also far less demanding than they seem. See Peter Eavis, “Behind the Headline Numbers of a Mortgage Settlement,” The New York Times (December 24, 2013); Peter Eavis and Michael Corkery, “Bank of America’s $16 Billion Mortgage Settlement Less Painful than It Looks,” The New York Times (August 21, 2014). And some of the settlement monies actually agreed to by the various banks are actually being funded by the investors the banks defrauded when they packed these mortgages into securities without regard to whether they met the stated standards, rather than the banks themselves. See Peter Eavis, “A Settlement on Soured Mortgages May Raise Questions on What Is Enough,” The New York Times (April 16, 2014). Finally, none of these settlements include money for raising the huge number of abandoned homes that now blight poor and working-class neighborhoods and reduce the value of the homes of those who have actually made their mortgage payments, making it more likely that they too will eventually succumb to the financial pressure they are under and leave their properties to foreclosure. See Gretchen Morgenson, “In a Bank Settlement, Don’t Forget the Bulldozers,” The New York Times (August 16, 2014). 486 . For an example of this, see Suero v, Federal Home Loan Mortgage Corp., Civ. Action No. 13–13014-JGD (USDC D. Mass., December 17, 2013) (2013 WL 6709001), in which the plaintiff’s home had declined in value from $283,000 to $115,000, but the lender refused to accept that amount in full payment of the loan from a third party willing to then resell it back to the original homeowner for that amount in lieu of foreclosure, insisting that it would only sell the property back to its debtor for payment of the outstanding loan balance in full, even though the lender’s own internal analysis determined that selling it for its current FMV would maximize the likely return for the lender. See also Shaila Dewan, “Massachusetts Sues Fannie and Freddie over Foreclosure Law,” The New York Times (June 2, 2014); Paul McMorrow, “Housing Recovery? Not for All,” The Boston Globe (February 5, 2013). 487 . See MacArthur Foundation, “Prolonged Housing Crisis Diminishes Confidence in the American Dream, 2015 Housing Survey Finds,” Press Release (June 9, 2015) (http://www.macfound.org/press/press-releases/prolonged-housing-crisis- diminishes-confidence-american-dream-2015-housing-matters-survey-finds/). 488 . See Atif Mian and Amir Sufi, House of Debt (Chicago, IL: University of Chicago Press, 2014), esp. Ch. 5; Binyamin Appelbaum, “The Case against the Bernanke- Obama Financial Rescue,” The New York Times (May 16, 2014). 489 . See Catherine Rampell, “Boom, Bust, Flip,” The New York Times (October 1, 2013). And the same thing has been happening with corporate debt. See Peter Lattman, “Treasure Hunters of the Financial Crisis,” The New York Times (November 9, 2013). 490 . For more on the current levels of economic inequality in the United States and throughout the world, see my Exploitation and Economic Justice in the Liberal Capitalist State. 184 ● Notes

491 . Currently the only way of bundling underwater mortgages together and modifying them en masse is by allowing cities to use their eminent domain power to fore- close on them and then negotiate with the relevant lenders, a technique that has been tried by a few localities already but is facing severe resistance from mortgage holders. See Shaila Dewan, “More Cities Consider Using Eminent Domain to Halt Foreclosures,” The New York Times (November 15, 2013); Laura Flanders, “Meet the Mayor Who’s Using Eminent Domain to Fight Foreclosure,” The Nation (December 9, 2013). And programs that make renegotiation available to individual homeowners who meet specified criteria but place the burden of ini- tiating the renegotiation process on the homeowners themselves have had only limited success, indicating further that automatic adjustment is the only realistic way to ensure that relief is made available to those who need it. See Ann Carrns, “700,000 Homeowners Could Still Benefit from U.S. Harp Refinancing,” The New York Times (January 23, 2015) (detailing some of the impediments that homeowners face in taking advantage of current programs that require individualized applications). 492 . Second defaults are especially likely, of course, when the modification is not sufficient to deal with the size of the problem, an all too common occurrence among those few mortgages that are getting renegotiated today under one of the limited loan modification programs currently being subsidized by the federal government. See Shaila Dewan, “New Defaults Trouble a Mortgage Program,” The New York Times (July 24, 2013). 493 . See Matthew Goldstein, “Federal Program Helps Keep Some Delinquent Borrowers in Their Homes,” The New York Times (September 2, 2014). 494 . See Thomas C. Schelling, “Hockey Helmets, Concealed Weapons, and Daylight Saving: A Study of Binary Choices with Externalities,” The Journal of Conflict Resolution 17 (1973): 381–428. 495 . This is especially true for widows, who often find that their mortgages were in their now-deceased husband’s name and they cannot renegotiate unless the loan is transferred into their name, but the loan cannot be transferred into their name because it is already not current. See Jessica Silver-Greenberg, “Mortgage Catch Pushes Widows into Foreclosure,” The New York Times (December 1, 2012). 496 . See my Exploitation and Economic Justice in the Liberal Capitalist State for a discussion of the importance of this kind of split in maintaining an incentive for self- improvement. 497 . See, e.g., Charles Taylor’s trenchant criticism of this aspect of negative liberty in “What’s Wrong with Negative Liberty,” in Philosophy and the Human Sciences: Philosophical Papers Volume 2 (Cambridge: Cambridge University Press, 1985), pp. 211–229. 498 . For much more on the relation between libertarianism, self-ownership, and negative liberty, see my Exploitation and Economic Justice in the Liberal Capitalist State , Ch. 7.1.2. 499 . Note that the same people who raise this objection are often perfectly happy to take the opposite position when it comes to violating our promises to retirees by reducing their previously agreed retirement benefits in order to save current taxpayers money. So this objection is often laced with a troubling amount of hypocrisy. 500 . Which why the new Consumer Financial Protection Bureau is proposing to explicitly prohibit such conduct with regard to the making of “payday” loans. See Michael D. Shear and Jessica Silver-Greenberg, “Payday Loan Rules Proposed by Consumer Notes ● 185

Protection Agency,” The New York Times (March 26, 2015) (also quoting recent speech by President Obama in which he said: “If you lend out money, you have to first make sure that the borrower can afford to pay it back”). 501 . See Jessica Silver-Greenberg and Peter Eavis, “Wall Street Predicts $50 Billion Bill to Settle U.S. Mortgage Suits,” The New York Times (January 9, 2013) and “Morgan Stanley Reaches $1.25 Billion Mortgage Settlement,” The New York Times (February 4, 2014) (with Federal Housing Finance Agency or FHFA); Nathaniel Popper, “Morgan Stanley in $2.6 Billion Settlement over Crisis in Mortgages,” The New York Times (February 25, 2015) (with Justice Department). Note that while the settlement numbers here are large, determining whether they are large enough depends on the relationship between these amounts and the amount of profit made on these transactions by the lender and the amount of losses caused. Those important figures, however, are rarely disclosed. See, e.g., Ben Protess, “Justice Department Sued over $13 Billion JPMorgan Pact,” The New York Times (February 10, 2014) (alleging Justice Department has improperly kept secret the details of the settlement and the investigation it was based upon, even from the court). 502 . See generally Paul Krugman, “Debt, Depression, DeMarco,” The New York Times (August 3, 2012) (criticizing the director of FHFA for refusing to allow borrowers with existing loans at high unsustainable rates to refinance unless they contribute further equity even though the alternative is simply default and greater losses for everybody); Annie Lowrey, “White House Urged to Fire a Housing Regulator,” The New York Times (March 17, 2013) (head of FHFA acting an impediment to refinancing underwater mortgages); Joseph Stiglitz and Mark Zandi, “The One Housing Solution Left: Mass Mortgage Refinancing,” The New York Times (August 12, 2012). 503 . For a description of some of the dangers here by the former inspector general for the US Troubled Asset Relief Program (TARP), see Neil Barofsky, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street (New York: Free Press, 2012). 504 . Note that this way of encouraging mortgage lenders to lend only 80% of value is similar (albeit more flexible) to the approach taken recently by the Irish Central Bank, which has now strictly limited the amount that banks can lend on properties to 80% of value. See Vincent Boland, “Irish Central Bank to Impose Curbs on Mortgage Lending,” Financial Times (October 7, 2013). Unfortunately, the US government seems to be taking the opposite approach and guaranteeing entire mortgages, not just down payments, even if the loans are for 100% of appraised value. See Peter Eavis, “U.S. Regulators Approve Eased Mortgage Lending Rules,” The New York Times (October 21, 2014) and “U.S. Loosens Reins, but Mortgage Lenders Want More Slack,” The New York Times (October 22, 2014); Patricia Cohen, “U.S. Lowers One Hurdle to Obtaining a Mortgage,” The New York Times (December 8, 2014); Tara Siegel Bernard, “Home Loan Programs Let Buyers Put Less Down,” The New York Times (February 6, 2015). While this will indeed encourage banks to lend, it will also encourage banks to lend irresponsibly, which is the same kind of lending that brought on the last financial crisis. See Floyd Norris, “Banks again Avoid Having Any Skin in the Game,” The New York Times (October 23, 2014). Given that there are other options that would encourage banks to lend without putting us in this precarious position again, this approach seems a fool- ish one to pursue. See Bernanke and Gertler, “Monetary Policy and Asset Price Volatility,” pp. 173–210, at p. 175 (“If [regulatory] liberalization gives additional 186 ● Notes

powers to private lenders and borrowers while retaining government guarantees of liabilities, excessive risk-taking and speculation will follow, leading, in many cases, to asset price booms”). 505 . See Michael Corkery, “Foreclosure to Home Free, as 5-Year Clock Expires,” The New York Times (March 29, 2015). 506 . This proposal is similar, albeit stricter, than the terms of a recent settlement between certain lenders and their borrowers. Monitoring of compliance would also be required, as lenders are currently having trouble meeting the renegotiation obligations to which they have already agreed. See Shaila Dewan, “Monitor Finds Mortgage Lenders Still Falling Short of Settlement’s Terms,” The New York Times (June 19, 2013). 507 . See Section 580b, California Code of Civil Procedure. 508 . Which is why everyone would be better off if the California rule was made effective nationwide. Indeed, some lenders continue to actively chase borrowers who have lost their homes to foreclosure for years for deficiency judgments (the difference between what the bank realized when the borrower’s home was sold at foreclosure and the amount the borrower owed the bank) that they are almost never able to collect even when the foreclosure was based on documents that were “robo-signed,” which means that the original foreclosure was actually unlawful. See Gretchen Morgenson, “Borrowers, Beware: The Robo-signers Aren’t Finished Yet,” The New York Times (November 15, 2014). 509 . While the US government seems inclined to deal with this problem by increasing the number of loans it will guarantee in their entirety, see Dionne Searcey and Peter Eavis, “Federal Housing Finance Agency Unveils Plan to Loosen Rules on Mortgages,” The New York Times (October 20, 2014), and to not even require a down payment, see Eavis, “U.S. Regulators Approve Eased Mortgage Lending Rules,” the British government has decided to take the more sensible step of guaranteeing only down payments in order to stimulate the housing market. See Julia Werdigier and Stephen Castle, “U.K. Takes Steps to Spur Stuttering Economy,” The New York Times (March 20, 2013) (discussing plans for government assisted down payments on home purchases); Jill Treanor, “Budget 2013: Osborne Downgrades UK Growth Forecasts,” The Guardian (March 20, 2013) (same); Chad Bray, “Britain Expands Program to Spur Home Purchases,” The New York Times (October 8, 2013) (British government to guarantee up to 15% of loan on houses worth up to £ 600,000). Of course, even this more limited policy may not be wise, for it may simply encourage housing prices to rise and enable borrowers to again buy properties they really cannot afford. See Heather Stewart, “Help to Buy Risks Helping to Create Another Housing Bubble,” The Guardian (April 28, 2013); Julie Werdigier, “Outcry Grows against British Housing Plan,” The New York Times (August 23, 2013); Julia Werdigier and David Jolly, “In Britain, Housing Prices Rise the Fastest since 2006,” The New York Times (January 3, 2014). One also has to be careful that such assistance with down payments are not simply another way of using money from (mostly) poor taxpayers to subsidize the rich. See Hilary Osborne and Rupert Neate, “Help to Buy? Yes Please, Say Bankers—Why Use Our Cash to Invest in Property?” The Guardian (October 9, 2013). Whether down payment assistance is wise policy or not, however, it is clearly more sensible than guaranteeing entire loans, even loans with small or no down payments, and even if neither the current US nor the current British approach is a good idea all-things-considered, nothing about this suggests we should not enable those who already have homes to renegotiate their loans if they need to do so in order to stay in them. Notes ● 187

510 . See Vickie Elmer, “Help for the Underemployed,” The New York Times (September 20, 2012). Note that what I am proposing is similar to measures now being under- taken in Ireland, where banks are being encouraged to write down mortgages for those currently on the edge of default, for this will not only minimize the bank’s losses, it will also help the general economy by preventing home values from falling further than they otherwise would. See Peter Eavis, “Ireland Plans Bold Measures to Lift Housing,” The New York Times (October 8, 2012). 511 . See Hudson Sangree, “Foreclosure Crisis Over, Data Suggest,” The Sacramento Bee (October 23, 2013). 512 . Note that in order to implement the kind of mortgage relief I have in mind, com- plimentary changes will also be required in the tax laws. Currently, the forgiveness of debt is counted as taxable income to the debtor. Those debtors who have been able to renegotiate their loans in the midst of the financial crisis have accordingly received a massive tax bill. See Dewan, “Welcome Relief for Homeowners, then the Tax Bill.” In order to avoid undermining the whole idea of renegotiation, this pro- vision needs to amended to provide that the forgiveness of debt that results from an automatic renegotiation (or from an individual renegotiation during a time when the price of housing in the relevant area has dropped more than 20%) needs to be exempt from income tax, at least with regard to properties that are being used as the debtor’s primary residence. 513 . Another area in which there is frequent lender abuse is that of “payday” loans; i.e., short-term loans taken out almost exclusively by poor people who are struggling to make ends meet and which carry interest charges that can soar to over 300%. See Jessica Silver-Greenberg and Rachel Adams, “Costly Loans Are Drawing Attention from States,” The New York Times (March 18, 2014). In some states these loans are prohibited by usury laws, but in many states they are not, and in the absence of federal regulation these state restrictions are far too easy to evade. Of course, the standard justification for these astronomically high interest rates is that poor people make risky debtors, and high interest rates are necessary to cover this risk if we are to live in a society where loans are to be made available to poor people at all. And it is true that poor people have a higher rate of default than middle-class or wealthy people. But not that much higher. We can see this by looking at the prof- itability of payday lenders, which is typically way above that of more traditional lenders. If payday lenders were merely covering their higher costs, the rate of profit on their overall portfolio of loans would be the same, despite the higher rates of interest charged. I will not say more about this particular abusive practice here, for the overall effect of this practice on the rate unemployment is probably relatively small, but this does not make the practice any less morally objectionable. 514 . For an example of how important it can be for a government entity to be able to lower the interest rates it has to pay to current market rates, consider the affect the ECB’s recent agreement to refinance Ireland’s debt will have on Ireland’s ability to stabilize its economy. See Mark Scott, “4 Years after Crisis, Ireland Strikes Deal to Ease Huge Debt Load,” The New York Times (February 7, 2013). 515 . Indeed, this is what many corporations are now doing. See Floyd Norris, “Investors Indulge in Below-Grade Bonds,” The New York Times (October 5, 2012). 516 . See Joseph A. Grundfest, Mark A. Lemley, and George G. Triantis, “Getting More Bang for the Fed’s Buck,” The New York Times (October 23, 2012). 517 . See generally Refund Transit Coalition, “Riding the Gravy Train: How Wall Street Is Bankrupting Our Public Transit Agencies by Profiteering off of Toxic Swap Deals” (June 2012). 188 ● Notes

518 . Such a practice has already begun to take hold elsewhere. Even highly developed European economies and their subdivisions are now commonly inserting clauses (called “collective action clauses”) in their bond issues giving them the right to restructure the relevant debt and apply these revised terms even to objectors as long as two-third of the other bondholders agree. See Reuters, “Analysis: Euro Zone Bond Clause Highlights Rich Nation Default Risk,” The New York Times (December 28, 2012). 519 . See Mark R. Reiff, “Proportionality, Winner-Take-All, and Distributive Justice,” Politics, Philosophy, and Economics 8 (2009): 5–42. 520 . Note the similar line of reasoning was used by Chief Justice John Roberts to uphold the Patient Protection and Affordable Care Act in National Federation of Independent Businesses v Sebelius , 132 S.Ct. 2566 (2012). 521 . Gretchen Morgenson, “Sandy Slapped Bond Issuers, Too,” The New York Times (November 10, 2012). 522 . See Mary Williams Walsh, “A County in Alabama Strikes a Bankruptcy Deal,” The New York Times (June 4, 2013) (agreement reached to restructure $2.4 billion in sewer debt for $1.84 billion); Floyd Norris, “Portent of Peril for Muni Bondholders,” The New York Times (June 6, 2013) (“Despite lots of legal protections, loans to municipal governments can be just like loans to people and companies: if the borrower truly can’t afford to pay what was promised, it won’t be paid”). Of course, the transaction costs of all this would be substantially reduced if public entities were not required to file for bankruptcy protection in order to accomplish this. The burden could be more equitably distributed too: instead of it falling equally on all the public entity’s creditors, it could fall more heavily on bondholders rather than former and current employees. See Monica Davey and Mary Williams Walsh, “Billions in Debt, Detroit Tumbles into Insolvency,” The New York Times (July 18, 2013) and “Detroit’s Creditor’s and Unions Prepare for Bankruptcy Fight,” The New York Times (July 19, 2013). The equities of distributing the burden of such financial reverses between various creditors is a difficult one, however, and I shall not be able to address it with anything like the attention it deserves here. All I will be able to point out here is that to the extent these debts are drawing higher than market interest, this is one place where justice demands the axe should fall. 523 . See In re City of Detroit, 504 B.R. 97, 115–117, (2013) (Bkrtcy.E.D.Mich. 2013). 524 . See Mary Williams Walsh, “‘Safe Harbor’ in Bankruptcy Is Upended in Detroit Case,” The New York Times (December 23, 2013); David A. Skeel, Jr. and Thomas H. Jackson, “Transaction Consistency and the New Finance in Bankruptcy,” Columbia Law Review 112 (2012): 152–202; Steven L. Schwarcz and Ori Sharon, “The Bankruptcy-Law Safe Harbor for Derivatives: A Path-Dependence Analysis,” presented to the Federal Reserve Bank of Chicago-International Monetary Fund conference on “Shadow Banking within and across National Borders” (November 7–8, 2013) (https://www.chicagofed.org/digital_assets/others/events/2013/inter- national_conference/schwarcz_110813_session815am.pdf); Stephen J. Lubben, “Safe Harbors for Derivatives vs. Chapter 11,” The New York Times (January 11, 2011); “Repeal the Safe Harbors,” American Bankruptcy Institute Law Review 18 (2010): 319–335; “Derivatives and Bankruptcy: The Flawed Case for Special Treatment,” University of Pennsylvania Journal of Business Law 12 (2009): 61–78. 525 . See Mary Williams Walsh, “Detroit Wins $55 Million in Concessions from 2 Banks,” The New York Times (December 24, 2013); Mary Williams Walsh, “Judge Disallows Plan by Detroit to Pay off Banks,” The New York Times (January 16, Notes ● 189

2014) (noting that the judge in charge of the Detroit bankruptcy proceeding has rejected the proposed settlement on the grounds that Detroit can do better even within the confines of existing bankruptcy law); Mary Williams Walsh, “Detroit Turns Bankruptcy into Challenge of Banks,” The New York Times (February 3, 2014) (noting that Detroit alleges that the banks who sold Detroit these swaps profited handsomely from the sale); Mary Williams Walsh, “Bond Insurer Files Suit against Detroit in Setback for Bankruptcy Plan,” The New York Times (March 17, 2014) (banks have agreed to resolve swaps for an $85 million termination fee after the bankruptcy judge ruled that the initial settlement demands of $230 million and $165 million were too high); Mary Williams Walsh, “Detroit Wins Judge’s Nod for Contract Settlement,” The New York Times (April 11, 2014) and “Detroit’s Bankruptcy Deal Hinges on 2 Banks,” The New York Times (September 10, 2014). 526 . See generally Peter Hecht, “Lambasting Wall Street, Federal Judge Allows Stockton to Seek Bankruptcy Protection,” Sacramento Bee (April 2, 2013); Monica Davey and Mary Williams Walsh, “Billions in Debt, Detroit Tumbles into Insolvency”; Bill Vlasic and Monica Davey, “Ruling Makes Detroit Biggest City to Qualify for Bankruptcy,” The New York Times (December 3, 2013); Monica Davey, Bill Vlasic, and Mary Williams Walsh, “Detroit Ruling on Bankruptcy Lifts Pension Protections,” The New York Times (December 3, 2013); Mary Williams Walsh, “Pension Ruling in Detroit Echoes West to California,” The New York Times (December 3, 2013); Mary Williams Walsh, “In Detroit Ruling, Threats to Promises and Assumptions,” The New York Times (December 4, 2013). Stockton has approximately $1.03 billion in debts; Detroit has approximately $19 billion. Prior filings by cities and counties seeking bankruptcy protection under Chapter 9 include: Jefferson County, Alabama (2011), $4.2 billion in debt; Orange County, California (1994), $1.7 billion in debt; the City of San Bernardino, California, (2013), $492 million in debt; and the City of Vallejo, California (2008), $175 million in debt. See Hecht, “Lambasting Wall Street.” The next big one may be Puerto Rico, at least if Puerto Rico can get the bankruptcy laws amended to allow commonwealths and territories and not just municipal and other local public entities such as counties to file. See Michael Corkery, “Puerto Rico Hires Bankruptcy Lawyers,” The New York Times (April 7, 2014) and “Judge Threatens Plan for Puerto Rico to Avert Financial Catastrophe,” The New York Times (February 9, 2015). 527 . See Monica Davey and Mary Williams Walsh, “Plan to Exit Bankruptcy Is Approved in Detroit,” The New York Times (November 7, 2014). 528 . See Monica Davey, “Billions in Debt, Detroit Faces Millions in Bills for Bankruptcy,” The New York Times (October 7, 2013). 529 . See Bill Vlasic, “Detroit Pensions Are Frozen, then Thawed,” The New York Times (January 7, 2014) (describing attempt by Detroit City Manager to freeze pensions benefits and eliminate cost-of-living increases); Steven Yaccino, “Detroit Pension Ballot Poses Tough Choices,” The New York Times (May 12, 2014) (describing compromise agreement that would cut pensions for most pensioners by 4.5% and end cost-of-living increases); David Firestone, “The Koch Brothers Kick Detroit While It’s Down,” The New York Times (May 21, 2014) (describing efforts by the Koch Brothers to scuttle compromise plan and make pensioners rather than bondholders bear the brunt of Detroit’s bankruptcy); Monica Davey, “Detroit’s Retirees Vote to Lower Pensions, in Support of Bankruptcy Plan,” The New York Times (July 22, 2014); Mary Williams Walsh, “Detroit Emerges from Bankruptcy, Yet Pension Risks Linger,” The New York Times (November 11, 2014). 190 ● Notes

