Grasping Reality with Both Hands

David Dayen: Politico won the wkd with story abt how the House might not have votes to pass the state aid bill http://politi.co/du7dar it passed 247-161

David Dayen:

Twitter: Politico won the wkd with story abt how the House might not have votes to pass the state aid bill http://politi.co/du7dar it passed 247-161

Why oh why can't we have a better press corps?

Human Demography and the Power of 2^n

Jason Kuznicki asks a question:

I Learned It on Wikipedia:

Using mathematical models, it is easy to demonstrate that every human being alive today is likely to be a direct descendant of Confucius, even using mathematical models that assume an extremely small amount of cross cultural mating, since any human alive today would have had 1.5 sextillion ancestors alive at the time of Confucius, over a quadrillion times more than the population of the earth at the time, making descent from Confucius a mathematical certainty, even accounting for consanguinity and geographical and cultural barriers, as noted by Yale professor Joseph T. Chang.

Seriously? Are we all direct descendants of every individual living at that time? Or of every individual who managed to leave descendants? I find it hard to believe, but it would be excellent if it were true.

We are overwhelmingly likely to be descended from any individual--as long as they managed to leave some descendants at all alive today.

Think of it this way: there were roughly 750M people alive in 1800, 500M people alive in 1500, maybe 250M people alive back in the time of Confucius.

That was 4 x 25 = 100 generations ago. The number of "slots" in the family tree for your ancestors doubles every generation:

2^100 = 1,267,651,000,000,000,000,000,000,000,000. That's how many slots in the family tree for ancestors you have back at the time of Confucius.

There were only 250,000,000 people alive at the time of Confucius.

That means that the average person back at the time of Confucius fills 5,070,062,000,000,000,000,000 slots in your ancestral family tree.

Josh Marshall: A Lot of I Told You Sos

From Josh Marshall:

Lot of I Told You Sos: A lot of other people know the economics better than I do. But my God there were a lot of folks earlier this year arguing, very convincingly, that the move away from stimulus to inflation-worry and retrenchment was little short of insane given the mammoth economic crisis the country was weathering. It had all the hallmarks, though on a much speeded-up basis, of the move to slash spending in 1937, which had terrible consequences for the US economy. The Fed itself isn't that high on the blame list on this, at least in relative terms. A lot of others were much more in the camp of getting all revved up about the dangers of inflation and debt when in fact we seemed to be just hovering off the edge of a tip back into a deflationary tumble. But it really is one of those 'what were they thinking' moments. And the Feds move today just sort of confirms it.

This Is Indeed a Gloomy Day: Department of Macroeconomic Policy

In a liquidity trap conventional monetary policy--the swapping of highly-liquid bank reserve cash for short-term government securities--is ineffective because the macroeconomic financial market imbalance is not a shortage of cash relative to demand but rather a shortage of high-quality (and perhaps long-duration) assets relative to demand. The private sector's finances are sufficiently shaky that it cannot create high-quality assets--if it could, we wouldn't have a problem. (And a private sector that cannot create high-quality assets cannot create any long-duration assets either--except for highly speculative ones.)

The government thus ought to take action--just as the government takes action in a normal monetary-policy episode by swapping cash for short-term Treasuries and thus alleviating the shortage of cash relative to demand that is causing unemployment.

What actions can the government take?

1. Diminish demand for high-quality financial assets and increase demand for real goods by credibly announcing that the inflation tax on high-quality financial assets will be a hair higher in the future--i.e., through quantitative easing and inflation targeting.

2. Manufacturing more high-quality assets through fiscal policy, by issuing more Treasury bonds and using the proceeds to pull government spending projects forward in time and push taxes back into the future--i.e., through expansionary fiscal policy.

3. Have the Treasury create additional high-quality assets by becoming the tail risk-bearing partner of the private sector, or possibly by expanding its own balance sheet--i.e., through financial markets policy.

