Flawed Primaries

Senator Thad Cochran of Mississippi defied almost every aspect of a primary run-off. He managed to win, something incumbents struggle to do in run-offs. As if that wasn’t astounding enough, he also managed to defy conventional wisdom by appealing to a voting bloc that tends to not vote for Republicans, being African Americans. The result increased turnout in the run-off compared to the general Republican primary by over 60,000 votes! Run-offs tend to have a more concentrated, extreme electorate, whether the extreme is far left or far right. But his victory isn’t without controversy; challenger Chris McDaniel believes that Democrats participated in the run-off, stealing victory from himself and unfairly rewarded Cochran for courting voters who aren’t Republicans.

McDaniel’s claims shouldn’t be brushed off immediately. Mississippi law allows an open primary system, meaning anyone may vote in a Democratic or Republican primary, even if they aren’t a registered member of the party. The catch is that once you participate in one primary, you may not participate in any run-offs for the other party during that election cycle. In other words, voting in the Democratic primary on June 3rd bars you from participating in the June 24th run-off. With increased turnout, especially from areas with high concentrations of African Americans, it isn’t crazy to say that Democrats most likely participated. The problem arises where there was such low turnout in the June 3rd Democratic primary, leaving many Democrats eligible to participate in the run-off. Additionally, McDaniel is beginning to create unsubstantiated numbers, citing “more than a thousand” irregularities in one county without any true evidence. Unless he finds hard evidence of actual voter fraud, and quickly, his numerical claims will become analogous to Joe McCarthy’s random numbers of the communists in the State Department.

The controversy continues to establish that Mississippi will go down in being the nastiest primary in 2014. Anyone who was surprised by the anger expressed by Chris McDaniel in his election night speech hasn’t paid close enough attention to him. He didn’t simply embody conservative principles; he held contempt for those who disagreed with him. Using the term “reaching across the aisle” in a pejorative sense should be a clear indicator that he really had no plan to change anything in Washington. But he demonstrates the scary reality that some individuals no longer view the other side as an American political party, but instead some kind of anti-American movement.

McDaniel seeks party purity, and voiced his disgust that individuals who weren’t Republicans voted. Mississippi law allows non-Republicans to vote, and many other states have open primaries. Including Mississippi, there are twenty states that utilize open primaries. If Mr. McDaniel is genuinely concerned about the issue, he should continue to push for a change in primary laws, regardless of the outcome of his race. I could get on board to a new type of election, but it wouldn’t be to eliminate open primaries in favor of closed primaries. Mississippi is the perfect case to show that both open and closed primaries do very little to improve the political climate.

I can say confidently that if Mississippi had a closed primary system, McDaniel would have crushed Cochran. This would have left Republicans with another candidate whose electability would be in question, and most likely would’ve made Mississippi a competitive state for Democrats. Had McDaniel been elected in November anyways, he would just contribute to the gridlock in Washington while pontificating his case for ideological purity; had he lost, it would have led to an even greater civil war between the Establishment GOP and the Tea Party. Meanwhile, we have seen that the open primary system has brought out an intraparty conflict, accusing their own of courting voters who aren’t the same ideologically, creating a narrative that compromise is not acceptable. Ironically, the rhetoric, coupled with Cochran’s strategy to mobilize Democratic voters, might just hand Democrats an environment to compete in Mississippi. So what should we do?

California and Louisiana have adopted a different form of primaries, a type that I think would moderate the extreme branches of the parties. Often referred to as the Jungle Primary, everyone runs on the same ballot, regardless of political affiliation. California has a jungle primary and then the top two will proceed to the November election. In Louisiana, it is a little different, as the primary is held in November, and the top two participate in a run-off only if no candidate can secure at least 50 percent of the vote. California’s system appears to be less chaotic, since Louisiana’s can allow a winner on the first ballot. But in an age where campaigns continue to run for more and more days, maybe it’d be nice to have that option; until someone doesn’t hit 50 percent and another month of campaigning begins.

Personally, I think California’s system is an easier transition for states to make. Candidates would need to appeal to the entire electorate, not just their own party. They would still need to identify their ideology and their stances, but they also would need to present ideas and demonstrate leadership. It wouldn’t be good enough just to say you’re a “true conservative”, you’d need to suggest your ideas and explain how you plan to implement them if elected to court votes against other conservatives, and show why your ideas are better than your liberal counterpart simultaneously. A system like this would require the two ends of the spectrum to interact with each other, or experience the fate of never making it past the primary. Independents would no longer sit on the sidelines, awaiting the parties to choose their candidates. Instead, they would be able to help make that choice without being demonized by the Chris McDaniels of the world, or being legally barred from participating in states with closed primaries.

