The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.
BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict.
The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.
But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.1
Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.
The lack of structural reform has meant that the unprecedented excess liquidity that central banks injected into their economies was not allocated to its most efficient uses. Instead, it raised global asset prices to levels even higher than those prevailing before 2008.
In the United States, housing prices are now 8% higher than they were at the peak of the property bubble in 2006, according to the property website Zillow. The price-to-earnings (CAPE) ratio, which measures whether stock-market prices are within a reasonable range, is now higher than it was both in 2008 and at the start of the Great Depression in 1929.
As monetary tightening reveals the vulnerabilities in the real economy, the collapse of asset-price bubbles will trigger another economic crisis – one that could be even more severe than the last, because we have built up a tolerance to our strongest macroeconomic medications. A decade of regular adrenaline shots, in the form of ultra-low interest rates and unconventional monetary policies, has severely depleted their power to stabilize and stimulate the economy.
If history is any guide, the consequences of this mistake could extend far beyond the economy. According to Harvard’s Benjamin Friedman, prolonged periods of economic distress have been characterized also by public antipathy toward minority groups or foreign countries – attitudes that can help to fuel unrest, terrorism, or even war.
For example, during the Great Depression, US President Herbert Hoover signed the 1930 Smoot-Hawley Tariff Act, intended to protect American workers and farmers from foreign competition. In the subsequent five years, global trade shrank by two-thirds. Within a decade, World War II had begun.
To be sure, WWII, like World War I, was caused by a multitude of factors; there is no standard path to war. But there is reason to believe that high levels of inequality can play a significant role in stoking conflict.
According to research by the economist Thomas Piketty, a spike in income inequality is often followed by a great crisis. Income inequality then declines for a while, before rising again, until a new peak – and a new disaster.
This is all the more worrying in view of the numerous other factors stoking social unrest and diplomatic tension, including
- technological disruption, a
- record-breaking migration crisis,
- anxiety over globalization,
- political polarization, and
- rising nationalism.
All are symptoms of failed policies that could turn out to be trigger points for a future crisis.
.. Voters have good reason to be frustrated, but the emotionally appealing populists to whom they are increasingly giving their support are offering ill-advised solutions that will only make matters worse. For example, despite the world’s unprecedented interconnectedness, multilateralism is increasingly being eschewed, as countries – most notably, Donald Trump’s US – pursue unilateral, isolationist policies. Meanwhile, proxy wars are raging in Syria and Yemen.
Against this background, we must take seriously the possibility that the next economic crisis could lead to a large-scale military confrontation. By the logicof the political scientist Samuel Huntington , considering such a scenario could help us avoid it, because it would force us to take action. In this case, the key will be for policymakers to pursue the structural reforms that they have long promised, while replacing finger-pointing and antagonism with a sensible and respectful global dialogue. The alternative may well be global conflagration.
New York Democrat may not impeach president, but his rigorous oversight will be a thorn in his side
Jerrold Nadler remembers when he began to figure out that you’ve got to fight back when life seems unfair.
It was 1957. Nadler was 10. He was at home in Brooklyn watching Disney’s film production of the 1943 novel “Johnny Tremain,” a young apprentice of silversmith Paul Revere on the eve of the American Revolution.
In the movie’s climatic scene, colonial lawyer James Otis delivers a rallying speech to revolutionaries in a cramped wooden attic in Boston.
Otis was the colonial lawyer whose five-hour speech in 1761 decrying British “writs of assistance” would later become the foundation of the Fourth Amendment protecting Americans from unreasonable search and seizure.
At the end of his winding speech, the fictionalized Otis scans the room and leaves his comrades with a parting message: “We fight and die for a simple thing — only that a man can stand.”
“I still remember watching it,” said Nadler, whom aides and confidants claim has a photographic memory.
.. First elected to Congress in 1992, Nadler is poised to become the next chairman of the House Judiciary Committee in January after the Democrat-controlled 116th Congress is sworn in.
Immigration, voting rights, and Justice Department oversight — read: Mueller investigation — are just three of the politically charged issues under the committee’s jurisdiction.