4. Have the Federal Reserve alter the supply of high-quality assets by taking some low-quality private-sector assets onto its own balance sheet and financing it by expanding its own short-term safe nominal liabilities--through what it calls non-standard monetary policy and I call financial market policy.

Note in this context what the Federal Reserve said that it might do yesterday: as its private-sector assets mature, it will buy long-term Treasury bonds--thus taking duration and some systemic but not default or other tail risk or other systemic risk onto its own balance sheet. This is very weak tea as far as a policy to remedy financial-market imbalances is concerned.

So I am disappointed.

I am also disappointed with senators 51-60 in the U.S. Congress, who in spite of a mammoth educational lobbying effort by Christie Romer, Larry Summers, and company persist in their refusal to allow the Obama administration to create more jobs by (2).

And I am also disappointed by the Treasury--which could, I think, be using its existing TARP authority to do an awful lot more of (3) than it is.

Others are disappointed as well.

Felix Salmon:

The Fed gives up on tightening: The big market reaction following today’s FOMC statement took place in the 10-year Treasury bond, where yields sank to 2.77% right after the statement came out, from 2.82% beforehand. That’s a big move by Treasury-bond standards, and constitutes the continuation of a longer trend: the yield was above 3% as recently as July 29, and we’re now well into yields not seen except during the very worst part of the financial crisis, when the flight-to-quality trade was in full force.

Today’s Treasury yields aren’t a function of flight to quality, necessarily, and the immediate impetus for this move was the fact that the Fed has committed to buying up more Treasury bonds itself:

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.

In other words, the Fed’s balance sheet had been shrinking, up until now, but that shrinking has now come to an end, and it’s going to remain at its current bloated level for the time being. This is tantamount to a very modest rate cut — not a full quarter-point, perhaps, but maybe half of that. Of course, when rates are at zero, basis points loom larger than they normally do, so these moves on the side of quantitative easing become very important. And more important still is the signal that the Fed is sending: we thought we were OK to tighten things up a little bit, but now we’ve changed our mind, and we’re getting a little bit looser instead. The recovery, in other words, still needs Fed support in order to maintain any semblance of sustainability or momentum.

The bigger picture, however, is one of the Fed largely having run out of ammunition. Most of what it’s doing now is symbolic: the real national response, as Mohamed El-Erian says, needs to come from the government rather than the central bank, and needs to be structural rather than monetary in nature. Given today’s decision, though, we can at least assume that any moves from the White House to try to bolster the national economy will be met with the strong support of Ben Bernanke...

Alex Frangos:

Is the Fed making the same mistakes Japan did when it comes to quantitative easing?

Macquarie Asia economist Richard Jerram says the Fed’s move Tuesday to reinvest maturing bonds rather than absorbing the cash reminds him of the “incremental policy shifts” the Bank of Japan made over the last decade that failed to convince markets of the bank’s intentions. “There are echoes of BOJ policy from 2001-04 in the Fed’s move. The BOJ made repeated incremental policy shifts, but struggled to explain why they were necessary or how they would affect financial markets or the real economy. There is a worryingly similar lack of clarity from the Fed,” Jerram writes in a note Wednesday morning Tokyo time.

Jerram figures maintaining the size of the Fed’s expanded balance sheet in this way might not have much of an impact on the economy anyway. “The idea that moderate and temporary debt purchases by the central bank affect bond yields is controversial. A survey of the BOJ’s experience found that most of the impact came from the commitment not to raise rates until inflation was positive (similar to the Fed’s “extended period”). They struggle to find a direct impact on bond yields from the balance sheet expansion.”

Ryan Avent:

Monetary policy: Small stuff: ONE of the most hotly anticipated Federal Open Market Committee statements has just come out, and it doesn't fail to disappoint. After acknowledging that recovery has slowed and, "is likely to be more modest in the near term than had been anticipated", the Fed opts to:

[M]aintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability....