530 . Which is why efforts to reduce state as opposed to municipal pensions, see, e.g., Mary Williams Walsh, “Cracks Starting to Appear in Public Pensions’ Armor,” The New York Times (February 25, 2015), are equally objectionable. 531 . See In re City of Detroit , 504 B.R. 97, 114–115 (Bkrtcy. E.D.Mich.I, 2013). 532 . Of course, we may indeed be prepared to simply to let those who lose their pensions starve—Congress has so far refused to top up the pension guaranty fund that covers certain multi-employer plans, and the fund may run out of money as soon as 2018. See Floyd Norris, “A Strategy for Pensions at Risk of Extinction,” The New York Times (December 4, 2014). 533 . See generally Michael Stern, “What Aid Means to City,” The New York Times (June 11, 1975); Municipal Assistance Corporation, “Program of Fiscal and Management Reforms Proposed for the City by Municipal Assistance Corporation,” The New York Times (August 1, 1975); Steven R. Weisman, “Deal of $1-Billion Takes Shape Here to Give City Cash,” The New York Times (August 4, 1975). 534 . For general information about the US Trustee’s Office, which functions with regard to bankruptcy cases similarly to how the US Attorney’s Office functions with regard to criminal matters, or at least that was how its function was originally envisioned, see http://www.justice.gov/ust/ . 535 . See Michael Corkery and Mary Williams Walsh, “Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable,’” The New York Times (June 28, 2015); Mary Williams Walsh, “The Bonds That Broke Puerto Rico,” The New York Times (June 30, 2015); Lizette Alvarez, “Despair and Anger as Puerto Ricans Cope with Debt Crisis,” The New York Times (July 3, 2015). 536 . See Federal Reserve Bank of New York, “An Update on the Competitiveness of Puerto Rico’s Economy” (July 31, 2014) ( http://www.newyorkfed.org/outreach- and-education/puerto-rico/2014/Puerto-Rico-Report-2014.pdf ), p. 18, 537 . See Ibid. at p. 4; Bureau of Labor Statistics, “Local Unemployment Statistics— Puerto Rico” (http://data.bls.gov/timeseries/LASST720000000000003 ) (July 4, 2015). 538 . Michael Corkery and Mary Williams Walsh, “Treasury Officials Increase Efforts with Finances of Puerto Rico,” The New York Times (April 13, 2015); Michael Corkery, “Financial Control Board Should Take Over Debt-Laden Puerto Rico, Lawmaker Says,” The New York Times (June 19, 2015); Michael Corkery and Mary Williams Walsh, “Puerto Rico Debt Crisis Splits Congress on Party Lines and Draws Muted Response from White House,” The New York Times (June 29, 2015). 539 . See Mark Stryker, “Christie’s Appraisal Will Reveal Value of Detroit Institute of Arts’ Collection,” Detroit Free Press (August 18, 2013). 540 . See Randy Kennedy, Monica Davey, and Steven Yaccino, “Foundations Aim to Save Pensions in Detroit Crisis,” The New York Times (January 13, 2014). 541 . See Randy Kennedy, “‘Grand Bargain’ Saves the Detroit Institute of Arts,” The New York Times (November 7, 2014); Monica Davey, “Finding $816 Million, and Fast, to Save Detroit,” The New York Times (November 7, 2014). 542 . See Walsh, “Detroit Emerges from Bankruptcy, Yet Pension Risks Linger.” 543 . See Walsh, “The Bonds That Broke Puerto Rico.” 544 . My thanks to Peter Dietsch for pressing me to make this distinction clear. 545 . See Louise Story, “Lines Blur as Texas Gives Industries a Bonanza,” The New York Times (December 2, 2013). For another story illustrating the economic masochism of using tax incentives to attract employers, see Louise Story, “Michigan Town Woos Hollywood, but Ends up with a Bit Part,” The New York Times (December 3, 2012). Notes ● 191

546 . Steven Rattner, “The Myth of Industrial Rebound,” The New York Times (January 25, 2014). 547 . See Matthew L. Wald, “Nevada a Winner in Tesla’s Battery Contest,” The New York Times (September 4, 2014); Anjeanette Damon, “Inside Nevada’s $1.25 Billion Tesla Tax Deal,” Reno Gazette-Journal (September 16, 2014). As a side note, Nevada’s offer of tax breaks and other incentives to Tesla was apparently made in reliance on a calculation by a state official that assumed every million dollars invested by Tesla in the state would generate $1.58 million in economic activity. See Matthew L. Wald, “Nevada Woos Tesla Plant in Tax Deal, but Economic Benefits Prompt Debate,” The New York Times (September 12, 2014). One won- ders whether Brian Sandoval, the Republican governor of Nevada who negotiated the deal, is prepared to acknowledge that a similar multiplier would apply to public spending too, or whether he, like his fellow Republicans, would insist that when it comes to public as opposed to private spending, no multiplier need apply. See also Charles V. Bagli, “JPMorgan Chase Seeks Incentives to Build New Headquarters in Manhattan,” The New York Times (October 17, 2014) (Chase seeking $1 billion in concessions under threat of relocating thousands of mid-level jobs). But New York Governor Andrew Cuomo and Bill de Blasio, Mayor of New York City, called the bank’s bluff and it turns out that JPMorgan Chase will not move or relocate any of its employees at all. See Charles V. Bagli, “JPMorgan Chase Drops Plan to Build 2 West Side Towers,” The New York Times (October 28, 2014). Had the State and the City agreed to provide the tax breaks JPMorgan sought, taxpayer funds would accordingly have been given away for nothing. 548 . See Jerry Hirsch, “Elon Musk’s Growing Empire Is Fueled By $4.9 Billion in Government Subsidies,” Los Angeles Times (May 30, 2015). 549 . See Jerry Hirsch, “Tesla in Line for $15 Million in California Job Creation Tax Credits,” Los Angeles Times (June 9, 2015) (noting that this particular deal with Tesla amounts to a taxpayer outlay only $3,300 per job). 550 . For further discussion of this particular tax giveaway, see Steve Eder, “For ESPN, Millions to Remain in Connecticut,” The New York Times (December 26, 2013). 551 . See Louise Story, “As Companies Seek Tax Deals, Governments Pay High Price,” The New York Times (December 1, 2013). 552 . Charter Township of Ypsilanti v. General Motors Corporation, 201 Mich. App. 128 at 134, 506 N.W.2d 566 at 559. 553 . See 11 U.S.C. § 365(a). 554 . See Story, “As Companies Seek Tax Deals, Governments Pay High Price.” 555 . See, e.g., the competition that went on between Washington, South Carolina, Alabama, California, and Utah over building the next generation of Boeing air- planes. See Reuters, “Washington State Clears Boeing Tax Breaks,” The New York Times (November 10, 2013); Christopher Drew, “New Boeing Jet, 777X, Hits $95 Billion in Orders,” The New York Times (November 17, 2013); Kirk Johnson, “Boeing Looks Around, and a State Worries,” The New York Times (December 10, 2013); Associated Press, “Boeing Details Expansion at South Carolina Plant,” The New York Times (December 13, 2013); McClatchy-Tribune News Services, “State Leaders Press for Boeing Union Vote, as Company Expands South Carolina Footprint,” The Bellingham Herald (December 13, 2013). Washington State, where Boeing’s principal production facilities are currently located, promised Boeing $8.7 billion in tax breaks if it assembled the 777X in the state even though Boeing was currently enjoying record profits, had a record $400 billion in backorders, and 192 ● Notes

therefore did not need this kind of taxpayer largesse, and even more importantly, would probably have been unable to find the kind of skilled workers it needed to assemble the 777X if the company were to move production of the plane elsewhere, leading many experts to say that such a move would have amounted to “corporate suicide.” See Steven Greenhouse, “Vote on New Boeing Contract Highlights a Rift in the Machinists’ Union,” The New York Times (January 1, 2014); Reuters, “Machinists Vote Helps Boeing Avoid Hiring Crunch,” The New York Times (January 4, 2014). Yet the giveaways go on. 556 . For further discussion of the Prisoner’s Dilemma, see my Punishment, Compensation, and Law: A Theory of Enforceability (Cambridge: Cambridge University Press, 2005), at pp. 12–15, 58–60. 557 . See Mike Maciag, “New Jersey’s Tax Incentives Soar as Job Growth Lags Behind,” Governing (June 2013) ( http://www.governing.com/topics/finance/gov-new- jersey-tax-incentive-payoff.html). See also Julie Satow, “Tax Break as a Not-So- Secret Weapon,” The New York Times (January 7, 2014) (companies can get up to $300 million in transferable tax credits if they relocate from another state to a depressed New Jersey urban area). 558 . Maciag, “New Jersey’s Tax Incentives Soar as Job Growth Lags Behind.” 559 . See ibid. (these $1.95 billion in incentives are claimed to have created or preserved approximately 36,000 jobs). 560 . See, e.g., Mark Bulik, “1892: General Electric Avoids Taxes,” The New York Times (October 29, 2014) (reporting that tax giveaways to General Electric go back to 1892). 561 . For another example of how destructive this kind of tax competition can be, note that life insurers have recently used the threat of relocating to other states to reap $100 billion in savings on US taxes, which are triggered by certain provisions in state law, receiving a benefit that goes to no one other than their shareholders, and one that actually threatens the financial solidity of these companies by reducing the amount of reserves they would otherwise be required to hold. See Mary Williams Walsh, “Life Insurers Use State Laws to Avoid as Much as $100 Billion in U.S. Taxes,” The New York Times (December 12, 2014). 562 . See Richard E. Baldwin and Paul Krugman, “Agglomeration, Integration, and Tax Harmonization,” European Economic Review 48 (2004): 1–23. 563 . See generally Reuven S. Avi-Yonah, “Globalization, Tax Competition, and the Fiscal Crisis of the Welfare State,” Harvard Law Review 113 (2000): 1573–1676, 1651–1666; Rodney D. Ludema and Ian Wooton, “Economic Geography and the Fiscal Effects of Regional Integration,” Journal of International Economics 52 (2000): 331–357. 564 . One of the issues I won’t be able deal with sufficiently here is whether and if so to what extent we should tolerate tax and/or regulatory competition by developing countries desperate to attract investment. My short answer is that under our principle of full employment, we should not tolerate it at all. If we want to aid developing nations (and I do not deny there are good reasons to do so) we should aid them, but that does not mean that our aid should take the form of allowing them to engage in virtual tax competition or to create a tax and/or regulatory envi- ronment that allows the exploitation of their workers and imposes externalities on their citizens. This kind of aid would place its burden primarily on those least able to bear it, rather than distributing it through our taxpayer base on a progressive basis. It is accordingly not an approach that would be supported by our principle of full employment. Notes ● 193

565 . Note that this usually works to the disadvantage of the United States, but these savings can run the other way. See Stanley Reed and Melissa Eddy, “BASF, an Industrial Pillar in Germany, Leans Abroad,” The New York Times (October 24, 2014) (noting that BASF is seeking to expand in the United States to take advantage of cheaper energy costs there). 566 . This seems to be one of the motivations behind the recent effort by the drugstore giant Walgreen to reincorporate abroad as part of a merger with the British pharmacy retailer Alliance Boots. The move would have generated some tax-savings for Walgreen, but it would also have effectively deprived Walgreen’s mostly US shareholders of rights vis à vis management they currently enjoyed under US law, leading some US shareholders to object to the deal. See David Gelles, “Walgreen Shareholder Opposes Potential Deal to Reincorporate Abroad,” The New York Times (May 13, 2014). Given the amount of criticism the move has generated, Walgreen now appears to be considering acquiring its foreign target without changing its US tax citizenship in the process. See Michael J. de la Merced and Alexandra Stevenson, “Walgreens Said to Consider a Tax Inversion-Free Merger with Alliance Boots,” The New York Times (August 5, 2014); Alexandra Stevenson and Chad Bray, “Walgreen Shies Away from Moving Its Tax Base to Britain,” The New York Times (August 6, 2014). 567 . For further discussion of this point see my Exploitation and Economic Justice in the Liberal Capitalist State at pp. 162–63. Of course, I am aware that the prevention of exploitive conduct by overseas employers engaged in the production of goods for the domestic market is not always going to be easy. See Stephanie Clifford and Steven Greenhouse, “Fast and Flawed Inspections of Factories Abroad,” The New York Times (September 1, 2013); David Barboza, “Despite Pledge by Samsung, Child Labor Proves Resilient,” The New York Times (July 10, 2014). But if sufficiently strict monitoring provisions are put in place, there is no reason to believe this objective is not achievable. See, e.g., David Barboza, “Samsung Contractor Suspended over Child Labor Allegations,” The New York Times (July 14, 2014). 568 . See generally Steven R. Ratner, “Corporations and Human Rights: A Theory of Legal Responsibility,” Yale Law Journal 111 (2001): 443–545. The US Supreme Court recently reinterpreted the Act and restricted these suits in Kiobel v. Royal Dutch Petroleum Co. , 133 S.Ct. 1569 (2013). See Editorial, “A Giant Setback for Human Rights,” The New York Times (April 17, 2013). But that does not change the fact that a properly designed and targeted statue setting forth rules regarding corporate responsibility abroad could pass constitutional muster and indeed work. 569 . See generally David Gelles, “Businesses Are Winning Cat-and-Mouse Tax Game,” The New York Times (August 28, 2014). 570 . See Carl Levin and Tom Coburn, “Memorandum to Members of the Permanent Subcommittee on Investigations,” Exhibit 1a to Exhibits to Hearing on Offshore Profit Shifting and the U.S. Tax Code (September 20, 2012), at p. 4. 571 . On the nature and tax effects of inversions more generally, see Mihir A. Desai and James R. Hines Jr., “Expectations and Expatriations: Tracing the Causes and Consequences of Corporate Inversions,” National Tax Journal 55 (2002): 409– 440 and Stephen E. Shay, “Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations,” Taxanalysts (July 28, 2014). Note, however, that while inversions can result in tax savings at the corporate level, they can also subject domestic shareholders to large tax liabilities, although this effect is often underplayed in the announcements made by management of these kinds of moves. See Steven Davidoff Solomon, “In Deal to Cut Corporate Taxes, Shareholders Pay the Price,” 194 ● Notes

The New York Times (July 8, 2014). Inversions also make these former US companies more likely to be targets of takeover bids themselves, for the protections against hostile takeovers available in US law are often not available under the laws of the low-tax jurisdictions to which they relocate. See Steven Davidoff Solomon, “The Unintended Twist of Tax Inversions,” The New York Times (April 24, 2015). 572 . See Editorial, “Pfizer’s Ploy and the Porous Tax Laws,” The New York Times (May 23, 2014); Andrew Ross Sorkin, “Patriot Flees Homeland for Greener Tax Pastures,” The New York Times (July 14, 2014); David Gelles and Chad Bray, “U.S. Drug Firms Seek Inversion Deals to Evade Taxes,” The New York Times (July 14, 2014); David Gelles, “Drug Maker Hospira and France’s Danone in Talks on $5 Billion Inversion Deal,” The New York Times (July 27, 2014), “Drug Maker That Did Inversion Seeks to Block One,” The New York Times (September 16, 2014), and “A Scramble to Acquire for Drug Companies.” 573 . See Gelles, “Walgreen Shareholder Opposes Potential Deal to Reincorporate Abroad”; Editorial, “Pfizer’s Ploy and the Porous Tax Laws”; Chad Bray, “Salix Pharmaceuticals to Buy Irish Company and Reincorporate Overseas,” The New York Times (July 9, 2014). 574 . See David Gelles, “Chiquita Rejects Unsolicited Offer and Will Proceed with Inversion,” The New York Times (August 14, 2014). 575 . See David Gelles, “Treasury Urges End to Foreign Tax Flights, Though Congress Is Unlikely to Act Soon,” The New York Times (July 16, 2014) and “AbbVie-Shire Deal Is Expected, in a Flight to a Lower-Tax Locale,” The New York Times (July 17, 2014); David Gelles and Mark Scott, “AbbVie Clinches $54 Billion Deal for Shire in a Move to Reduce Taxes,” The New York Times (July 18, 2014); Michael D. Shear and David Gelles, “Obama Seeks to Close Loophole that Firms Use to Shield Profits Abroad,” The New York Times (July 24, 2014); Andrew Ross Sorkin, “Banks Cash in on Inversion Deals Intended to Elude Taxes,” The New York Times (July 28, 2014). But see Julie Hirschfeld Davis, “U.S. Acts to Curb Firms’ Move Overseas to Avoid Taxes,” The New York Times (September 22, 2014) (suggesting there may be something the Obama administration can do without legislative action). 576 . See U.S. Department of Treasury, “Treasury Announces First Steps to Reduce Tax Benefits of Corporate Inversions,” Press Release (September 22, 2014) (http://www. treasury.gov/press-center/press-releases/Pages/jl2647.aspx); U.S. Department of the Treasury, “Fact Sheet: Treasury Actions to Rein in Corporate Tax Inversions,” Press Release (September 22, 2014) ( http://www.treasury.gov/press-center/press- releases/Pages/jl2645.aspx). 577 . See Julie Hirschfield Davis, “White House Weighs Action to Deter Overseas Tax Flight,” New York Times (August 5, 2014); David Gelles, “New Rules Make Inversions Less Lucrative, Experts Say,” The New York Times (September 22, 2014) (but will not stop them); Victor Fleischer, “Treasury Tales a Modest Step on Inversions,” The New York Times (September 22, 2014); David Gelles, “Medtronic Adjusts Merger Financing after Treasury’s Crackdown on Inversion Deals,” The New York Times (October 3, 2014); David Gelles, “After Tax Inversion Rules Change, AbbVie and Shire Agree to Terminate Their Deal,” The New York Times (October 20, 2014); David Gelles, “Chiquita Will Not Buy Fyffes, Clearing the Way for Its Own Takeover,” The New York Times (October 24, 2014). 578 . See David Gelles, “New Corporate Tax Shelter: A Merger Abroad,” The New York Times (October 8, 2013) (describing how mergers are now used to lower tax liability). Notes ● 195

