Repealing the Johnson Amendment

Mr. Trump has added a plank to this party’s platform to repeal I.R.S. rules sponsored by Lyndon Johnson in 1954 barring churches and nonprofits from expressing political free speech. . . . Trust me, the repeal of the Johnson Amendment will create a huge revolution for conservative Christians and for free speech (Jerry Falwell Jr., Republican National Convention, 2016).


To claim that churches are not political is like claiming that Rome executed Jesus for being nice. There is nothing I can think of that, by its very nature, is more political than religion.

Simple solution: tax wealth.

Or, as a wise man once put it: “Render unto Caesar the things that are Caesar’s and unto God the things that are God’s” (Matthew 22:21). Added another wise man: “Pay to all what is due them — taxes to whom taxes are due, revenue to whom revenue is due, respect to whom respect is due, honor to whom honor is due” (Romans 13:7). Nor are we talking about “good Christian leaders.” We are talking about the monster Nero. So, get over it.

What should Ms Yellen do?

My colleague and Fed Chair is in a hard place:

Normally, raising interest rates tightens the monetary supply, making money at T1 worth less than money at T2 and so on, which is the reverse of an inflationary trend. It is deflationary. Since money will be worth more tomorrow than today, up to the margin I will invest less money today relative to tomorrow. Normally this will place downward pressures on employment since I am not going to invest today what I can invest more profitably tomorrow. (Again, under inflationary conditions the reverse holds; since my capital will be worth less — will purchase less — tomorrow than today, I will purchase things today.) Normally.

One of the corollaries to this principle is that, generally, I only tighten the monetary supply when the economy is approaching full employment, which our economy is, thanks almost entirely to quantitative easing (QE) and historically low interest rates.

But this raises questions about why interest rates are so low in the first place. As everyone knows, interest rates are historically low because the Fed wants people to spend money and fuel economic growth. Still, many of us can remember times — the 1950s and 1960s — when the economy was expanding and interest rates still held within a normal range. Here is the Federal Funds rate since 1954 posted on this morning:


So, yes, it hit .93 in June 1958. But since December 2008 the Federal rate has never been anywhere near this high; and we have near full employment! So, what gives? Here’s what gives; real wages since April 2006 from this morning’s Bureau of Labor Statistics:


And here is how the Bureau of Economic Analysis reports wage growth since 1960.

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Stagnant. Unlike a household budget, the discrete elements within an integrated national economy shape one another profoundly. If I do not maintain the road in front of my house, drivers will either avoid my street or break their axle. To maintain the road we develop equitable formulas whose underlying principle is that when all of our streets are maintained this improves the general welfare of everyone (U.S. Constitution, Preamble).

But when private investors discovered that purchasing policymakers at every level of government was an efficient way to reduce or eliminate their share of public costs, they began throwing huge sums of money into political races. Such sums were justified by the even larger sums of capital private investors saved by shifting public costs onto the shoulders of individuals without sufficient wealth to purchase policymakers. As their share of the public cost increased, working families were told that the fault lay in big government. Reduce the cost of government and working families would (1) receive higher wages and greater benefits from deregulated employers relieved of their tax and regulatory burden; and (2) would enjoy relatively higher wages because their wages would be taxed at a lower level and because products produced by non-taxed, deregulated industries would cost less. Which is the same as saying, when no one pays to maintain the road in front of my house, it will cost less for me to drive on it.

Obviously, since they could earn higher returns in a deregulated environment private investors had no interest in passing their higher earnings either onto workers or onto consumers. The long and short of it is that since 1970, roughly, working families have had to do more with less. Yes, working families are working their tail ends off since the burden of paying for literally everything falls on their shoulders. Thus the historically low unemployment. And, yes, private investors are doing really, really, really well, thank you, since they have been relieved of any responsibility for helping pay for public services. (How well? Compare working families in 1965 to working families in 2016. That’s how well.)

What the Fed Chair should do is tax wealth (my colleague Emmanuel Saez and French economist Thomas Piketty are right). But tax authority does not fall under the Fed. So Ms Yellen has but one tool. And since Congress is completely in the pocket of private investors, it has abdicated all responsibility to use any of the other tools available to public policy makers (other than criticizing big government).

