Don't Raise the Ceiling, Lower the Floor

I've been waiting for this. It has been obvious for some time now that the only way out of the federal debt crisis is to inflate the currency. Now Paul Krugman has brought it out into the open. His proposal, only partly tongue in cheek, is for Treasury to mint a trillion dollar platinum coin, deposit it at the Federal Reserve, and spend that. No need to bother with the messy politics of raising the debt ceiling. Apparently the Secretary of the Treasury has the authority to mint platinum coins in any denomination he chooses. It's meant for commemorative purposes but the language isn't restrictive.

I doubt the secretary would do anything quite so transparent or frivolous but there isn't a doubt in my mind we are in for a round inflation, and it will be wild. Democrats want    huge tax increases. Republicans aren't going to let that happen. Republicans want draconian spending cuts. Democrats aren't going to let that happen. The middle ground isn't acceptable to either party. With no leadership from the White House what's left?  

We've never had truly ruinous inflation in this country but we may be about to see something close. If we are to avoid it it might be worth reflecting on what it could be like. One people who have experienced it, with whom we may be ably to relate, are the Germans. A major reason Germans are so fiscally responsible today isn't that it is their nature. It is that they have a deep national memory of what can go terribly wrong.

In 1922 French and Belgian troops invaded the Ruhr Valley and took over Germany's most important factories in response to a default on reparations from WWI. The government called a general strike and printed a staggering volume of paper marks to compensate for lost wages. The result was hyperinflation. By 1923 Germans would take wheel barrows loaded with marks to the bakery to buy bread.

The German middle class was destroyed. When the Great Depression came Germany had no reserves. They were the hardest hit of all. Conditions became ripe for the rise of Hitler and his Nazis. Jews were convenient scapegoats. The rest as they say is history.

I don't expect things to get quite that bad but they could. I do think things will be bad. Interest rates have to go up sooner or later and that will have an impact on the housing market. I wouldn't be surprised to see a relapse into recession this year. Economic stagnation could last a while.

The poor will be hit hardest as they always are, and there will be a lot more of them. There already are. The middle class will be hit too. I think the long term unemployed are in for serious trouble. So are the elderly on fixed incomes. Social Security may be indexed to inflation but most retirement plans are not. Bond yields will go up but values will fall on bonds not held to maturity. Only the rich will escape most of the damage. They can always park excess assets in gold. If all else fails they can follow Gerard Depardieu to Russia.

It's probably too late to avoid this entirely but there are some things we can do. Entitlement spending probably can't be reined in completely but it can be tweaked. Some of the worst boondoggles have to stop. We can no longer afford farm subsidies, wind credits, solar loan guarantees to Obama campaign contributors, or ethanol mandates. We have to do some things to get the economy moving. That means opening federal lands to energy extraction, taking down trade barriers, and restraining regulators.

Paul Krugman is talking about trillion dollar coins. It's time to get serious.

Punitive Incarceration

If I had my way we would abolish the death penalty in favor of life without parole. Several states already have and I expect more will follow. It isn't that I don't think the worst murderers deserve to die. They do. I think we will be a better society without a death penalty. We don't really need it. The only real justification for executing a criminal is retribution and that is one of our baser human motives. There is no reason a lifetime of incarceration shouldn't prevent a subsequent murder. The death penalty is expensive, more expensive even than thirty or forty years behind bars. And there is the question of wrongful convictions. Is there anyone out there who still doesn't believe we occasionally execute the wrong man? I don't say innocent. Almost all executions involve really bad actors but unsavory character is not a capital crime.

Robert Blecker has an article in City Journal advocating what he calls Permanent Punitive Segregation. He would make life in prison for the worst of the worst as unpleasant as constitutionally allowable. He would put them in something close to permanent solitary confinement with no contact with other inmates, specially trained guards who would avoid unnecessary conversation, no television or other entertainment, pictures of their victims unreachable but on prominent display, a bland tasteless diet, limited exercise, and no possibility of ever touching another human being.

Professor Blecker justifies his proposal primarily on grounds of retribution. The punishment should fit the crime. The guilty should get his just deserts. I don't disagree that some of these criminals deserve harsh treatment but who benefits? The prisoner isn't going to repent and reform. We've already given up on that. Do we really want a public policy based on vengeance? The Texas prison system is run by the Department of Corrections. We aren't going to correct anybody here but do we want a separate Agency for Revenge?