579 . This is not to suggest that individuals and small businesses do not have other options for evading or avoiding taxes; they do. See, e.g., Alexandra Stevenson, “Senate Inquiry Faults Hedge Funds’ Tax Strategy,” The New York Times (July 21, 2014) and “Hedge Fund Chief Testifies at Senate Tax-Avoidance Hearing,” The New York Times (July 22, 2014). But I won’t have time to go into these here. 580 . See Andrew E. Kramer, “G-20 Backs Plan to Tax Evasion by Large Corporations,” The New York Times (July 19, 2013) (this article appears to have been withdrawn because of its reference to tax evasion, which is illegal, instead of tax avoidance, which is not, but the factual assertion that I have cited it for remains valid). 581 . See David Scheffer, “The Ethical Imperative of Curbing Corporate Tax Avoidance,” Ethics & International Affairs 27 (2013): 361–369, 364; Carl Levin and Tom Coburn, “Memorandum to Members of the Permanent Subcommittee on Investigations,” at pp. 5–6. 582 . See Gretchen Morgenson, “When Taxes and Profit Are Oceans Apart,” The New York Times (July 5, 2014), quoting Audit Analytics Trend Reports, “Foreign Indefinitely Reinvested Earnings: Balances Held by The Russell 1000—A 6 Year Snapshot” (March 31, 2014) (http://www.alacrastore.com/storecontent/Audit- Analytics-Trend-Reports/Foreign-Indefinately-Reinvested-Earnings-Balances- Held-by-The-Russell-1000-A-6-Year-Snapshot-2033-34). 583 . To get an idea of how much this costs in lost tax revenue, consider this: General Electric, one of the few companies to bite the bullet and repatriate some of the cash it has sheltered overseas despite the tax liability this will trigger, recently announced it will bringing some $36 billion in cash back to the United States, on which it will pay $6 billion in taxes. See David Gelles and Michael J. de la Merced, “G.E.’s Retrieval of Overseas Cash Highlights Tax Debate,” The New York Times (April 10, 2015). 584 . Transfer pricing is the amount a foreign subsidiary charges a domestic subsidiary or parent for some good or service. To move profits overseas, all the parties have to do is have the foreign subsidiary charge high rates for the goods or services it provides to the domestic entity, thereby eating up all the profits the domestic entity would otherwise earn and shifting those profits to the lower tax jurisdiction in which the foreign subsidiary resides. See generally Edward D. Kleinbard, “‘Competitiveness’ Has Nothing to Do with It,” Tax Notes 144 (2014): 1055. 585 . See Reuven S. Avi-Yonah, “Testimony for Hearing on Profit Shifting,” U.S. Senate Permanent Subcommittee on Investigations (September 20, 2012), at p. 5. 586 . See Frank Clemente and Marc Auerbach, “The Walmart Web: How the World’s Biggest Corporation Uses Tax Havens to Dodge Taxes” (Americans for Tax Fairness, June 2015) (http://www.americansfortaxfairness.org/files/TheWalmartWeb-June- 2015-FINAL.pdf ); Jesse Drucker and Renee Dudley, “Wal-Mart Has $76 Billion in Undisclosed Overseas Tax Havens,” Bloomberg News (June 16, 2015). 587 . See Terry Macalister, “Starbucks Pays Corporation Tax in UK for First Time in Five Years,” The Guardian (June 23, 2013) (noting that Amazon and Google also paid very little UK corporate taxes despite substantial economic activity there). While Amazon and Google seem perfectly happy to defend their failure to pay a substantial UK tax bill, Starbucks has been subject to such withering criticism that its management has actually decided to move its regional headquarters from Amsterdam to London and ramp up its UK tax contribution. See David Jolly, “Criticized on Taxes, Starbucks Will Move European Offices to London,” The New York Times (April 16, 2014). 588 . See Josh Barro, “Corporate Tax Reform: Focusing on Where the Money Is, Not Where the Jobs Are,” The New York Times (February 4, 2015); Jeff Sommer, “Jeers 196 ● Notes

and Cheers over Tax Inversions,” The New York Times (September 13, 2014); Andrew Pollack, “Drug Patents Held Overseas Can Pare Makers’ Tax Bills,” The New York Times (September 29, 2014). This method of sheltering income can also be combined with an inversion to create a sort of double tax break, although one of the jurisdictions best known for offering this kind of opportunity for tax avoidance has said it will begin phasing out these kinds of opportunities. See Stephen Castle and Mark Scott, “Ireland to Phase out ‘Double Irish’ Tax Break Used by Tech Giants,” The New York Times (October 14, 2014). It appears, however, that it will replace this maneuver with another that will allow a similar kind of abuse. See Editorial, “Ireland, Still Addicted to Tax Breaks,” The New York Times (October 19, 2014); Mark Scott, “Ireland Vies to Remain Silicon Valley’s Low-Tax Home away from Home,” The New York Times (November 9, 2014). 589 . See Charles Duhigg and David Kocieniewski, “How Apple Sidesteps Billions in Taxes,” The New York Times (April 28, 2013); Nelson D. Schwartz and Charles Duhigg, “Apple’s Web of Tax Shelters Saved It Billions, Panel Finds,” The New York Times (May 20, 2013). 590 . See OECD, “Intra-Industry and Intra-Firm Trade and the Internationalisation of Production,” OECD Economic Outlook 71 (June 2012) (http://www.oecd.org/ economy/outlook/2752923.pdf). 591 . See Gretchen Morgenson, “Piles of Overseas Profits Investors Can See but Not Touch,” The New York Times (May 22, 2015). 592 . See, e.g., Andrew Ross Sorkin, “A Deal to Dodge the Tax Man in America,” The New York Times (May 12, 2014) (describing Pfizer’s plan to move its holding company from the United States to Britain as part of its proposed acquisition of AstraZeneca, a move that would deprive the US Treasury of billions in tax revenues over the next decade). 593 . See generally http://www.wto.org/index.htm . 594 . See James Kanter, “E.U. Focuses on Belgium in Tax Avoidance Inquiry,” The New York Times (February 3, 2015); James Kanter and Mark Scott, “Amazon’s Tax Deal with Luxembourg May Break Rules, E.U. Regulator Says,” The New York Times (January 16, 2015); James Kanter, “E.U. Accuses Starbucks and Netherlands of Making Unfair Tax Deal,” The New York Times (November 14, 2014); Danny Hakim, “Europe Takes Aim at Deal Created to Escape Taxes,” The New York Times (November 14, 2014); James Kanter and Mark Scott, “E.U. Inquiry into Fiat Tax Deal Could Reverberate” and “Ireland’s Tax Deals for Apple Prompt Warning from European Commission,” The New York Times (September 30, 2014); Mark Scott, “Amazon’s Tax Deal in Luxembourg Is Latest Target of E.U. Inquiries,” The New York Times (October 7, 2014); European Commission, Alleged Aid to Apple (Brussels: June 11, 2014) (http://ec.europa.eu/competition/state_aid/cases/25320 0/253200_1582634_87_2.pdf ). Of course, Apple is not the only American company to use Ireland to shelter its income from taxes—Google, Facebook, and many others move money through Ireland to lower their taxes too. See Eduardo Porter, “Tax Tactics Threaten Public Funds,” The New York Times (October 1, 2014). 595 . See James Kanter, “Hundreds of Companies Seen Cutting Tax Bills by Sending Money through Luxembourg,” The New York Times (November 5, 2014); Lesley Wayne, Kelly Carr, Marina Walker Guevara, Mar Cabra, and Michael Hudson, “Leaked Documents Expose Global Companies’ Secret Tax Deals in Luxembourg,” The International Consortium of Investigative Journalists (November 5, 2014) (http://www.icij.org/project/luxembourg-leaks/leaked-documents-expose- global-companies-secret-tax-deals-luxembourg); James Kanter and Andrew Higgins, Notes ● 197

“Jean-Claude Juncker, Top E.U. Official, Faces Rising Furor over Luxembourg Tax Revelations,” The New York Times (November 6, 2014); James Kanter, “Jean- Claude Juncker Breaks Silence over Luxembourg Tax Issues,” The New York Times (November 12, 2014). 596 . See Mark Scott, “Amazon to Stop Funneling European Sales Through Low-Tax Haven,” The New York Times (May 24, 2015). 597 . See Nicola Clark, “State Tax Deal for Boeing Draws an E.U. Challenge,” The New York Times (December 19, 2014). See also Christopher Drew and Nicola Clark, “In Appeal, W.T.O. Upholds Decision against Boeing,” The New York Times (March 12, 2012) (finding that illegal subsidies were given Boeing but that even larger illegal subsidies were granted by various European governments to Airbus, Boeing’s primary competitor). 598 . Interfering with them might also violate what Peter Dietsch calls the “fiscal auton- omy prerogative” of states—the idea that each polity has the right to decide the level of government services it prefers and therefore the level of taxation it requires. See Peter Dietsch, Catching Capital: The Ethics of Tax Competition (Oxford: Oxford University Press, forthcoming) (note that Dietsch also presents several strong arguments for believing that these moves are not necessarily as efficient as they seem). 599 . For a similar proposal, see Kimberley A. Clausing and Reuven S. Avi-Yonah, Reforming Corporate Taxation in a Global Economy: A Proposal to Adopt Formulary Apportionment , The Brookings Institution (June 2007) ( http:// www.brookings.edu/~/media/research/files/papers/2007/6/corporatetaxes%20 clausing/200706clausing_aviyonah.pdf). 600 . This seems to be the idea behind the British government’s recent proposal to tax the local profits of global companies at 25%, notwithstanding where those profits may technically be reported as a result of the complicated tax structures often adopted by these global corporations. See, e.g., Mark Scott and Stephen Castle, “British Government Proposes a ‘Google Tax,’” The New York Times (December 3, 2014). 601 . See Andrew E. Kramer and Floyd Norris, “G-20 Backs Plan to Tax Avoidance by Large Corporations,” The New York Times (July 19, 2013); Andrew E. Kramer, “Plan at G-20 Is to Tighten Global Rules on Taxes,” The New York Times (September 5, 2013). 602 . See, e.g., Addressing Base Erosion and Profit Shifting (OECD Publishing 2013) (http://www.keepeek.com/Digital-Asset-Management/oecd/taxation/addressing-base-erosion-and-profit-shifting_9789264192744-en#page5); Action Plan on Base Erosion and Profit Shifting (OECD Publishing, 2013) (http://www.oecd.org/ ctp/BEPSActionPlan.pdf). 603 . See Laura D’Andrea Tyson, Kenneth Serwin, and Eric J. Drabkin, “The Benefits for the U.S. Economy of a Temporary Tax Reduction on the Repatriation of Foreign Subsidiary Earnings,” New America Foundation (Berkeley Research Group, Fall 2011) (http://www.brg-expert.com/media/publication/24_Repatriation%20Study. pdf). 604 . Michael Mundaca, “Just the Facts: The Costs of a Repatriation Tax Holiday,” Treasury Notes (U.S. Department of the Treasury, March 23, 2011) (http://www. treasury.gov/connect/blog/Pages/Just-the-Facts-The-Costs-of-a-Repatriation-Tax- Holiday.aspx). See also Heidi Moore, “Tim Cook’s Pitch for a Corporate Tax Holiday Suits Washington Just Fine,” The Guardian (May 17, 2013). 605 . For the mechanics of how this works, see Kimberley Clausing, “Corporate Inversions,” Tax Policy Center (Urban Institute and Brookings Institution, August 20, 2014), p. 4 (http://www.urban.org/UploadedPDF/413207-corporate-inversions.pdf ). 198 ● Notes

606 . I am under no illusions, of course, about the extent of accounting and legal inge- nuity that will no doubt be brought to bear on evading these limits, as evidenced by the failure of such limits to work the last time an amnesty was offered. See Dhammika Dharmapala, C. Fritz Foley, and Kristin J. Forbes, “Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act,” Journal of Finance 66 (2011): 753–787. Having had that experience, however, we should be able to craft more difficult to evade limits now and actually prohibit round-tripping (the deliberate pumping up of cash reserves overseas to take advantage of the amnesty), the use of funds for stock buybacks or dividend payments, the pay-down of debt, and any attempt to simply use repatriated cash to do things that were already planned to be done or would have been done with non-repatriated cash. 607 . See Floyd Norris, “Recovery in Germany Is Faster than Elsewhere,” The New York Times (May 10, 2013) (noting that “some of the credit” for Germany’s quicker recovery from the Great Recession and lower unemployment rate goes to “German policies that encourage employers facing downturns to reduce working hours rather than fire workers”). When France tried this in 1998 as a way of reducing unemployment, productivity and spending thrived and unemployment dropped from 12% to 9.1%. Eric Pfanner, “France’s Short Work Week a Mixed Blessing,” The New York Times (June 17, 2002). 608 . See Special Report, “Separation Anxiety,” The Economist (October 1, 2009). For some discussion of using this technique to reduce unemployment in the United States, see Hanna Seligson, “An Alternative to Layoffs: The Shorter Workweek,” The New York Times (March 1, 2009). 609 . See, e.g., George Wentworth, Claire McKenna, and Lynn Minick, “Lessons Learned: Maximizing the Potential of Work-Sharing in the United States,” National Employment Law Project (October 2014) (http://www.nelp.org/page/-/UI/2014/ Lessons-Learned-Maximizing-Potential-Work-Sharing-in-US.pdf?nocdn=1). 610 . See Catherine Rampell, “Should the Government Pay People to Work Less?” The New York Times (November 10, 2009); Jack Ewing, “Germany’s Secrets for a Steadier Job Market,” The New York Times (April 21, 2010); Joe Nocera, “What Is Business Waiting For?” The New York Times (August 15, 2011). For a comparison of the relevant unemployment rates, see http://www.oecd.org/els/employmentpol- iciesanddata/howdooecdlabourmarketsperform.htm . 611 . See generally Dagmar Breitenbach and Gerhard Schneibel, “Germany’s Part-Time Jobs System Is Thriving Despite Fierce Criticism,” Deutsche Welle (April 27, 2011). 612 . See, e.g., Casey B. Mulligan, “What Job-Sharing Brings,” The New York Times (May 8, 2013). 613 . This would distinguish what I have proposed from the French program that reduced the work week from 40 to 35 hours for everybody. The idea behind this program was not to prevent layoffs, but rather to encourage more new hires. And indeed, the program was credited of creating 300,000 to 350,000 new jobs just after it was introduced, but it now seems to be so full of loopholes that it is having little continuing effect. It is also having the negative side-effect of (erroneously) making France look like the home of lazy workers, even though practically no one actually works only 35 hours. See generally Liz Alderman, “In France, New Review of 35-Hour Workweek,” The New York Times (November 26, 2014). 614 . See Catherine Rampell, “Working Parents, Wanting Fewer Hours,” The New York Times (July 10, 2013). Notes ● 199

615 . See Tony Schwartz, “Escalating Demands at Work Hurt Employees and Companies,” The New York Times (June 5, 2015). See also Christine Porath, “No Time to Be Nice at Work,” The New York Times (June 19, 2015), and the various studies cited therein. 616 . Special Report, “Separation Anxiety.” 617 . Brian Blackstone, “U.S., Europe Differ in Approach to Getting Back on Growth Track,” The Wall Street Journal (November 10, 2009). 618 . See my Exploitation and Economic Justice in the Liberal Capitalist State. 619 . See Francisco E. Balderrama and Raymond Rodriguez, Decade of Betrayal: Mexican Repatriation in the 1930s (University of New Mexico Press, rev. edn., 2006). To put the size of this “reparation” in perspective, remember that the US population in 1930 was only 122,775,046. It is over 320 million today. 620 . In the United Kingdom, through a series of restrictive measures said to be harsh- est in Europe, the coalition government hopes to reduce net immigration from the hundreds of thousands to something like 10,000 by 2015. See, e.g., Dominic Casciani, “Q&A: UK Immigration Cap,” BBC News (April 14, 2011); BBC News, “UK Government Agrees on Skilled Migration Cap” (November 23, 2010). 621 . See Robert Pollin, Back to Full Employment (Cambridge: MIT Press, 2012), pp. 47–52 for a discussion of the relevant empirical evidence. 622 . See Gregory DeFreitas, “Immigration, Inequality, and Policy Alternatives,” in Globalization and Progressive Economic Policy , ed. Dean Baker, Gerald Epstein, and Robert Pollin (New York: Cambridge University Press, 1998), pp. 337–356, esp. at p. 346; Phillip Swagel, “Stronger U.S. Growth Ahead,” The New York Times (June 27, 2013). See also Congressional Budget Office, “The Economic Impact of S. 744, the Border Security, Economic Opportunity, and Immigration Modernization Act” (June 2013) (noting that while the immigrations reforms envisioned by this bill would bring an estimated 10 million more people into the United States, it would also create jobs, increase business and household spending, and result in higher tax revenues that would more than offset the attendant costs). 623 . See OECD, International Migration Outlook 2013 (OECD Publishing, 2013), esp. Ch. 3 ( http://dx.doi.org/10.1787/migr_outlook-2013-en ) 624 . David Jolly, “Immigration Cost to Countries Is Overstated, Study Finds,” The New York Times (June 13, 2013) (quoting Jean-Christophe Dumont, who headed the OECD study). 625 . Congressional Budget Office, The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments (December 2007) (footnotes omitted). 626 . See Leah Zallman, Steffie Woolhandler, David Himmelstein, David Bor, and Danny McCormick, “Immigrants Contributed an Estimated $115.2 Billion More to the Medicare Trust Fund than They Took out in 2002–09,” Health Affairs 32 (2013): 1153–1160. 627 . See Congressional Budget Office, Impact of Unauthorized Immigrants. 628 . Jolly, “Immigration Cost to Countries Is Overstated, Study Finds.” 629 . See Christian Dustmann and Tommaso Frattini, “The Fiscal Effects of Immigration to the UK,” The Economic Journal 124 (2014): F593–F643. 630 . See N. Gregory Mankiw, “Give Me Your Tired, Your Poor and Your Economists, Too,” The New York Times (February 9, 2013) (arguing that competition from immigrants for US jobs keeps down labor costs). 631 . See Somini Sengupta, “Silicon Valley and Immigrant Groups Find Common Cause,” The New York Times (February 12, 2013). 632 . Sari Pekkala Kerr, William R. Kerr, and William F. Lincoln, “Skilled Immigration and the Employment Structures of U.S. Firms” (February 2013) ( http://www. 200 ● Notes

people.hbs.edu/wkerr/Kerr_Kerr_Lincoln%20Feb2013.pdf). See also Somini Sengupta, “A Bill Allowing More Foreign Workers Stirs a Tech Debate,” The New York Time (June 27, 2013) (referring to similar studies). 633 . Of course, current visa programs may have some loopholes that allow them to be abused, but it should be easy enough to close these loopholes and ensure that highly-skilled foreign workers really are hired only when suitably skilled Americans are not available, and not just when an employer wants to pay its existing workers less or weaken union membership in its workforce. See Editorial, “Workers Betrayed by Visa Loopholes,” The New York Times (June 15, 2015). 634 . Indeed, Germany—the most successful economy in the European Union—has already recognized this and is way out in front of the United States and the United Kingdom in seeking to encourage immigration by highly skilled workers. See Alison Smale, “Needing Skilled Workers, a Booming Germany Woos Immigrants,” The New York Times (July 18, 2014). Thankfully, unions and employers in the United States are now beginning to urge the government to adopt similar policies, although nothing constructive has happened yet. See Ashley Parker, “Visas Are Urged for Lower-Skilled Work,” The New York Times (February 21, 2013). 635 . See Jeffry S. Passel and D’Vera Cohn, “U.S. Unauthorized Immigration Flows Are Down Sharply since Mid-Decade,” Pew Hispanic Center (September 1, 2010) (annual inflow of illegal immigrants to the United States was nearly two- thirds smaller in March 2007 to 2009 than it was in March 2000 to 2005); Noam Scheiber, “Job Growth for Hispanics Is Outpacing other Groups,” The New York Times (March 8, 2015) (illegal immigration dropped even further in 2011). 636 . See Jennifer Medina, “California Farmers Short of Labor, and Patience,” The New York Times (March 29, 2014). 637 . Adam Davidson, “Do Illegal Immigrants Actually Hurt the U.S. Economy?” The New York Times (February 12, 2013). See also Tyler Cowen, “A Strategy for Rich Countries: Absorb More Immigrants,” The New York Times (November 8, 2014). 638 . See my Exploitation and Economic Justice, pp. 162–163 for further discussion of the effects of prohibiting the exploitation of foreign workers. It seems that public sensitivity to this issue may finally be beginning to overcome the seemingly irresistible appeal of cheaper prices that such exploitation can deliver, primarily because of the very public and shocking death of over 1,000 workers in the collapse of a poorly maintained Bangladeshi clothing factory. See Liz Alderman, “Public Outrage over Factory Conditions Spurs Labor Deal,” The New York Times (May 19, 2013); Joseph Stiglitz, “On the Wrong Side of Globalization,” The New York Times (March 15, 2014) (arguing that we must not engage in a regulatory “race to the bottom” in the guise of free trade, for that benefits only the wealthiest among us and hurts everyone else everywhere). 639 . To get a sense of the number of jobs lost to just one country that allows what would by our standards constitute the exploitation of workers, see Robert E. Scott and Will Kimball, “China Trade, Outsourcing and Jobs: Growing U.S. Trade Deficit with China Cost 3.2 Million Jobs between 2001 and 2013, with Job Losses in Every State,” EPI Briefing Paper #385 (Economic Policy Institute, December 11, 2014) (http://s2.epi.org/files/2014/bp385-china-trade-deficit.pdf ). 640 . I realize that this is not always the case, and that there is no conceptual reason why this must necessarily be true. Indeed, it might be the case that free trade reduces employment in both countries. This, arguably, has been the result of NAFTA, the North American Free-Trade Agreement. See Jeff Faux, “NAFTA, Twenty Years after: Notes ● 201

A Disaster,” The Huffington Post (January 1, 2014); Robert Scott, “Brad Delong’s Case for NAFTA: Based on Assumptions, Not on Data,” Economic Policy Institute (August 12, 2014) (http://www.epi.org/blog/brad-delongs-case-nafta-based- assumptions/ ); Jeff Madrick, “Our Misplaced Faith in Free Trade,” The New York Times (October 3, 2014). Even when there are employment gains, moreover, these might be offset be reductions in real wages. See Robert E. Scott, “Globalization Lowers the Wages of U.S. Workers,” Fact Sheet (Economic Policy Institute, March 13, 2015) ( http://s1.epi.org/files/pdf/81409.pdf ). With NAFTA, however, these negative effects have been the result of the opportunities NAFTA opened for the impermissibly unjust exploitation of Mexican labor. If these opportunities were eliminated, it might indeed be true that any reshuffling of jobs in various industries on either side of the border that occurred would indeed be good for everybody. And remember, I am not proposing that we pursue free trade agreements as a way of addressing high domestic unemployment—I am addressing whether we should react to high domestic unemployment by enacting protectionist measures, which is a very different thing. The fact that our principle of full employment does not support enacting protectionist legislation does not mean it supports free trade no matter what. The extent to which our principle does support affirmatively pursuing freer trade is something I shall get to in a moment. 641 . See Edmund L. Andrews, “U.S. Adds Tariffs on Chinese Tires,” The New York Times (September 12, 2009). 642 . See Gary Clyde Hufbauer and Sean Lowry, “US Tire Tariffs: Saving Few Jobs at High Cost,” Peterson Institute for International Economics, Policy Brief Number PB12–9 (April 2012) ( http://www.iie.com/publications/pb/pb12-9.pdf ). 643 . See generally Reiff, Punishment, Compensation, and Law, pp. 70–73. 644 . See ibid., pp. 71–73. 645 . See Nicholas Kulish and Jackie Calmes, “Obama Bid for Europe Trade Pact Stirs Hope on Both Sides,” The New York Times (February 13, 2013). 646 . See Steven Erlanger, “Conflicting Goals Complicate an Effort to Forge a Trans- Atlantic Trade Deal,” The New York Times (June 12, 2013). At least the Europeans seem to have come to some sort of consensus among themselves on what their bargaining position should be, allowing the transatlantic talks to move forward. See James Kanter “European Ministers Clear Trade Deal,” The New York Times (June 14, 2013) and “E.U. Tries to Assuage Fears over U.S. Trade Deal,” The New York Times (March 27, 2014) (discussing European fears that trade deal with the United States might lead to weakening of European standards in areas like environmental protection, food safety, and publically funded healthcare). 647 . See Scott C. Bradford, Paul L. E. Grieco, and Gary Clyde Hufbauer, “The Payoff to America from Global Integration,” in The United States and the World Economy: Foreign Economic Policy for the Next Decade, ed. C. Fred Bergsten (Washington, DC: Institute for International Economics, 2005), pp. 65–109. 648 . See generally Council of Economic Advisers, “The Economic Benefits of U.S. Trade,” (Executive Office of the President, May 2015) ( https://www.whitehouse. gov/sites/default/files/docs/cea_trade_report_final_non-embargoed_v2.pdf). 649 . This is why President Obama’s request for fast-track authority to negotiate the Trans-Pacific Partnership (TPP) has run into such opposition from Democrats in Congress. See, e.g., Jonathan Weisman, “Obama’s Trade Bills Face Tough Battle against House Democrats,” The New York Times (June 12, 2015); Neil Irwin, “What You Should Know about the Trans-Pacific Partnership,” The New York Times (June 12, 2015). 202 ● Notes