Those who identify with the far left or far right will be opposed to this type of primary. It almost ensures that a candidate from the far end of the spectrum would lose in the general election.  Too many moderates and independents would form a voting bloc with the political ideology of the less extreme candidate to defeat the extreme candidate. What they fail to realize is that their perfect candidate isn’t going to fulfill their wish list of ideas, but they will contribute greatly to the gridlock already present in politics. The difference between Legislators and Politicians is that one group intends to take care of their constituents by continuously making progress and maintaining government, while the other just wants to win elections. Jungle primaries can help individuals identify which group the candidates fall into. Maybe it will even challenge the two parties to moderate themselves, for fear a third party emerging. But that’s speculation for another day. The biggest deficit we face right now is our deficit of leadership, and any process to get more real legislators is worth an attempt to me.










Iraq: A Predictable Mess

The hawks of the GOP are having their “I told you so” moment as Iraq begins to crumble. Prime Minister Maliki appears to be an ineffective leader, and the Iraqi forces don’t appear to be well equipped enough to push back from the aggressors of Islamic State of Iraq, better known as ISIS. Multiple high profile cities, some of which were key victories for the United States just a decade ago, continue to fall to the overwhelming power of ISIS. The critics of U.S. withdrawal from Iraq are claiming that this was predictable, and I agree with them. However, the Republican Party and pro-Iraq War proponents have overlooked a very important detail; this was predictable from the start of the war, not just from when Obama took office.

When the decision was made in 2003 to invade Iraq, we were led on premises that were false. The Bush Administration alleged that Iraq possessed WMD’s, and managed to tie Saddam Hussein to Islamic extremists, some of whom sympathized with Al Qaeda. We have since proven without doubt that WMD’s were not in Iraq, disproving a premise that President Bush, Vice President Cheney, and Secretary Rumsfeld consistently claimed was irrefutable. But often we overlook the second premise for entering Iraq regarding the relationship between Saddam Hussein and religious extremists. His relationship was almost identical to our relationship with these extremists; he wanted them gone.

While Saddam Hussein was a brutal, evil dictator, one thing he and his regime kept on high priority was to prevent any conflict between Sunnis and Shias. The history of Iraq showed a constant struggle between these two groups, leaving Saddam no choice but to aggressively reduce the influence of both groups, primarily in the forms of fear and violence. The strategy was effective, as neither group was able to successfully overthrow the regime, leaving a strange sense of religious harmony, where each section of Islam had been left with something, but not everything. Of course disputes occurred, and I wouldn’t say the individuals from either sect were happy with the conditions under Saddam, but the religious wars were kept to a minimum in Iraq. Even Christians were able to worship in Iraq, although they only made up 8 percent of the nation at their peak. Saddam just wanted to cultivate his power; he had very little interest in either sect of Islam gaining influence.

His own greed actually was the reason why Saddam was vehemently against Al Qaeda. He found them to be too extreme, and viewed their inflammatory rhetoric as a threat to his own power. There are few records that tie Saddam to Al Qaeda in any form, and the few that do all are reports of the conflicts between them. The bottom line is Saddam would never consider allying himself with Al Qaeda since it would align himself with the Sunnis, leaving the potential for his influence to be divided between himself and the leaders in the Sunni community. This leads to the conclusion that no, Al Qaeda was not able to use Iraq as a safe haven, seeing how Saddam tirelessly kept bin Laden and all of his accomplices out of Iraq.

So when we decided to invade Iraq, there was not any evidence that Saddam had conspired with Al Qaeda to execute the 9/11 Attacks. Couple that with questionable evidence of WMD’s, and the case to enter Iraq becomes very weak. There were critics who worried that the invasion would lead to unnecessary bloodshed in some kind of attempt of vengeance for 9/11. Many of these criticisms came from the religious community of all faiths. Instead, they called for diplomatic, global resolutions to investigate the credibility of the intelligence the U.S. had gathered and determine if WMD’s were present. Other naysayers questioned if it was really the time to divert our attention to Iraq at all, regardless of the presence of WMD’s. Individuals such as former President Bill Clinton or then-General Eric Shinseki worried that the invasion was pre-emptive, as there wasn’t any evidence that concretely linked Iraq to 9/11. Shinseki also believed that the amount of soldiers necessary to claim Iraq would be enormous.