The Fed is keeping the "extended rate" language to which Kansas City Fed president and inflation hawk Tom Hoenig objects... the Fed has opted to take a "symbolic" step in reinvesting the proceeds from maturing mortgage-backed securities... it is adjusting the composition of its balance sheet away from MBS and toward long-term Treasuries. It's not quite clear what's behind that; perhaps the Fed simply wants to reduce its intervention in mortgage markets. The long and short of it is that the Fed has taken the minimum possible non-contractionary action. I am struggling to understand it. Perhaps the Fed is wary of doing too much at once. Perhaps it is interested in demonstrating that it is aware of the economic risks but not yet convinced that further action is warranted. For now, though, it seems as though the Fed has acknowledged risks but refused to do anything substantive about them.

And:

Monetary policy: The day after: READERS won't be surprised to hear me express disappointment with the Fed's decision. I'm not alone in my dismay. Markets continue to swoon in the wake of the decision; American indexes opened off around 2%. Commodity prices are sinking as well, in response to signs from around the globe that economic activity is likely to slow through the end of 2010. This morning, Census reported a significant increase in America's trade deficit, up from $42 billion in May to $50 billion in June, as exports declined slightly while imports increased. Fed activity won't help; the news that a new round of quantitative easing isn't immediately forthcoming boosted the dollar.

Macroeconomic Advisers try to find the silver lining:

We read today's statement as signaling that the Committee may have rapidly moved from a tightening bias to an easing bias, in which case a restart of long-term asset purchases is on the table. This could partly reflect a move to a "risk management" approach, in addition to the apparently significant downgrade in the FOMC's forecast....

I see the Fed as failing in two key ways. Policy... is too tight. (And it's somewhat bizarre; as Paul Krugman says, what are the odds that the current size of the Fed's balance sheet, which the Fed has opted to preserve, was right for last year's scariest moments, this spring's optimism, and the current period of nervousness?) But perhaps more distressing, the Fed's communication has been simply miserable. It hasn't explained why its outlook has changed enough to alter policy but not enough to alter policy meaningfully. It continues to emphasise price stability while inflation expectations decline. It's all very unhelpful. But perhaps the members of the Federal Open Market Committee are watching today as traders bid down stocks and commodities and bid up the dollar and understanding that they have reinforced the economy's disinflationary, pessimistic mood. The question is: come September, what are they going to do about it?

And:

Trade: A perfect storm: Leaders in America and China are very nearly without options; America's Congress is too paralysed to pass stimulus or deficit reduction plans, and China is squeezed between international pressure to rebalance and domestic pressure to maintain growth. Against this backdrop, America's recovery looks ever weaker, joblessness is rampant, and elections loom. The ground could hardly be more fertile for protectionist populism, and politicians are beginning to rise to the occasion.

Matthew Yglesias:

Matthew Yglesias » Overselling vs Doing Nothing: Right now the inflation rate is below-target and the price level is below trend. There’s some greater-than-zero quantity of currently idle resources that could be mobilized before a higher level of aggregate demand pushed the price level above trend. Does that mean 6 percent unemployment or only 8.5 percent unemployment? I have no idea, but there’s only one way to find out and that’s to go see.

In terms of structural issues, I think that all countries at all times feature some of these and could and should be working on improving the fundamentals. Recessions tend to turn minds out of cheerleading mode and draw attention to these issues, but they’re not necessarily propitious moments for dealing with them. The tendency is for all incumbents and all policies they promote to become unpopular during recessions, which makes it hard to build support for anything aimed at reaping long-term benefits.

The Fed should do its job, and then everyone will get off their cases and go back to ignoring monetary policy. If it doesn’t, people like me are going to have to start publishing tedious articles complaining about the absurd governance structure of the FOMC.

Live at the New York Times

Should We Brace for Deflation Now?

Robert Gibbs Doubles Down Yet Again

Repeated plays of double-or-nothing are the road to bankruptcy, Robert.

