Through the looking glass

David Brooks touches, I think, on a lot of the same things I was getting at in my earlier post about personal responsibility going out the window during a depression:

Our moral and economic system is based on individual responsibility. It’s based on the idea that people have to live with the consequences of their decisions. This makes them more careful deciders. This means that society tends toward justice — people get what they deserve as much as possible.

...

...Individual responsibility doesn’t mean much in an economy like this one. We all know people who have been laid off through no fault of their own. The responsible have been punished along with the profligate.

...It makes sense for government to try to restore some communal order. And the sad reality is that in these circumstances government has to spend money on precisely those sectors that have been swinging most wildly — housing, finance, etc. It has to help stabilize people who have been idiots.

As Krugman would say, we're "through the looking glass"--virtuous behavior on an individual level is sinking the economy, and the only way to bring it back up is to give money to those who behaved the worst.

There can be no doubt

...that Paul Krugman is the Nobel-prize winning economist for nerds.

PS: The comments for this post are pretty funny, too.

Hold your breath

Apparently we're once again moving to the brink of disaster in the credit markets. Krugman tells us not to worry about the plummeting stock market:

Panic about the credit markets instead. Interest rate on 3-month Treasuries at 0.02%; interest rate on high-yield (junk) bonds over 20%.

This is an economic emergency.

If my understanding is correct, the spread between those two numbers indicates how scared investors are that borrowers in the private market (including banks, companies, and you and me) will default. Treasuries are loans to the federal government, and are considered virtually 100% safe (since the government can always tax, borrow, or print money to repay a debt, and will basically never default). Since everyone is "flocking to safety" and loaning to the federal government, the federal government can demand to borrow at very low interest rates and still find a lender. In fact, the federal government can now borrow $100 today and only have to repay a total of $100.02 three months from now!

On the flipside, "junk" bonds--which are considered higher risks for default, and which can only find lenders by offering to borrow at very high interest rates--their interest rates are shooting through the roof. This is because nobody wants to invest in the private markets, because they are afraid that private borrowers will default.

And so a wide gap between those two interest rates indicates people are getting the hell out of the private markets and essentially stuffing their cash under the government's mattress.

Incidentally, while this is all bad news, it also illustrates why federal deficit spending is required in these situations. The government can borrow money for free; now is the time for the government to borrow lots of it and get it spent in the economy, so as to make up for the decrease in consumer spending and keep lots of businesses alive (thus preserving jobs). And of course, this should be done in a constructive way, with spending on things like increased unemployment insurance, infrastructure, financial aid to the states, and tax relief for everyone.

Anyone who talks about balanced budgets right now just doesn't know what they're talking about. Obama needs to run, like, a 500 billion dollar deficit next year.

Credit freeze is...melting? So we're starting on a...credit meltdown? Wait

Not sure which metaphor to go with, but it appears that credit--once frozen--is now...unfreezing.

This is good, because the lack of affordable credit (or in some cases the lack of any credit at all) is the actual problem underpinning the financial collapse. Krugman attributes the improvement to the bank recapitalizations by governments around the world, spearheaded by Gordon Brown.

So, if all goes well, Depression II will be averted, and we will undergo a mere run-of-the-mill recession--which sucks, yes, but is better than a whole bunch of people having to live in their cars.

A time to spend

Says Krugman:

It’s now clear that rescuing the banks is just the beginning: the nonfinancial economy is also in desperate need of help.

And to provide that help, we’re going to have to put some prejudices aside. It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold.

It's somewhat counterintuitive but true: federal deficit spending is good in a recession, because it gets money flowing in the economy. Moreover, since lenders have lost confidence in the private banks, they all want to lend to the federal government--even if it means lending at an interest rate of a fraction of a percent. So the government essentially has a credit card with a hyper-low interest rate of, like, 0.15% that it can use to get money flowing in the economy in various ways: by increasing unemployment benefits, by cutting taxes, and by investing in infrastructure improvements. The idea is that you keep spending until the economy recovers, at which point tax revenues also recover and you can balance the budget and pay down the debt.

Uh oh

Today when I left work, everything looked on track for the bailout. All sides had agreed on the principle points: $700 billion, government buys equity in the firms, oversight of the federal purchase of assets, relief for Main Street, limits on executive compensation. The consensus was that a bill would be signed by the weekend.