.. Nadler has likewise skirted around such questions, though he said he is eager to conduct oversight hearings on the Trump administration’s policies of
- separating immigrant families at the U.S.-Mexico border,
- increases in anti-Semitic incidents and hate crimes since the president took office, and
- voter suppression, not to mention
- Russia’s interference in the 2016 election.
.. “The question of impeachment is down the road,” Nadler told Roll Call in a wide-ranging interview in which he cast doubts over whether Democrats would ever reach a point where they would seriously pursue impeaching Trump.
“As far as impeachment is concerned, we have to see what Mueller comes up with,” Nadler said. “I certainly wouldn’t predict it.”
.. Though he hails from one of the most liberal districts in the country, New York’s 10th, Nadler’s political demeanor more closely resembles the calculated coolness of party leaders than the pot-stirring of liberal firebrands such as California Rep. Maxine Waters, the presumed next House Financial Services chairwoman
.. Multiple former aides could not identify a single hobby of his that didn’t include reading or debating public policy with his friends.
.. “Hobbies? He doesn’t have any,” said Brett Heimov, Nadler’s former Washington chief of staff. “Reading books — that’s his hobby.”
.. the only yeshiva-educated member of Congress. He does not drink. The most alcohol Nadler will consume is on Jewish holidays: a sip or two of Manischewitz for the Kiddush ritual.
.. He has retained senior staff in Washington and field directors in his district at an astonishingly high rate. Nadler’s Washington director, John Doty, has been with him since the congressman’s first full term. Same with his scheduler, Janice Siegel.
“Twelve years, 20 years, they’ve stuck with him,” said Manhattan Borough President Gale Brewer, a longtime friend. “He’s always had good staff around him.”
.. Just about the only thing that has changed about Nadler since the 1990s is his weight.
In the early 2000s, the congressman peaked at a gargantuan 338 pounds. The butt of countless bodyweight jokes, even among his peers, during the Clinton impeachment trial, Nadler used to take the elevator up to the second floor of the Capitol for votes because he just couldn’t make it up a lone flight of stairs. He underwent a stomach-reduction surgery during Congress’ August recess in 2002 and eventually cut his weight roughly in half.
.. Since arriving in Washington in 1992 after a 15-year stint in the New York state Assembly in Albany representing liberal Manhattan, Nadler has lived out of a suitcase in a series of hotels whenever he’s in town for work. For the first few years, he stayed at the Howard Johnson’s near the George Washington University campus.
.. From the start, Nadler opposed the sweeping 1994 crime bill that originated in the Judiciary Committee over the “three strikes” statute for previously convicted felons.
After the GOP picked up 54 seats and a majority in the Newt Gingrich-led Republican Revolution in the 1994 midterm elections, Nadler confronted Democratic leadership in a head-on clash to chip away at senior members’ monopoly of power at the committee and subcommittee level.
.. After the midterm trouncing, they agitated for a vote on a party rule that would bar Democratic chairs and ranking members from leading subcommittees, too. When Democratic leader Richard A. Gephardt refused, Nadler collected the requisite 50 petition signatures to force a vote.
The caucus voted to adopt the new rule, infuriating some members, including former Energy and Commerce Chairman John D. Dingell of Michigan, who was forced to give up one of his subcommittee posts.
“There were a number of committee chairmen who wouldn’t talk to me for years after that,” Nadler recalled. The clash over the rule, still the party standard, is largely forgotten these days.
Nadler didn’t make waves on the national scene until four years later, though, in 1998 when he emerged as one of Clinton’s most outspoken defenders during the impeachment proceedings.
Nadler relished being a nettle for Republicans as they pursued allegations that Clinton had perjured himself when he told independent counsel Ken Starr in a deposition that he never had a sexual relationship with White House intern Monica Lewinsky.
The New York congressman was a frequent guest on CNN and other TV networks, on which he argued that Clinton may well have perjured himself — but that alone was not grounds for impeachment.