Despite these concerns, the Bush Administration dismissed them all as either partisan attacks or just miscalculations by uninformed individuals. They began a campaign where any opposition was labeled un-American. The famous “You’re either with us, or you’re with the terrorists” line from President Bush’s speech to the joint session of Congress perfectly sums up the talking points to defend the positions of the Bush Administration. The reason the case brought by the Bush Administration appeared to be so solid wasn’t because of the evidence they had, it was because of they managed to mute any criticism with rhetoric. No one who had analyzed the evidence could publicly challenge the Administration without being labeled a sympathizer towards terrorists or being dismissed as ignorant, crippling the debate.

So we went to war. We deposed Saddam, a truly evil dictator in just about every sense of the word. But what were we left with? A country in shambles, no WMD’s, and no exit strategy. In the years to come, we would see strong insurgencies of Sunnis, some from groups that had stemmed from Al Qaeda (although, not Al Qaeda itself). The war had become increasingly unpopular, as we began to notice that the cost was rising in both soldiers and dollars, along with the realization that WMD’s weren’t there. We attempted to leave in a safe, timely manner. No matter when we had left, Iraq would have faced this situation. It is fair to say that a different leader could have handled it better, and perhaps the crisis wouldn’t have gotten out of hand as it has now. Yet, we are the exact reason they find themselves in this situation right now.

While it is noble to believe that we should intervene, I don’t see how we can without being entangled in another affair without clear, concise objectives. Nor do I see how it would be beneficial for Iraq for us to occupy the country again. But what puzzles me is that those who are championing their predictions on Iraq over Democrats by pointing to the current mess fail to realize that they are the same people who made the mess in the first place. Just a few days ago, former Vice President Cheney insisted that Obama had failed the nation by letting Iraq crumble. There is no acknowledgement of his own mistakes in Iraq, such as the lack of evidence to support the original invasion.

 I’m left wondering why we should be taking his opinion, or any other opinion from the Bush Administration, seriously. With the exception of Colin Powell, there really is no repentance offered by anyone in the Bush Administration for their poor decisions regarding Iraq. This is perhaps why the only voices that truly support intervention in Iraq are the same voices that wanted to go into Iraq back in 2002, only now their credibility has substantially declined. The unfortunate part is their credibility only appears to have been reduced largely in part due to an American public too jaded to return to Iraq, rather than because of the fact that both premises of entering Iraq were completely wrong. Iraq is deteriorating, and it is easy to observe that ISIS is rapidly making Iraq even worse. We cannot, however, forget that this mess was predictable but not inevitable. Had we not gone into Iraq in 2003, under false premises, we would not be entangled in the mess currently occurring in Iraq. Hypothetically, down the line if this had occurred anyways in Iraq, at least we wouldn’t be tied to the nation at all. And the ones who tied us this entire mess?

The Bush Administration. Don’t ever forget that.

They already misled us once, let’s not let it happen again.







The Dangers of Modi’s “Discipline”

The new prime minister of India, Narendra Modi, has promised to enact “unpopular” measures to revitalize a troubled economy and erase mounting deficits. Touting “discipline” and fiscal responsibility, Modi seems poised to unveil his plans to combat the deficit, plans which are certain to include cuts to central government spending and creating a more business-friendly environment. And in the spirit of “responsible” economic conservatives everywhere, he is all but certain to target India’s social welfare programs while reducing or eliminating taxes and other regulations deemed unfriendly to investors. While these policies might appeal to free-market supporters, it is unclear just how adversely they will affect the hundreds of millions of impoverished Indians who depend upon these programs. Modi, however, enjoys a mandate unseen in Indian elections in the past three decades. His BJP has an outright majority in the Lok Sabha, and the Congress Party, his principle opponents in the election have lost the majority of their seats in that body. Modi’s opponents are divided, weakened, and now, effectively, leaderless.