But after a thoroughly enjoyable evening dining with Marian and the great Harinder Chahal, I come back home to find this NYT headline staring me in the face:

Talks Implode During Day of Chaos; Fate of Bailout Plan Remains Unresolved

When the economy is on the verge of utter, Depression-level collapse, the last thing you want is some salient public event to panic everyone into thinking that everyone else is panicked, thus causing everyone to pull their money out of the system. It's a collective action problem. So words like "chaos" and "-plode" in the morning headlines do not bode particularly well.

Moreover, it is not a good sign that the level-headed authorities that are supposedly piloting us through these troubled waters are doing things like entreating House Speakers on bended knee and pleading with them not to blow things up:

In the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.

“I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.”

Mr. Paulson sighed. “I know. I know.”

Before tonight, I thought there was an air of cautious optimism that some kind of package--however suboptimal--would be agreed upon that would stave off financial collapse. But it seems like that has been replaced with something far more ugly, visceral, and frightening: panic. It's palpable. It's in the language people are using. "Madness", says Krugman. "This sucker could go down", says Bush. Bailout plans are in "disarray", says WSJ. And Drudge? "BREAKDOWN" (although, it should be noted that there are no siren animated GIFs--close shave there). And on top of all this, Washington Mutual failed and was bought out by JPMorgan.

Of course, all this is just one layman's gloss of the whole thing. Hopefully I'm mildly embarrassed tomorrow and nothing extraordinary happens. But I have the sinking feeling that tomorrow will soon have the word "Black" attached to the front of it.

PS: Apparently, the key figure to keep an eye on is not the stock market but the so-called "TED spread". This measures the difference between the interest on 3-month Treasury bills (T-bills) and the 3-month LIBOR. Let's see if I understand this well enough to explain it coherently:

A T-bill is a security that the federal government issues as a way of borrowing money from the general public: you pay, say, $1000 for the T-bill, and the government agrees to pay you back $1100 in three months. T-bills are considered one of the safest possible investments, because they are backed by the federal government--the government, of course, being the only player in town capable of raising funds by coercive force (taxes) or, if it comes down to it, by simply printing more money. Interestingly, the interest rate of the T-bills is determined by a regularly held auction, so that it is constantly fluctuating depending on how much demand there is for people to lend money to the government (or, put another way, how much demand there is for T-bills). If there are lots of people who want to lend to the government, then the government can command a lower interest rate for itself, because lenders will be undercutting each other at the auction with lower and lower interest rate offers. If there aren't a lot of people who want to lend to the government, it will be forced to borrow at a higher interest rate. If investors don't have confidence in private institutions, then they tend to flock to the safety of federally-backed T-bills, driving down the T-bill interest rate.

Meanwhile, in just the same way that the government borrows money from the general public (including big banks), big banks borrow from other big banks. The LIBOR is the average interest rate at which this interbank borrowing takes place.

The upshot of all this is that, when times are good and investors are very confident in the private banking system, then banks will consider loaning to other banks to be as safe a bet as loaning to the federal government--and so the interest rates will be about the same for lending to each, and the difference between the rates (the TED spread) will be small. However, if there is little confidence that banks can repay their loans, then no one will want to risk lending them money unless they get a juicy interest rate in return (e.g., I'm not gonna take the risk of lending First Shitty Bank International a billion dollars unless there's a significant upside in it for me--like, say, that First Shitty will borrow from me at high interest rate). And so the average rate at which banks lend to each other--the LIBOR--will be higher.

To put it all together: if there's high confidence that private banks can repay their loans, then these banks can demand interest rates as low as what the government demands. However, when confidence in the banks' ability to repay is at an ebb, borrowing banks cannot command a good interest rate from lending banks, and so the average interest rate of interbank loans (LIBOR) rises. Moreover, since investors are flocking to the federal government (since it's too risky to lend to private banks), the interest rate of T-bills goes down. The rising LIBOR and falling T-bill rate means a higher TED spread.

The TED spread, then, reflects the amount of credit that is available: a high TED spread means there is not that much credit around (i.e., not much money available that can be borrowed), and a low TED spread means that credit is plentiful (i.e., it is easy to get an affordable loan).