650 . See Josh Bivens, “The Trans-Pacific Partnership Is Unlikely To Be A Good Deal for American Workers,” EPI Briefing Paper #397 (Economic Policy Institute, April 16, 2015) (http://s1.epi.org/files/pdf/83872.pdf ). Note that I am not suggesting that as long as the relevant final trade agreement requires other nations to provide workers with the same rights and benefits that our own citizens would have were this work performed at home, the agreement is sufficient to ensure that foreign workers are not exploited—clearly this does not seem to be the case. See Eduardo Porter, “Globalization that Works for Workers at Home,” The New York Times (February 24, 2015). Provisions to this effect in our trade agreements are essen- tial, but they cannot do the job on their own. Giving foreign workers the right to sue their employers for violations of these agreements in our home courts is the enforcement mechanism that is necessary if we are to ensure that imported goods are not made with exploited labor, and therefore the temptation to access exploited labor is not going to be a reason for American employers to shift American jobs overseas. And the same would hold true for violations of environmental laws. 651 . See Binyamin Appelbaum, “Perils of Globalization When Factories Close and Towns Struggle,” The New York Times (May 17, 2015). 652 . Proposals to extend the Trade Adjustment Assistance Act and provide additional assistance to those who are displaced when their jobs are shifted overseas are both necessary and helpful too, of course, but these are not a substitute for preventing unjust job shifting in the first place, for as I have already shown, the loss that unemployment brings cannot be made up merely by the receipt of money. 653 . See Jonathan Weisman, “Debate Over Currency Cheating Intensifies in Trade Talks,” The New York Times (May 19, 2015); Jared Bernstein, “How to Stop Currency Manipulation,” The New York Times (January 9, 2015); C. Fred Bergsten and Joseph E. Gagnon, “Currency Manipulation, the US Economy, and the Global Economic Order,” Policy Brief Number PB12–25 (Peterson Institute for International Economics, December 2012) (http://www-.iie.com/publications/pb/pb12-25.pdf ); Joseph E. Gagnon, “Combating Widespread Currency Manipulation,” Policy Brief Number PB12–19 (Peterson Institute for International Economics, July 2012) ( http://vvvvw.iie.com/publications/pb/pb12-19.pdf ). 654 . Jared Bernstein and Dean Baker, “Taking Aim at the Wrong Deficit,” The New York Times (November 6, 2013). 655 . See Paul Krugman, “Holding China to Account,” The New York Times (October 2, 2011); Bernstein, “How to Stop Currency Manipulation.” 656 . See Appelbaum, Ewing, and Gough, “Overseas Stimulus Moves Drive Yen, Euro and Renminbi down against Dollar.” 657 . See Paul Krugman, “Those Depressing Germans,” The New York Times (November 2, 2013) (citing recent US Treasury report on foreign currencies and currency policies); Sarah Wheaton, “U.S. Accuses Germany of Causing Instability,” The New York Times (October 30, 2013); Jack Ewing, Alison Smale, and James Kanter, “Germany’s Neighbors Admonish It over Surplus,” The New York Times (November 13, 2013). Unfortunately, given the weakness of the European economy, which currently teeters on the brink of deflation as well as recession, the US government and the Federal Reserve seem content recently to allow the euro’s value against the dollar to fall. See Appelbaum, Ewing, and Gough, “Overseas Stimulus Moves Drive Yen, Euro and Renminbi down against Dollar.” 658 . See Robert E. Scott, “U.S. Trade Deficit with Japan Resulted in Net Job Losses in All but Three Congressional Districts,” Economic Snapshot (Economic Policy Institute, February 25, 2015) (http://www.epi.org/publication/u-s-trade-deficit-with-japan Notes ● 203

-resulted-in-net-job-losses-in-all-but-three-congressional-districts/?utm_source =Economic+Policy+Institute&utm_campaign=3f4ab1f91a-EPI_News&utm _medium=email&utm_term=0_e7c5826c50-3f4ab1f91a-55957733).

5 The Politics of Unemployment 1 . Lawrence R. Klein, The Keynesian Revolution (New York: Macmillan, 1966), p. 179. 2 . Virgil, Georgics , Bk. 2, Line 490. 3 . This phenomenon is usually seen most directly in developing economies, where a small but growing manufacturing capital is able to draw labor at will from an underemployed agricultural sector, see W. Arthur Lewis, “Economic Development with Unlimited Supplies of Labor,” Manchester School 22 (1954): 139–191, and is what some economists think is happening in China now. See, e.g., Paul Krugman, “Hitting China’s Wall,” The New York Times (July 16, 2013). It is therefore not much of a stretch to see how this effect might be replicated in advanced economies with high unemployment rates, and how we might consider it a form of fascism— an internal variant of the kind of external economic exploitation that occurred under colonialism and occurs today under the guise of economic and/or political imperialism. 4 . See Reiff, Exploitation and Economic Justice in the Liberal Capitalist State, pp. 3–10. 5 . See ibid., pp. 5–7. 6 . See Annie Lowrey, “The Rich Get Richer through the Recovery,” The New York Times (September 10, 2013); Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States (Updated with 2012 Preliminary Estimates),” (September 3, 2013) (http://elsa.berkeley.edu/~saez/saez-UStopincomes-2012. pdf ). 7 . Joan Robinson, “Obstacles to Full Employment,” in Contributions to Modern Economics (New York: Academic Press, 1978), pp. 20–28, p. 27 (based on a paper originally published in 1946). 8 . For further discussion of how those who would actually be adversely affected by the lack of government action to address high unemployment might nevertheless be manipulated into opposing such action, see Reiff, “The Politics of Masochism,” 29–63. 9 . See Adam Smith, The Wealth of Nations (New York: Modern Library edn., 2000), Bk. 4, Ch. 2, pp. 484–485. 10 . See, e.g., ibid., Bk. 4, Ch. 9, p. 745. 11 . For a detailed discussion of Smith’s references to “the invisible hand” and the meaning of those references in their actual context, see Mark R. Reiff, “Two Theories of Economic Liberalism,” Adam Smith Review 9 (forthcoming). 12 . Jacob Viner, “Adam Smith and Laissez Faire,” Journal of Political Economy 35 (1927): 198–232, 231–232. I think it is also fair to say that Viner’s view is today the most common view among Smith scholars. See, e.g., Lisa Herzog, Inventing the Market: Smith, Hegel, and Political Theory (Oxford: Oxford University Press, 2013), pp. 36–37. 13 . John Maynard Keynes, “The End of Laissez Faire (1926),” in Essays in Persuasion , pp. 272–294, at pp. 287–288. For an earlier, similar, but even more extensive attack on the idea that unbridled laissez faire is the best way to advance the public interest, either economically or more generally, see Henry Sidgwick, The Principles of Political Economy (Cambridge: Cambridge University Press, 2011), Bk. 3, Ch. 2, 204 ● Notes

esp. pp. 403–418, and The Elements of Politics (Cambridge: Cambridge University Press, 2012), Ch. 10. 14 . See Eric Alterman, “What Are Republican Donors Thinking?” The Nation (November 17, 2014). 15 . See George R. Feiwel, “Reflection on Kalecki’s Theory of Political Business Cycle,” Kyklos 27 (1974): 21–48, esp. at 24. 16 . Micha ł Kalecki, “Political Aspects of Full Employment” (1943), in Selected Essays on the Dynamics of the Capitalist Economy 1939–1970 (Cambridge: Cambridge University Press, 1971), pp. 138–145, 139 (emphasis in the original). For similar arguments, see Sidney S. Alexander, “Opposition to Deficit Spending for the Prevention of Unemployment,” in Income, Employment and Public Policy: Essays in Honour of Alvin H. Hansen (New York: W. W. Norton & Company, 1948), pp. 177–198; and William D. Nordhaus, “The Political Business Cycle,” The Review of Economic Studies 42 (1975): 169–190. 17 . For a recent study of just how much power certain people derive from the idea that they are and should remain the economic focus of the nation, see Martin Gilens and Benjamin I. Page, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens,” Perspective on Politics 12: 564–581. 18 . See Paul Krugman, “Phony Fear Factor,” The New York Times (August 8, 2013). Note, however, that I have interpreted Kalecki here slightly differently than Krugman. Krugman takes Kalecki’s reference to the “state of confidence” in expanding upon this point to be equivalent to what Krugman refers to as “the confidence fairy,” the idea that the reducing the national debt will make the participants in the economy more confident in the strength and stability of the economy and therefore more willing to spend and invest, an argument that I have discussed already in the course of discussing the basis for the “anti-debt argument” for austerity. Here, I choose to interpret Kalecki as referring to a different kind of confidence—not the kind of general confidence that would provide a causal explanation for how austerity could be expansionary, but the specific confidence of the economic elite, who will not cooperate in putting people back to work unless this is seen to be done by them or at least at their direction and not by the government on its own, for if it is seen to be done by the government on its own then the overall power and influence of those Kalecki labels the “captains of industry” will be diminished. In other words, I think Kalecki’s argument is about power dynamics, not economics (after all Kalecki’s essay is entitled “Political Aspects of Full Employment”) (my emphasis). But even if I am wrong about this being what Kalecki meant, that would not change my argument in any way. It would just make my point here more original. 19 . See Luis Garicano, Claire Lelarge, and John Van Reenen, “Firm Size Distortions and the Productivity Distribution: Evidence from France,” Institute for the Study of Labor, Discussion Paper No. 7241 (February 2013) ( http://www.econstor.eu/ bitstream/10419/71683/1/738531383.pdf). 20 . See ibid., pp. 1–4, 27–28. 21 . See Liz Alderman, “The Number that Many French Businesses Fear,” The New York Times (July 23, 2014). 22 . See ibid. 23 . The same explanation applies to Italian employers’ reluctance to hire workers who would enjoy the protections of Article 18, which kick in once a firm has 15 “permanent” employees. Notes ● 205

24 . See, e.g., Albert Halasi, “Toward a Full Employment Program: A Survey,” in Planning and Paying for Full Employment, ed. Abba P. Lerner and Frank D. Graham (Princeton: Princeton University Press, 1946), pp. 1–33, at p. 7. 25 . See Floyd Norris, “The Time Bernanke Got It Wrong,” The New York Times (July 18, 2013); Federal Reserve Board, “Remarks by Governor Ben S. Bernanke at the Conference to Honor Milton Friedman,” University of Chicago, Chicago, Illinois (November 8, 2002); DeLong, “‘Liquidation’ Cycles and the Great Depression.” Note that there is an economic version of the liquidationist view too: that allowing inefficient enterprises to fail purges the economy of inefficiency and ultimately leads to a more healthy and productive allocation of resources. For reasons that I discuss indepth in the course of examining the anti-interventionist view, however, this version of the liquidationist argument is no different than other forms of the anti-interventionist view and is mistaken for the same reasons that these other versions of this view are mistaken. What I am focusing on here, however, is the moralized version of the liquidationist view, for that view is (largely if not entirely) independent of its alleged economic effects. 26 . One can also see echoes of this view, as I suggested in volume I, in the reaction of German ordoliberals to the sovereign debt crisis, although as I said this reaction rests on a misguided interpretation of ordoliberalism. 27 . For similar definitions of domination, see Frank Lovett, A General Theory of Domination and Justice (Oxford: Oxford University Press, 2010). 28 . See Adam Smith, Lectures on Jurisprudence (Oxford: Oxford University Press, 1978), iii, 130, p. 192: “The love of domination and authority over others . . . is I am afraid natural to mankind.” See also idem, iii, 114, p. 186. 29 . See C. W. and A. J. K. D, “Did Slavery Make Economic Sense?” The Economist (September 27, 2013); Gordon Tullock, “The Economics of Slavery,” Left and Right 3 (1967): 5–16. 30 . See Alina Tugend, “Uncertainty about Jobs Has a Ripple Effect,” The New York Times (May 16, 2014). 31 . See Robert Rowthorn, “Kalecki Centenary Lecture: The Political Economy of Full Employment in Modern Britain,” Oxford Bulletin of Economics and Statistics 62 (2000): 139–173, 140. 32 . Paul Krugman, “Weaponized Keynesianism,” The New York Times (June 24, 2009) (quoting Frank). See Kalecki, Political Aspects of Unemployment, pp. 141– 142, for his prediction that there would continuously be tremendous pressure to focus deficit spending on the armaments industry. See also Kalecki, “The Impact of Armaments on the Business Cycle after the Second World War” [1955], in Kalecki, Collected Works: Volume II, pp. 351–373. 33 . Isaiah Berlin, “The Originality of Machiavelli,” in Against the Current (Princeton: Princeton University Press, 2001), pp. 25–79, at 61. See also Michał Kalecki, “The Business Cycle and Armaments” [1935], in Collected Works of Michał Kalecki: Volume I (Oxford: Oxford University Press, 1990), pp. 182–187; Micha ł Kalecki, “The Fascism of Our Times” [1946] and “Vietnam and US Big Business” [1967], in Collected Works of Micha ł Kalecki: Volume VII (Oxford: Oxford University Press, 1997), pp. 287–291 and pp. 292–297; Kalecki, “Political Aspects of Full Employment,” pp. 141–42; Feiwel, “Reflection on Kalecki’s Theory of Political Business Cycle,” 21–48, 39. 34 . This is something that Kalecki himself noted some 20 years after his essay initially appeared. See Feiwel, “Reflection on Kalecki’s Theory of Political Business Cycle,” 206 ● Notes

21–48, 39, quoting Kalecki from 1962: “Were the forecasts I made then accurate? I suppose so, but as usual with historical forecasts, not always in every detail. After analyzing the nature of opposition of big business to stimulating economic activity by government expenditure, I foresaw that future crises will be mitigated that way, but not entirely eliminated. Furthermore, I foresaw that government intervention in the course of the business cycle will give rise to a ‘political business cycle.’ It appears that current events correspond grosso modo to these forecasts. On the other hand, my article deals with full employment on the basis of arms build-up in a fascist regime. However, experience has shown that fascism is not an indispensable system for armaments to play an important role in counteracting mass unemployment. However, one should note that in the USA, where this process has been strongest, some elements of fascism have appeared.” For a similar translation, see Collected Works of Michał Kalecki: Volume I (Oxford: Oxford University Press, 1990), pp. 573–574. 35 . Despite having lived through the Nazi era, Hayek was always more sensitive to what he saw as the continuing threat of socialism than he was to the continuing threat of fascism. He embraced the distinction between totalitarianism and authoritarianism, seeing the latter as consistent with liberal democracy, even suggesting at one point that the military regime of General Pinochet in Chile fit the bill of a limited state. See Renato Cristi, Carl Schmitt and Authoritarian Liberalism (Cardiff: University of Wales Press, 1998), pp. 146–168, esp. p. 168 n. 16 (quoting interview with Hayek on his visits to Pinochet in Chile); Karen Fischer, “The Influence of Neoliberals in Chile before, during, and after Pinochet,” in The Road from Mont Pelerin, pp. 306–346, pp. 326–327. 36 . Note that liberalism and perfectionism exist on a continuum—few people are pure liberals or pure perfectionist; most people embrace some of the fundamental pre- suppositions of liberalism and some of those of perfectionism. Where they fall on this continuum therefore depends and the particular mix of fundamental presup- positions they embrace and how committed they are to them. For further discussion of the distinction between liberals and perfectionists, see Reiff, “The Attack on Liberalism.” 37 . For more on the rise of the 1%, see Chrystia Freeland, Plutocrats: The Rise of the Super-Rich and the Fall of Everyone Else (New York: Penguin, 2012). 38 . Think, e.g., of the Koch brothers, who have spent hundreds of millions of dollars on right-wing causes, including funding attacks on pubic unions and other orga- nizations and attacks on legislation that supports the unemployed and working class. See, e.g., Nicholas Confessore, “Group Linked to Kochs Admits to Campaign Finance Violations,” The New York Times (October 24, 2013) (discussing funding of ballot propositions that would prohibit unions from using automatic pay- roll deductions to raise money for political campaigns); State of California Fair Political Practices Commission, Investigation Report, Case No. 12/784, Report 30, Americans for Responsible Leadership, Interview with Anthony Russo (August 16, 2013), pp. 7, 8, 26, 39, 65, 68, 83, 86, 94, 106 (http://www.nytimes.com/ interactive/2013/10/25/us/politics/25kochs-document2.html?ref=politics) (same); Laurel Rosenhall, “FPPC Drops Hammer on Campaign Donors,” The Sacramento Bee (October 25, 2013); Nicholas Confessore, “Tax Filings Hint at Extent of Koch Brothers’ Reach,” The New York Times (September 12, 2013); Eric Lipton, “Billionaire Brothers’ Money Plays Role in Wisconsin Dispute,” The New York Times (February 21, 2011); Nicholas Confessore, “$122 Million in 2012 Spending by Koch Group,” The New York Times (November 14, 2013); Jane Mayer, “Covert Notes ● 207