One rather disturbing development is the lack of an official Opposition leader in the Lok Sabha. Last week, the Speaker of the Lok Sabha formalized the decision after no minority party gained sufficient seats to field a candidate fro the position. The lower House requires a minority party to hold at least 10% (55) of the seats in order to put forward a leader of the opposition, and the once-dominate Congress Party only held 44 in their devastating loss the the BJP. Despite holding onto a plurality in the Rajya Sabha, the CP has lost most of its ability to resist BJP policies. The Rajya Sabha has no power to block financial legislation or call for a vote of no confidence in the government. Without the official Leader of the Opposition and the support of the other minority parties (two of which have risen above 30 seats), the Congress Party has almost no power to oppose Modi on tax reform, government borrowing and spending, or other financial issues as laid out in article 110 of the Indian Constitution of 1949. Put bluntly, Modi can use his majority in the Lok Sabha to fulfill his promises to “incentivize business” by lowering taxes and regulations without fear of the CP and its allies in the Rajya Sabha. Put even more bluntly, Modi could rewrite Indian tax law overnight. But given the Thatcher-esque language modi has employed in his speeches about the economy and the deficit, he is unlikely to stop at relaxing taxation.

Modi has made mention many times of his willingness to address the problems that plague India’s welfare programs. I’m not about to argue with the man that these programs need fixing; they do. Any social services that attempt to help a nation of over a billion people living under dozens of different legal codes are going to have some serious issues. The BJP’s desire to create a uniform civil code (as mentioned in Chirag’s primer) might help ease some of these problems, but that’s different kettle of fish. Besides, I highly doubt Modi plans to overhaul these programs with the intention of creating better, more reliable aid for the people. Politicians who promise to “fix” social welfare programs tend to mean “dismantle”. His message of fiscal responsibility has little room in it for the necessary increases in spending such an effective reworking would entail. Those of Modi’s economic views believe it is better to encourage outside investors and unregulated market growth than to invest in the welfare of the poor and protect the vulnerable.

I hope to write more in the coming weeks, as Modi reveals exactly what his plans for achieving financial stability are. I hope he will not abuse his party’s mandate to enact “responsible” policies like those of Reagan and Thatcher before him. A developing nation with over 800 million citizens surviving on less than two American dollars per day can ill afford cuts to its social welfare programs. I hope Modi sees that he cannot expect to drive the development of his nation by cutting off its most vulnerable citizens from support. I hope these things. I expect the worst.




They’re Insiders Now

Last week, House Majority Leader Eric Cantor lost his Virginia GOP primary against Tea Party-backed candidate Dave Brat. Cantor lost badly, spending more on statehouse dinners than his opponent’s total expenditures, and receiving fewer votes than in his 2012 election. What is remarkable about this particular Tea Party victory is that it is remarkable at all – an underfunded unknown defeating a well-situated incumbent with a near-spotless record in the eyes of his party. Brat was given only cursory consideration in the national media, since he was neither a “serious” threat or a particularly crazy challenger (Idaho, anyone?). The merciful calm surrounding the race was not to last, however. Immediately, both sides, (or all three sides, if the Republican establishment counts) weighed in on the results with the predicable cries of euphoria and despair. Democratic National Committee Chair Debbie Wasserman Schultz claimed that “Tonight’s result in Virginia settles the debate once and for all — the Tea Party has taken control of the Republican Party. Period.” Actually, no. It means the Tea Party has taken control of the Republican electorate in that Virginia district. However, if the powers that be continue to hype these instances out of all proportion, they just might succeed.

The Tea Party’s power comes from their overblown coverage. This was true during their ascendance in 2010, when both conservative and liberal media giants went out of their way to highlight the vast good or evil this relatively minor movement was going to do. They got name recognition. They got powerful backers. And most importantly, they got a clearly defined political “brand” that the later Occupy movements never fully developed. That is to say, the Tea Party became clearly defined as the right of right movement that was going to challenge both wrongheaded liberal policies and the cowardly republican mainstream that dared compromise over key issues. They mustered that brand to inforce gridlock in the face of government shutdown, despite their small numbers. Other republicans became terrified of an organized effort to unseat incumbents who dared to even look left of the aisle. That would be supporting all the ills of big government, all the problems the Tea Party promises to fix. The Tea Party owns discontent. They do not own the Republicans. Yet. One race, albeit an historic one, does not grant them actual control of anything. They were handily defeated in other important races, including a primary challenge to Senate Minority Leader Mitch McConnell, reversing the trends of 2010 and 2012. The Tea party caucus has never had more than a third of the Republican majority in either the House or the senate.