The big danger is that credit will "freeze up"--become unavailable--and that all of the parts of the economy that rely on there being credit--people being able to buy houses and cars, businesses being able to stock inventory and keep operations going during a revenue slump, financial institutions being able to pay investors who unexpectedly want their money back--will simply stop. And this will cause a negative feedback loop of investors pulling their money out of the system (i.e., liquidating their assets--i.e., selling their assets--i.e., turning their assets into cash), leading to a flooding of the market with assets, which will cause the value of the assets to plummet (too much supply, not enough demand), which will cause the financial institutions--whose net worth is tied up in the assets--to have even more losses, which will make confidence in these institutions' ability to repay their loans sink even lower, which will make interest rates even higher (and thus, credit even scarcer), and so on, until we wake up and Depression II is upon us, and a huge chunk of the economy has gone out of business, and unemployment is at 25%.

Phew! So, I'm not sure if all that is correct. It is my best understanding of the whole situation, and I am, I hasten to remind you, a layperson when it comes to this stuff. But I think the basics are there, and in any case, I recommend keeping a tab on Paul Krugman's blog tomorrow, as he will no doubt have some kind of analysis of that all-important TED spread figure.

Oh, and by the way: here is what the TED spread actually looks like. We're already way up in the 3% "credit hell" zone--let's see what tomorrow brings.

Nothing new under the bloggy sun

I was going to write a post called "Parity" in which I noted that according to the RCP meta-poll, 538, and Intrade, the race was about even--but then I saw that Paul Krugman has beaten me to it with a post called "Even Odds". Then I was going to write another post about how the McCain campaign is lying its pants off when it claims that Obama called Palin "a pig with lipstick", but half the internet has got that one covered.

For what it's worth, I think things are about to start turning around for Obama and the Democrats, and that this latest outrageously false claim from the McCain campaign is one outrageously false claim too far. Following Ezra Klein's insightful post the other day, the media renders the continuous onslaught of news data comprehensible to consumers by framing it within running narratives. I would add that--perhaps out of an obligation to "balance", or maybe just because of a bias towards closer and more interesting races--there is a somewhat pendular motion to press coverage, such that a week or two of positive coverage for a candidate tends to be balanced by a period of negative coverage.

I think the press is getting antsy with its rosy McCain-surging-from-convention-and-Palin-pick narrative, which is one that has emphasized Palin's star turn over the steady drumbeat of false claims eminating from the McCain campaign. However, in order for the shift to occur, there has to be something for the media to affix its narrative to. This pig/lipstick nonsense could be it. In the first place, it's a deception that is readily verifiable in print and on video, so mainstream outlets can comfortably show it without fear of seeming impartial: they can just run a clip of McCain people accusing Obama of making the insult, and then juxtapose it with footage of what Obama said in context, with no need for a reporter to connect any dots. Second, it plays into what has become a pattern of questionable or outright false statements from the McCain campaign, giving the story a direction to run in: does the McCain campaign have a truth problem?

Of course, these things don't happen entirely on their own. Obama is going to have to drive the narrative in speeches, through surrogates, and in campaign ads. He is going to have to actively call out McCain and Palin for campaigning on personal attacks, misrepresentations, and outright lies, and for their silence on issues like health care and the economy.

Biden is already sounding the notes (via Fallows):



And looking around the internet, some people have submitted some pretty good-sounding examples of "what Obama should say". From a Sullivan reader:

"Yesterday I talked to a group of voters about how the McCain campaign is trying to call their continuation of just about every single Bush-Cheney policy of the last eight years "change." In doing so, I used a common, hundred-year-old phrase that we all understand: You can put lipstick on a pig, but it's still a pig. Now the McCain campaign demands that I apologize for saying this. Everyone, it seems, wants to hear my answer. Here it is: NO.

No, I will not apologize for telling the American people the truth: That McCain and Palin represent a stunning, and disastrous, continuation of Bush and Cheney's policies. Policies of sacrificing the middle class to give huge tax cuts to millionaires and big corporations. Policies that prevent Americans from getting the health care they need. Policies that would privatize Social Security and take away a woman's right to choose.

[...]

There's a word I've heard from the McCain campaign recently: "deference." No one is going to ask Sarah Palin a question, they say, unless they show her "deference." Joe Biden points out that they oppose all stem cell research, and they are offended he even mentioned it. I point out that their claim of bringing change is ridiculous, and they demand an apology. Apparently we are not showing them enough deference.

Let me explain something to Senator McCain and Governor Palin, as deferentially as I can: This is a democracy -- not a monarchy. You don't get to demand "deference" from the American people as if they were your royal subjects. You -- and I -- and everyone who seeks elected office must defer to the American people, and answer their questions, and fight for them even when it's politically inconvenient. That is what I promise to do. Thank You."

