Larry Summers Is Not the Main Problem

I'm as pleased as anyone that Larry Summers has withdrawn from consideration as the next Chair of the Fed. I thought he would do a terrible job. But Summers himself was never the real problem. His candidacy was only a symptom. The real problem is that we have a President who wanted to nominate Summers in the first place. Obama does not understand what's wrong with the American economy, and five years into his term, he persists in some basic misunderstandings.

There are two basic Democratic narratives to explain the 2008 financial meltdown, and they contradict each other. When Obama took office, he had to choose which story to believe. The first story is that the economy thrived under Clinton, and Bush's people screwed it up. I'll call that the Democrat vs. Republican story. It's partisan, but not ideological.

The other story is that Clinton's economic policies led to a short-term boom, but set us up for the long-term bust that started in 2008. The toxic securities that crashed the system in 2008 were deregulated under Clinton. Deregulation of banks started under Clinton. Clinton thought Alan Greenspan was a genius. The list goes on. The Bush people, at worst, only exaggerated what Clinton's people had already been doing. Their basic emphases (favoring investors over workers, worrying more about inflation than unemployment, etc.) were the same. Call this the Left-vs.-Right story. It's ideological, but not partisan.

You can't believe both of these stories if you're going to actually come up with a plan to improve the economy. You have to pick one. If the Democrat-vs.-Republican story is the right one, the best thing to do is to put Clinton's old academic advisers back in charge. But if the Left-vs.-Right story is true, then putting the old Clinton guys back in charge is the LAST thing you should do. Clinton's economic policies, devised by Robert Rubin and the so-called "Rubinites" associated with him, are either the way out of our country's economic mess or a way further into that mess. It can't be both.

Obama clearly chose the "Clinton knew how to run the economy" story at the outset of his first term. That makes sense. Obama had never had a strong personal vision for economic policy. (Read the economy chapter in The Audacity of Hope and you'll see what I mean.) He was immediately forced to take responsibility for a national economic crisis that had hit late in his election campaign, giving him almost no time to think our economic problems through or develop new policy ideas. And he had to stop the bleeding somehow. Going with the Democrat-vs.-Republican story gave Obama a ready-made team to put in charge and a set of basic policies to follow. (Larry Summers, Clinton's old Treasury Secretary, is one of the main Rubinites.) Going with the Left-vs.-Right narrative would have meant coming up with a completely new team and a completely new set of ideas. But who would he have picked? How would he distinguish good policy advice from bad? Accepting the Left-vs.-Right narrative meant moving into uncharted territory during a national emergency. Throwing out the old playbook and starting over is a much riskier move, and Obama hates unnecessary risks. Electing Hillary Clinton instead of Obama would not have avoided this problem. Hillary would have relied on Bill's old economic advisers, too.

While Obama's original choice might have been reasonable at the time, it has also turned out to be wrong. Five years later, growth is still sluggish, unemployment still high, and income inequality more rampant than ever. We've had five years of the Rich Man's Recovery, where the tiny fraction at the top have started growing even richer than they were in the Bush II years, but the rest of the country is still nowhere close to getting back to economic health. Not only is that not success, it's potentially a recipe for much bigger failure. The high levels of inequality make the whole system less stable and more prone to catastrophe.

Sure, we are almost certainly better off than we would have been if McCain, rather than Obama, had been calling the shots, and better off than we would be under President Romney. A move to the kind of Austrian economics that people like Rand Paul favor would have been a disaster. Obama understandably wants credit for keeping the economy from going off the rails completely and for whatever recovery has taken place over the last five years. He's committed on some level to defending his earlier decisions, and doesn't feel he has any room to maneuver on his left. He's right as far as that goes: his centrist policies are surely healthier than hard-right economic ideology would be. But "better than crazy" is not good enough. And while Obama's policies fit reality better than the right wing's do, the actual economic reality is still far to Obama's left.