.. “An impeachable offense is an abuse of presidential power designed to or with the effect of undermining the structure or function of government, or undermining constitutional liberties,” he told the crowd of several hundred.
.. “The fact is, impeachment is not a criminal punishment,” Nadler told Roll Call. “There are crimes that you could commit that are not impeachable offenses and there are impeachable offenses that are not crimes. They’re different tests.”
.. During the Clinton impeachment proceedings, Nadler believed a crucial function of the Judiciary Committee was to educate Americans about that distinction between crimes and impeachable offenses.
He pushed for, and secured, a Judiciary hearing in 1998 to answer what constitutes an impeachable offense, even though Democrats were in the minority.
.. “The purpose of the whole impeachment process is to protect the integrity of liberty and of the rule of law and of government, to protect against a person with aggrandized power or who destroys the separation of powers or something like that,” Nadler said.
.. “If you’re serious about removing a president from office, what you’re really doing is overturning the result of the last election,” Nadler said. “You don’t want to have a situation where you tear this country apart and for the next 30 years half the country’s saying ‘We won the election, you stole it.’”
.. And by bipartisan support for impeachment, Nadler does not mean winning over Republican lawmakers.
“I’m talking about the voters, people who voted for Trump,” he said. “Do you think that the case is so stark, that the offenses are so terrible and the proof so clear, that once you’ve laid it all out you will have convinced an appreciable fraction of the people who voted for Trump, who like him, that you had no choice?
.. He has already promised to investigate the circumstances surrounding Sessions’ firing.
.. Part of that probe will focus on “cooperation” between Russians and Americans, including, potentially, some members of Trump’s inner circle
.. Legislatively, one of his top priorities will be to strike a deal with the Republican president and Senate on immigration, an elusive feat for recent administrations.
if you’re looking for confirmation bias—and by all accounts, that’s the mode of analysis our president prefers—there is plenty of evidence to suggest that the only thing the Trump administration needs is More Trump.
.. the Trump clones did well. Sure, Corey Stewart and Kris Kobach lost. But Trump can tell himself that Virginia is a Clinton state he doesn’t need and that he couldn’t lose Kansas in 2020 if he tried. In important states—tossups he has to have for reelection—the Trump clones won. In Florida and Georgia, Ron DeSantis and Brian Kemp ran as Mini-Trumps. And not only did these two win, but they beat the kind of young, progressive minority candidates that the Democrats are itching to put up against Trump in two years... Trump skeptics took a thumping. Barbara Comstock, Mia Love, Mike Coffman—all of those uppity conservatives who voted for Trump when they had to, but refused to bend the knee? Gone, gone, and gone. And in case you doubt how crucial this was to the president, he spent several minutes of his postelection press conference naming and shaming the Republican losers who did not sufficiently “embrace”—his word, he used it five times—him... Because, as everyone knows, Carlos Curbelo would have held on to Florida’s 26th District—which is 72 percent Hispanic and 50 percent foreign-born—had he gotten on board with Trump’s plan to sign away birthright citizenship. Cuck got what he deserved... The gains in the Senate are even better. Not only did Republicans add to their number, they did so while subtracting people, such as Jeff Flake and Bob Corker, who never showed the same level of discernment as Beautiful Ted. The result is a bigger, Trumpier majority, which, by extension, will put even more pressure on the one or two remaining Republican senators who have been reluctant to embrace the president... So if, for instance, the president needed the Senate to confirm a judge or a new attorney general, or—and we’re just spitballing here—vote on a trial of impeachment, then Trump is in a much stronger position... for all the talk about how Trumpism is a reaction to leftism and social-justice warriors and political correctness, the truth is that it is principally an intra-party fight... And like the Maoists, the Trumpers aren’t really interested in picking a fight with the other superpower. They’re much more concerned with controlling the near abroad—which is to say, the Republican party. That’s why they tend to focus their hatred on Republicans and conservatives who decline to get on board, rather than on Democrats and liberals. Jeff Flake is the enemy; Kamala Harris is just a random nonplayer character... Always remember that Trumpers—the people who believe in him, not the remora fish looking for their bits of chum—care very little about the left. Their real opponents are other Republicans. Seen from that perspective, Tuesday’s vote was a huge success. Because for Trumpers, it’s never a binary choice. Wherever a Trump-skeptical Republican was running against a Democrat, Trumpism couldn’t lose... In the final weeks of the midterm campaign, 4 percent looked like the most important number in politics: unemployment was under it and GDP growth over it. This was, economically speaking, as good as it gets, and most political professionals thought Republicans should be running on these numbers... Yet Trump decided to close the election with American