Now, let me be clear, I am not saying that that the effects of this upset will be any different than if it had given the Tea Party actual control of the Republicans. Seeing such a “comfortable” candidate unseated by a primary challenger will keep many Republicans who might have stepped up their defiance of the fringe in line, cementing gridlock. Or, possibly, this will open up the district for the democratic candidate, however unlikely as that may be. But this is not the result of the Tea Party’s own political validity, but rather their monopoly on discontent with Washington via the the media. And Eric Cantor’s failure to recognize his campaign weaknesses. Dave Brat won the election, wich deserves attention. He did just unseat the House Majority Leader, after all.

But the Tea Party as a whole gains little tangible power form his victory. Brat’s victory replaces one hardliner with another, albeit one slightly more nutsy on immigration reform. What they do gain is compensation in the media and the minds of their fellow congressman for their poor showing in the other primaries. One can only hope that their fellow conservatives will awake to the twin realities of inevitable challenges from Tea candidates and the possibility of defeating them. No matter how hard a Republican toes the line, they will always be vulnerable to discontented voters as long as they allow one group to claim outsider status. How long until Republicans begin pointing the finger right back in the Tea Party’s face and say “You’ve had four years of your way, and all you have complished is grinding the gears of this government to a complete halt. You are insiders now, and your de-facto leadership has wrecked our ability to govern at all. You are the problem with Washington now.”? When the new Tea Party incumbents face their own serious challengers in the primaries, what will their defense be? When we all acknowledge the difference between wanting change in government and the power of this failed movement, where will we be? When we realize the only thing keeping these people in power is our refusal to nail the lid down, what will we do? Maybe, just maybe, we let them slide into their well-earned grave and get back to to the business of governing.





Why I Vote: An Open Letter to my Peers

Dear Voters under 30,

My name is Peter. I am currently eighteen years old, going on nineteen this August. As I spend my summer canvassing neighborhoods and making phone calls, I am always surprised to see how many people from my age group find no interest in voting. The 26th Amendment of the Constitution sets the voting age at eighteen years old, yet many of my peers are apathetic towards politics in general. Even in the election years with high youth turnout, such as 2008 or 2012, only about 50 percent of eligible voters under the age of 30 voted, according to the Center for Information and Research on Civic Learning and Engagement (CIRCLE). Midterm elections fare significantly worse, with only 24 percent of youth voters participating in 2010. This can have serious implications in our political system if youth turnout remains so paltry. After all, Barack Obama most likely wouldn’t have won either the popular vote or the Electoral College if the youth turnout was only 24 percent, instead of 50 in 2012.

It isn’t that we don’t care. Whether I’m wandering about campus, hanging out with friends, or just out in the community, I overhear you guys voicing your opinions on everything. Sometimes you’re thrilled, other times you’re just making a joke about how lazy Congress is. What I notice the most though is a completely apathetic view of democracy. There is little interest in voting, not because it is a hassle, but because so many of us believe our vote is useless. The narrative that our votes don’t count and the impression that politicians will never legislate to our needs dominates the perspective of our demographic. I won’t argue that there are a lot of useless, stiff suits in government who need to be thrown out. But I’ll let you in on a secret: you can help me get rid of them.

It isn’t a secret that there are issues that are of high importance to us; the economy, job prospects, health care, and student loans are just a few. But if we look at the demographics of Congress, we see a great deficit of representatives from our generation. We don’t even have many representatives who are close to our generation by age. Only 8 percent of governors in the United States are under fifty (four governors). The Senate is only slightly better, where 10 percent of their body is under fifty (ten senators). Even the House, which has the highest representation of members under fifty, only has 26 percent of its body under the age of fifty (one hundred fifteen representatives). When you change the representation to under forty, there is not a single governor or senator, and the amount of House members drops sharply to thirty three (7.5 percent of the House). Many of our government officials grew up in a world completely different than ours. College wasn’t leaving millions of students with debts greater than their first year’s salary, jobs were out there for those who worked hard, and health care costs weren’t skyrocketing out of control yet. How can we expect them to understand our plights?

The solution is for us to tell them about our struggles. It isn’t that our lawmakers are stupid, it’s just that they haven’t walked a mile in our shoes. Right now, all they do is read the vague talking points. We need to make our voices heard. By participating in elections, our lawmakers will see that we are a significant demographic in order to secure victory. We can put pressure on our lawmakers to heed our calls for reform. They’ll hear our testimonies and want our input on how to solve the issues. We can make government work for us, even if very few lawmakers are from our generation. Eventually, if we can continuously participate, we can perhaps elect more members from our generation earlier than age forty to public office to institute reform. But I’m starting to get ahead of myself.