Normally, at full employment, we should raise interest rates. But to mistake our economy for an economy that is overheating is like claiming that I am spending too much because Donald Trump bought another Casino. Investors are doing really, really, really well. But the average working family — the ones who will suffer most from a rate hike — are doing really, really, really badly. And they will do worse with the rate hike. Meanwhile, investors will simply move their capital elsewhere.

Unfortunately, the feeling is that since Ms Yellen is the only adult at home, she should do something. My fear is that she will do what normally would be right, but under the current circumstances is wrong.

Saving the TPP

As many of you know, WSJ is my morning paper. I know what I think; I’m not always sure what they are thinking. As many of you also know, I teach economic theory and history at UC Berkeley. So, yes, I buy into the “gains from trade,” “trade-offs,” and the like. And then there’s this morning’s headline:

This should have no one scratching their heads. In WSJ-speak “U.S.” always means large private corporations and those who invest in them; it never means mom-and-pop shops and working families — I mean never.

But now let us suppose that the TPP is a legacy issue for President Obama. Let us say he needs this feather in his already surprisingly substantial plumage. There are really three questions Obama needs to answer: (1) when; (2) how badly; and (3) is it politically feasible?

When. If President Obama wants TPP now, that ain’t gonna happen. Not in an election year. Not with HRC running against an anti-TPP Republican; go figure. The only way TPP happens is under HRC’s watch. But, since this is so, nothing can be lost (and much can be gained) going back to the drawing board; only this time with a bevy of environmental, consumer, and labor advocates at his shoulder. TPP was never a good deal, not for U.S. working families, not for the environment, not even for free trade. It was good for business. But, listen: business is global. No TPP, and business is more than happy to take its capital elsewhere. Business is simply rent-seeking. That’s what business does. President Obama could vastly strengthen HRC’s hand and add a whole peacock of plumage to his legacy by saying “No” to this TPP and renegotiating a trade agreement that works for working families, the environment, and free trade.

How Badly. Listening to the rhetoric coming from the White House, President Obama wants this agreement very badly. So, too, do pro-business Republicans. Of course, there are going to be trade-offs. The question here is, how close can President Obama stand to working families without losing Congress? Right now there is significant leeway. Close those health and safety gaps. Close the windfall for pharmaceuticals. Eliminate the threat to Internet freedom. Strengthen the protections enjoyed by working families. Strengthen environmental protections. With each of these steps, President Obama obviously shrinks the rent corporations will take home from TPP. At some point business will tell their lap-dog legislators to wait for a “more favorable business climate”; meaning HRC. Nevertheless, something is better than nothing, and at the moment the President is nowhere close to the margin. Moreover, the closer he gets to this margin, the higher the turn-out in November, which actually strengthens the hand of pro-environmental, pro-working family activists. How badly do you want TPP Mr President?

Political Feasibility. Now, it may be that a pro-environment, pro-working family TPP simply isn’t in the cards at this moment. And it may also be that business has already determined that TPP is not going to happen before 2017. TPP was the trophy the President felt he could win. It may turn out that he can’t under any circumstances.

But let us assume for the sake of argument that trade is good and that gains from trade are real. I need clothes. I can’t make clothes. I teach. I trade my teaching for clothes. I win. The tailor wins. Unless we are simply luddites, then we want trade, but not at any cost. We want trade that does not lead to a net loss in externalities: environmental degradation, poor health, less freedom, lower wages and benefits. These are not negotiable points. They never should have been. If business cannot prosper unless it harms our environment, health, freedoms, and livelihoods, then business should not prosper. Its that simple. But that is not an argument against trade agreements. Rather is it an argument for trade agreements that truly benefit the communities they claim to serve — not on the authority of the business community, which will always claim that its benefits are enjoyed by all, but on the authority of those who have a stake in the outcomes: environmentalists, consumer advocates, and trade unions.

So, Mr President, how badly do you want to save TPP? If you want it this badly, then get in touch.

1860 and 2016

As astonishing as it may seem, where voters stood on slavery and states rights in 1860 is a fairly good gauge of where they will stand today on Trump v Clinton, which may help to explain why Donald Trump has fallen into fourth place (behind Clinton, Stein, and Johnson) among African American voters. But that is not my point.