As I said before, what Robert Gibbs should be saying is:

I apologize for expressing my point inartfully, confusingly, and misleadingly. Of course we hear the frustration. We understand it. We are frustrated too. Large pieces of our agenda have been completely stalled by procedural obstacles in the legislature. Large pieces have been enacted in imperfect form. We agree: the glass is not full. We have not done everything that we hoped to do. While our policies have successfully stopped the depression in its tracks, the economy, while improving, is still in bad shape. Global warming is unaddressed. Guantanamo Bay is still open. But while the glass is not full, it is definitely not empty. A realistic look should convince anyone that the glass is much more than half full.

But Robert Gibbs appears to be constitutionally incapable of staying on-message. Sam Stein:

Gibbs Stands By His 'Professional Left' Critique, Expects Liberals To Vote In 2010: Speaking publicly for the first time since he disparaged the "professional left," White House Press Secretary Robert Gibbs said he stands by his comments.... Taking the podium after a day off to tend to a sore throat, Gibbs said he has not reached out to any Democrats to discuss his remarks, in which he chastised liberals for wanting to "eliminate the Pentagon" and pursue Canadian-style health care reform. Nor, he added, has he talked to the president about the matter.... Does he stand by the comments? "Yes," he replied.... As for remorse, however, little was offered. Gibbs noted that the president has achieved many of the objectives that he had pledged on the campaign trail, insinuating that he isn't getting enough credit for these accomplishments. The frustration came from there but the sentiments aren't wholly unique. "I doubt I said anything you haven't already heard before," said Gibbs.

The press secretary did not name names when pressed as to whom he was targeting with his criticism. The professional left was defined by Deputy Press Secretary Bill Burton as primarily cable news pundits. But no one on the TV circuit, let alone in public office, has called for the Pentagon to be eliminated. Gibbs hinted, briefly, that Rep. Dennis Kucinich (D-Ohio) had done as much on the presidential campaign trail, only to have CBS's Chip Reid correct him. Kucinich had promoted a Department of Peace.

A day after the controversy over Gibbs' remarks was seemingly been put to rest by a quick walk-back from the press secretary, Wednesday's briefing seems likely to reignite the debate over the White House's relationship with liberals. But if there was nervousness over base voters not heading to the polls, Gibbs didn't show it: "I don't think [liberal voters won't show up]," he said, "because I think what's at stake in November is too important to do that."

A press secretary who cannot stay on-message should not be a press secretary.

And It Is Not 2.71%, It Is 2.68% Now...

Paul Krugman: The Meaning Of 2.71%

Paul:

The Meaning Of 2.71 - : As of right now, the 10-year bond rate is 2.71 percent. As you can see from the chart above, this puts it back where it was in the early spring of 2009 — higher than it was during the Oh-my-God-we’re-all-gonna-die period of winter 2008-2009, but lower than anything else we’ve seen for decades.

As it happens, interest rates are also now lower than they were when the big debate over fiscal policy and its interest-rate effects began. For those who don’t remember or don’t know, this started with the claim that government borrowing would send rates soaring, crowding out private investment, and that this would abort the recovery. I tried at the time to point out that this reflected a failure to understand basic macroeconomics; but as usual, made no headway with the culprits.

Said culprits then claimed that rising interest rates in the months following, rather than reflecting improved expectations about the economy, confirmed their view.

Later they changed their stance, claiming that the real problem was rising debt threatening solvency, and that America was going to be Greece any day now.

What we actually see is exactly the story those of us who knew their Hicks told from the beginning: short rates hard up against zero as long as the economy remains deeply depressed, long rates fluctuating based on changing beliefs about how long it would take for the economy to recover sufficiently for the Fed to begin tightening.

And anyone who believed the stuff about invisible bond vigilantes, and acted on it, has lost a lot of money.

How Soon Will We Face Deflation?