Centrism is almost never the long-range solution to a fundamental crisis. A major crisis is usually a sign that a set of policies have major underlying problems. Sticking to the middle of the road makes sense in the good times, but disasters as big as 2008 are reality's way of telling you that you are on the wrong road. Proceeding cautiously down the wrong road and obeying a reasonable speed limit only changes how fast you get lost. To actually get out of trouble, you have to turn around and go in a different direction. That Obama wanted to put Larry Summers, the chief advocate of deregulating the exotic securities that caused the 2008 crisis, in charge of the Federal Reserve, shows that Obama still thinks that he can keep going down the Clinton/Bush economic road and it will all be okay if he just drives carefully enough. That he wanted to have Larry Summers riding shotgun with him is bad. But even if Summers isn't officially navigating, Obama is still following the wrong directions.

cross-posted from Dagblog

Why Obama Won't Make College Cheaper, Part 1

Education reform in America is always an attempt to get something for free. It has been that way for at least twenty-five years. No matter what the scheme of the hour is (charter schools, Teach for America, No Child Left Behind, Race to the Top) or whether you're talking about K-12 or college, every reformer makes one of two promises. Either they promise to make education better without spending any more money, or they promise to make education better while spending less money. Education reformers basically say, "Four dollars is too much to pay for a hamburger. Bring me a three dollar steak."

If you ask why the reformer expects this strategy to work, or how it could, you will be told to "be realistic." It is of course deeply unrealistic to expect taxpayers to increase spending on education. So the only "realistic" course of action is to create excellence through funding cuts. Since no solution but a three dollar steak is acceptable, we just have to figure out a plan that gets us an especially juicy, delicious, and healthy steak for three dollars. There's always a clever new three-dollar-steak scheme, no matter what happened with the last one, and you just have to give the new idea a chance. Twenty-five years on, and education reformers are still talking about the newest, hottest plan. That's because none of the old plans did much good.

President Obama's new college affordability plan is one of these reform efforts. He plans to make college cheaper for everyone, and to do this without spending any more money. Instead, he will shift around the money the federal government already spends to create incentives. College costs are a real problem, and Obama is right to want those costs lower. His plan will not actually do that.

Why not? There is the problem of getting the plan through Congress.There is the problem that this plan (like No Child Left Behind) relies on crude and oversimplified metrics that pretend to measure complicated and slippery things, and then penalizes schools based upon that statistical pretense.But the real problem is that you can't set prices for things that you don't buy. Obama's plan won't change college prices, or colleges' underlying costs, because there simply isn't enough money on the table to make a difference.

The federal government is the biggest individual player in American higher education, because it's the only entity that contributes, directly or indirectly, to nearly every college or university in the country. That means a lot of money, in absolute terms: the country has nearly 4500 colleges, universities and community colleges, with well over twenty million students. But the federal government isn't the most important contributor to any of those 4500 college budgets. It isn't the second-biggest contributor to those budgets, either. (The only exception is the service academies. The United States government pays for the entire budget at West Point and Annapolis, and they get to set the tuition: free.) We don't have a federal education system. Washington doesn't run our colleges, and doesn't pay for them. Instead, we have a vast decentralized system with thousands of schools competing in a free market.

The federal government does pay enough money to influence college's actions. Title IX, for example, is enforced by a threat to strip all government grants and funds from schools that don't comply. Losing ten or twelve percent of your annual budget really hurts; think what a ten-percent pay cut would do to you. So paying ten (or twelve, or six) percent of every school's budget gives you a lot of say. What it doesn't give you is the power to make schools give up larger sources of revenue. Tuition is a bigger part of the budget than federal funding, hands down. A deep cut in tuition could very quickly add up to more revenue lost than the federal government adds. Even if you threaten to pull all of your financial contribution (and in practice the government would only be diminishing it, in gradual stages), that's not enough to make a school forgo MORE than what you're paying. If you tell a restaurant that they have to cut the price of a steak dinner in half or you'll stop leaving a fifteen percent tip, what do you think will happen?

The reason no restaurant will sell you a steak for three dollars is that no restaurant can buy a steak for three dollars. People don't generally sell things for less than those things cost them. In fact, the only thing for sale in America for less than it costs is a college education. Colleges are already discounting tuition as much as they feel they can afford. Tuition never covers the full cost of operating a college, and the wealthier the school, the more it spends in excess of tuition. (The Harvards and Princetons of the world have the luxury of spending much more than they charge.) So college tuition is already being set significantly below cost. Tuition grows because costs grow. Why?

