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Liberals see racial animus, is it really there? Also, the next Great Moderation

Ruminations, July 20, 2014

Racial or political animus?
Last week, on ABC's "This Week," Attorney General Eric Holder told correspondent Pierre Thomas that he perceives "racial animus … [and] a certain level of vehemence… that's directed at me [and] directed at the President. ... There's a certain racial component to this for some people."

And Emory University Professor Andra Gillespie, speaking to CNN said “people need to examine their hearts sometimes and examine the ways in which stereotyping informs the ways we view things."

Even if you are opposed to Holder and think his comments wrong, is there something to his perceptions? Does Gillespie’s observation have some merit?

While there is no doubt that there are some people who judge others by skin color (blacks and whites as well as those in between) we should also consider Holder’s comments in the context of Gillespie’s observation: Is Holder himself stereotyping and does that inform the way he views things? And, if it does, does that mean that he is wrong?

Consider this hypothetical: A man wearing a KKK robe, carrying a sign that says “I hate black people,” says that Obama’s economic policies are wrong. Does the fact that this person is a KKK adherent make him wrong? If a man wearing Black Panther military garb carrying a sign that says “I hate white people” says that Obama’s economic policies are right, does that make him right? Put in that context, although the appearance of each individual may alienate us, they may be right.

But perhaps the world is not as even-handed as this hypothetical would suggest. In his book, The Righteous Mind: Why Good People Are Divided by Politics and Religion (discussed in January), self-professed liberal Jonathan Haidt had 2,000 people complete a Moral Foundations Questionnaire: one third of the answers –your opinion; one third -- how you think a conservative would respond; one third – how you think a liberal would respond. What Haidt found was that moderates and conservatives were spot-on in their assessments of liberals whereas liberals (the more liberal the worse) were wrong on their assessments of what conservatives would answer. Essentially, conservatives thought that liberals were good people with bad ideas while liberals thought that conservatives were naturally mean people. Further, because liberals are convinced of their open-mindedness and rationality, they cannot see their own failings. As an example of liberal attitudes toward conservatives, Haidt quotes (in part) a column written by Village Voice theater critic Michael Feingold. Feingold wrote: “Republicans don’t believe in the imagination, partly because they don’t have one, but mostly because it gets in the way of their chosen work, which is to destroy the human race and the planet. Human beings, who have imaginations, can see a recipe for disaster in the making; Republicans, whose life goal is to profit from disaster and who don’t give a hoot about human beings, either can’t or won’t, which is why I personally think they should be exterminated before they cause any more harm.” (Now bear in mind, we are talking about broad generalizations and there are whack-jobs on the right who may speak as strongly as Feingold. But, what Haidt implies is that although there are extremists on the left and right, leftists in general are not uncomfortable with Feingold’s evaluations and, in general believe that conservatives are bad.)

So, let’s go back to Holder’s assessment of Obama’s and his opponents as having racial animus and a level of vehemence. While perhaps not accurate, it is understandable because he is a liberal (believing that he is open-minded and rational) and his conservative opponents are, he probably believes, naturally mean (having racial animus and vehemence is certainly mean) – but, that seems to excuse him from assessing the veracity of their statements.

How do we correct Holder and those who think as he does? He is predisposed not to listen to conservatives but maybe he will listen to liberals such as Cass Sunstein (whom we wrote about three years ago). Sunstein, President Barack Obama’s former Administrator of the Office of Information and Regulatory Affairs, currently a professor at Harvard Law and married to UN Ambassador Samantha Powers, has an interesting perspective on the conservative/liberal divide – one that complements Haidt’s thesis. In his book Going to Extremes – How like minds unite and divide, he expands on the theory of “group-think,” where members of a cohesive group self-promote agreement and conformity and don’t explore contradictory ideas or logic. Based on his study, he posits that if you are not in regular conversation with people who disagree with you, you can become more and more extreme.

Sunstein points out that a cascade of opinion can cause many to choose an idea bereft of rationality, as in stock-market bubbles, fashion fads and presidential primaries. Could this also be a critical contributing factor to the rise of fascism in the 1930s, student radicalism in the 1960s, the growth of Islamic terrorism in the 1990s and the financial panic of the 2000s? Carrying it a bit further, the cascade can lead to group polarization and “a threat to security, to peace, to economic development, and to sensible decisions in all sorts of domains.”