In the post-WWII United States, the rate of inflation has a very clear tendency to fall whenever the unemployment rate rises above 7%:

When the unemployment rate has been above 8%, the average fall in the annual CPI inflation rate over the next two years has been 4.5 percentage points.

Our current annual inflation rate is about 1%:

Does this mean that two years from now we can expect our annual inflation rate to be -3.5%--that we can expect fairly rapid deflation? The odds are very low. Patterns that apply to times when prices have always been rising cannot be extrapolated to inflation rates below zero. Firms are very loathe to cut nominal wage rates, and if nominal wages do not fall then firms cannot on average cut prices by more than 2% per year or so without facing bankruptcy.

Does this mean that two years from now we can expect our annual wage inflation rate to still be between 0% and 2%? That is certainly the way to bet.

in Which Tyler Cowen Calls, I Think Wrongly, for Deflation

Tyler:

Marginal Revolution: What's the actual problem in the labor market?: Yet I have seen not one such post to the unemployed: "Hey guys, lower your wage demands!  It's good for you!  You'll get a job and avoid the soul-sucking ravages of idleness.  It's good for the country!  It's good for Bernanke, you'll get those regional Fed presidents off his back!  Why not?  The best you can hope for is to get tricked by money illusion anyway!  Show up those elites and get to that equilibrium on your own!  Take control!" and so on.  If such posts would seem patently absurd, we should ask what that implies for our underlying theory of current unemployment...

Such posts are not "patently absurd," but they are almost surely wrong, and very dangerous as well.

Is the problem with the U.S. economy that the real wage is too high for it to be profitable for employers to re-employ the unemployed even at normal levels of demand--that we are in a situation of classical unemployment? I would say no. Is the problem with the U.S. economy that workers think that the real wage is lower than it is and so are unwilling to accept the jobs offered--that we are in a situation of Lucas price level-misperception unemployment? I would say no. is the problem that demand is too low--that we are in a situation of Keynesian unemployment? I would say yes.

So what happens in a situation of Keynesian unemployment if you have wage deflation?

What happens is that as wages fall more working households find that they can no longer make their mortgage and their credit card payments, and defaults rise. Rising defaults increase the flight to safety and quality in financial markets and push down aggregate demand further. If you could have what Jacob Viner called a "balanced deflation"--wages and debts--that would be fine. That is why devaluation works so well to cure Keynesian unemployment in an economy that does not have large net foreign-currency liabilities: devaluation is a way of attaining balanced deflation--and it works.

So in my view, Tyler's thought experiment tells us nothing about our underlying theory of current unemployment. Indeed, Keynes dealt with this 74 years ago: Chapter 19 http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch19.htm:

A reduction in money-wages is quite capable in certain circumstances of affording a stimulus to output.... The argument simply is that a reduction in money-wages will cet. par. stimulate demand by diminishing the price of the finished product, and will therefore increase output and employment.... In its crudest form, this is tantamount to assuming that the reduction in money-wages will leave demand unaffected... aggregate demand depends on the quantity of money multiplied by the income-velocity of money and that there is no obvious reason why a reduction in money-wages would reduce either the quantity of money or its income-velocity....

Let us... apply our own method of analysis.... [E]ffective demand, being the sum of the expected consumption and the expected investment, cannot change if the propensity to consume, the schedule of marginal efficiency of capital and the rate of interest are all unchanged.... Thus the reduction in money-wages will have no lasting tendency to increase employment except by virtue of its repercussions either on the propensity to consume for the community as a whole, or on the schedule of marginal efficiencies of capital, or on the rate of interest.... The most important repercussions on these factors are likely, in practice, to be the following:

A reduction of money-wages will somewhat reduce prices. It will, therefore, involve some redistribution of real income (a) from wage-earners to other factors entering into marginal prime cost whose remuneration has not been reduced, and (b) from entrepreneurs to rentiers to whom a certain income fixed in terms of money has been guaranteed.... What the net result will be on a balance of considerations, we can only guess. Probably it is more likely to be adverse than favourable....