If you want to be a successful education reformer, meaning you want to make a good living peddling your five-point plan for three-dollar steaks, your answer should be cast in moral terms. Costs are high because someone lacks character! High costs can only be a sign of laziness and corruption! After all, that's what makes those costs amenable to "reform." And of course, the moral explanation is satisfying, because it allows you to attack anyone who disagrees with you as a bad person.

But if you look around America's 4500 colleges, you see almost all of them behaving the same way. There isn't a group of "virtuous" colleges holding down costs and another group of decadent spendthrifts charging 50% more than other schools. There are only slight differences between institutions. It is not that all 4500 colleges happen to be run by weak and depraved characters. When you see thousands of independent institutions behaving the same way, it's a sign that there are actual economic reasons in play. Colleges act the way they do because they're responding to real pressures that "character" will not make go away. Colleges don't spend money because somebody at the college was raised wrong. Colleges spend money because they believe they have to. Colleges spend what they need to spend to survive.

Those costs keep growing for reasons that I'll try to explain in Part Two.

cross-posted from Dagblog

My Neighborhood, Times Two

I was back in my old neighborhood a couple of weekends ago, walking toward the farmer's market, when I passed a little knot of people who were looking up and gesturing toward the dignified brick apartment buildings that line one of the boulevards. They were all clearly from somewhere else, and one of them was explaining the handsome buildings, which apparently struck them as odd, to the others:

"I think they're pretty dumpy on the inside, but they look good from out here," he said.

I thought that was pretty remarkable, because the guy wasn't actually claiming to have been inside any of the buildings he was talking about. He just thought they were run-down dumps inside. All he could actually see were the buildings' admittedly-impressive outsides, but he he didn't or couldn't permit himself to be impressed by them. So he assumed that the handsome buildings were all squalid inside.

He was dead wrong. I should know. He was pointing at my old building.

I lived in that place for seven years, in a big pre-war apartment with hardwood floors, and the only thing that was ever remotely squalid in that place was my bachelor housekeeping. It was a nicer place than I really should have rented right out of graduate school; my excuse is that I'd come straight from California, where the rent on even a shabby studio was always basically all the money you had, and so my big beautiful apartment with the fancy view seemed like a steal. And having an apartment like that made feel like I was finally, after so many years of school, a middle-class grownup. I only left that building when I got married and began my weekly interstate commute, because I needed a place closer to my office when I was in town.

Now, there may theoretically be an apartment building on that street that isn't well maintained on the inside. Maybe they weren't all as nice as mine. But I've been in lots of those buildings, either as a prospective renter or while visiting a friend, and I've never seen any of the dumpy apartments this guy was talking about.

The guy explaining how terrible the apartments on that street were (don't let the fancy outsides fool you!) wasn't saying that because he knew it to be so. He apparently believed that those buildings were all concealing slum conditions because he wanted (or needed) to believe that. I don't know about you, but when I'm in a place I haven't been before I generally assume that the houses I'm looking at are pretty much the way they look, with the insides roughly as shabby, shiny, or well-kept as the outsides. I would never look at a house with its paint peeling off and say, "I bet it's an absolute palace inside," or presume that a fancy-looking house on the lake is secretly a dump. But for whatever reason, these strangers were not ready to accept that my neighborhood actually was the way it looked. So they had to invent facts not in evidence, the dumpy apartments secretly hidden inside impressive buildings, rather than deal with the reality staring them in the face. Those nice-looking buildings just couldn't be what they looked like, because they weren't supposed to be there.

(And actually, it was a little bit worse than that. As my spouse pointed out to me later, that guy had to actively ignore evidence he could see, namely the carefully-maintained landscaping around the buildings he was calling dumpy. In his world, the landlords have let those beautiful old buildings run to complete ruin but also meticulously landscaped them.)

Why not just accept the evidence in front of their eyes? One possible explanation is what I'll call suburbanite bias: the conviction that life in the Big Dirty City is just one long squalid nightmare. I don't just mean preferring to live outside the city yourself. I mean the insistence that living anywhere in the city is so hopelessly awful that anybody would count themselves blessed to "escape" to the suburbs. I should admit that I've never viewed the suburbs as a place to which I would eagerly escape; there's a reason that my blog name isn't "Doctor Pepper Pike, OH." But I see that some people might like a suburb better than the city. What I'm talking about is the belief that everyone in the city, except maybe a handful in luxury high-rises, must be living in a horrifying slum. Call it Urban Derangement Syndrome.