And, of course, this can exacerbate the liberal/conservative divide. For people who are more intelligent, this becomes a larger problem because they reference more sources that support their opinions. Of course just hearing someone with an opposing viewpoint doesn’t save you. You have to actively listen: paraphrase his/her ideas and try to understand the rational behind the ideas. If you don’t, you run the risk of marginalizing yourself. And that could put you in the extreme category.

In addition, when we immediately categorize someone into the “other” category, as in the earlier example of the KKK and Black Panther speakers, we often ignore what they say to our detriment.

We also need to remember that there is political positioning from both sides of the aisle that overlay the views of conservatives and liberals. For example, Texas Governor Rick Perry is being criticized for his eyeglass frames and Michelle Obama is criticized because she wants children to eat healthy meals.

Does this mean that liberals and conservatives are hopelessly at loggerheads? Not necessarily. Jonathan Haidt is a liberal, as is Cass Sunstein. So what to do about Eric Holder? The only one who can do something about his perspective is Eric Holder. And, assuming he holds the idea that conservatives are naturally mean and he has a circle who agrees with him, it is unlikely he will change his views. We’ll just have to consider him as a nice person with bad ideas.

Another “Great Moderation?”
The difficulty of an economic program today is that the causes of the Great Recession were so varied that we’re not sure how much each contributed, how to counteract them, what we can do to head off future debacles and indeed if we have all the right facts. The primary causes of the Great Recession were (in no particular order), the Community Reinvestment Act, artificially low interest rates, complex financial instruments, repeal of the Glass Steagall Act, mortgages sold to people who couldn’t afford them, worthless financial instruments sold by banks, the housing bubble, and the Great Moderation (see below).

Since everything was good before it went bad, people are inclined to go back to the good and hope it doesn’t go bad again. For example, interest rates are being held artificially low, housing prices are reaching their bubble prices and now – maybe another Great Moderation.

The Great Moderation lasted for almost a quarter-century after the mid-1980s. The American economy experienced fairly even-keeled growth, unmarred by any major financial disturbance. This has led some economists to conclude that the Great Moderation itself was a contributor to the Great Recession. Because we had fairly even-keeled growth, financial operators felt comfortable to take bigger and bigger risks. When the economy began to collapse, the risks collapsed even faster, contributing to the Great Recession and the economic doldrums that we are currently experiencing.

So, this line of thinking goes, a few larger recessions would have served to inoculate the economy against taking extraordinary risks and our current economic situation would be much healthier.

John Taylor, professor of economics at Stanford and senior fellow at the Hoover Institution has proposed a rule (conveniently called the Taylor Rule) that the Federal Reserve employ in setting monetary policy. He reasoned in last week’s Wall Street Journal that when monetary policy was more rule-based in the 1980s and 1990s, we got an improved economy, and declining unemployment and inflation. The ad hoc policy of the past decade, he contends, contributed to the Great Recession and the not-so-great recovery.

Federal Reserve Chair Janet Yellen disagrees. First of all, no one wants to be bound by rules – especially after operating without rules for the past decade. "It would be a grave mistake for the Fed to commit to conduct monetary policy according to a mathematical rule,"

"The overwhelming weight of evidence,” countered House Financial Services Committee Chairman Jeb Hensarling (R, TX), “is that monetary policy is at its best in maintaining stable prices and maximum employment when it follows a clear, predictable monetary policy rule." Hensarling is right but it doesn’t necessarily follow that a predictable monetary policy rule causes stable prices and maximum employment. In fact, some – like former Fed Chair Paul Volcker – might argue that stable prices are a component of maximum employment.

Then again, if Hensarling prevails, then we have to assume that Congress in its wisdom has covered all situations to which the rule applies.

Others might argue that the current Fed policy has led – so far – to stable prices and high unemployment. And still others may say that demonstrably the stable prices and low interest rates have had little or no effect on unemployment and that current Fed policy is tip-toeing on the abyss of high inflation, high interest rates and high unemployment – a perfect trifecta.

While we can agree that monetary policy should concentrate on stable prices, it seems – especially after the extraordinary steps that were deemed necessary in 2007-2008 – that the Fed needs the flexibility to maneuver its policies when circumstances dictate. Of course, when there is a lack of rules, one assumes that the Fed will operate with a carefully crafted plan. One assumes.

Quote without comment
Marine LePen, French lawyer, politician and the president of the far-right Front National (FN), Party, in an interview with Der Spiegel, June 3, 2014: “The French want to regain control of their own country. They want to determine the course of their own economy and their immigration policies. They want their own laws to take precedence over those of the European Union [EU]. The French have understood that the EU does not live up to the utopia they were sold. It has distanced itself significantly from a democratic mode of operation.”