Carnage 2. He obsessed about the caravan that was winding its way to our southern border. (No one seems to have asked why they wouldn’t be deterred by the Wall that Mexico paid for.) Trump ordered 5,000 troops to the border. Then the number was 10,000. Then 15,000. Then he said he was going to order these soldiers to fire on anyone who threw a rock in their general direction, even though the caravan was still a thousand miles away. The president ran an anti-immigration ad so vile that Fox News—the network whose journalists appeared onstage at a Trump campaign rally—pulled it off the air... In short, Trump looked at our fat, happy days of peace and prosperity and decided to run on fear, division, and chaos. And he was right... In politics, as in every other facet of life, you must always consider opportunity cost. And yes, it’s possible that some other closing message from the president might have produced marginally better electoral outcomes for Republicans. But maybe not. At the very least, the president’s gambit did no great harm. There was no big break against Republicans. Most of the races went according to form... The caravan worked. Sticking with Brett Kavanaugh was smart. There was no price for playing “false flag” games with the attempted mail-bombing of Democrats. No apologies, for anything, ever... Those are the lessons of 2018 and the doctrines that will shape the war of 2020. You can understand why Trump looked across the country on Tuesday night and tweeted, “Tremendous success tonight. Thank you to all!” He was smiling. The GOP caucuses in both the House and Senate will be even more friendly to him than before. His enemies have been crushed beneath his feet... The problem with getting rid of Love and Curbelo and Comstock is that it gives Democrats control of the House. Trumpism may not be interested in Democrats, but Democrats are interested in Trump. And now they have subpoena power.
.. Once a new speaker is sworn in, the Democrats will be able to investigate and call witnesses and poke and prod the administration in ways we can foresee and ways we cannot. There are, for instance, reports that the president’s son expects to be indicted. If that comes to pass, any attempt by the president to protect him will face scrutiny with the force of law behind it.
.. The White House and its surrogates have announced that they welcome Democratic overreach and are prepared to make war against congressmen who push investigations. Trump expressly threatened potential investigators in his press conference.
.. But the kinds of Democrats willing to take the hardest line against Trump will be from the safest districts. Trump can’t hurt them. And, moreover, getting to overreach means enduring an awful lot of pain during the initial-reach. Clinton and the Democrats benefited from Republican overreach in the 1998 midterm elections. The experience was not terribly pleasant for them... There are other problems on the horizon. The Democrats who won on Tuesday—Jon Tester, Joe Manchin, Tim Kaine—tended to be more centrist. The party’s progressive stars—Beto! Andrew! Stacey!—were wiped out, leaving Alexandria Ocasio-Cortez sitting forlornly in the corner with her movie-star cheekbones, glamorous jackets, and lost dreams of a socialist-Democratic future. This does not mean that Democratic voters will choose a nominee who is in step with mainstream politics in 2020. But these losses make that possibility more likely. The lesson has been taught, and all Democrats have to do is learn it... There’s even the possibility that Democrats may look at the midterms and the caravan and learn a lesson about immigration. They’re never going to outbid Trump on nativism, but they don’t have to. All they have to do is convince a small share of marginal independent voters that they’re not secretly for open borders and that they do take illegal immigration seriously. If you can’t do that while maintaining your liberal base, then you don’t belong in professional politics. It’s not a heavy lift... The other problem for Trump is that the numbers don’t look especially good for him. It is difficult to imagine external circumstances being better for Republicans two years from now—you can’t really top “no major wars and 4 percent.” So the macro-environment will either be equivalent or worse... In 2016, he got the second-smallest share of the popular vote (46.1 percent) of any Republican since 2000. He ran 3 points—which is a lot—behind Republicans in the House popular vote that year. And in the 2018 midterms, he pulled the Republican share of the House popular vote down to his own 2016 level, to what is likely the third-smallest percentage for Republicans since 1994.. Trump won in 2016 because even though he ran behind most congressional Republicans, their turnout was enough to pull him over the line. Over the last two years, Republicans have been pulled backward toward him, not the other way around... The good news for Trump and his Republicans is that they won’t have to beat the ’27 Yankees. They just have to beat whomever the Democrats put in front of them... for Trump in 2020, there cannot be a Morning in America campaign. There will be no 48-state mandate that realigns American politics for a generation. At best, Trump can hope to radicalize Democrats into nominating a weak contender and then gamble that the country is closely enough divided to give him a chance of drawing to an inside straight, again. This is not a crazy strategy. It might even be the best move available on the board.All of which means more chaos, more apocalypse, more carnage. More Trump.