And from Nate Silver at 538:

My opponent's chief strategest just said, "this campaign isn't about the issues." Well, I've got news for you, America. The Republican Party is desperate. They are going to do anything to try and hold onto their power, because they know the damage they've done to our country, and they don't know how to fix it. They know that people are out of work, and they don't know how to help them. They know that people are dying because they don't have health insurance, and they don't know to save them. They know that families are struggling to put food on the table, and they know don't know how to provide for them.

So they're going to try and distract you, America, because that's the only thing they know how to do. They're going to try and scare you. They're going to try and tell you stories, instead of offering solutions. And yes, folks -- these are the same people that have been lying to you for the last eight years -- and they're going to lie to you again.

We'll see how it goes in the next couple of days. McCain has been in the driver's seat for the last week or so, but he's sold his soul to do it. If Obama can regain the momentum, he will be in a strong position heading into the final two months.

The Conscience of a Nerd

One interesting thing about blogs is that it allows serious columnists--like Paul Krugman--to let loose a little, and do things that they could never do in a printed op-ed piece, like drop pop-culture references left and right. Krugman has been doing just this a lot lately at his blog Conscience of a Liberal, and I must say, the man has good taste. Check out these references, all in the last couple of weeks:

• Monty Python's Meaning of Life
• Network
• Dr. Doom
• From Russia With Love
• The Hitchhiker's Guide to the Galaxy
  

If he just added a generous sprinking of Simpsons quotes, it would be like reading an article by my friends.

The effects of rising gas prices

Paul Krugman has a post about the long-term elasticity of gas prices:

In the long run, the best estimate of the price elasticity of demand for auto fuel seems to be -0.7. That is, a 10 percent rise in prices will reduce gas consumption by 7 percent. Of this, 4 points come from shifting to cars with better mileage, 3 points from driving less.

If it's true that there's a widespread perception that gas prices are rising because worldwide demand is outpacing worldwide production--and that this trend will continue for the foreseeable future--then I bet the change in consumer's behavior would be even more drastic.

For example, if I thought that gas prices would increase but soon stabilize, or if I thought that they would eventually come down again, then I might still buy a more fuel-efficient car and drive less, but wouldn't make any more drastic lifestyle changes.

However, if I thought that there was no predictable ceiling on gas prices at all, I might make a more drastic and permanent decision, like moving from the suburbs to the city to eliminate a lengthy commute, or move somewhere with decent public transit options. Moreover, cities would start seeing a demand for more public transit and higher density housing that is closer to places of employment.

So I wonder what the public's perception is as to why gas prices are increasing, and whether they think the trend is likely to continue for a long time.

Gas tax holiday

The best, tightest explanation I've seen about why McCain's--and now Clinton's--proposed "gas tax holiday" doesn't make any sense is at Krugman's blog:

Why doesn’t cutting the gas tax this summer make sense? It’s Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.

Is the supply of gasoline really fixed? For this coming summer, it is. Refineries normally run flat out in the summer, the season of peak driving.

So the actual price of gasoline this summer is going to be what it's going to be, whether a portion of that price is paid to the government (in the form of a tax) or not. Eliminate a tax of 5%, and the price will rise 5%.

If you actually wanted to save the consumer money--which is what McCain and Clinton cynically claim the "gas tax holiday" will accomplish--you would have to introduce price controls. That is, you would have to have the government enforce some kind of maximum above which the price of gasoline could not rise. But of course, this wouldn't really work: though you'd save the consumer money, you'd also cause gas shortages that would hinder the consumer from getting gas at all.

At the end of the day, the price of gasoline is being driven up by scarcity--world demand is increasing significantly faster than world supply. No legislative gimmickry or tax holidays are going to change that basic fact.

Obama, at least, has had the backbone to speak this truth to the American people.

Responding to Paul Krugman

Paul Krugman has an op-ed today that makes a couple of points defending Hillary Clinton and a couple of points questioning Barack Obama. As a dutiful Obama supporter, I'll try to make arguments against some of his points.

Mr. Obama was supposed to be a transformational figure, with an almost magical ability to transcend partisan differences and unify the nation.

