Matt Yglesias

Why Neo-Hooverism Now?

As I documented, the right initially tended toward a neo-Hooverite line on the economic crisis. Then came a seeming shift and the emergence of a broad consensus in favor of strong action. Recently, though, there’s been a tilt back in the neo-Hooverite direction even as the crisis has grown more severe and along with it, increased blogospheric interest in what motivates neo-Hooverism. Steve Benen offered a five-fold categorization of motives:

1. The Moral Explanation: Ed Kilgore explains that some on the right thing America is too fate and happy. This is a bit like David Frum’s nineties vintage Donner Party conservatism.
2. The Benefactor Explanation: Matt Stoller says the right is more interested in entrenching inequality than worrying about the economy.
3. The Illiterate Explanation: Maybe they’re just dumb.
4. The Strategic Explanation: TPM Reader JF observes that a long depression serves the GOP’s political interests.

The obvious thing to say about this is that these explanations are mutually re-enforcing. In particular, the fact that a prolonged economic downturn serves the GOP’s political interests massively increases the grasp of the other factors. It’s one thing for a political party to buck the desires of its interest-group base or the ideological biases of its core supporters when doing so is necessary for the party’s political fortunes. But to buck those desires when doing so would be bad for the party’s electoral prospects is really asking a lot.

Beyond that, the emergence of age polarization in the electorate may play a role here. Elderly people, and especially the more prosperous group of elderly people, are actually reasonable well-positioned to weather a deflationary storm. By contrast, young people pay a huge lifelong economic price for graduating into a weak labor market or getting laid off after only a few years in the workforce.

Everything Must Go!

When I saw the headline “Consumer Prices Fall by Record Amount” I was ready to move into full-blown panic mode. Everyone likes to spend less, of course, but deflation is a bad thing and record deflation could be really terrifying. Fortunately, this turns out to be one of those situations they had in mind when they came up with the “core” inflation statistic that eliminates consideration of volatile commodities like energy:

Energy prices led the decline, falling 8.6 percent in October as the price of gasoline continued its steady slide from highs of more than $4 a gallon. The costs of transportation fell 5.4 percent while clothing prices fell 1 percent. [...] Even excluding volatile food and energy prices, prices dropped 0.1 percent in October. It was the first such decline in more than two decades and raises the specter of deflation as the economy contracts and demand for goods and services across the board plunges. [...] Mr. Sullivan added that he expects core prices, which are up 2.2 percent this year, to continue to fall back, but he does not expect them to slip into negative territory.

That’s not nearly as terrifying. Still, any core deflation at all is rare — we got through the last two recessions without any, which is how you know they were relatively mild recessions.