It could also have been about the specific part of the city my neighborhood is in. The skeptical visitors might simply have been unable to believe the sight of lovely vintage buildings in the black part of town. The neighborhood is actually mixed-race; I've spent years there, and I'm so white I'm nearly translucent. African-Americans are a plurality rather than a majority. And it's also a mixed-income neighborhood, with a healthy share of working-class homeowners but a bunch of doctors and classical musicians too. But the neighborhood has enough African-Americans that visitors from a racially unmixed area might view it as a "black neighborhood." (In this case, that which is not all-but-completely white becomes "black.") They may have refused to believe in the impressive apartment buildings they were seeing because they were under the impression that they were in The Ghetto, where all African-Americans live in miserable tenements and have The Blues. If you can buy decent soul food, it must be a slum. The Ghetto, in this case, is positively full of endocrinologists and cellists, but this isn't about the details. It's about the Big Picture, where all black people live in Bad Neighborhoods. How can there be nice apartments in a Bad Neighborhood? It makes no sense.

A slightly different version of this problem would be that the visitors viewed an entire side of town, the stereotypically "black" side, as one vast undifferentiated expanse of The Ghetto, and could not process that the "black" portion of a city actually has all kinds of neighborhoods, good, bad, and in-between. One way or another, the outsiders' refusal to accept what they were seeing as real is about a refusal to accept complexity. It's refusal to accept the variety that messes with easy simplifications. The "black side of town" is no more one single place than a city or a neighborhood is one place: they contain multitudes.

My other neighborhood, in the city where I own a home with my spouse, is also probably misunderstood by some outsiders. That neighborhood too is economically and ethnically mixed, and also viewed as the scary desperate city by surbanites with Urban Derangement Syndrome. Our house was built in the 1920s, and has no room for a huge lawn or huge attached garage. And it's only a few blocks from a high school with a large proportion of African-American students. ZOMG! Black teenagers! It are an urban jungle! Every night, my spouse and I lock our vintage leaded-glass windows and huddle by the working fireplace in terror.

Neither neighborhood is an exclusive bougie enclave. They have petty crime; you need to lock your doors, you shouldn't leave valuables in the car, and you shouldn't believe that everyone buttonholing you on the street is telling you their real story. When I first moved in to my old apartment my morning newspaper would get stolen in the morning. In other words, they are neighborhoods in cities, where you should take basic sensible precautions and generally not be an idiot. Does that make them "high crime" neighborhoods? Depends on how you're counting. Are they "dangerous" neighborhoods, where random pedestrians will be waylaid by a bunch of extras from The Wire? No. The scary thugs only live in the secret slum apartments hidden inside nice buildings. They never come out.

The thing about a city is that no neighborhood is very far from a different neighborhood; a good city doesn't sprawl. A city that does is a collection of suburbs on steroids. That boulevard of brick pre-war apartment buildings is only a block or two in one direction from a street full of blue-collar single-family homes. Half a mile in another direction is a shady street lined with what I can only call minor mansions. One nearby street is a depressed and dispiriting commercial strip. Another nearby street is filled with antiques dealers. Half a mile's run in yet another direction takes you to a park filled with live deer. It's a neighborhood. It neighbors other things. That's the point.

I left that neighborhood, but I didn't "escape" it. In fact, on the morning that I passed the guy explaining how all the apartments were actually dumps, I was in the neighborhood because I was moving back. My spouse has taken a year's leave from her job, so I gave up the bachelor pad near my office and moved with her back to another big pre-war apartment in another of those handsome buildings that the guy considered dumps in disguise. (Meanwhile, we rented the house in our other urban neighborhood to a group of classical musicians. Mostly string section. You know: animals.) So my old neighborhood is also my new neighborhood, at least for a year. And if the apartments in the neighborhood are secretly dumpy, well, I just rented another. Its dumpiness is still secret.