This is the common misunderstanding of Obama's rhetoric when content is confused with process. When Obama talks about "transcending" partisan differences, it does not mean that somehow everyone will hew to the same ideological line, or that ideological differences will go away. Rather, it means that the process of politics will be executed in good faith, and that the opposition will have its voice be heard and not be shut out of the process, encouraging pragmatic resolutions to the immense problems our nation faces: the Iraq War, the upcoming recession, health care affordability, rising energy prices, global warming, terrorism, etc. There is nothing "magical" about any of this, and there is no rule that says that only Obama is capable of achieving it. Clinton could have chosen this route of conciliary and empathetic politics, but instead has opted for 90s-style ultra-partisan warfare politics and its incessant "fighting" of the "Republican machine". This difference in political methodologies between the candidates is a substantive one. As Clinton herself demonstrated in the early 1990s with the 'Hillarycare' debacle, the wrong political strategy can doom even the most well-thought-out policy.

Once voters got to know him — and once he had eliminated Hillary Clinton’s initial financial and organizational advantage — he was supposed to sweep easily to the nomination, then march on to a huge victory in November.

If the implication is that this was the Obama campaign's prediction of how things would go, then it is wrong. In fact, the Obama campaign has for a long time been soberly predicting that Obama's margin of victory would not be large and that there would be absolutely nothing easy about toppling the Clinton machine. So there is more humility to the Obama campaign, I think, than Krugman lets on.

Well, now he has an overwhelming money advantage and the support of much of the Democratic establishment — yet he still can’t seem to win over large blocs of Democratic voters, especially among the white working class.

As a result, he keeps losing big states.

It has always been predicted that Obama would lose big states such as Texas, Ohio, and Pennsylvania (at around Super Tuesday, the Obama campaign itself predicted losses in these states by 4, 7, and 5 percent, respectively). This is part of the reason why Obama's campaign strategy has been to capitalize on lopsided margins in smaller states and/or caucus states where superior organization pays off.

And general election polls suggest that he might well lose to John McCain.

Tellingly, no citation. In the helpful metapoll over at RealClearPolitics, it shows that Obama is polling on average 1.5 points ahead of McCain, and Clinton is polling 0.6 ahead. In other words, even though the Democrats are currently campaigning against each other, they are both essentially in a dead heat with McCain (good news for Democrats). So I don't know where Krugman is getting his polling data from.

According to many Obama supporters, it’s all Hillary’s fault. If she hadn’t launched all those vile, negative attacks on their hero — if she had just gone away — his aura would be intact, and his mission of unifying America still on track.

But how negative has the Clinton campaign been, really? Yes, it ran an ad that included Osama bin Laden in a montage of crisis images that also included the Great Depression and Hurricane Katrina. To listen to some pundits, you’d think that ad was practically the same as the famous G.O.P. ad accusing Max Cleland of being weak on national security.

It wasn’t. The attacks from the Clinton campaign have been badminton compared with the hardball Republicans will play this fall. If the relatively mild rough and tumble of the Democratic fight has been enough to knock Mr. Obama off his pedestal, what hope did he ever have of staying on it through the general election?

I agree with Krugman that many Obama supporters overstate the damage done by Clinton's attacks, and tend to exaggerate the actual negativity of the ads themselves. At the same time, though, I don't think it makes sense to judge the negativity of Clinton's ads by using Republican attacks as a yardstick. Even if a Clinton attack is substantively less negative than a Republican one, the fact that it is uttered by a fellow Democrat can make it far more damaging. For example, the suggestion that Obama is less prepared to be President than John McCain is very damaging coming from the mouth of a leading Democrat, but is par for the course coming from a Republican.

Moreover, I think Krugman and Clinton supporters in general should be on guard against facile arguments of the type "what Clinton did was justified in the primary because Republicans will do the same thing in the general". To a certain extent it's fair--and in fact desired--for primary candidates to take off the gloves a little bit and go after each other's weak spots, especially the ones that will likely be exploited in the general election. Hillary's prevarications, Obama's preacher--bring it on. However, as I argue above, there are some attacks that cannot be made by Republicans, that can only inflict pain because they are uttered by Democrats. It doesn't make sense to say of these Democrat-on-Democrat attacks that they are some kind of precursor of what is to come in the general election, and therefore fair game.

[M]aybe his transformational campaign isn’t winning over working-class voters because transformation isn’t what they’re looking for.