Professor Blecker also suggests his policy would act as a deterrent. I think he is being disingenuous here. He offers no support beyond human nature and common sense. Surely he knows that the prospect of a death sentence has never been a deterrent. It has sometimes led to false confessions in plea bargaining but few murderers commit their crimes in the expectation they will be caught.  Those who do act in passion with little regard to consequences. Human nature and common sense would lead one to believe the prospect of life in solitary confinement would do nothing to alter this basic dynamic.

I don't expect the Becker proposal will gain much traction. Legislators won't want to make life sentences more expensive than they already are. Prison wardens don't want prisoners with no incentive for good behavior because life is already as difficult as guards can make it. And, since the policy makes sense only in jurisdictions with no death penalty, public opinion has already swung in favor of more humane prisons.

I can understand the sentiment behind the idea. If Adam Lanza had survived his rampage at Sandy Hook Elementary School his maximum sentence in a Connecticut court would have been life without parole. Many people would think that was not enough. I might even be inclined to agree. But what good would it have done to put that poor mad soul to death? Would the parents of his victims feel better knowing that he would live out his life in misery? Wasn't he already miserable?

We will continue on our path toward abolishing the death penalty, state by state. It is an anachronism. When it is gone our grandchildren will ask us what took us so long. We aren't going to replace it with another policy based solely on revenge.

Dance Partner

I'm with Jonah Goldberg. It's disconcerting to see Joe Biden turn out to be the adult in the White House. When it came down to the wire he was the only Democrat Mitch McConnell could find who was capable of negotiating a deal. I am among those who think this is a bad time to be raising taxes on anybody but this is also a time for pragmatism, time to take the best deal we can get.

Pragmatism used to be a virtue in politics. These days it seems to be in short supply. It doesn't bode well for the next few years, but there are a few bright spots. Both parties recognize that a thriving economy is vital to their interests and there are some areas where those interests are beginning to align.

One is trade. The president wants a new multilateral agreement with the Trans Pacific Partnership and he should get it. It will get a lot of people back to work and into better jobs, an unqualified good thing that even party ideologues can support. So will a long overdue deal with the European Union. Even big labor can support that. EU laws are more labor friendly than ours. The pendulum has swung pretty far against unions in the US lately. It probably wouldn't hurt to have it swing back a bit, especially in the manufacturing sector.

Another area most of us can probably agree on is exploiting newly accessible gas and oil reserves. Self proclaimed environmentalists reflexively resist anything that will prolong the industrial revolution but the cat is out of the bag on this one. Matt Damon's anti-fracking propaganda movie Promised Land is too late to stop it. Any economic revival will necessarily be driven by cheap and abundant energy supplies. They are here. They are relatively clean. They come with little risk. They offer all sorts of well paying jobs, and not just in extraction.

I'm guessing this is the year for some sort of immigration reform. There are enough Republicans and Democrats who want something like the DREAM Act that they should be able to get it passed. They will demagogue each other mercilessly but they will pass something. It makes sense. Few of us really want to deport people who were brought here illegally as children, grew up here, and are Americans in everything but the paper work. If they are to stay here it is in everyone's best interest to educate them, get them into the most productive jobs possible, and let them make positive contributions to society. We need them and despite all the election year posturing I suspect most of us know that.

Prospects for education reform are looking up too. Not much is likely to come from Washington. Teachers unions are still too powerful for that but they are slowly losing their grip at the state and local level where the most important decisions are still made. Charter schools are steadily gaining ground. So are vouchers and other forms of subsidy for private schools. Nothing can compete with the influence of parents on the education of children and parents are seeing more choice. I expect the trend to continue and that is also an unqualified good thing.

I wish I were as optimistic about entitlement spending but I just don't see a way through the morass on Medicare, Obamacare, and what seems now to be unlimited unemployment insurance. The latter may ease up a bit with an improving economy but it is a perverse form of welfare that will require better leadership than we have now for a long term fix. I am pleasantly surprised the Vice President has done what he has. I doubt he can do much more.