So what do I ask of you? It seems daunting at first. I’m not asking you to run into the streets and raise hell. I’m asking you to take a good hour out of your busy schedule to find out what elections are coming up in your area this November and make sure you’re registered to vote. Then, just take a few moments out of each week to see what the candidates are up to. You’ll gather a lot quickly by looking it up in your local news. I tend to ‘like’ local news sources on Facebook and follow them on Twitter, so the news will be accessible any time. As you sift through the news, you’ll develop opinions on the issues and the candidates. If you feel inclined, contact the candidates through email or social media to get questions answered, or even to get involved! If you’re too busy or don’t feel strongly enough to volunteer, that’s fine too. Just keeping up with the news is more than enough participation for some people.

Regardless of what you do to participate, you should exercise your right to vote. As you get closer to Election Day, consider voting early so you can get it out of the way. Otherwise, you can vote on Election Day in November. Don’t forget to bring your ID if your state has a voter ID law in place (Yes! They actually have those!!). Voting is the way for us to get the attention of our lawmakers, and if we can’t get their attention, how do we expect them to actually hear anything we have to say?

Many of us already have taken a step by keeping up with the news. I applaud all of you, and encourage those of you who haven’t kept up with the news to give it a shot. For us who do vote and get involved, I have one last thing to ask of you. Talk to your friends, coworkers and peers. Sometimes you just need to give someone a little nudge to spark initiative and original thought. If we see 30 percent of youth turnout in 2014, I think it’ll be surprising. But just imagine if we came out in droves and hit 50 percent again, just like in 2012. We would immediately shake things up in Washington, and that’s with only half of us voting!

We’ve had our voices heard already on marriage equality, and look at the progress we’ve made with the shift in public opinion on marriage. We can make a difference, and we already have made differences. Let’s take it a step further, and make sure we are given the respect we deserve. President Obama showed the United States how influential the youth vote can be; that was only the beginning. It’s time to show the United States we aren’t just influential, but that we are also here to stay in the political calculus. Good luck this year, and I hope you’ll reconsider how influential your vote will be this November. It’d really help us begin to fix the issues that impact us.

Thank you,








The Negative Sign: Why it Matters for Europe (And Us Too)

It’s not everyday that purely academic economic theory gets put into actual practice by a mainstream institution, but that’s just what happened this week when the European Central Bank (ECB) lowered its interest rate for commercial bank deposits to -0.10%. This was in conjunction with expanded efforts by the ECB to inject extra monetary stimulus into an extremely depressed European economy. Now I admit, at first glance, news like this doesn’t seem all that strange. Our own Federal Reserve has been undertaking multiple rounds of monetary stimulus ever since the 2008 financial crash (think Quantitative Easing). To explain why this could be a potential earthquake, I want you to take a look at the exact interest rate number; it’s negative. That’s. Not. Normal.

Most economic majors would characterize Central Banks like this (at least I hope they would): in addition to being a bank for the commercial banks, it’s their job to execute monetary policy through various tools, a common one being interest rates that, when adjusted, can expand or contract the flow of credit in an economy. It’s fairly simple. When interest rates decrease, mainstream thought tells us that this incentivizes additional borrowing thereby increasing economic activity. The opposite occurs when interest rates rise. Mainstream thought goes on to say that proper adjustments in interest rates, the most famous of which is the discount rate, by a Central Bank can lead to prudent economic management without the need for governments to get overzealous with fiscal policy. But what if interest rates don’t work?

Imagine a situation where interest rates are already fairly low (within a couple percentage points of zero) and the economy is doing great. Then, without warning, some major catastrophe happens and the economy plunges headlong into recession. The expected response for Central Banks is to lower interest rates and stimulate economic growth. But what happens as the rate approaches zero and the Central Bank can’t lower it anymore? You become stuck in a situation called a liquidity trap; the financial system can borrow cheaply, almost freely, and yet banks, corporations, and consumers are neither borrowing nor spending. They just save money and use the savings to pay off old debts. Meanwhile, the economy moves along at a snail’s pace while sparking deflationary fears.