After I passed those confident visitors I went to the farmer's market and then back to my new apartment where my wife and my unpacked boxes were waiting. Then I stood at the counter in my newly-renovated kitchen and ate an organic peach. Just another day in the hood.

cross-posted from Dagblog

A Tale of Two Newspapers

Everyone's talking about Jeff Bezos buying The Washington Post. But it's also been a dramatic week for two newspapers close to my heart in different ways: The Boston Globe and The Cleveland Plain Dealer. Two days ago, The Globe, like the WaPo, was sold to an individual billionaire with a high profile. Today the Plain Dealer, which has not been sold, stopped delivering the newspaper. It will still be printed every morning, but it will only be delivered three days a week. Nearly one third of its reporters were laid off on Wednesday. It's not the first round of buyouts or layoffs at the PD, and it's not the second either. The newsroom is now down to about a third of what it was in the 1990s.

The Plain Dealer will be "digital-first" from now on. On the first day of this bold step into the future, naturally, the electronic version of the newspaper crashed. Digital-first means you try to log into the website first, and when that doesn't work you go out and see if the drugstore will sell you an actial copy of the paper. But hey, you get what you pay for, right? And the web side of the business is strictly non-union.

Now, plenty of people will tell you that this is an inevitable consequence of our modern age. The newspaper has to die, because the internet demands it! Also, video killed the radio star, which is why you no longer own a radio. But apparently, it's not inevitable everywhere. The Boston Globe got sold to John Henry, the principal owner of the Boston Red Sox, for a Filene's-bargain-basement price of $70 million, even when other bidders offered more. Henry isn't talking layoffs. Boston is going to stay a two-newspaper town, and the premier newspaper is going to keep competing hard.

(Anyone who thinks that Henry bought the newspaper to get more or nicer coverage for the Red Sox, by the way, has no idea how the Boston sports media works. The Red Sox are not going to get more attention from Henry's Globe, because it is literally impossible for the Red Sox to get any more attention than they already do. And the coverage is not going to get nicer or softer, because the readers won't read that. The gold standard for Boston sports coverage remains a complex brew of idolatry and hostility. Boston baseball reporters don't play softball.)

Starting today, Cleveland is a less-than-one-newspaper city, with a Plain Dealer that is somewhat less than a newspaper. And that brings Cleveland one step closer to becoming something less than a city. It is part of a great city's death. Boston, a city that has thrived in the information age, will keep the major newspaper that a major city needs to function and thrive. The New York Times seems to have deliberately sold The Globe to an owner whose other enterprises are tied to Boston's civic health, and who seems motivated to protect the city's basic ecosystem. That's a choice on the Times Company's part. And the way Henry eventually runs his newspaper (or Jeff Bezos runs his) is a choice, just as the Newhouse family's decision to gut The Plain Dealer was a choice.

There's more than one route to profitability here. John Henry is not stupid with money. But he might have to be content with a lower direct return. A good newspaper in the internet age is only modestly profitable. A gutted newspaper is more profitable for a while, as long as you keep cutting costs faster than you lose revenue, but that's not a sustainable business model. That is selling copper wiring from abandoned houses.

Cleveland is a city being slowly run to death by economic rationalists whose business model adds up to sheer madness. It illustrates American business's suicidal focus on cost containment, with everyone trying to run the leanest operation in a city suffering economic famine. It is cheaper to lay off workers, and so stores no longer have enough consumers. The stores scale back, and their suppliers go hungry. It no longer "makes sense" to run a department store downtown. It no longer "makes sense" to run a daily newspaper.  And then you are trying to attract new enterprises to a city you have to leave to find a Macy's, trying to recruit employees to a city where you can't get a newspaper delivered on Monday or Tuesday. It makes no sense.

Cleveland is a city of assets whose value has been allowed to decline, and assets whose value is ignored. It is a city of grand buildings left unrenovated and unoccupied, because no one chooses to value them. It is a city where a great newspaper is allowed to become a part-time enterprise, because no one chooses to see its value. And little by little it has become a place torn down by its owners, stripped down to be sold for parts by people who do not live there, who do not need or wish for the city to thrive. The car that could be rebuilt is sold for scrap metal. The business that could be made profitable is closed.