The outgoing attorney general did more to enact the president’s priorities than any other member of the Cabinet, but that didn’t save him from White House hostility.
The paradox of Jeff Sessions’s tenure as attorney general is that no member of the Trump administration was so beleaguered and disparaged by President Trump, but no member got as much done.Even as he endured persistent verbal abuse from the president, Sessions steamed forward on a range of conservative social-policy priorities, aggressively reorienting the Justice Department’s stances on immigration, civil rights, and criminal justice, among other issues. In an administration plagued by incompetent and ineffective figures, Sessions was a paragon of efficacy—a distinction that horrified his many opponents, but did nothing to win Trump’s trust or affection.
- When it came time for Trump to pull the plug on the Deferred Action for Childhood Arrivals program, as he had promised he would during the 2016 campaign, the president got cold feet, but Sessions was happy to be the public face of the withdrawal. It was Sessions who
- tried to follow through (unsuccessfully) on Trump’s threat to cut off funding to sanctuary cities. It was Sessions who issued new guidance to immigration judges. And, most prominent, it was Sessions who
- went to the border to announce the Trump administration’s decision to separate migrant children from their parents.
Sessions openly said the plan to split families up was intended to deter migrants, even as other administration officials said otherwise. The policy was met with widespread and appropriate horror, and Trump eventually pulled back—but he had backed the plan before that, and Sessions had followed through... But these weren’t just Sessions’s pet issues. They were Trump’s as well. Hardline immigration policies, giving police free rein, fighting phantom voter fraud—these were all signature Trump projects. Sessions had been the first U.S. senator to endorse Trump, and Trump took from him a range of policy concepts—especially on immigration—as well as a top adviser, Stephen Miller. But Sessions’s stewardship of those projects didn’t return him to favor with Trump, who, according to Bob Woodward’s book Fear, called Sessions “mentally retarded” and a “dumb Southerner.”.. When McGahn’s departure was announced in August, I wrote that he’d been the most effective person in the West Wing, through his stewardship of judicial appointments. But Trump disliked and distrusted McGahn, and seemed eager to have him gone... Of course, the same issue poisoned both Sessions’s and McGahn’s relationships with Trump: the Russia investigation, and especially Special Counsel Robert Mueller’s takeover of it... Trump was angry that neither man had protected him. He raged at Sessions’s lack of “loyalty” and complained that Attorney General Eric Holder had “totally protected” Barack Obama. (What he meant by that is unclear.) He twice instructed McGahn to fire Mueller, and McGahn twice refused, once threatening to resign... Attorney General Matthew Whitaker assumes control of Mueller’s probe. Whitaker was outspokenly critical of the special counsel’s inquiry before joining the administration, so Trump may now have a leader of the Justice Department who is more pliable on the Mueller front. But the president is unlikely to find an attorney general who will do as much to move his priorities forward as Sessions did—and the new attorney general will come into the job knowing that loyalty and efficacy aren’t enough to garner favor with Trump.