Although I sometimes disagree with Jonathan Chait (as in this RBC post), I’ve been a big fan since his days at The New Republic. He now writes for New York Magazine, which published his remarkably prescient mid-October essay about the fiscal cliff. Directly or indirectly, that essay shaped much of the subsequent public debate on the subject (and inspired one of my own recent NYT columns).
If you don’t know Chait’s work, a good place to start is yesterday’s post about Republican rage at the trillion-dollar platinum coin proposal. If I were the business owner whose argument Chait deconstructs, I’d go immediately into hiding.
If you don’t like this piece—well, there’s no accounting for taste.  But if, like me, you can’t think of anyone whose writings about the recent fiscal wrangling have been more reliably informative and readable, you’ll want to bookmark his NY Magazine archive and read him first thing each morning.
Author: Robert Frank
Robert H. Frank is the Henrietta Johnson Louis Professor of Management and Professor of Economics at Cornell's Johnson Graduate School of Management and the co-director of the Paduano Seminar in business ethics at NYU’s Stern School of Business. His “Economic View†column appears monthly in The New York Times. He is a Distinguished Senior Fellow at Demos. He received his B.S. in mathematics from Georgia Tech, then taught math and science for two years as a Peace Corps Volunteer in rural Nepal. He holds an M.A. in statistics and a Ph.D. in economics, both from the University of California at Berkeley. His papers have appeared in the American Economic Review, Econometrica, Journal of Political Economy, and other leading professional journals.
His books, which include Choosing the Right Pond, Passions Within Reason, Microeconomics and Behavior, Principles of Economics (with Ben Bernanke), Luxury Fever, What Price the Moral High Ground?, Falling Behind, The Economic Naturalist, and The Darwin Economy, have been translated into 22 languages. The Winner-Take-All Society, co-authored with Philip Cook, received a Critic's Choice Award, was named a Notable Book of the Year by The New York Times, and was included in Business Week's list of the ten best books of 1995. He is a co-recipient of the 2004 Leontief Prize for Advancing the Frontiers of Economic Thought. He was awarded the Johnson School’s Stephen Russell Distinguished teaching award in 2004, 2010, and 2012, and its Apple Distinguished Teaching Award in 2005.
View all posts by Robert Frank
A suggestion to the Treasury Department: someone there needs to run up to Philadelphia and pick up one of those $100 platinum coins they already have laying around the mint. Then bring it back and deposit it at the FED for a $100 credit. Then issue a press release simply describing what they have done, no further elaboration necessary. The point would be clear: we have done the platinum coin thing (though at a very low amount), and we can do it again - at any amount we wish.
Dunno how I feel about the Pt coin thing, but your suggestion is freaking brilliant. Seriously. Somebody needs to do this, now, as a kind of a warning shot across the bow.
Robert: Agreed, Chait is one of the treasures of political journalism today.
I don’t know if it’s a root cause of the deadlock we’re seeing right now, but the insistence by some that the Federal budget can be analogized to a small business doesn’t inspire much confidence in our elected officials. It fundamentally misunderstands the role of government spending in different contexts. To be sure, a lot of what we’re seeing right now boils down to old-fashioned political brinksmanship. At the same time, I’ve lately been getting the impression that people like Representative Walden don’t comprehend the impact that the actions they propose will have on the country generally and their districts specfically. Whether this is the result of so-called “epistemic closure” or tribalism, I couldn’t say. But it’s damned scary.
Congressman Walden wrote this: My wife and I have owned and operated a small business since 1986. When it came time to pay the bills, we couldn’t just mint a coin to create more money out of thin air. We sat down and figured out how to balance the books. That’s what Washington needs to do as well.
Forget all that brouhaha about “deconstructing” the small business argument. The small business argument is simply bullshit.
You own a small business. You’re working your ass off to keep it going, but your expenses are currently greater than your revenue, because times are tough and revenue is below your normal expectation. So what do you do? YOU GO TO THE BANK TO GET A LOAN, doofus.
Maybe the bank thinks you aren’t a good risk, and turns you down. Or perhaps they think you are a marginal risk, so they charge you a higher rate.
But in case the doofuses in Congress haven’t noticed, the lenders out there in the real world think US Treasury paper is the BEST PLACE IN THE WHOLE FREAKIN WORLD to put their money right now. Real interest rates are net negative! So you borrow the money now, when times are tough, and you pay it back when business gets better.
Reagan didn’t understand that. Bush (the real one) probably understood it, but was powerless to do anything to implement it. Bush (the fake one) didn’t understand it. And in between, we had one Dem in the White House. Not only did he understand it, he DID it.
And unfortunately, we have a Democratic Party who seem totally incapable of making their case to the country. So we have the Republicans-the party of Reagan and Bush and Bush-lecturing us on fiscal responsibility, and painting the Dems with the brush of irresponsibility.
And we have an electorate whose collective IQ seems to be somewhere between below average and hopelessly retarded, and buys all that Republican bullshit.