Don't cry for the Washington Post. There are worse things than being bought. The worst thing that happened to The Plain Dealer was its out-of-town owners keeping it.

cross-posted from Dagblog

Tribal Knowledge

Fox News's hostile interview with Reza Aslan has lit up the internet. (See Michael Maiello and Historiann for two of the smarter takes.) Obviously, interviewer Lauren Green's insistence that something must be very wrong for a Muslim to write a book about Jesus, and that such a book must be wrong, is a problem. But Green (and her producers) are simply peddling a toxic version of an idea that lots of us entertain in various forms. The idea that a non-believer cannot understand (or worse, should not be allowed to speak about) a belief is only a more aggressive outgrowth of the common conviction that being a believer, or identifying with some specific group, gives you a special insight or understanding denied to outsiders. The conviction that no Muslim could write a "fair" book about Jesus grows from the belief that Christians, by virtue of being Christians, understand Jesus better than anyone else possibly could. That sense of privileged understanding comes from one's social identity, not from actual knowledge, and can be actively hostile to such knowledge. In the Reza Aslan example, faith in Jesus Christ might be construed as more important than, for example, the ability to read Biblical Greek. To a certain kind of Christian, a Muslim who can read New Testament Greek represents not one but two problems. Aslan's scholarly accomplishment is perceived as a threat to "knowledge" derived by other means.

This is by no means limited to Christians, or to religious believers. I happened to read Janet Malcolm's In the Freud Archives the week before the Aslan interview. In that book, Malcolm deals, fairly indulgently, with the common claim among Freudians that only someone who has undergone Freudian analysis is entitled to an opinion about Freud. Only insiders, only properly initiated believers, can be authorities on the subject. (Replace "Freud" here with "scientology" and "Freudian analysis" with "dianetics counseling" and see how that sounds.) And this insistence that outsiders could not possibly understand led important Freudians to restrict access to factual evidence. (Malcolm also weirdly treats this as not-unreasonable.) The custodians of the Freud Archive refused to allow scholars to see biographical evidence about Freud, including letters in his own hand, unless they were sure that the scholar was a true believer who would stick to the current Freudian orthodoxies. The facts are a threat to  belief.

A less toxic but more annoying version of this behavior that I run into a lot is some people's conviction that they have a special insight into certain literature because of their ethnic background. There are, unfortunately, Irish-American students who are profoundly convinced that they have special insight into James Joyce or W. B. Yeats because of their "Irishness." This is observably untrue. Being named O'Shaughnessy doesn't give you any special insight into Ulysses, or guarantee that you'll understand any of it. Likewise, you occasionally run into Brits who are convinced that anyone who is not English or (if the person in question is Scottish or Welsh) not British could ever properly understand Shakespeare. There's much more I would like to know about Shakespeare's works, but I am willing to match my current knowledge of the subject against David Beckham's at any time. He can bring along Posh Spice for help.

But followed to its conclusion, this identification with the literature of one's tribe can shade into racism; the presumption of privileged understanding is, after all, a presumption of privilege. An English racist gives himself credit for Shakespeare's works, despite not having been much help writing them, and presumes that this gives him one-up on, say, a Pakistani immigrant who got at least as much Shakespeare in school as the Englishman did. The English racist may not understand a quarter of Henry V, but he takes credit for it because it was produced by "his people." Indeed, literary scholarship once actively promoted this racialist approach. You can still find old anthologies with titles like "Poems of the English race." Similarly, the Irish-American undergraduate who gives himself credit for Joyce, Yeats, and Heaney is in danger of slipping into the belief that his ethnic group possesses certain kinds of innate superiority. The more seriously he takes that belief, the uglier it has the potential to get.
 
There's nothing wrong with taking a particular interest in something because of your tribal affiliations. (I've got my Yeats and Heaney on the bookshelf.) But believing that you have special access to understanding it is a problem, not least because it keeps you from doing the work required to actually know about something.

I'm a practicing Christian and Reza Aslan is not. But Reza Aslan can read the Christian Gospels in the original and I cannot. That means he has a lot of things to say that I'm interested to hear. I'm going to make my own decisions about my beliefs at the end of the day. (I also know a translator of the New Testament and I acknowledge his superior learning, but I don't go to the same church he does on Sundays.) I'm perfectly happy to admit that Reza Aslan knows things about my religion that I do not know myself. If I refused to admit that, I would cut myself off from learning more.

In the end, tribal knowledge isn't about knowing. It's about believing one knows. That is a very different thing.  And at a certain point, actual information starts to feel like a threat to one's tribal certitude. Nothing is more dangerous to the illusion of knowledge than facts. There's more than one reason that Lauren Green didn't let Reza Aslan talk about his book. She might have learned something about the historical Jesus, and that would have been intolerable.

cross-posted from Dagblog