If this situation sounds familiar, it should. This is precisely what happened following the financial crash in the United States and Europe, the effects of which we are still stuck with. Banks have no choice but to store away the trillions in monetary stimulus rather than lend it into the real economy. The Central Bank is powerless to fight this situation with interest rates because they’ve begun to run up against what’s called the zero lower bound, the idea that interest rates on bank deposits can’t go below zero. When interest rates are positive, even if they’re as small as 0.15% for example, banks make some money by keeping the money in the Central Bank’s vaults. We’re all familiar with this because our savings accounts generally receive some annual interest income; ergo, we get paid for keeping our money in a commercial bank.

In a weak economy like ours, banks don’t see many lending opportunities because consumers are either ineligible for loans or too cautious to borrow and spend. So the rational step is to just keep the money and earn, however small, interest income on it. The problem is that this does nothing to advance an economic recovery. This is where the idea of a negative interest rate was born. Think about it for a second. If interest rates are negative, the bank has to pay the Central Bank for its deposits rather than the other way around. Many economists have theorized that this would incentivize a commercial bank to make more loans rather than keeping trillions parked. To them, negative interest rates have the added benefit of monetary stimulus without the need for governments to run deficits and run up public debt (you can see why Europe seemed like such a good place to try this out right?).

Sounds fairly promising. I should clarify that the ECB’s experiment isn’t technically the first time a negative interest rate has been used. Both Sweden and Denmark tried it with their respective currencies. Suffice it to say, their results weren’t really much to look at. Denmark in particular instituted the rate to lower the value of its currency which had been driven too high at the time. Other than that however, its not exactly clear that the negative interest rates did much for either of their economies. Granted, the Eurozone is a much larger economy; however, there are other reasons to doubt the policy.

First and foremost, it’s not at all clear that the incentive structure will work as it’s supposed to. Now, more than any time in recent history, is an ideal time to borrow; interest rates are near zero and no one will ever get such cheap loans once the economy picks up and interest rates rise. But people still aren’t borrowing and the negative interest rates, being placed only on commercial bank deposits at the Central Bank, will not change any systemic incentives for consumer borrowing. Even if banks are more willing to lend, which it isn’t clear that they will be, consumers have to be willing to borrow.

Why do I say that banks might not be willing to lend? If you think about it, negative interest rates are kind of like a tax imposed by the Central Bank on deposits. However, making more loans isn’t the only way to avoid such a tax; remember, loans come with huge risks for banks, particularly when consumers don’t have as many assets as they used to. Instead, banks might very well return to pre-crash behavior and avoid the negative interest rates by making risky bets and investments using shoddy financial products. This is particularly dangerous considering that European Banks are in far worse financial health than U.S. Banks. It’s even possible that the banks, based on their risky position, might look at the -0.10% figure and assume that such a rate is not worth avoiding in the short-term and end up doing nothing. The ECB doesn’t really have the option of going lower with the negative interest rate because, if the rate gets too low, that would undermine trust in the entire banking system. Remember that the basic purpose of a financial system is to provide a safe place for your money. What on earth is safe about a system that periodically takes away chunks of your money?

There’s an even worse problem I have with this negative interest rate debate. No matter what some economists may say, negative interest rates are at best a short term substitution for actual fiscal policy. Central Banks can’t credibly sustain such rates for longer than a couple of years max. On top of that, there’s no guarantee about the quality or quantity of lending that the rates MIGHT encourage. Only fiscal policy, channeled into productive economic sectors can guarantee long-term, sustainable returns to the economy. But wait, you might say. The whole reason this debate got started was because Western countries have run up large levels of public debt! I’ll stop you right there and remind you that Europe is a special case compared to the United States, Britain, Australia, Canada, and other countries with their own currencies. European countries can’t print the Euro and are therefore very vulnerable to public debt crises. But that doesn’t mean that European politicians and the ECB are out of options completely. This isn’t the article to discuss them, but Europe does have policy options for increasing government spending. It should be pursuing those options and establishing a long-term growth strategy rather than blindly pursuing dubious attempts to stimulate untargeted, questionable lending by banks

For let us not forget, that this was how we got into this mess in the first place.