From the beginning, I wondered what Mr. Obama’s soaring rhetoric, his talk of a new politics and declarations that “we are the ones we’ve been waiting for” (waiting for to do what, exactly?) would mean to families troubled by lagging wages, insecure jobs and fear of losing health coverage. The answer, from Ohio and Pennsylvania, seems pretty clear: not much. Mrs. Clinton has been able to stay in the race, against heavy odds, largely because her no-nonsense style, her obvious interest in the wonkish details of policy, resonate with many voters in a way that Mr. Obama’s eloquence does not.

I agree absolutely with Krugman: the majority of the sorts of "troubled" working-class families described above are going to favor Clinton's no-nonsense wonkish approach over Obama's admittedly airy-fairy rhetoric of "change" and "transcendence". No one's saying that Clinton doesn't have strengths--indeed, I think Obama has learned from Clinton that often times conveying wonkish competence and mastery of details can be more comforting than high-flying oratory. However, just because these voters prefer Clinton to Obama does not mean that they will prefer McCain to Obama. If these voters are really as policy and detail minded as Krugman suggests, then they will certainly choose any Democrat over any Republican in the general, come what may. The same is not necessarily true, however, for many Independents and new voters who do respond to Obama's soaring oratory--which is why I think Obama is better positioned than Clinton to win the general election in November.

Tellingly, the Obama campaign has put far more energy into attacking Mrs. Clinton’s health care proposals than it has into promoting the idea of universal coverage.

During the closing days of the Pennsylvania primary fight, the Obama campaign ran a TV ad repeating the dishonest charge that the Clinton plan would force people to buy health insurance they can’t afford. It was as negative as any ad that Mrs. Clinton has run — but perhaps more important, it was fear-mongering aimed at people who don’t think they need insurance, rather than reassurance for families who are trying to get coverage or are afraid of losing it.

To say that Obama "has put far more energy" into attacking Clinton than promoting universal coverage is, I think, an obvious exaggeration. But I do agree that the particular attack ad that Krugman refers to was an inexcusable misrepresentation of Clinton's health care proposals, and should never have been run.

The question Democrats, both inside and outside the Obama campaign, should be asking themselves is this: now that the magic has dissipated, what is the campaign about? More generally, what are the Democrats for in this election?

That should be an easy question to answer. Democrats can justly portray themselves as the party of economic security, the party that created Social Security and Medicare and defended those programs against Republican attacks — and the party that can bring assured health coverage to all Americans.

They can also portray themselves as the party of prosperity: the contrast between the Clinton economy and the Bush economy is the best free advertisement that Democrats have had since Herbert Hoover.

But the message that Democrats are ready to continue and build on a grand tradition doesn’t mesh well with claims to be bringing a “new politics” and rhetoric that places blame for our current state equally on both parties.

I think the Democratic candidate will be able to portray him or herself and the party in all the ways Krugman wants them to be portrayed, whether it's Obama or Clinton. What we're seeing here is the kind of myopia and cognitive dissonance that the long and bitter primary tends to cause amongst Democrats: we tend to lose sight of the fact that both candidates--though different in their political styles and what they emphasize--are overwhelmingly more the same than different, with almost no significant policy differences between them. Moreover, there is no tension between Obama's project of a "new politics" and the idea of building on "a grand tradition" of the Democratic Party, so long as we remember to distinguish between the content of policy proposals (which build on tradition) and the process of getting those policies passed into law (which requires "new politics").

So I think Krugman's criticisms of Obama are overblown. On the other hand, I'm also sympathetic to the article in general: with Frank Rich, Maureen Dowd, and even David Brooks cheerleading for Obama week in and week out and bashing Clinton, a Clinton supporter like Krugman must feel obligated to balance out the scales a little bit on the NYT op-ed pages.

Rising food prices

Paul Krugman has a post and recent op-ed about an emerging crisis: food inflation. Krugman notes that

[r]ice, the staple food for half the world, gained 2.4 percent to $21.50 per 100 pounds in Chicago, double the price a year ago.

As you'd expect, this is afflicting not just industrialized nations like the United States, but poor countries as well. More important, it is causing big grain exporting countries to hoard their supplies to make sure they cover the needs of their own citizens first, which in turn causes a "run" on grain--the dwindling supply raises prices, which adds to the panic, which causes more hoarding, which raises prices, and so on, in a vicious circle.

Credit freezes and financial meltdowns

For some reason there seems to be a positive correlation between financial panics and poorly mixed metaphors. Paul Krugman's on it.