Operations: The Billionaire Brothers Who Are Waging a War against Obama,” The New Yorker (August 30, 2010). And the Koch brothers show no signs of let- ting up—if anything, they seem to be doubling down. See Nicholas Confessore, “Koch Brothers’ Budget of $889 Million for 2016 Is on Par with Both Parties’ Spending,” The New York Times (January 26, 2015); Carl Hulse and Ashley Parker, “Koch Group, Spending Freely, Hones Attack on Government,” The New York Times (March 24, 2014); Matea Gold, “Koch-Backed Political Coalition, Designed to Shield Donors, Raised $400 Million in 2012,” Washington Post (January 5, 2014); Communication, “The Koch Network: A Cartological Guide,” OpenSecrets Blog (January 7, 2014) ( http://www.opensecrets.org/news/2014/01/koch-network- a-cartological-guide.html). 39 . Martin Luther King, Jr., “Address at the Conclusion of the Selma to Montgomery March” (March 25, 1965) ( http://mlk-kpp01.stanford.edu/index.php/encyclopedia/documentsentry/doc_address_at_the_conclusion_of_selma_march/ ). Note that throughout this passage and indeed the rest of his speech, King draws on the work of the eminent southern historian C. Vann Woodward, The Strange Career of Jim Crow (New York: Oxford University Press, 1955). 40 . Michael Oakeshott, “The Political Economy of Freedom,” in Rationalism in Politics and Other Essays (Indianapolis, IN: Liberty Fund, New and Expanded edn., 1991), pp. 384–406, 388–389. 41 . Ibid. at p. 393–394. 42 . See Paul Krugman, “The Fear Economy,” The New York Times (December 26, 2013) (noting that the “quits” rate—the percentage of people voluntarily leaving their jobs each month—goes up during periods of low unemployment and down during periods of high unemployment, and is currently far below where it was before the beginning of the Great Recession). 43 . See generally “Symposium: Republicanism and Global Justice,” European Journal of Political Theory 9.1 (2010). 44 . See generally, Keith Bradley, Slavery and Society at Rome (Cambridge: Cambridge University Press, 1994): Sandra R. Joshel, Slavery in the Roman World (Cambridge: Cambridge University Press, 2010): Moses I. Finley, Ancient Slavery and Modern Ideology (New York: Viking Press, 1980); M. I. Finley, “The Freedom of the Greek Citizen in the Ancient World,” Talanta 7 (1976); Moses I. Finley, Democracy Ancient and Modern (London: Chatto and Windus, 1973). 45 . Note that I am not arguing that the modern concept of republican liberty necessarily entails both freedom from domination and the freedom to dominate. I am quite sure those who have articulated the modern concept of republican liberty have constructed a concept that requires no such thing. I am merely suggesting that in looking into the past for this idea, the advocates of republican liberty may have missed the fact that the ancient concept of republican liberty had both a liberal and an anti-liberal side, and that in borrowing just the liberal side, they have really reinvented the concept more than resurrected it. 46 . Friedrich Nietzsche, On the Genealogy of Morality (Cambridge: Cambridge University Press, 1994). 47 . For some recent experimental studies suggesting this kind of thinking is indeed more common among the rich than the poor, see Michael W. Kraus, Paul K. Piff, Rodolfo Mendoza-Denton, Michelle L. Rheinschmidt, and Dacher Keltner, “Social Class, Solipsism, and Contextualism: How the Rich Are Different from the Poor,” Psychological Review 119 (2012): 546–572; Michael W. Kraus, Serena Chen, and Dacher Keltner, “The Power to Be Me: Power Elevates Self-Concept Consistency 208 ● Notes

and Authenticity,” Journal of Experimental Psychology 47 (2011): 974–980; Michael W. Kraus and Dacher Keltner, “Signs of Socioeconomic Status: A Thin- Slicing Approach,” Psychological Science 20 (2009): 99–106. 48 . See Christopher Ingraham, “More than Three Quarters of Conservatives Say the Poor ‘Have it Easy,’” The Washington Post (June 26, 2014); Pew Research Center, “Beyond Red vs. Blue: The Political Typology” (June 26, 2014) ( http://www.people-press.org/files/2014/06/6-26-14-Political-Typology-release1.pdf ), pp. 44–45. 49 . For the most up to date list of these states, see Kaiser Family Foundation, “Status of State Action on the Medicaid Expansion Decision” ( http://kff.org/health-reform/state- indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/ ). 50 . See Terry Golway, Machine Made: Tammany Hall and the Creation of Modern American Politics (New York, W.W. Norton & Company, 2014), p. xii. 51 . See Aditya Chakrabortty, “Greece Is a Sideshow. The Eurozone Has Failed, and Germans Are Its Victims Too,” The Guardian (June 22, 2015). 52 . See Charles M. Blow, “The President, Fox News and the Poor,” The New York Times (May 14, 2015) (quoting O’Reilly). 53 . See Aditya Chakrabortty, “Austerity? Call It Class War—And Heed This 1944 Warning from a Polish Economist,” The Guardian (January 14, 2013). 54 . See Daniel Gross, “McDonald’s and Visa Conjure Fantasy Budget for Low-Wage Employees,” The Daily Beast (July 16, 2013); Peter S. Goodman “McDonald’s Budget Plan Leaves out Critical Line: Corporate Welfare,” The Huffington Post (July 17, 2013). 55 . MoJo News Team, “Full Transcript of the Mitt Romney Secret Video,” Mother Jones (September 19, 2013) ( http://www.motherjones.com/politics/2012/09/full- transcript-mitt-romney-secret-video ). For a partial list of the expression of similar sentiments by other members of the 0.01%, see Paul Krugman, “Plutocrats Feeling Persecuted,” The New York Times (September 23, 2013). See also Reuters, “John Boehner Is Sick Of Unemployed People that Would ‘Rather Just Sit Around,’” Huffington Post (September 18, 2014) (quoting John Boehner, Speaker of the US House of Representatives, from an address to the American Enterprise Institute: “this idea that has been born, maybe out of the economy over the last couple years, that you know, I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around. This is a very sick idea for our country).” See also Lauren Sher, “CNBC’s Santelli Rants about Housing Bailout,” ABC News (February 19, 2009) (http://abcnews.go.com/blogs/headlines/2009/02/cnbcs-santelli/ ) (the rant that gave birth to the Tea Party movement). 56 . See Daniel Goleman, “Rich People Just Care Less,” The New York Times (October 5, 2013). 57 . See Nietzsche, On the Genealogy of Morality , pp. 11–37. 58 . See Habermas, A Theory of Communicative Action, Volume 2: Lifeworld and System , pp 332–373, esp. p. 355ff. 59 . Ibid., p. 293. For further discussion of this point albeit in a slightly different context, see N. E. Simmonds, “Justice and Private Law in a Modern State,” Queensland Law Journal 25 (2006): 229–252, 231 and “The Bondwoman’s Son and the Beautiful Soul,” American Journal of Jurisprudence 58 (2013): 111–133, 125. 60 . For a discussion of the rise and persistence of this attitude among some segments of the population, see Kristina Cooke, David Rohde, and Ryan McNeill, “The Undeserving Poor,” The Atlantic (December 2012). 61 . See Patricia Cohen, “Taxes Take Away, but Also Give Back, Mostly to the Very Rich,” The New York Times (March 17, 2015). Notes ● 209

62 . See Nicholas Kristoff, “A Nation of Takers?” The New York Times (March 26, 2014). This idea—that the rich are rich because they unquestionably deserve to be given their contribution to society—is also popular among their defenders in the academy. See, e.g., N. Gregory Mankiw, “Defending the One Percent,” Journal of Economic Perspectives 27 (2013): 21–34. 63 . See Leslie Scism, “AIG’s Benmosche and Miller on Villains, Turnarounds and Those Bonuses,” The Wall Street Journal (September 23, 2013). 64 . See Leslie Scism, “AIG’s Benmosche Backs off Inflammatory Comments,” The Wall Street Journal (September 24, 2013) (noting that Benmosche had also made similar comments back in 2009). For further examples of such shameless bonus- taking, see Reiff, Exploitation and Economic Justice in the Liberal Capitalist State , pp. 141–146. 65 . See Paul Krugman, “Paranoia of the Plutocrats,” The New York Times (January 26, 2014). 66 . See Katie McDonough, “Billionaire Sam Zell Defends Another Billionaire on a Network Owned by a Billionaire,” Salon (February 7, 2014) ( http://www.salon. com/2014/02/07/billionaire_sam_zell_defends_another_billionaire_on_a_net- work_owned_by_a_billionaire/); David Streitfeld, “Tom Perkins, Defender of the 1% Once Again,” The New York Times (February 14, 2014); Evelyn M. Rusli, “Tom Perkins Regrets His Nazi Comparison, but Not the Message,” The Wall Street Journal (January 27, 2014); Michael J. de la Merced, “Schwarzman’s Unfortunate War Analogy,” The New York Times (August 16, 2010) (updated with Schwarzman’s limited apology). 67 . See the comments made recently by Boris Johnson, the Conservative Mayor of London, who lambasted just about everyone for bullying “zillionaires,” who he said should actually be in for “automatic knighthoods.” See Adam Withnall, “Boris Johnson Says Super-Rich Are ‘Put-upon Minority’ Like Homeless People and Irish Travellers,” The Independent (November 18, 2013). See also David A. Graham, “Tom Perkins Has a Fascinating, Radical, Un-American Voting Plan,” The Atlantic (February 2014) (discussing Perkin’s view that the rich should get more votes than the poor). 68 . See, e.g., Friedrich Nietzsche, “The Greek State,” in On the Genealogy of Morality , pp. 176–186. 69 . See generally Editorial, “The War on Women,” The New York Times (February 25, 2011); Editorial, “The Campaign against Women,” The New York Times (May 19, 2012); Editorial, “Republicans Take Aim at Poor Women,” The New York Times (June 22, 2015). 70 . For a detailed discussion of the nature and extent of these attacks, see Gordon Lafer, “The Legislative Attack on American Wages and Labor Standards, 2011– 2012,” EPI Briefing Paper #364 (Washington, DC: Economic Policy Institute, October 31, 2013). 71 . See generally Eduardo Porter, “More Renters, Less Risk for Wall St.,” The New York Times (October 28, 2014) (quoting, among others Shelia C. Bair, Head of the Federal Deposit Insurance Corporation during the mortgage bubble and its implo- sion, questioning whether we should continue to encourage home-ownership for the less wealthy); Andrew Oswald and Richard K. Green, “Debate: Should Home- Ownership Be Discouraged?” The Economist (September 19, 2012); William D. Cohan, “Why Wall Street Loves Houses Again,” The Atlantic (October 2013) (discussing, inter alia , the purchase of some 32,000 single-family homes out of foreclosure for $5.5 billion by the Blackstone Group, a Wall Street hedge fund, which 210 ● Notes

intends to rent them out to families that can no longer qualify for home loans or afford the requisite down-payment); Michael Corkery, “Wall Street’s New Housing Bonanza,” The New York Times (January 29, 2014) (putting single-family rental industry at $1.5 trillion); Matthew Goldstein, “Soured Mortgages Attract Institutional Dollars,” The New York Times (April 27, 2014 (putting the number of US homes now owned by Blackstone at 44,000). See also Shaila Dewan, “Home Buyers Are Scarce, So Renters Take Their Place,” The New York Times (December 4, 2013) (homes built for rental now at record high); Annie Lowrey “Few Places to Go,” The New York Times (December 9, 2013) (demand for rental housing has continued to climb as “many Americans have lost their mortgaged homes and chosen to rent. Others were unable to obtain financing for a purchase, because of a loss of income or tighter credit standards”); Shaila Dewan, “In Home Loans, Subprime Fades as a Dirty Word,” The New York Times (June 28, 2014) (“more than 12.5 million people who might have qualified for a home loan before the crash have been shut out of the market” according to Mark Zandi, chief economist for Moody’s Analytics). Indeed, the rental business is becoming so profitable now that hedge funds are beginning to take profits by selling these homes to each other, and even individual investors are starting to get into the purchase-to-rent market. See Matthew Goldstein, “Investors Who Bought Foreclosed Homes in Bulk Look to Sell,” The New York Times (June 27, 2014); Matthew Goldstein, “American Homes Acquires Rival in Buy-to-Rent Business,” The New York Times (July 1, 2014); Lisa Prevost, “Single-Family Homes as Rentals,” The New York Times (July 17, 2014). This, in turn, is pushing up the prices of homes even more, making them more unaffordable to an even larger group of people. See Floyd Norris, “Investors Are Pushing Starter-Home Prices Up,” The New York Times (July 4, 2014). 72 . See Reuters, “Home Ownership Approaches 20-Year Low as Renting Rises,” The New York Times (October 28, 2014); Jeff Sommer, “The Great American Dream, Still Deferred,” The New York Times (February 7, 2015). For a complete set of the relevant statistics, see Robert R. Callis and Melissa Kresin, “Residential Vacancies and Home Ownership in the Third Quarter 2014,” U.S. Census Bureau News (Washington, DC: U.S. Department of Commerce, October 28, 2014) ( http:// www.census.gov/housing/hvs/files/qtr314/q314press.pdf). Even more disturb- ingly, more and more higher-end purchases, especially in urban areas, are not even being used as primary residences—they are being used as secondary residences and left unoccupied for most of the year. See Julie Satow, “Pied-à -Neighborhood: Pieds- à-Terre Owners Dominate Some New York Buildings,” The New York Times (October 24, 2014). 73 . See Floyd Norris, “More Americans Are Preferring the Lease to the Mortgage,” The New York Times (October 31, 2014). 74 . See Laurie Goodman, Rolf Pendall, and Jun Zhu, “Headship and Homeownership: What Does the Future Hold?” (Urban Institute Housing Finance Policy Center, June 2015) ( http://www.urban.org/sites/default/files/alfresco/publication-pdfs /2000257-Headship-and-Homeownership-What-Does-the-Future-Hold.pdf). 75 . See Zachary Bleemer, Meta Brown, Donghoon Lee, and Wilbert van der Klaauw, “Debt, Jobs, or Housing: What’s Keeping Millennials at Home?” Federal Reserve Bank of New York Staff Reports no. 700 (November 2014) (http://www.newyorkfed.org/research/staff_reports/sr700.pdf): Lisa Prevost, “Millennials on the Homeownership Path,” The New York Times (March 6, 2015). 76 . See Dionne Searcey, “More Americans Are Renting, and Paying More, as Homeownership Falls,” The New York Times (June 24, 2015); Joint Center for Notes ● 211

Housing Studies, “The State of the Nation’s Housing 2015” (Harvard University, 2015) (http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/jchs-sonhr-2015- full.pdf). 77 . See Associated Press, “Home Prices Maintain Steady, if Modest, Upward Trajectory,” The New York Times (March 31, 2015). 78 . See Shaila Dewan, “In Many Cities, Rent Is Rising out of Reach of Middle Class,” The New York Times (April 14, 2014) and “Evictions Soar in Hot Market; Renters Suffer,” The New York Times (August 28, 2014); Ian Lovett, “As Housing Costs Soar, San Francisco Seeks Ballot Solution,” The New York Times (October 2, 2014); Mireya Navarro, “New York Rents Outpaced Inflation over 3 Years, Census Data Show,” The New York Times (February 24, 2015); D. W. Gibson, “How to Dump Tenants and Make a Fortune,” The Nation (June 11, 2015). The same phenomenon is occurring in the United Kingdom. See Katie Allen, “UK Houses Slip from Record Highs, Adding to Signs of Cooling Market,” The Guardian (November 18, 2014) (noting that there has been a 28% surge in the number of people on the brink of homelessness in the United Kingdom since 2012). 79 . See Jessica Yager, “The Challenge of High Rents: Exploring Whether a New Tax Benefit Could Help Keep Unsubsidized Rental Units Affordable,” Research Brief (NYU Furman Center, June 2015) (http://furmancenter.org/files/ NYUFurmanCenter_ChallengeofRisingRents_10JUN2015.pdf). 80 . See Mireya Navarro, “88,000 Applicants and Counting for 55 Units in ‘Poor Door’ Building,” The New York Times (April 20, 2015). 81 . See New York City Rent Guidelines Board, “2015 Income and Affordability Study” (April 2, 2015) (http://www.nycrgb.org/downloads/research/pdf_reports/ia15.pdf )., pp. 3, 14–16. 82 . See Los Angeles Homeless Services Authority, “2015 Greater Los Angeles Homeless Count” (LAHSA, May 11, 2015) (http://documents.lahsa.org/Planning/home- lesscount/2015/HC2015CommissionPresentation.pdf); Adam Nagourney, “Los Angeles Confronts a Spike in Homelessness Amid Prosperity,” The New York Times (June 12, 2015). 83 . See Dionne Searcey, “In Tepid Housing Market, Builders Cater to Desires of Well- Off,” The New York Times (February 24, 2015). A similar process is going on with regard to existing homes. See Associated Press, “Home Prices Inch Upward, but Consumer Confidence Weakens,” The New York Times (February 25, 2015) (“Americans are listing fewer homes for sale, pushing up prices and keeping many houses out of reach for would-be buyers”). 84 . See Gary Blasi and Phillip Mangano, “Stop Punishing and Start Helping L.A.’s Homeless,” Los Angeles Times (June 30, 2015); Gale Holland, “Garcetti Shifts Stance, Won’t Enforce Tough New Homeless Measures,” Los Angeles Times (June 30, 2015). 85 . For further discussion of the history of this view among those on the American Right, see Jennifer Szalai, “Just Deserts,” The Nation (November 19, 2013). 86 . See Krugman, “Hunger Games, U.S.A.”; Editorial, “More Hunger for the Poorest Americans,” The New York Times (December 24, 2013) (noting that while food stamps benefits for 850,000 of the nation’s poorest households are being drastically cut, crop insurance subsidies for farmers are being increased ); Lee Fang, “Farm Bill Cuts $8 Billion in Food Stamps, Preserves Handouts to Koch Industries,” The Nation (February 5, 2014). See also Ron Nixon, “Farm Bill Compromise Will Change Programs and Reduce Spending,” The New York Times (January 27, 2014); Ron Nixon, “Senate Passes Long-Stalled Farm Bill, with Clear Winners and 212 ● Notes

Losers,” The New York Times (February 4, 2014) (under the new farm bill, “farmers fared better than the poor”). For a discussion of just how devastating these cuts in food stamps can be on the poor, see Kim Severson and Winnie Hu, “Cut in Food Stamps Forces Hard Choices on Poor,” The New York Times (November 7, 2013); Teresa Tritch, “Breadlines Return,” The New York Times (November 26, 2013); Patrick McGeehan, “Brooklyn Pantry Struggling to Help Fill Gap Left by Federal Cuts to Food Stamps,” The New York Times (November 25, 2013). And remember, “half of all American children will at some point during their childhood reside in a household that uses food stamps for a period of time.” Mark R. Rank, “Poverty in America Is Mainstream,” The New York Times (September 2, 2013). 87 . See Isaiah Berlin, “Two Concepts of Liberty,” in Liberty, ed. Henry Hardy (Oxford: Oxford University Press, 2002), pp. 166–217, 172–173, 214–216. 88 . See G. A. Cohen, “The German Idea of Freedom” (http://www.youtube.com/ watch?v=KSNJGymnLG4). 89 . A. James Gregor, “Introduction” in Giovanni Gentile, Origins and Doctrine of Fascism , trans. A James Gregor (New Brunswick, NJ: Transaction Publishers, 2002), p. xii. 90 . Gentile, Origins and Doctrine of Fascism , p. 32. 91 . See Gregor, “Introduction,” in Gentile, Origins and Doctrine of Fascism, p. xi. For an explanation of why Gentile thought this, see A. James Gregor, The Ideology of Fascism (New York: Free Press, 1969), pp. 210–224. 92 . See generally Reiff, “Two Theories of Economic Liberalism”; Razeen Sally, “Ordoliberalism and the Social Market,” New Political Economy 1 (1996): 233–257; Werner Bonefeld, “Freedom and the Strong State: On German Ordoliberalism,” New Political Economy 17 (2012): 633–656; Volker Berghahn and Brigitte Young, “Reflections on Werner Bonefeld’s ‘Freedom and the Strong State: On German Ordoliberalism’ and the Continuing Importance of the Ideas of Ordoliberalism to Understand Germany’s Contested Role in Resolving the Eurozone Crisis,” New Political Economy 18 (2013): 768–778. 93 . As Harry Binswanger recently explained in an op-ed piece defending the 1% in Forbes, “the real issue is not financial, but moral.” Harry Binswanger, “Give Back? Yes, It’s Time for the 99% to Give Back to the 1%,” Forbes (September 17, 2013). 94 . See, e.g., Jeremy Waldron, “The Theoretical Foundations of Liberalism,” The Philosophical Quarterly 37 (1987): 127–150, 134–135. 95 . For a history of perfectionist hostility toward science and the scientific method, see Stephen Holmes, The Anatomy of Antiliberalism, (Harvard: Harvard University Press, 1993), esp. pp. 23–25 and pp. 247–252. 96 . See Isaiah Berlin, “Joseph de Maistre and the Origins of Fascism,” in The Crooked Timber of Humanity (Princeton: Princeton University Press, 1990), pp. 91–174, 114–120. 97 . Ibid., p. 122. 98 . Ibid., p. 162. 99 . For examples on how religious faith can be used to ignore science, even in the modern world, see Chris Mooney, The Republican War on Science (New York: Basic Books, 2005); Union of Concerned Scientists, “Scientific Integrity in Policymaking: An investigation into the Bush Administration’s Misuse of Science” (March 2004) and “Scientific Integrity in Policymaking: Further Investigation into the Bush Administration’s Misuse of Science” (July 2004). 100 . See Berlin, “Joseph de Maistre and the Origins of Fascism,” pp. 125–126 (quoting Maistre), and Carl Schmitt, The Crisis of Parliamentary Democracy, trans. Ellen Kennedy (Chicago, IL: University of Chicago Press, 1988), p. 76 (quoting Mussolini). Notes ● 213

101 . For a very recent example of this, see Kenneth Rogoff, “Why the Greek Bailout Failed,” Project Syndicate (July 1, 2015). Rogoff argues that there was nothing wrong with the austerity program that the Troika forced upon the Greeks—the reason it failed was that the Greeks didn’t believe it would work, as if such a belief would have had some magical powers that would have made the same actions have different effects. 102 . See, e.g., Michael W. Kraus and Jacinth J. X. Tan, “Americans Overestimate Social Class Mobility,” Journal of Experimental Social Psychology 58 (2015): 101–111; Shai Davidai and Thomas Gilovich, “Building a More Mobile America—One Income Quintile at a Time,” Perspectives on Psychological Science 10 (2015): 60–71; Michael W. Kraus, Shai Davidai, and A. David Nussbaum, “American Dream? Or Mirage?” The New York Times (May 1, 2015). 103 . See, e.g., Binyamin Appelbaum, “David Brat’s Hand-of-God Economics,” The New York Times (July 8, 2014); Paul Krugman, “Beliefs, Facts and Money: Conservative Delusions About Inflation,” The New York Times (July 6, 2014) and “The Incompetence Dogma: So Much for Obamacare Not Working,” The New York Times (June 26, 2014). For examples of this phenomenon in other contexts, see Seymour Hersh, “Selective Intelligence,” The New Yorker (May 12, 2003) (discussing the history of neo-conservative disdain for the intelligence community’s assessments of the dangers posed by the Soviet Union and Iraq); Brendan Nyhan, “When Beliefs and Facts Collide,” The New York Times (July 5, 2014) (discussing Pew survey showing that 33 percent of the public believes “Humans and other living things have existed in their present form since the beginning of time”).