If we are dealing with an unclosed system, and the reduction of money-wages is a reduction relatively to money-wages abroad when both are reduced to a common unit, it is evident that the change will be favourable to investment, since it will tend to increase the balance of trade. This assumes, of course, that the advantage is not offset by a change in tariffs, quotas, etc. The greater strength of the traditional belief in the efficacy of a reduction in money-wages as a means of increasing employment in Great Britain, as compared with the United States, is probably attributable to the latter being, comparatively with ourselves, a closed system....

If the reduction of money-wages is expected to be a reduction relatively to money-wages in the future, the change will be favourable to investment, because... it will increase the marginal efficiency of capital; whilst for the same reason it may be favourable to consumption. If, on the other hand, the reduction leads to the expectation, or even to the serious possibility, of a further wage-reduction in prospect, it will have precisely the opposite effect....

The reduction in the wages-bill, accompanied by some reduction in prices and in money-incomes generally, will diminish the need for cash for income and business purposes; and it will therefore reduce pro tanto the schedule of liquidity-preference for the community as a whole. Cet. par. this will reduce the rate of interest and thus prove favourable to investment. In this case, however, the effect of expectation concerning the future will be of an opposite tendency to those just considered....

Since a special reduction of money-wages is always advantageous to an individual entrepreneur or industry, a general reduction (though its actual effects are different) may also produce an optimistic tone in the minds of entrepreneurs, which may break through a vicious circle of unduly pessimistic estimates of the marginal efficiency of capital and set things moving again on a more normal basis....

On the other hand, the depressing influence on entrepreneurs of their greater burden of debt may partly offset any cheerful reactions from the reduction of wages. Indeed if the fall of wages and prices goes far, the embarrassment of those entrepreneurs who are heavily indebted may soon reach the point of insolvency....

This is not a complete catalogue of all the possible reactions of wage reductions in the complex real world. But the above cover, I think, those which are usually the most important.

If, therefore, we restrict our argument to the case of a closed system... we must base any hopes of favourable results to employment... to an increased marginal efficiency of capital... or a decreased rate of interest....

The contingency, which is favourable to an increase in the marginal efficiency of capital, is that in which money-wages are believed to have touched bottom, so that further changes are expected to be in the upward direction. The most unfavourable contingency is that in which money-wages are slowly sagging downwards and each reduction in wages serves to diminish confidence in the prospective maintenance of wages. When we enter on a period of weakening effective demand, a sudden large reduction of money-wages to a level so low that no one believes in its indefinite continuance would be the event most favourable to a strengthening of effective demand. But this could only be accomplished by administrative decree....

On the other hand, it would be much better that wages should be rigidly fixed and deemed incapable of material changes, than that depressions should be accompanied by a gradual downward tendency of money-wages, a further moderate wage reduction being expected to signalise each increase of, say, 1 per cent. in the amount of unemployment. For example, the effect of an expectation that wages are going to sag by, say, 2 per cent. in the coming year will be roughly equivalent to the effect of a rise of 2 per cent. in the amount of interest payable for the same period. The same observations apply mutatis mutandis to the case of a boom.

It follows that with the actual practices and institutions of the contemporary world it is more expedient to aim at a rigid money-wage policy than at a flexible policy responding by easy stages to changes in the amount of unemployment; — so far, that is to say, as the marginal efficiency of capital is concerned. But is this conclusion upset when we turn to the rate of interest?

It is, therefore, on the effect of a falling wage- and price-level on the demand for money that those who believe in the self-adjusting quality of the economic system must rest the weight of their argument; though I am not aware that they have done so.... We can, therefore, theoretically at least, produce precisely the same effects on the rate of interest by reducing wages, whilst leaving the quantity of money unchanged, that we can produce by increasing the quantity of money whilst leaving the level of wages unchanged. It follows that wage reductions, as a method of securing full employment, are also subject to the same limitations as the method of increasing the quantity of money. The same reasons as those mentioned above, which limit the efficacy of increases in the quantity of money as a means of increasing investment to the optimum figure, apply mutatis mutandis to wage reductions....