Common Misconceptions About Common Core

Throughout the news, there has been a constant push from all interest groups either supporting or opposing the new proposed standards by Common Core for the public education system. Proponents of the standards argue that this will help students succeed at levels they haven’t seen in years. They also attest that these standards will prepare students for the workforce after school. Critics shoot back, decrying the standards as taking away local control, along with maintaining that the standards are ludicrous and are hardly an improvement in any sense of the word. Sifting through recent reports on Common Core would suggest that public opinion is turning on the standards, as it was announced in the past week that both Indiana and Oklahoma would be dropping the standards, leaving 42 states in place with them (the highest count had been 45 states). But what I’ve noticed among all reports are common errors and misconceptions on what Common Core is, and I am curious how much of the criticism would fade into the background if everyone was on the same page.

To start off, Common Core is not a change in curriculum. Instead, it is a new set of standards; in other words, what the learning goals of the lessons are. Standards would be the conceptual skills that a student will develop from a lesson, such as critical thinking, writing skills, and reading comprehension. These standards can be met with any set of curriculum, so long as lessons are tailored appropriately. Curriculum, on the other hand, is the actual topic of the lesson; think of American History, Algebra I, or Biology, just to name a few topics. The standards are based on the Bloom’s Taxonomy of Learning Domains. The Taxonomy has six levels of thinking (shown below), and the problem with the current standards in many public schools is that it only relies on the three lower levels out of six.

The three, knowledge, comprehension and application, while important, don’t actually promote a lot of original thought. Critics argue that by only utilizing the three lower levels of Bloom’s Taxonomy, you promote a system where students can understand ideas, but not create new ideas; innovation is completely lost. Some would consider this the precedent that encourages students to just memorize information for the test, and not actually retain anything. The standards, according to supporters, will require students to utilize the three higher levels of Bloom’s Taxonomy: analysis, evaluation and synthesis. Students will not just be able to understand and apply old ideas, but they can now analyze them and make suggestions for improvements. The standards may change curriculum, if school districts feel as though their current curriculum cannot help achieve these standards, but there will hardly be a catharsis of the normal subjects in schools.

Aside from the misunderstanding of what Common Core does, there is also a rumor going around that Common Core is being mandated by the Obama Administration. As I stated earlier, only 42 states are implementing Common Core, and at its height only 45 were signed up. Common Core implementation is solely up to the states. It is true that the Obama Administration’s Education program, Race to the Top, could provide federal funds to implement “innovative” education standards statewide, and that Common Core would help the state secure these funds. However, many of the states implementing Common Core will not be receiving any of the funds from Race to the Top; the implementation will be state funded. Looking state by state, it becomes clear that this is a bipartisan conglomeration of states that hope to align their standards with one another. This is hardly a scheme by the Obama Administration to seize control from the states. Really, all the federal government is doing offering to help states cover the implementation costs of Common Core.

In fact, the federal government didn’t even write up the Common Core standards. No, it was actually a coalition of business groups, along with educators and parents. The standards are crafted to give each student the skills that employers claim that their employees lack. Business leaders believe these standards will produce a highly skilled workforce, offering our youth stable, well-paying jobs when they are done with school. Educators argue that these standards will actually improve the quality of education that students receive in public schools. The problem that students face right now is being able to produce original ideas in a coherent way so that the idea can actually be shared in the public sphere of ideas. This disconnect from ideas in one’s mind and being able to articulate them out loud is a problem, according to business leaders who believe that innovation and new frontiers are being stifled by years of an outdated model of schooling. Common Core is a new solution to an old problem, and is attempting to be the permanent solution.

But many groups and individuals are still skeptical if this is a solution that should even have a test run. While the standards don’t mandate curriculum changes, there are fears that curriculum will change so radically to achieve the standards, and many worry that the changes in curriculums won’t be dictated by local school districts. This sounds to me like nothing more than another slippery slope. Each district will be able to adjust their curriculum accordingly to help their students meet the standards of Common Core. Others worry of the cost of the new testing system. I do sympathize with these individuals, as the cost is a genuine concern. But I would argue that the current high-stakes testing model has not been a success, shown by how our students appear to struggle to compete globally with their international peers. So perhaps an overhaul is necessary, and many states have taken independent initiatives to find ways to pay for the tests. I wouldn’t call Common Core perfect, but it is definitely a step in the right direction by attempting to engage students in all six levels of Bloom’s Taxonomy. My suspicion is that many of Common Core’s critics are relying on misinformation, and aren’t evaluating the standards by its merits, but instead its misconceptions. Let’s set an example for our students and utilize Bloom’s Taxonomy and analyze, evaluate, and then synthesize a solution for the education crisis in our nation. Common Core is a good place to start, and we’ll see where it takes us.