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Index

Adams, Rachel, 187n. control by regulation and supervision, Affordable Care Act, 121, 188n., 208n. 63–4, 178n. Alden, William, 177n. difficulties identifying, 62 Alderman, Liz, 132n., 142n., 148–53n., and inflation distinguished, 62 155–8n., 160n., 167n., 198n., 200n., Audit Analytics Trend Reports, 195n. 204n. Auerbach, Marc, 195n. Alesina, Alberto, 10, 13, 136n., 137n., austerity 162n. Alesina on, 10, 13, 136n. Alexander, Sidney S., 204n. in Brazil, 132n. Allen, Franklin, 176n. claim that expansionary, 5, 8, 10, 11, 13, Allen, Katie, 156n., 211n. 30–1, 33, 130, 146n., 155n., 204n. Alterman, Eric, 204n. Classical economists on, 39 alternative minimum tax for corporations, as contrary to principle of full 95 employment, 15–16, 21, 32, 39 Alvarez, Lizette, 190n. and cost of borrowing, 11, 33 Amazon, 85, 93, 195n., 196n., 197n. in Cyprus, 29, 150n. Anderson, Jenny, 147n., 163n., 173n. and economic contraction, 24, 26–7, Andrews, Edmund L., 201n. 29–31, 32–4, 37, 137n., 154n., 159n., Anscombe, G. E. M., 40, 162n. 162n. anti-interventionism, 205n. and economic inequality, 30, 151n. see also government intervention in the effect on consumer and lender economy confidence, 11–13 anti-Keynesianism, 22, 46, 58, 67 effect on debt-to-GDP ratio, 13, 26, 36, anti-liberalism, 125–6, 128, 130, 181n., 132n., 146n., 204n. 207n. effect on imports, 5 see also perfectionism effect on exports, 133n. Appelbaum, Binyamin, 142n., 159–67n., effect on real wages, 25 170–3n., 176n., 179n., 182n., 183n., effect on unemployment, 10, 11, 13–14, 202n., 213n. 16–18, 21, 24, 27–8, 30, 33, 34–7, 39, Apple, 92, 93, 196n. 138n., 147n. Aranda, Samuel, 147n. and effective demand, 5, 37 Ardagna, Silvia, 10, 136n., 162n. failure during the Great Depression, 5, Arrow, Kenneth J., 40, 162n. 31, 35, 36–7, 133n., 155n. Ash, Michael, 136n. and family analogy, 3–5, 133n. asset bubbles, 61–4, 169n., 176n., 177n. in France, 34–5, 151n., 156n., 158n. causes of, 62–3, 177n., 178n. and future generations, 16–18 274 ● Index austerity—Continued Baldwin, Richard E., 192n. G-20 on, 161n. Ball, Laurence M., 153n., 162n. German support for, 28, 34, 141n., Bank of America, 182n., 183n. 150n., 156n., 157n. bankruptcy in Greece, 29, 34, 132n., 149n., 150n. and automatic stay, 81, 188n. hardship caused by, 13–14, 15, 24–41, cost of experts, 81–2 132n., 146n., 154n., 157n., 164n., of Detroit, 81–4, 188–90n. 208n. effect on pension obligations, 81, 82, Hayek on, 5 189n., 190n. in Ireland, 34, 132n. effect on promises made in return for tax in Italy, 35, 132n., 148n. relief, 87 in Japan, 52, 155n. effect on second-mortgages, 71–2, 182n. in Latvia, 33, 156n. of Espírito Santo Financial, 147n. and national debt, 5, 11, 24, 36, 132n., federal management of, 82–3 136–7n., 155n., 204n. of Lehman Brothers, 164n. political support for, 37, 41, 57, 129, of public entities, 79, 81, 83, 188n., 147n., 156n., 157n., 160n. 189n. in Portugal, 26, 132n., 147n. of Puerto Rico, 83, 84, 189n., 190n. and public employment, 13, 138n., 159n. safe harbor provisions, 188n. Reinhart and Rogoff on, 9–10, 135n., of Stockton, 81, 189n. 136n., 213n. role of U.S. Trustee’s Office, 83, 190n. Schumpeter on, 5 value of claims released in, 182n. in Spain, 26, 32, 132n., 147n., 148n., see also home mortgage debt, state and 157n. local government debt von Mises on, 5 Barboza, David, 193n. in United Kingdom, 24, 31–2, 34, 145n., Barlevy, Gadi, 176n. 146n., 147n., 153n., 156n., 157n., Barley, Richard, 152n. 181n. Barofsky, Neil, 185n. in United States, 35–6, 135n., 159n., Barro, Josh, 195n. 160n., 162n. Barro, Robert J., 131n. Austin, Algernon, 139n. Bartlett, Bruce, 140n., 163n., 181n. Austrian economics, 3, 6, 42 Basu, Sanjay, 164n. Avent, Ryan, 162n., 163n. BBC News, 147n., 171n., 199n. Avi-Yonah, Reuven S., 192n., 195n., 197n. Bell, David N. F., 164n. axioms, for principle of full employment Benmosche, Ben, 123, 209n. in general, 16, 18, 21, 47, 48, 50, 64, 76, Bennhold, Katrin, 153n. 100, 128 Bentzein, Hans, 159n. burden of risk of error, 14, 26, 32, 39, 46, Berg, Andrew G., 180n. 57, 60, 61, 66, 67, 82, 96, 99 Berghahn, Volker, 212n. form and duration of unemployment, 98 Bergsten, C. Fred, 201n., 202n. large losses, 66 Berlin, Isaiah, 129, 205n., 212n. non-dictatorship, 63 Berlin, Noah, 159n. Bernanke Ben S., 36, 64, 71, 160n., 161n., Bagli, Charles V., 191n. 170n., 178n., 179n., 182n., 183n., Baier, Jens, 141n. 185n., 205n. Bair, Shelia C., 209n. Bernard, Tara Siegel, 139n., 182n., 185n. Bajaj, Vikas, 135n. Bernasek, Anna, 170n. Baker, Dean, 199n., 202n. Bernheim, B. Douglass, 131n. Baker, Peter, 140n. Bernstein, Jared, 142n., 202n. Baker, Scott R., 137n. Bilefsky, Dan, 156n. Balderrama, Francisco E., 199n. Binswanger, Harry, 212n. Index ● 275

Bivens, Josh, 133n., 135n., 136n., 138n., layoffs at Disney, 19–20, 143n. 139n., 160n., 179n., 202n. layoffs at Southern California Edison, Blackstone Group, 209n., 210n. 143n. Blackstone, Brian, 159n., 199n. no personal liability on home mortgage Blanchard, Oliver, 155n., 168n. loans, 77, 186n. Blanchflower, David G., 146n., 164n. Callis, Robert R., 210n. Blasi, Gary, 211n. Calmes, Jackie, 159n., 160n., 201n. Blasio, Bill de, 191n. capitalism, 2, 5, 65, 69, 109, 110, 112, 113 Bleemer, Zachary, 210n. Cappelli, Peter, 142n. Bloom, Nicholas, 137n. Carney, Mark, 62, 154n. Blow, Charles M., 208n. Carr, Kelly, 196n. Blythe, Mark, 132n., 133n., 154n., 155n., Carrns, Ann, 184n. 159n. Carvajal, Doreen, 177n. Boeing, 93, 191n., 192n., 197n. Casciani, Dominic, 199n. Boland, Vincent, 185n. cash hoarding, 17, 47, 49, 50, 52, 56, Bonefeld, Werner, 212n. 164n., 168n., 169n. Bor, David, 199n. see also liquidity preference Borio, Claudio, 178n. Cassidy, John, 180n. borrowing. See lending Castle Stephen, 145n., 146n., 151n., 153n., Boston Consulting Group, 141n., 142n. 155n., 157n., 176n., 186n., 196n., Bovino, Beth Ann, 180n. 197n. Bowers, Simon, 145n. Cecchetti, Stephen G., 135n. Bowles, Samuel, 67–8, 180n., 181n. Center for Responsible Lending, 169n. Bowley, Graham, 173n. Chakrabortty, Aditya, 208n. Boyce, Alan, 181n. Chambers, John B., 180n. Boyer, Robert, 67–8, 180n. Chen, Serena, 207n. Bradford, Scott C., 201n. Chetty, Raj, 139n. Bradley, Keith, 207n. China, 23, 104, 117, 154n., 203n. Bray, Chad, 141n., 147n., 158n., 177n., currency manipulation by, 107, 202n. 186n., 193n., 194n. regulatory competition by, 200n. Breitenbach, Dagmar, 198n. retaliatory tariffs by, 105 Brown, Meta, 210n. Chisholm, James, 153n. Buchanan, James M., 52, 53, 55–8, 131n., Christou, Odysseas, 150n. 174n. Clark, Nicola, 197n. Buffett, Warren E., 66, 179n. Clausing Kimberley A., 197n. Bulik, Mark, 192n. Clemente, Frank, 195n. Bureau of Labor Statistics, 154n., 166n., Clifford, Stephanie, 134n., 194n. 174n., 175n., 190n. Clinton, William Jefferson, 22, 42, 58, Burkhead, Jesse, 131n., 141n. 142n. Burrowes, Jennifer, 143n. Coburn, Tom, 193n., 195n. Bush, George W., 13, 22, 23, 42, 140n., Cohan, William D., 209n. 144n., 212n. Cohen, G. A., 127, 212n. Butler, Sarah, 163n. Cohen, Norma, 134n., 145n., 146n., 157n. Buttonwood, 167n. Cohen, Patricia, 139n., 160n., 179n., 185n., 208n. Cabra, Mar, 196n. Cohn, D’Vera, 200n. Cadman, Emily, 146n. Cole, G. D. H., 159n. California collective action clauses in bonds, use of, bankruptcies in, 81, 189n. 188n. Fair Political Practices Commission, collective action problems, 74 206n. Confessore, Nicholas, 206n., 207n. 276 ● Index

Congressional Budget Office, 100, 137n., DeFreitas, Gregory, 199n. 140n., 159n., 161n., 199n. deleveraging, 7, 132n. Cooke, Kristina, 208n. Dell’Ariccia, Giovanni, 168n. Coolidge, Greg, 131n. DeLong, J. Bradford, 132n., 136n., 155n., Cooper, David, 139n. 178n., 201n., 205n. Corkery, Michael, 169n., 182n., 183n., depression, 22, 25, 27, 132n., 156n., 159n., 186n., 189n., 190n., 210n. 165n., 185n. Costa, Daniel, 142n. see also Great Depression Council of Economic Advisors, 139n., deregulation, 62, 185–6n. 142n., 144n., 146n., 154n., 201n. derivatives, 79, 81, 166n., 188n. Cowell, Alan, 157n. see also interest rate swaps Cowen, Tyler, 200n. Desai, Mihir A., 193n. Coy, Peter, 136n. Detroit, 81–4, 188–9n. credit. See lending cuts in municipal pensions by, 84, 189n., Creswell, Julie, 168n. 190n. Cristi, Renato, 206n. Detroit Institute for the Arts, 83–4 crowding out, 2, 5–8, 10, 133n., 134n. Dewan, Shaila, 134n., 138n., 179n., Cuomo, Andrew, 191n. 181–4n., 186n., 187n., 210n., 211n. Cyprus Dharmapala, Dhammika, 198n. economic contraction in, 151n. Dietsch, Peter, 190n., 197n. effects of austerity in, 29, 150n. discrimination against unemployed, 15, effect of write-down of Greek bonds on, 140n. 151n. Dome, Takuo, 131n. haircut for depositors in, 29, 150n. Donadio, Rachel, 149n. unemployment in, 29, 150n. Drabkin, Eric J., 197n. Drew, Christopher, 191n., 197n. Dabla-Norris, Era, 179n. Drucker, Jesse, 195n. Dahl, Darren, 141n. Dudley, Renee, 195n. Daley, Suzanne, 138n., 147–50n. Duhigg, Charles, 196n. Damon, Anjeanette, 191n. Dustmann, Christian, 199n. Datablog, 145n., 146n. Davey, Monica, 188n., 189n., 190n. Eaton, George, 157n., 166n., 176n. Davidai, Shai, 213n. Eavis, Peter, 158n., 168n., 175n., 177n., Davidoff, Steven M., 165n. 181n., 182n., 183n., 185n., 186n., Davidson, Adam, 143n., 155n., 200n. 187n. Davis, Carl, 179n. economic contraction. See economic growth Davis, Gavyn, 152n. Economic Focus, 155n. Davis, Julie Hirschfield, 194n. economic growth Davis, Steven J., 137n. and consumer and investor confidence, Dealbook, 168n. 10, 13, 152n. debt. See home mortgage debt, national and crowding out, 6, 8, 10 debt, state and local government debt and debt-to-GDP ratio, 8–10, 36, 136n., debt-to-GDP ratio, 3, 22, 135n. 145n., 146n., 156n. effect of austerity on, 26, 27, 30, 36, 37, distribution of benefits from, 111, 113, 132n., 148n., 151n., 156n. 177n. effect on economic growth, 8–10, 36, and economic inequality, 30, 64, 66, 136n. 180n., 181n. effect on interest rates, 175n. effect of austerity on (see austerity) deficit spending. See fiscal stimulus effect of deficit spending on, 5, 36, 141n., deflation, 18, 48, 49, 52, 57, 132n., 166n., 161n. 167n., 172n., 173n., 175n., 202n. effect of foreclosure rate on, 77 Index ● 277

effect of lack of skilled labor, 101 and economic performance, 5, 17–21, in Europe, 27–8, 30, 32–5, 148n., 141n. 150–4n., 157n., 158n., 162n., 164n., effect of austerity on, 5, 37 172n., 173n., 199n. effect of cash hoarding on, 7, 49 export-led, 107 effect of currency devaluation, 47 in Germany, 141n., 149n., 151n., 152n. effect of deficit spending on, 18, 21 and growth of financial sector, 135n. effect of monetary policy on, 61 and human capital, 98 Hayek on, 59 and increased consumption, 2 and immigration, 100–1 and inflation, 60, 142n., 163n., 164n., and inflation, 18, 19, 59, 60 170n. Keynes on, 2, 38–9, 41–2, 44, in Japan, 163n. 176n. and national debt, 8–10, 36, 135n., for labor, 21, 60 136n., 145n., 146n., 156n. and pension cuts, 82 old v. new industries, 8 Pigou on, 175n. and private lending rates, 134n. and price of goods, 6, 42 and rates of taxation, 69 redistribution and, 66–9, 180n. and real wages, 43–4 and skills gap, 19–20, 141n. and tax incentives, 87 Eichengreen, Barry, 154n. and trade deficit, 165n. Eisenberry, Ross, 180n. and uncertainty, 12 Eisinger, Jessie, 169n., 177n. in United Kingdom, 24, 32, 26, 145n., Elliott, Larry, 145n., 146n., 147n., 153n., 146n., 176n., 186n. 156n., 157n., 163n. in United States, 35, 36, 48, 159n., Elmendorf, Douglas E., 159n. 160n., 161n., 170n., 173n., 199n. Elmer, Vickie, 187n. economic inequality Erlanger, Steven, 146n., 150n., 151n., and austerity, 30, 41, 151n. 153n., 201n. and decline of powerful states, 181n. ESPN, 86, 191n. effect on economic growth, 180n. euro zone effect of monetary policy on, 65, 179n. attitude toward peripheral members, and inflation of asset bubbles, 178n. 133n. and negative liberty, 128 austerity in, 27, 29, 30, 157n. and progressive taxation, 65 demand for imported goods, 133n. redistribution as a cure for, 64, 66, economic growth in, 30, 31, 151n., 180n. 152n., 153n., 154n. and supply-side economics, 144n. and Greece, 150n. and unemployment, 65 haircut for depositors in Cyprus, 29 in United Sates, 183n. inflation in, 49, 52, 166n., 167n. Economic Policy Institute, 133n., 135n., mandate of ECB, 44, 163–4n. 136n., 138n., 139n., 142n., 143n., national debt of, 132n. 160n., 166n., 180n., 200n., 201n., risk of disintegration, 165n. 202n., 209n. unemployment in, 32, 152n., 154n., Eddy, Melissa, 149n., 164n., 165n., 167n., 155n. 172n., 193n. use of collective action clauses in bonds, Eder, Steve, 191n. 188n. education. See training, retraining European Central Bank (ECB), 27, 30, efficiency, economic, measures of 44, 49, 51, 52, 134n., 135n., 153n., Kaldor-Hicks, 79, 80 159n., 163n., 164n., 165n., 167n., Pareto, 73, 74, 79 171n., 172n., 173n., 187n. effective demand European Commission, 93, 135n., 142n., and collapse of housing market, 72 149n., 152n., 196n. 278 ● Index

European Union (EU) Federal Open Market Committee (FOMC), austerity in, 26, 132n., 158n. 142n., 165n. credit rating, 152n. Federal Reserve Bank, 12, 22, 36, 134n., economic growth in, 152n. 161n. effect of troubles with euro, 167n. attitude toward inflation, 170n. fear of inflation in, 163n. of Chicago, 165n., 188n. immigration into, 200n. dual mandate of, 164n. skills gap in, 142n. and forward guidance, 170n. Eurostat, 148n., 151n., 152n., 154n., of Minneapolis, 142n. 157n., 167n. of New York, 154n., 174n., 190n., 210n. Evans, Charles L., 166n., 169n. open market operations, 23, 43, 50, 83, Evans rule, 169n. 84 Evenoff, Douglass D., 178n., 179n. of St. Louis, 134n. Ewing, Jack, 134n., 141n., 145n., 147n., supervisory authority of, 178n. 148n., 149n., 151–4n., 156n., 157n., and value of dollar, 202n. 158n., 161n., 164–7n., 169n., Federal Reserve Board, 137n., 138n., 144n., 171–4n., 198n., 202n. 160n., 162n., 164n. exploitation, definition of, 99 Feiwel, George R., 204n., 205n. exploitation, elimination of Financial Crisis of 2008, 7, 25, 26, 30, 33, effect on deficit, 70 39, 61, 62, 76, 81, 102, 137n., 146n., effect on income distribution, 64, 66, 111 148n., 153n., 156n., 178n., 183n., ex post v. ex ante, 67 185n., 187n. and extension of overtime rules, 67, 68 Fincher, Stephen, 124 and foreign workers, 90, 96, 103, 104, Finley, Moses I., 207n. 107, 192n., 193n., 200n., 201n., Firestone, David, 189n. 203n. fiscal stimulus, 5, 6, 16, 30, 56–9, 64, 70, and free trade, 103 113, 161n., 176n., 179n. lexical priority of, 103 v. austerity, 5, 10, 16, 12, 21, 26, 28, and unemployment, 66, 103 32–5, 39, 52, 57, 157n., 158n., 181n. and currency fluctuations, 165n., 202n. farm subsidies, 211 by developing economies, 32–3 farm workers, shortage of, 102 by ECB, 159n., 171n., 172n., 173n. Farmer, Roger E. A., 162n. in France, 29–30, 158n. farmers v. the poor, 212n. and future generations, 16–18 Fang, Lee, 211n. and inflation, 5, 18–20, 41, 52–3, 170n. fascism in Japan, 155n., 173n., 174n. and distribution of negative liberty, 125–6 Kalecki on, 114, 179n. as form of liberalism and democracy, 127 MMT on, 144n. and full employment, 116, 128, 203n. and national debt, 1, 10–11, 22, 98–9 Gentile on, 127, 212n. and skills gap, 19–21 Hayek on, 206n. in United Kingdom, 176n. and Joseph de Maistre, 212n. in United States, 31, 32, 154–5n., 159n., Kalecki on, 205–6n. 160n., 166n., 169n., 170n. ordoliberalism as reaction to, 127 see also austerity, public spending political v. interpersonal, 117, 118–19, Fischer, Karen, 206n. 126 Flanders, Laura, 184n. and positive liberty, 127 Flassbeck, Heiner, 150n. and suppression of workers, 116 Fleischer, Victor, 194n. as threat to freedom, 117 Foley, C. Fritz, 198n. Faux, Jeff, 200n. Forbes, Kristin J., 198n. Favero, Carlo, 10, 136n. foreclosure. See home mortgage debt Index ● 279 foreign trade full employment and currency manipulation, 107, 165n. in general, 10, 57, 58, 65, 75, 103, 109, dependency on, 33, 133n. 110 effect on GDP, 106 principle of, 14, 15, 16, 18, 21, 32, 35, effect on unemployment, 103–7, 200n., 39, 45, 46, 47, 48, 50, 51, 57, 60, 61, 202n. 63, 64, 65, 66, 67, 69, 76, 79, 80, 81, and exploitation of foreign workers, 84, 88, 96, 97, 99, 100, 102, 103, 104, 103–4, 106–7 106, 107, 128 GATT, 93 reasons why people might oppose, intra-firm, 92, 196n. 109–11, 114–16, 128 NAFTA, 201n. Fuller, Joseph, 143n. protectionism, in general, 89, 103–5 Furceri, Davide, 153n. and regulatory competition, 106–7, 200n., 201n. Gable, Mary, 139n. retaliatory tariffs, 105 Gagnon, Joseph E., 202n. risks of free trade pacts, 105–6, 200–1n., Galbraith, James K., 148n. 202n. Garicano, Luis, 204n. Trade Adjustment Assistance Act, 202n. Geitner, Paul, 155n. WTO, 93 Gelles, David, 168n., 193n., 194n., 195n. forward guidance, 61, 169n. General Electric (GE), 192n., 195n. Fourquet, Laurie, 153n. General Motors (GM), 84, 87, 191n. Fox, Justin, 135n. Gentile, Giovanni, 127, 212n. France Germany austerity in, 34–5, 151n., 156n., 158n., on austerity, 28, 34, 35, 141n., 149n., 159n. 156n., 158n., 159n., 212n. budget deficit in, 31, 158n. cost of borrowing for, 141n., 158n. cost of borrowing for, 34, 158n. economic growth in, 30, 133n., 151n., debt-to-GDP, 151n. 152n., 154n., 198n. economic growth in, 151n., 152n., 154n., exports from, 133n. 156n., 158n. on Greece, 28 effect of reduction in working hours, on immigration, 200n. 198n. inflation in, 44, 49, 163n. evasion of regulation in, 114 job losses to United States, 193n. firm size in, 114, 204n. Kuzarbeit program, 97 inflation in, 167n. mini-jobs program, 97, 198n. unemployment in, 32 Nazi period, 116 Frank, Barney, 117, 205n. and ordoliberalism, 212n. Frank, Robert H., 177n., 180n. and public liability for private loans, Frankel, Jeffrey, 132n. 148n. Frattini, Tommaso, 199n. unemployment in, 32, 97, 198n. freedom. See liberty and value of euro, 107, 202n. Freeland, Chrystia, 181n., 206n. Weimar period, 28, 133n. Freytas-Tamura, Kimiko De, 141n., 143n. Gertler, Mark, 178n., 185n. Friedman, Benjamin M., 140n., 179n. Giavazzi, Francesco, 10, 136n., 137n. Friedman Milton Gibson, D. W., 211n. on Keynes, 176n. Gilbert, Jonathan, 164n. on natural rate of unemployment, 52–5, Gilens, Martin, 204n. 57, 58, 59, 174n., 175n. Giles, Chris, 146n., 156n., 157n. rational expectations explanation of Gilovich, Thomas, 213n. inflation, 60, 174n. Gold, Matea, 207n. Fieldhouse, Andrew, 160n. Goldberg, Michele, 181n. 280 ● Index