There is, therefore, no ground for the belief that a flexible wage policy is capable of maintaining a state of continuous full employment; — any more than for the belief than an open-market monetary policy is capable, unaided, of achieving this result. The economic system cannot be made self-adjusting along these lines.

If, indeed, labour were always in a position to take action (and were to do so), whenever there was less than full employment, to reduce its money demands by concerted action to whatever point was required to make money so abundant relatively to the wage-unit that the rate of interest would fall to a level compatible with full employment, we should, in effect, have monetary management by the Trade Unions, aimed at full employment, instead of by the banking system.

Nevertheless while a flexible wage policy and a flexible money policy come, analytically, to the same thing, inasmuch as they are alternative means of changing the quantity of money in terms of wage-units, in other respects there is, of course, a world of difference between them...

Andrew Hall: Robert E. Lee's Civil War Army of Northern Virginia as a Slave-Raiding Enterprise

Andrew Hall:

'We Have Received Provocation Enough': On the first day of July 1863, Confederate Lieutenant General James Longstreet (left), writing through his adjutant, ordered General George Pickett to bring up his corps from the rear to reinforce the main body of the Army of Northern Virginia. The lead elements of the armies of Robert E. Lee and George Meade had come together outside a small Pennsylvania market town called Gettysburg. The clash there would become the most famous battle of the American Civil War, and would be popularly regarded as a critical turning point not just of that conflict, but in American history. More about Longstreet's order shortly. I was thinking about the central role of the Battle of Gettysburg in our memory of the war when I recently read an essay by David G. Smith, "Race and Retaliation: The Capture of African Americans During the Gettysburg Campaign," part of Virginia's Civil War, edited by Peter Wallenstein and Bertram Wyatt-Brown. All but the last page and a few citations is available online through Google Books.

It's not a pleasant read.

During the Gettysburg Campaign, soldiers in the the Army of Northern Virginia systematically rounded up free blacks and escaped slaves as they marched north into Maryland and Pennsylvania. Men, women and children were all swept up and brought along with the army as it moved north, and carried back into Virginia during the army's retreat after the battle. While specific numbers cannot be known, Smith argues that the total may have been over a thousand African Americans. Once back in Confederate-held territory, they were returned to their former owners, sold at auction or imprisoned.

That part of the story is well-known. What makes Smith's essay important is the way he provides additional, critical background to this horrible event, and reveals both its extent across the corps and divisions of Lee's army, as well as the acquiescence to it, up and down the chain of command. The seizures were not, as is sometimes suggested, the result of individual soldiers or rouge troops acting on their own initiative, in defiance of their orders. The perpetrators were not, to use a more recent cliché, "a few bad apples." The seizure of free blacks and escaped slaves by the Army of Northern Virginia was widespread, systematic, and countenanced by officers up to the highest levels of command. This event, and others on a much smaller scale, were so much part of the army's operation that Smith argues they can legitimately be considered a part of the army's operational objective. Smith is blunt in his terminology for these activities; he calls them "slave raids."

These ugly episodes did not spring up spontaneously; it was a violent and entirely predictable result of multiple factors that had been building for months or years. For a long time, there was growing resentment in Virginia over escaped slaves seeking refuge in Pennsylvania, where there was considerable sympathy for the abolitionist cause, and stops on the Underground Railroad. These tensions increased substantially after the outbreak of the war, as Virginia slaves learned that they could expect to be safe as soon as they reached Union territory, where they would be considered contraband. White Southerners' resentment of this situation redoubled again in the fall of 1862, with the news that the Lincoln administration would issue the Emancipation Proclamation. This further encouraged slaves to flee to the North, and made it clear to slaveholders—had it not been clear before—that defeat would put an end to the "peculiar institution," and upend the economy and culture that went with it.