My point is that the culture of slavery is alive and well south of the Mason-Dixon. Why? Ideally, when the delegates to the Constitutional Convention discussed republican institutions, they aimed at the Athenian ideal of a free, educated, wealthy and leisured public servants. Of course, ideally Aristotle had excluded both farmers and businessmen from those qualified for public service, since both in his view were dependent on labor for their livelihood, thus creating the moral hazard that they might use public office to promote private self-interest. With these two critical exceptions, southern plantation owners and northern businessmen recognized in themselves the qualifications for public service.

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But this left the critical point of representation. Who would public servants represent? Again, ideally, they would represent citizens. Yet, who are citizens? And, again, Aristotle was the authority. Citizens were those who, like those who represented them, were healthy, wealthy, and wise. Upon this criteria, however, plantation owners recognized that they were at a disadvantage. For although their populations were roughly equal, there were far more individuals in the north who qualified for citizenship. It was to remedy this advantage that northerners agreed to allow southerners to count each slave 3/5ths toward representation.

Two points: private property herein gained representation in an institution for which res publica, the wealth we hold in common, was to have been the guiding principle. Indeed, 1787 is a watershed precisely for this reason: southern delegates were permitted to turn republican ideals on their head, elevating private property to the guiding principle of their national form. The second point, however, is that this property came specifically in the form of labor. This meant that when labor organized collectively in the northern states for bargaining power, workers in the south, for whom labor-cum-private-property had become a guiding national principle, could not easily organize without at the same time disavowing their “nation.” These two related points were central to the 1860 election. And they remain so today.

The third point that needs mentioning is how these two points are related to the right to bear arms, which, for southerners has since the seventeenth century, always meant both the right to prevent anyone from seizing my private property — my wealth, my slaves — and the right to suppress rebellion by my slaves, who are my property. Guns have always been directed against the central authorities, who may try to seize my property, and, defensively, against that property itself, my slaves. In other words, it has never been about a well-trained militia.

Of course, what this also means is that southerners have never fully bought into republican values and institutions, standing ever ready to renounce republicanism and set out on their own. Remember, until Nixon’s “southern strategy,” the south was solidly democratic; philosophically, it still is. It is the north, and the democratic party, that now best represent republican values and principles.

Take another look at the two maps above. That solid red in the north on the 1860 electoral college map? That is the republican vote. The blue in the south? That’s democratic.

Zero Tolerance

There is an unmistakable neoliberal inflection in zero tolerance. Our assumption, which theoretically ought to hold, is that both acts and responses to acts, when grounded in color-blind law, by definition rise above racism. A law that specifies how much of a park bench an individual can occupy does not specify the race of either the individual sitting or the individual applying the cuffs.


What such laws fail to grasp is the rent-seeking opportunity created by systemic violence. By constraining individuals born to one set of parents in one neighborhood more than another, I effectively drive down their market value while at the same time making their incarceration more likely; which, in turn, constrains them further; and so on. But again no race-based criteria are required.

The conceit that individuals are free to throw off their constraints whenever they like through a simple decision to comply ignores the cumulative effect both of constraints applied and of rents earned. As I drive down an individual’s value, I earn efficiencies (rents) in their devaluation. Call these efficiencies “freedoms.” I earn these freedoms not through compliance, however; I earn them through the constraints under which other economic actors are forced to perform. I run the 100M with 10kg weights strapped to my competitors’ ankles. Now, however, I am permitted by law to strap another 10kg weight somewhere to their bodies whenever they lose. The effects are cumulative. And, note, not once have I mentioned race. My criteria are color-blind.

The neoliberal inflection of zero tolerance comes precisely from its assertion that its principles are neutral, without valence. Did the rent-seeking opportunity not exist in the first place, this claim might hold up to closer scrutiny. But, to continue our analogy, I enter the race already with all of my opponents wearing weights about their ankles. Moreover, arising out of past rent-seeking opportunities, my opponents have all been aggregated in specific geographical areas that are petri dishes of rent-seeking, where the economic value of individuals has been driven down so far and where the constraints everywhere — from education, to health, to security, to freedom of movement — are so odious as to constitute tons of weights around the ankles of each. And since neoliberalism counts this a “level playing field” it counts any public social intervention onto this field an unwelcomed limitation of freedom: a distortion.