Goldfarb, Robert W., 143n. Grundfest, Joseph A., 187n. Goldstein, Matthew, 143n., 184n., 210n. Guevara, Marina Walker, 196n. Goleman, Daniel, 208n. Golway, Terry, 208n. Habermas, Jürgen, 122, 208n. Goodman, Laurie, 210n. Hakim, Danny, 146n., 153n., 154n., 158n., Goodman, Peter S., 208n. 167n., 196n. Gordon, John Steele, 143n., 144n. Halasi, Albert, 205n. Gorton, Gary, 176n. Hansen, Alvin H., 131n., 132n., 136n., Gough, Neil, 165n., 174n., 202n. 138n., 144n., 146n., 168n. Gould, Elise, 138n., 166n. Hanson, Samuel G. government borrowing. See public Hassan, Mehdi. borrowing, national debt Hay, George, 147n. government intervention in the economy Hayek, F. A. need for, 64, 69, 178n., 205n., 206n. on austerity, 5, 37 see also anti-interventionism on crowding out, 6 government spending. See public spending on deficit spending, 18, 133n., 141n., Graham, David A., 209n. 163n., 165n. Graham, Frank D., 205n. on distinction between totalitarianism Grauwe, Paul De, 147n. and authoritarianism, 206n. Great Depression, 5, 6, 31, 35, 36, 37, 39, on effect of increase in effective demand, 100, 111, 115, 117, 128, 132n., 133n., 59 154n., 175n., 205n. on full employment, 58–60, 174n., Great Prosperity, 58, 59, 175n. 175n., 176n. Greece on the Great Prosperity, 58, 175n. bailout for, 29, 149n., 150n., 213n. on Keynes and Keynesianism, 58, 59, creditors attitude toward, 121, 133n., 161n., 175n., 176n. 149n., 150n. on relation between unemployment and debt relief needed for, 27–8, 83, 149n., freedom, 117 151n., 157n. on role of government, 8 economic contraction in, 27, 33, 148n., on stagflation, 58 153n. on use of inflation to reduce effect of austerity on, 27–9, 34, 132n., unemployment, 55, 56, 59–60, 141n., 150n., 153n., 155n. 176n. increasing debt-to-GDP, 22, 27, 83, health insurance, 15 132n. Hecht, Peter, 189n. Nazi-era loans to Germany, 28, 150n. Hedges, Chris, 140n. social unrest in, 28, 34, 150n. Hendren, Nathaniel, 139n. systemic risk created by situation in, 30, Herndon, Thomas, 136n. 208n. Hersh, Seymour, 213n. unemployment rate in, 27 Herzog, Lisa, 203n. Green, Richard K., 209n. Higgins, Andrew, 150n., 151n., 156n., Greenhouse, Steven, 192n., 193n. 157n., 196n. Greenspan, Alan, 23, 43, 63, 144n., 163n., Higgins, Michelle, 177n. 178n. Hiltzik, Michael, 154n., 160n. Greenstone, Michael, 138n. Himmelstein, David, 199n. Greenwood, Robin, 171n. Hines, James R. Jr., 193n. Gregor, A. James., 212n. Hirsch, Jerry, 191n. Gregory, T. E., 165n. Holland, Gale, 211n. Greifeneder, Rainer, 143n. Hollande, Franҫois, 34, 158n. Grieco, Paul L. E., 201n. Hollander, Samuel, 131n. Gross, Daniel, 208n. Holmes, Stephen, 212n. Index ● 281 home mortgage debt, foreclosure of in retirement, 82 counterproductive for lender, 70, 72, and right to renegotiate home loans, 74, 77–8 78 and deficiency judgments, 77 taxes on, 65–6, 69, 80, 91–2, 94, 96, and effective demand, 70, 71–2, 75 122, 158n., 187n., 196n. participation of hedge funds in, 72 see also redistribution and reduction in new lending, 70–1 inflation reluctance to refinance, 71, 73–4 and asset bubbles distinguished, 61–2 renegotiation as alternative, 72–3, 74, Buchanan on, 53, 55–7 77–8, 79 causes of, 18–20, 38, 42, 43, 49, 55, 57, and unemployment, 77–8 142n., 163n. value of claims released by creditor in and currency fluctuations, 47, 48, 165n. bankruptcy, 182n. and deficit spending, 3, 5, 18, 41, 42–3, homelessness, 34, 124, 138n., 209n., 211n. 53, 57, 58–9, 141n., 163n. Hoover, Kevin D., 162n. definitions of, 41–2, 50, 163n. Hu, Winnie, 140n., 212n. effect on distribution of wealth, 45 Hubbard, Glenn, 181n. in EU, 49, 52, 132n., 166n., 167n. Hudson, Michael, 196n. Friedman on, 52–5, 57, 174n., 176n. Hufbauer, Gary Clyde, 201n. Hayek on, 58–60, 141n. Hughes, Krista, 159n. in Japan, 52, 57, 163n., 173n. Hulse, Carl, 207n. Keynes on, 41–2, 43–4, 46, 176n. Hume, David, 1, 131n. and mandate of ECB, 44, 163–4n. Hurricane Sandy, 81, 188n. and mandate of Federal Reserve, 44 immigration, 99–103, 200n. moral importance relative to and fertility rates, 103 unemployment, 3, 18, 44–8, 50–1, effect on public purse, 100–1, 102 60–1, 82, 161n., 162n., 163n., 164n., effect on real wages, 101 170n. effect on unemployment, 100, 102 Piketty on, 45 and skills gap, 101–2, 200n. rational expectations explanation, 53–6, in United Kingdom, 101, 199n. 174n., 174n. in United States, 100–1, 199n., 200n. Schumpeter on, 132n. target rate, 48, 50, 52, 162n., 165n., income 166n., 168n., 169–70n. corporate, 91–2, 95, 96, 196n. and unemployment, 37, 38, 43, 44–7, decline in real, 27, 47 53–7, 142n., 167n., 170n., 171n., distribution of, 47, 64, 65, 66, 68, 69, 172n. 111–12, 114, 126, 165n., 179n., in United Kingdom, 25, 26, 43, 49, 51, 180n., 181n., 203n. 166n., 176n. and economic mobility, 213n. in United States, 48, 166n., 167n., 170n., effect of austerity on, 36 175n., 176n. from employment, 80, 114 who suffers, 45–6, 61, 82, 164n., 165n. fixed, 45–6, 82 see also deflation, Phillips curve, future expectations, 17, 80 stagflation and housing, 124, 210n., 211n. Ingraham, Christopher, 208n. and inflation, 25, 37, 163n. Inman, Phillip, 134n., 145n., 146n., 152n., from interest, 16, 80 153n., 156n., 171n., 173n. no-income loans, 76 irrational behavior. See rational behavior for overtime, 67 Institut national de la statistique et des ad psychological egoism, 128 études économiques, 167n. spending v. paying down debt, 76 interest rate swaps, 79, 81, 189n. reduction in, 14, 15, 99 exemption from automatic stay, 81 282 ● Index

International Monetary Fund (IMF), 153n., Jones, Clare, 145n. 156n., 188n. Jordà, Òscar, 137n., 147n., 178n. on austerity, 136n., 147n., 155n., 160n., Joshel, Sandra R., 207n. 162n. junk bonds, 50 on economic inequality, 179n., 180n. on Greece, 149n. Kaiser Family Foundation, 208n. on inflation, 168n. Kalecki, Michał interventionism. See government on fascism, 205n., 206n. intervention in the economy and Keynes, 163n., 179n. inversions, 91–2, 95, 193n., 194n., 196n., Krugman on, 204n. 197n. on increasing effective demand, 179n. invisible hand, 112, 203n. on inflation, 163n., 164n. Ioannou, Christine, 150n. on obstacles to full employment, 114–17, lreland 141n., 204n., 205n., 206n. bailout of, 187n. on redistribution and unemployment, cost of borrowing for, 22 65 effects of austerity in, 33, 34, 132n., Kanter, James, 148–52n., 156n., 157n., 157n. 158n., 172n., 173n., 196n., 197n., famine of 1847, 121 201n., 202n. mortgage relief in, 187n. Kaufman, George G., 176n., 178n. national debt, 83, 148n. Keegan, William, 146n. as tax haven, 93, 196n. Keltner, Dacher, 207n., 208n. Irons, John, 135n. Kennedy, Ellen, 212n. Irwin, Neil, 137n., 154n., 155n., 159n., Kennedy-Johnson administration, 175n. 165n., 166n., 167n., 169n., 171n., Kennedy, Randy, 190n. 172n., 173n., 177n., 182n., 201n. Kerr, Sari Pekkala, 199n. Italy Kerr, William R., 199n. austerity in, 27, 32, 35, 148n., 154n., Keynes, John Maynard, 134n., 162n., 156n., 158n. 163n., 164n., 203n. cost of borrowing for, 158n. on assumption of economic rationality, 41 debt-to-GDP, 27, 132n., 148n. on austerity, 36 economic contraction in, 27, 30, 32, 148n. on deficit spending, 2, 9, 59 risk to depositors in, 29 on economic egoism, 113 size of national debt, 83 on inflation, 41–2, 43–4, 46, 176n. Ivory, Danielle, 138n. on liquidity preference, 7 on stickiness of wages, 43, 46, 59 Jackson, Andrew, 21 on stimulating effective demand, 36–8, Jackson, Thomas H., 188n. 101, 133n., 179n. Jayadev, Arjun, 137n. Keynesians and Keynesianism, 22, 36, 46, Jelmayer, Rogerio, 132n. 57 Ji, Yuemei, 147n. critique of classical economics, 37–8 Johnson, Boris, 209n. need for microfoundations, 39–41 Johnson, Kirk, 191n. on relation between inflation and Johnson, Simon, 140n. unemployment, 43–4, 46, 59, 176n. Johnston, David Cay, 144n., 181n. and stagflation, 37–9 Joint Center for Housing Studies, 182n., success of, 58, 157n., 162n. 210–11n. Kharoubi, Enisse, 135n. Jolly, David, 133n., 138n., 145n., 147n., Killingsworth, Charles, 19, 21, 141n. 148n., 151n., 152n., 153n., 154n., Kimball, Will, 200n. 155n., 157n., 158n., 167n., 171n., King, Mark, 146n. 172n., 174n., 186n., 195n., 199n. King, Martin Luther Jr., 118, 139n., 207n. Index ● 283

Kitsantonis, Niki, 148n., 149n., 150n., 153n. Lapavitsas, Costas, 150n. Klein, Lawrence R., 203n. Lattman, Peter, 168n., 183n. Klein, Matthew C., 146n. Latvia Kleinbard, Edward D., 195n. cost of borrowing in, 33, 156n. Kline, Patrick, 139n. economic contraction in, 33, 156n. Klitgaard, Thomas, 154n. effects of austerity in, 33, 156n. Kocherlakota, Narayana, 142n., 162n. unemployment in, 33, 156n. Kochhar, Kalpana, 179n. Lazear, Edward P., 142n. Kocieniewski, David, 196n. Laursen, John Christian, 131n. Kollewe, Julia, 138n., 173n. Lee, Donghoon, 210n. Konczal, Mike, 137n. Legrain, Philippe, 171n. Kramer Andrew E., 161n., 195n., 197n. Leigh, Daniel, 153n., 155n., 162n. Kraus Michael W., 207n., 208n., 213n. Lelarge, Claire, 204n. Kresin, Melissa, 210n. Lemley, Mark A., 187n. Kristoff, Nicholas, 209n. lending Krugman, Paul, 11, 133–9n., 142–6n., central bank duty to supervise, 64, 185n. 148n., 151–6n., 158n., 159n., 160n., effect of inflation on lenders, 46 164n., 165n., 167n., 170n., 173n., to governments, 34, 81, 175n. 176n., 181n., 182n., 185n., 192n., and inflation of asset bubbles, 178n. 202–5n., 207n., 208n., 209n., 211n., junk bonds, 50 213n. when irresponsible, fraudulent, and/ Kuehn, Daniel, 142n. or otherwise wrongful, 63, 64, 75–6, Kulish Nicholas, 150n., 157n., 201n. 169n., 185n. Kurzarbeit. See work-sharing preference for “old” industries, 8 Kuttner, Kenneth N., 178n. reluctance of private banks to engage in, 7, 52, 70–1, 134n., 178n., 186n. labor and renegotiation, 73 alleged scarcity of skilled, 19, 21, 142n., see also home mortgage debt, national 143n., 200n. debt, state and local government debt bargaining power of, 111 Leonhardt, David, 140n., 166n. cost of foreign, 89, 90, 103–6 Lerner, Abba P., 132n., 140n., 205n. exploitation of, 90, 103–4, 105, 112, Levin, Carl, 193n., 195n. 201n., 202n. Lewis, W. Arthur., 203n. no general scarcity of, 18–19, 28, 145n., lexical priority, 3, 45, 47, 100, 102, 103 203n. Li, Shan, 143n. and immigration, 199n. liberal capitalist state, attributes of imported, 20 appropriate attitude toward risk in, 110 industrial reserve army, 111 and equal worth of all, 69 inflation in market for, 42, 44, 45, 59, 60, priority due reducing unemployment in, 61, 62, 68, 176n. 109, 110 market reforms, 57 psychological egoism in, 110–15, 125, regulation of, 57, 114–15 128 and supply and demand, 43, 44, 46, 60 and unjust wars, 2 surplus of, 18 use of progressive taxation in, 65 underutilization of, 39 see also invisible hand, liberalism see also full employment, unemployment liberalism labor participation rate, 83 attitude toward domination by private Lafer, Gordon, 209n. parties, 119, 128 laissez faire, 35, 112, 203n. and commitment to equality, 125–6, 128 landlord-tenant relationship, opportunities and contempt for poor and unemployed, for domination, 123–4 69 284 ● Index liberalism—Continued Maciag, Mike, 192n. and deficit spending, 22 Madrick, Jeff, 170n., 201n. and democracy, 1 Maistre, Joseph de, 129, 212n. and economic egoism, 125, 127 Malkin, Elisabeth, 156n. and immigration, 102 Malliaris, A. G., 176n., 178n. and inflation, 47 Malthus, Thomas Robert, 2, 131n. and negative liberty, 125–7, 129 Mangano, Phillip, 211n. v. perfectionism, 181n., 206n. Mankiw, N. Gregory, 167n., 199n., 209n. and redistribution, 65 Manpower Group, 141n. and republican liberty, 207n. Marchingo, Mathew, 141n. reason v. faith in pure and practical marginal propensity to consume, 34, 37, 64, reasoning, 129–30 66, 67, 68, 86, 134n., 179n. and unemployment, 109–13, 116, 117, Marino, Vivian, 177n. 127–8 Market Data Center, 157n. libertarianism Marshall, Alfred, 10, 136n. and government regulation, 74, 119, 128 Mason, Rowena, 147n. and negative liberty, 75, 184n. Mathews, Dylan, 144n. and self-ownership, 75, 184n. Mattioli, Dana, 168n. liberty Mauro, Paolo, 168n. and wage flexibility, 46 Mayer, Jane, 206n. see also negative liberty, positive liberty, McClatchy-Tribune News Services, 191n. republican liberty McCormick, Danny, 199n. Lincoln, William F., 199n. McDonough, Katie, 209n. Linder, Fabian, 133n., 150n. McGeehan, Patrick, 139n., 212n. Lipton, Eric, 179n., 206n. McKenna, Claire, 198n. liquidationism, 115–16, 132n., 205n. McKinsey & Company, 132n. liquidity preference, 7, 134n. McMahon, Tim, 175n. see also cash hoarding McMorrow, Paul, 183n. long term v. short term, 14, 24, 53, 95, 101, McNeill, Ryan, 208n. 104 McVeigh, Tracy, 180n. Looney, Adam, 138n. Meade, J. E., 163n. Los Angeles Homeless Services Authority, Medina, Jennifer, 200n. 211n. Mendoza-Denton, Rodolfo, 207n. Los Angeles, homeless problem in, 124, Merced, Michael J. de la, 168n., 169n., 211n. 193n., 195n., 209n. Loungani, Prakash, 153n., 162n. Merkel, Angela, 149n. Lovett, Frank, 205n. Meyer, Chris, 181n. Lovett, Ian, 211n. Mian, Atif, 183n. Lowell, B. Lindsay, 142n. Mill, John Stuart, 1, 10, 131n., 133n., Lowrey, Annie, 136n., 137n., 144n., 150n., 136n. 153n., 154n., 157n., 159n., 160n., Miller, Marcus, 146n. 181n., 185n., 203n., 210n. Miller, Rich, 167n. Lowry, Sean, 201n. Minder, Raphael, 147n., 148n., 153n., Lubben, Stephen J., 188n. 157n. luck egalitarianism, 115 mini jobs, 97 Ludema Rodney D., 192n. Minick, Lynn, 198n. Luxembourg, 93, 196–7n. minimal state, 63 Ministry of Labour, 133n. Macalister, Terry, 195n. Mishel, Lawrence, 139n. MacArthur Foundation, 183n. Mitchell, Josh, 139n. Machiavelli, Nicolo, 117, 205n. modern monetary theory (MMT), 144n. Index ● 285 monetarism, 6, 8, 52, 57, 58 analytical tool v. political theory, 75, 125, see also Friedman, Milton 126 monetary policy Berlin on, 212n. and asset bubbles, 61–4, 177n., 178n., distribution of, 126 185n. and domination, 120, 128 and economic inequality, 65, 179n. in fascist society, 125, 126, 127 and inflation, 62 fundamental right v. mere interest, 75, limits of, 155n., 178n. 125, 126, 128 and national debt, 23 maximization of, 75, 125, 129 and unemployment, 62, 164n., 178n., and nostalgia for master-servant 181n. relationship, 126 MoJo News Team, 208n. and positive liberty compared, 127 Monaghan, Angela, 146n. and self-ownership compared, 75, Montagnoli, Alberto, 164n. 184n. Mooney, Chris, 212n. subject to equality restraint, 125–9 Moore, Heidi, 197n. Taylor on, 184n. moral hazard, creation of, 74, 77, 96 neoliberalism, influence in Chile, 206n. Morgenson, Gretchen, 135n., 179n., 182n., New Jersey, and use of tax incentives, 88, 183n., 186n., 188n., 195n., 196n. 192n. Moro, Mirko, 164n. New York City, 83, 124, 139n., 177n., Morrison, Matt, 143n. 178n., 191n. Moulds, Josephine, 146n. New York City Rent Guidelines Board, Mulheirn, Ian, 146n. 211n. Mulligan, Casey B., 198n. Nietzsche, Friedrich, 207n., 208n., 209n. multiplier effect, 13, 37, 101, 138n., 191n., on distinction between slave morality and 205n. the morality of the nobility, 120 Mundaca, Michael, 197n. on greater worth of the elite, 69, 124 Municipal Assistance Corporation, 83, on purpose of social cooperation, 12 190n. on self-affirmation, 124 Musk, Elon, 86, 191n. Nixon, Ron, 211n. Muth, John F., 174n. Nocera, Joe, 198n. Noonan, Peggy, 144n. NAFTA, 200–1n. Nordhaus, William D., 204n. Nagourney, Adam, 179n., 211n. Norris, Floyd, 132n., 133n., 134n., 138n., NAIRU. See natural rate of unemployment 139n., 149n., 152n., 154n., 155n., national debt, 5, 66, 131n., 132n., 140n., 156n., 161n., 166n., 167n., 174n., 143n. 185n., 187n., 188n., 190n., 197n., argument for, 22–3, 144n., 163n. 198n., 205n., 210n. effect of austerity on, 24, 132n., 145n., Nussbaum, A. David, 213n. 146n. Nyhan, Brendan, 213n. effect on economic growth, 22 and investor and consumer confidence, Oakeshott, Michael, 119, 207n. 11, 204n. Obama, Barack, 12, 15, 22, 56, 91, 106, when owed to ourselves, 16 113, 140n., 144n., 154n., 180n., see also debt-to-GDP ratio, sovereign debt 183n., 185n., 194n., 201n., 207n., natural rate of unemployment, 45, 52–4, 213n. 57, 58, 175n. O’Brien, Matthew, 138n., 154n., 159n. Navarro, Mireya, 211n. O’Connor, Sarah, 144n., 145n., 146n., Neate, Rupert, 186n. 157n. negative interest, 52, 158n., 172n. Okun, Arthur M., 180n. negative liberty Olsen, Erik, 149n. 286 ● Index

Orange County, California, bankruptcy of, Perotti, Roberto, 10, 13, 136n., 137n. 189n. Petek, Gabriel J., 180n. ordoliberalism, 127, 205n., 212n. Petruno, Tom, 134n. O’Reilly, Bill, 122 Pew Research Center, 208n. Organization for Economic Cooperation Pfanner, Eric, 198n. and Development (OECD), 25, 30, Phillips curve, 38, 43, 176n. 95, 97, 100, 136n., 142n., 146n., Phillips, Alban W. (Bill), 38 148n., 150n., 151n., 154n., 156n., Phillips, Matt, 135n., 144n. 196n., 199n. Pianigiani, Gaia, 148n. Organization of Petroleum Exporting Pickard, Jim, 145n. Nations (OPEC), 38 Piff, Paul K., 207n. Osborne, George, 25, 31, 136n., 145n., Pigou, A. C., 175n., 176n. 146n., 147n., 153n., 154n., 156n., Plane, Mathieu, 151n. 157n., 186n. Plant, Arnold, 165n. Osborne, Hilary, 146n., 186n. plutocracy, 120, 206n., 208n., 209n. Osterman, Paul, 142n. see also fascism, perfectionism Ostry, Jonathan D., 180n. political liberalism. See liberalism Oswald, Andrew, 209n. Pollack, Andrew, 169n., 196n. O’Toole, Fintan, 157n. Pollin, Robert, 136n., 199n. overtime rules, extension of, 67–8, 180n. Popper, Nathaniel, 160n., 178n., 185n. Oxfam, 151n., 180n. Porath, Christine, 199n. Porter, Eduardo, 132n., 133n., 154n., Packer, George, 139n. 155n., 157n., 162n., 163n., 167n., Page, Benjamin I., 204n. 196n., 202n., 209n. Panic of 1837, 21 Portugal, 22, 26, 83, 132n., 147n. Parker, Ashley, 200n., 207n. positive liberty Parker, George, 145n. and fascism, 127 part-time employment, 97, 198n. and negative liberty compared, 127 see also mini jobs, work-sharing poverty, 28, 122, 181n., 212n. participation rate. See labor participation Povoledo, Elisabetta, 158n. rate Preston, Julia, 143n. Passel, Jeffry S., 200n. Prevost, Lisa, 182n., 210n. payday loans, 184n., 187n. Prisoner’s Dilemma, 87, 192n. Peck, Emily, 136n. Protess, Ben, 185n. Peck, Richard, 154n. psychological egoism, 110–15, 125, 128 Pellegrini, Frank, 144n. public borrowing, 1–8, 16–18, 22, 26, 33, Pendall, Rolf, 210n. 66, 141n., 144n., 145n., 146n., 163n. pensions see also national debt cuts under austerity, 28, 149n. public goods, 3, 8, 112 cuts under bankruptcy laws, 81, 82, 84, public sector employment. See under 189n., 190n. unemployment lack of protection for, 190n. public spending modest level of most, 28, 82 Austrians on, 3 perfectionism, 69, 118, 120, 127, 129, claim that unproductive, 2, 3, 5 181n., 206n. as competition for private industry, 117 and maximizing negative liberty, 75, 125, and economic growth, 36, 37 129 and family analogy, 3–5, 133n. relative priority of faith and reason, on infrastructure, 52, 116 128–30, 212n. on military, 33, 35, 117, 160n. see also fascism, negative liberty, positive multiplier for, 13, 37, 138n., 191n., liberty 205n. Index ● 287

and national debt, 148n. Reiff, Mark R., 143n., 144n., 162n., 174n., v. quantitative easing, 50 175n., 178–81n., 183n., 184n., 188n., in United States, 36, 159n., 160n., 170n., 193n., 199n., 200n., 201n., 203n., 211n. 206n., 209n., 212n. see also austerity, fiscal stimulus Reinhart, Carmen M., 8–10, 135n., 136n. Puerto Rico, 83, 84, 189n., 190n. Reinhart, Vincent R., 135n. Putnam, Robert D., 140n. rental housing availability of, 124, 210n., 211n. quantitative easing, 43, 49, 50–1, 52, 59, demand increasing for, 210n. 61, 156n., 169n., 170n., 171n., 177n. flipping of, 72 hedge funds purchasing, 210n. Rachman, Gideon, 136n. rents increasing for, 124, 211n. Raman, Manjari, 143n. republican liberty Rampell, Catherine, 139n., 140n., 143n., and domination, 120, 207n. 159n., 166n., 183n., 198n. and self-ownership, 75 Rank, Mark R., 212n. Restuccia, Dan, 143n. rational behavior, 39–41, 53, 54, 63, 85, 87, retraining, 20 111, 129 see also training see also rational expectations explanation Reyburn, Scott, 177n. under inflation Rheinschmidt, Michelle L., 207n. rational choice theory, 58 Rohde, David, 208n. Ratner, Steven R., 193n. Ricardo, David, 2, 131n. Rattner, Steven, 191n. Rich, Motoko, 138n. Rawls, John, 140n., 144n. Ricka, Frantisek, 179n. Raza, Connie, 139n. Rigby, Elizabeth, 145n. Reagan, Ronald, 22, 141n., 163n. risk redistribution of income and wealth attitude toward, 55, 74, 110 from government to private sector, 41 of austerity approach, 26 Kalecki on, 65, 179n. burden of risk of error, 46, 60–1, 82, 99, limits on, 66 106 from poor to the rich, 41 and choice, 20 progressive v. regressive taxation, 65–6 of currency fluctuations, 89 and reduction of unemployment, 68–9, of default by homeowners, 78 181n. of default by public entities, 81 redistributive effects of inflation, 45 of drop in property values, 77 from rich to the poor, 65, 111 effect of government guarantees against, through the elimination of exploitation, 186n. 67 and exotic financial instruments, 63, as way to address economic inequality, 64, 169n. 66, 180n. of fraud, 77 as way to stimulate effective demand, of free trade, 105, 106 64–6, 67–8 and home loans, 7, 78 Reed, Stanley, 193n. and inflation, 43, 46–9, 50, 52, 57, 60, reflective equilibrium, 45 61, 161n. refinancing. See home mortgage debt, state investment, 23, 50, 177n. and local government debt and liquidity preference, 49 Refund Transit Coalition, 187n. of loaning money to poor, 187n. regulatory competition and evasion, 84–5, of poverty, 28 89–90, 93, 96, 103, 106, 114, 192n., and principle of full employment, 21, 200n. 38–9, 57, 60, 64, 67, 76, 80, 96, 98, Rehn, Ollie, 135n. 106, 110 288 ● Index risk—Continued Scott, Mark, 187n., 194n., 196n., 197n. to taxpayer, 78, 84 Scott, Robert E., 200n., 201n., 202n. of trade war, 89, 106 Searcey, Dionne, 160n., 182n., 186n., of Treasury Securities, 22 210n., 211n. of trickle down, 67 self-ownership of trickle up, 64 and libertarianism, 75, 184n. and unemployment, 20 and negative liberty contrasted, 75, 184n. Rivlin, Gary, 140n. and republican liberty contrasted, 75 Robbins, Lionel, 165n. self-respect, 115 Robinson, Joan, 111, 163n., 203n. Seligson, Hanna, 198n. Robinson, Nick, 147n. Sengupta, Somini, 199n., 200n. Rodriguez, Raymond, 199n. Serwin, Kenneth, 197n. Rogoff, Kenneth, 8–10, 135n., 136n., Severson, Kim, 212n. 165n., 168n., 213n. Sharda, Shailesh, 141n. Romer, Christina D., 154n., 155n., 167n. Sharon, Ori, 188n. Rosenhall, Laurel, 206n. Shay, Stephen E., 193n. Rothstein, Jessie, 142n. Shea, Gary, 157n. Rowthorn, Robert, 205n. Shear, Michael D., 184n., 194n. Rudolph, Joshua S., 171n. Sheffrin, Steven M., 174n. Rusli, Evelyn M., 209n. Shekeris, Anthos I., 150n. Ryan, Paul, 135n. Sher, Lauren, 208n. Ryzik, Melena, 140n. Shierholz, Heidi, 138n. Shiller, Robert J., 143n., 159n., 169n., Sacco, Joe, 140n. 180n. Saez, Emmanuel, 139n., 203n. Sidgwick, Henry, 203n. Sally, Razeen, 212n. Silver-Greenberg, Jessica, 169n., 181n., Salzman, Hal, 142n. 184n., 185n., 187n. Sangree, Hudson, 187n. Simmonds, N. E., 208n. Satow, Julie, 192n., 210n. Singapore, 83, 180n. Saul, Stephanie, 178n. Singer, Paul, 177n. Sawyer, Malcolm C., 156n., 179n. Skeel, David A. Jr., 188n. Say, Jean-Baptiste, 1, 3, 4, 131n., 132n., Skidelsky, Robert, 146n., 154n., 156n., 179n. 161n. Sayre, Scott, 158n. slavery, 116, 118, 119, 120, 126, 205n., Say’s Law, 179n. 207n. Schäuble, Wolfgang, 34, 159n. Smale, Alison, 149n., 152n., 156n., 200n., Scheffer, David, 195n. 202n. Scheibehenne, Benjamin, 143n. Smith, Adam, 1, 3–4, 64, 112–13, 116, Scheiber, Noam, 180n., 200n. 131n., 132n., 133n., 203n., 205n. Schelling, Thomas C., 184n. see also invisible hand Schmitt, Carl, 206n., 212n. Soble, Jonathan, 155n., 163n., 173n., 174n. Schneibel, Gerhard, 198n. socialism, 75, 117, 206n. Schnurr, Leah, 170n. Solomon, Steven Davidoff, 168n., 176n., Schularick, Moritz, 178n. 193n., 194n. Schumpeter, Joseph A., 5, 132n. Sorkin, Andrew Ross, 150n., 168n., 169n., Schwarcz, Steven L., 188n. 170n., 194n., 196n. Schwartz, Barry, 143n. sovereign debt, 23, 137n. Schwartz, Nelson D., 137n., 157n., 159n., and ordoliberalism, 205n. 160n., 161n., 196n. see also Greece, national debt Schwartz, Tony, 199n. Spain, 22, 26–7, 29, 32, 132n., 138n., Scism, Leslie, 209n. 145n., 147n., 148n., 153n., 157n. Index ● 289

Spencer, Roger W., 134n. Double Irish, 196n. Spiegel, Peter, 157n. general v. special, 84–5 Spletzer, James R., 142n. and inversions, 91–2, 95, 193n., 194n., stagflation, 19, 37–9, 55, 58, 59 196n., 197n. Starbucks, 92, 93, 195n., 196n. and transfer pricing, 92, 94–6, 195n. state and local government debt virtual v. real, 85, 94, 96, 192n. definition of, 79 tax cuts effect of derivatives on, 79 designed to “starve the beast,” 181n. interest payments entitled to less and economic growth, 145n. protection than wages, 80–1 and George Bush, 23, 42, 144n. need for renegotiation of, 78–80 and national debt, 23–4, 42 and principle of full employment, 79–80 for rich, 23–4, 157n., 179n. role of Fed in restructuring, 83, 84 for those with highest marginal propensity see also bankruptcy, Detroit, Puerto Rico to consume, 68, 144n. Stern, Michael, 190n. tax havens, 89, 93, 195n. Stettner, Walter F., 131n., 132n. taxation Stevenson, Alexandra, 193n., 195n. v. borrowing, 1–2 Stewart, Heather, 144n., 146n., 171n., 186n. and debt forgiveness, 187n. Stewart, James B., 169n. and depopulation, 83 Stiglitz Joseph E., 179n., 180n., 185n., eliminating inflation creep, 165n. 200n. v. elimination of exploitation, 67, 103–4 Stockton, bankruptcy of, 81 federal v. state, 65–6 Stone, Charley, 140n. and fiscal stimulus, 155n. Story, Louise, 178n., 190n., 191n. of foreign earnings, 195n., 197n. Strack, Rainer, 141n. and future generations, 16–17 Streitfeld, David, 209n. and immigration, 100, 199n. structural unemployment. See under income v. sales, 66 unemployment indexing to economic growth, 69 Stryker, Mark, 190n. of interest on public debt, 80 Stuckler, David, 164n. as method of funding war, 2 substitution effect, 68 progressive v regressive, 65–6, 99, Sufi, Amir, 183n. 179n. Summers, Lawrence, 155n., 156n., 157n., and redistribution, 64–7 171n., 181n. of repatriated earnings, 195n. Suphaphiphat, Nujin, 179n. Romney on, 122 supply and demand, law of, 6, 10, 42–4, 59 and subsidies for work-sharing, 99 supply-side economics, 67, 144n., 180n. subsidies for rich v. subsidies for poor, Surowiecki, James, 143n. 122–3, 208n. Swagel, Phillip, 199n. under austerity approach, 29–30, 34, 37, Swarns, Rachel L., 140n. 147n., 150n., 151n., 158n. Swiss Central Bank, attempt to manage the when budget in surplus, 21, 23, 42 franc, 172–3n. see also tax competition Szalai, Jennifer, 211n. Taylor, Alan M., 137n., 147n., 178n. Taylor, Charles, 184n. Tabuchi, Hiroko, 133n., 173n., 174n., 175n. Taylor, Eva, 159n. Tan, Jacinth J. X., 213n. Taylor, Paul, 159n. TARP, 185n. technological innovation, and tax competition, 84–97, 190n., 191n., unemployment, 19, 21, 68 192n., 193n., 195n. Tesla, 86, 191n. amnesty for repatriation of “foreign” Thiess, Rebecca, 160n. earnings, 197n. Thomas, Katie, 168n. 290 ● Index

Thomas, Landon Jr., 134n., 143n., 145–51n., and effective demand, 18, 67–8, 175–6n., 153n., 157n., 160n., 171n., 172n., 179n. 173n., 178n. in euro zone, 32 tit for tat, 105 in Europe, 148n., 151n., 152n., 154n., Tobin, James, 6, 36, 37, 133n., 161n., 155n., 167n. 162n., 163n., 169n., 175n. fiscal stimulus as cure for, 6, 18, 21, 32, Todd, Peter M., 143n. 51–2, 144n. trade. See foreign trade in France, 30, 198n. Trading Economics, 148n., 151n., 156n. in Germany, 97, 198n. training in Greece, 27–8 government subsidies for, 20 Hayek on, 58–60, 175n. reluctance of employers to provide, 20 higher rates for women and minorities, Transatlantic trade talks, 106, 201n. 14, 139n. transfer pricing, 92, 94–6, 195n. and household debt, 7 (see also Transpacific trade talks, 106–7, 201n., foreclosure) 202n. insurance payments, 202n. Traynor, Ian, 149n. in Ireland, 34, 157n. Treanor, Jill, 186n. in Latvia, 33, 156n. Treasury Inflation Protected Securities long term, 139–40n. (TIPS), 174n. mistakes made by those opposed to full Treasury View, 6, 133n. employment, 109–12, 117, 130 Tremlett, Giles, 147n. monetary policy as cure for, 50–1, 61–4, Trevelyan, Charles Edward, 121 164n., 169n., 170n., 178n. Trevisani, Paolo, 132n. moral importance relative to inflation, Triantis, George G., 187n. 3, 18, 44–8, 50–1, 60–1, 82, 161n., trickle-down approach, 64, 67, 70, 180n. 162n., 163n., 164n., 170n. see also supply-side economics natural rate of, 45, 52–4, 57, 174n. trickle-up approach, 66–7, 70 opposition to efforts to reduce (see politics Tritch, Teresa, 140n., 212n. of unemployment) Troika, 27–9, 149n., 150n., 151n., 213n. in Portugal, 147n. Tsangarides, Charalambos G., 180n. in public sector, 13, 79 Tsounta, Evridiki, 179n. in Puerto Rico, 83, 84, 189n., 190n. Tugend, Alina, 139n., 205n. quits rate, 207n. Tullock, Gordon, 205n. real wages and, 46 Tyson, Laura D’Andrea, 136n., 142n., 197n. as reflection of utilization of capital resources, 6 uncertainty index, 12, 137n. relation to rate of inflation, 37, 38, 43, unemployment 44–7, 53–7, 142n., 167n., 170n., in Cyprus, 29 171n., 172n., 176n. and debt-to-GDP ratio, 10 and self-ownership, 75 discrimination against unemployed, 15, and skills gap, 19–21, 141n., 142n. 140n. in Spain, 27, 147n., 148n. during 1930s, 6, 175n. structural v. cyclical, 14, 19, 142n. during 1970s, 37, 175n. and tax rates, 69 and economic contraction, 155n. as triggering increased tax competition, 85 and economic inequality (see in United Kingdom, 24–5, 51, 133n., redistribution) 138n., 144n., 145n., 154n. and economic uncertainty, 12 in United States, 6, 14, 18, 32, 35–6, 50, effect of austerity on, 10, 11, 13–14, 138n., 154n., 175n., 198n., 207n. 16–18, 21, 24, 27–8, 30, 33, 34–7, 39, see also, asset bubbles, home mortgage 138n., 147n. debt, immigration, protectionism, Index ● 291

state and local government debt, tax farm subsidies in, 125 competition, and work sharing foreign trade by, 5, 133n. Union of Concerned Scientists, 212n. home ownership in, 124 unions, 57, 119, 123, 200n., 206n. home sales in, 71 Unmack, Neil, 147n. inflation in, 48, 176n. United Kingdom mortgage relief, in, 80–1 attitude toward and effects of national debt of, 16–17, 21, 22, 42, 83, immigration, 100, 101, 199n. 144n. attitude toward fiscal stimulus, 133n., number of people holding jobs, 14 141n., 176n. number of unemployed, 32 attitude toward poor and unemployed, overtime rules in, 67 122 poverty wages in, 122 budget deficits in, 31 public employment in, 13 budget surpluses in, 22 reluctance of private banks to lend in, 7 cost of borrowing by, 11, 26, 33, 34 repatriation of Mexican-Americans during decline in share of global exports, 24 Great Depression, 100 decreasing lending by banks in, 7 skill gap in, 142n., 143n., 200n. economic contraction in, 24 special difficulties for women and economic performance compared to minorities in, 14 United States, 31 surplus in labor force, 18 effect of austerity in, 10, 11, 24, 31, 37, tax subsidies for bottom 80%, 123 138n. tax subsidies for top 1%, 122–3 homelessness in, 211n. taxes in, 37, 65, 91, 95, 195n. inflation in, 43, 49, 166n., 176n. treatment of post-War Germany, 133n. monetary policy in, 51 fate of unemployed in, 14 potential housing bubble forming in, 31, unemployment rate, 97, 175n. 62, 211n. use of budget surplus by, 21, 22, 23, 42, 58 reduction in public employment in, 138n. see also foreign trade, immigration, underemployment in, 25 inversions unemployment in, 24, 25, 32, 97 U. S. Senate Permanent Subcommittee on United States Investigations, 177n., 193n., 195n. access to courts by exploited foreign U.S. Department of the Treasury, 144n., workers, 90 194n., 197n. asset bubbles in, 62, 178n. U.S. Inflation Calculator, 175n. attitude of conservatives in, 121 U.S. Trustee’s Office, 83, 190n. attitude toward Keynesianism, 37 austerity in, 35, 36, 37, 159n., 160n. van der Klaauw, Wilbert, 210n. Bush Tax Cuts, 42 Van Horn, Carl E., 140n., 271n. Clinton budget surpluses, 42, 58 Van Reenen, John, 204n. consumer confidence in, 11 Virgil, 109, 203n. corporate tax revenues, 91 Viner, Jacob, 112, 203n. cost of borrowing for, 11, 33 Vlasic, Bill, 189n. debt-to-GDP ratio, 8, 22, 36, 135n. von Mises, Ludwig, 5, 164n. deficit spending in, 21, 22 dual mandate of Fed, 44 wages, stickiness of, 43, 44, 46, 59, 99 economic growth in, 32, 36 Wagner, Richard E., 174n. economic inequality in, 183n., 203n. Wagstyl, Stefan, 153n. effect of currency manipulation on Wald, Matthew L., 191n. unemployment in, 107, 165n. Waldron, Jeremy, 212n. effect of fiscal stimulus in, 31, 32, 154n. Walsh, Mary Williams, 188n., 189n., 190n., effect of shorter work week in, 198n. 192n. 292 ● Index

Wapshott, Nicholas, 161n. Woirol, Gregory R., 141n. war Wolfers, Justin, 154n., 166n. and government borrowing, 1–2, 17, 24, Wood, Zoe, 163n. 144n. Woodward, C. Vann, 207n. and inflation, 42 Woolhandler, Steffie, 199n. and internal dissent, 117 Wooton, Ian, 192n. on the poor, 181n. World War II, 2, 22, 38, 67, 111, 159n. on science, 212n. work sharing, 97 on women, 123, 209n. criticisms of, 98 Wassener, Bettina, 173n. government subsidies for, 97 Watt, Nicholas, 147n. mini-jobs program distinguished, 97 Wayne, Lesley, 196n. recommended by principle of full wealth. See redistribution employment, 99 weaponized Keynesianism, 33, 117, 205n. as way to bank expertise, 97–9 Weaver, Andrew, 142n. as way to redistribute burden of economic Weisenthal, Joe, 169n. contraction, 98–9 Weisman, Jonathan, 159n., 161n., 179n., and worker productivity, 98 201n., 202n. Wren-Lewis, Simon, 154n. Weisman, Steven R., 190n. Weldon, Duncan, 143n. Yaccino, Steven, 189n., 190n. Wentworth, George, 198n. Yager, Jessica, 211n. Werdigier, Julia, 145n., 157n., 171n., Yardley, Jim, 156n. 186n. Yellen, Janet L., 133n., 138n., 161n., 162n., Wheaton, Sarah, 202n. 170n., 171n. White, Lawrence H., 132n., 134n. Yohe, William F., 134n. Williams, Timothy, 139n. Young, Alexis, 143n. Wilson, Valerie, 139n. Young, Brigitte, 212n. winding down, 195 Winerip, Michael, 139n. Zallman, Leah, 199n. Wintour, Patrick, 146n., 156n. Zandi, Mark, 185n., 210n. Withnall, Adam, 209n. Zhu, Jun, 210n. Witkin, James, 181n. Zukin, Cliff, 140n.