Economic science habitually overlooks the actual composition of this playing field. This fall when I teach Urban Economics at the University of California, Berkeley, I shall have to supplement the standard canon — which knows nothing of this systemic violence — with research setting it in relief.

On State Religion

Whenever I see a headline like this, two thoughts come to my mind. The first is, “what a rotten job we have done educating the electorate.” My second thought is, “what a rotten job we have done educating our parishioners.” Republican institutions and values are extraordinarily fragile things — just ask the Athenians or Romans or Genoese or Venetians. Always and everywhere they have rested on res publica, the wealth we hold in common; or, as several of our states have it, they rest on commonwealth. Whenever and wherever wealth becomes bunched at the top of the income hierarchy, then and there republican institutions cease to operate and republican values are abandoned.

57% Of Republicans Say Dismantle Constitution And Make Christianity National Religion

Which is why it is so fundamentally damaging and dangerous to teach U.S. history as a story about being fair or good. These are good things. But that is not, fundamentally, what U.S. history is about. Rather it is about institutions and processes that we have reason to believe will “establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity” (“Preamble,” U.S. Constitution). Failing in this task by, for example, depleting the wealth we hold in common or by cynically reserving that wealth only for those few at the top of the income hierarchy will — guaranteed — establish injustice, domestic turmoil, endanger our shores, undermine our general welfare, and secure the blessings of liberty for no one. “General welfare” therefore is not a matter of being fair or good. It is a matter of national survival as a republic.

But we have also failed our parishioners, specially when we behave as though Christians can be indifferent to the political and policy choices that face our communities. I think of Paul’s words to the church at Corinth in this regard; words that would never, ever have been written did our present political and social agnosticism prevail:

Consider your own call, brothers and sisters: not many of you were wise by human standards, not many were powerful, not many were of noble birth. But God chose what is foolish in the world to shame the wise; God chose what is weak in the world to shame the strong; God chose what is low and despised in the world, things that are not, to reduce to nothing things that are. 1 Cor. 1:26-28

Imagine a preacher saying such nasty things about the wise, powerful, and noble members of her congregation or community. “Well, pastor, if that is how you feel, I am taking my tithe down the street! Imagine the nerve!”

Or I think of Paul’s counsel in his letter to the church at Rome telling the Christians there to pay their taxes; taxes to the profligate and dissipated Emperor Nero; taxes used not only to provision Rome’s occupying forces all around the Mediterranean, but to support temple prostitution in Nero’s personal temple franchise.

Let every person be subject to the governing authorities; for there is no authority except from God, and those authorities that exist have been instituted by God. Therefore whoever resists authority resists what God has appointed, and those who resist will incur judgment. For rulers are not a terror to good conduct, but to bad. Do you wish to have no fear of the authority? Then do what is good, and you will receive its approval; for it is God’s servant for your good. But if you do what is wrong, you should be afraid, for the authority does not bear the sword in vain! It is the servant of God to execute wrath on the wrongdoer. Therefore one must be subject, not only because of wrath but also because of conscience. For the same reason you also pay taxes, for the authorities are God’s servants, busy with this very thing. Pay to all what is due them — taxes to whom taxes are due, revenue to whom revenue is due, respect to whom respect is due, honor to whom honor is due. Rom. 13:1-7

Clearly Paul is not counseling Christians to only obey Christian politicians. He is not even telling them to only obey good people; although it is worth noting that Paul calls the secular — no, the Pagan! — leaders of Rome both “God’s servants” and “good.” Imagine that!

Why is Paul not demanding that the Christians in Rome overthrow Nero and establish a Christian nation? Could it be that this would fly in the face of everything Jesus did and taught, including his submission to Roman courts and incarceration?

Yet we continue for the most part to play it safe from our pulpits, fearful that we might offend this or that individual or group. Government is good! Even secular government, Pagan government, is good! Pay your taxes! Amen!