A November 1862 Harper's Weekly (New York) illustration showing Confederates driving slaves further south, to put them out of reach of the Federal armies in advance of the Emancipation Proclamation. The accompanying article told of two white men who escaped to Union lines and:

upon being questioned closely, they admitted that they had just come from the James River; and finally owned up that they had been running off "niggers" having just taken a large gang, belonging to themselves and neighbors, southward in chains, to avoid losing them under the emancipation proclamation. I understand, from various sources, that the owners of this species of property, throughout this section of the State, are moving it off toward Richmond as fast as it can be spared from the plantation; and the slaveholders boast that there will not be a negro left in all this part of the State by the 1st of January next.

Against this backdrop, the organization of Federal units of black soldiers, comprised of both escaped slaves and free men, was taken as an outrage. It struck a raw nerve, never far off in the Southern psyche: fear of a slave insurrection. The prospect of African American men in blue uniforms was taken as an extreme provocation, so much so that it was proposed in the Confederate congress—and endorsed by General Beauregard, the hero of Fort Sumter—that all Federals captured, black or white, should be summarily executed. This proposal was never adopted, but the Confederate congress did eventually pass, in May 1863, a proclamation instructing President Jefferson Davis to exercise "full and ample retaliation" against the North for arming black soldiers.

Finally, there was simple revenge. The Union army's shelling of Fredericksburg several months before had been a particular sore point, that festered for months as the Confederate army went into winter quarters nearby. One officer, determined to fix the destruction there in his mind's eye, made a special visit to that town one last time before setting out on the road north into Maryland and Pennsylvania.

So when Lee's army finally marched north in June 1863, it was fully infused with the intent to exact "full and ample retaliation" on Union territory as it passed. Lee issued orders against the indiscriminate destruction of civilian property, but made no mention of seizing African Americans, whether free or former slaves. In his essay, Smith points out that diaries, letters and even official reports from every division in Lee's army mention Confederates rounding up African Americans and holding them with the army. The practice was tolerated—when not actively encouraged—by officers at all levels of the army. Some, in fact, saw it as not only justified, but a legitimate tactic to meet the Confederacy's military objectives. Smith quotes a private letter to his wife from Major General Lafayette McLaws, whose division would bear the brunt of the action on the assault on the Peach Orchard on the second day at Gettysburg. Marching north into Maryland and Pennsylvania with his division, McLaws wrote:

It is reported that our army will will not be allowed to plunder and rob in Pennsylvania, which is all very well, but it would be better not to publish it as we have received provocation enough to burn and take and destroy, property of all kids and even the men, women & children along out whole border. In every instance where we have even threatened retaliation, the enemy have given [way]—I am strongly in favor of trying it the very first chance we get.

In McLaws' view, the seizure of "even the men, women & children" was both justified as moral retribution and as an intentional escalation of tactics.

McLaws' corps commander was Longstreet, the most senior of Lee's officers and effectively the second-in-command of the Army of Northern Virginia. Longstreet acknowledged the practice of seizing civilians and accommodated it. In sending orders to George Pickett,  whose corps was bringing up the rear of the army, Longstreet, writing through his adjutant, G. Moxley Sorrel, sent word on July 1—the day the two armies first engaged each other—to move his troops toward Gettysburg. In closing he added, "the captured contrabands had better be brought along with you for further disposition."

"Further disposition" here refers to imprisonment, auction, enslavement, and (often) severe punishment at the hands of a former-and-once-again master.

McLaws' letter and the thirteen words closing Longstreet's order are damning, in that they show full well that the seizure and abduction of African Americans was, if not written policy, widely tolerated and made allowance for, even at the highest levels of the Confederate command structure. McLaws was a division commander, and Longstreet was second-in-command; while their words do not prove Lee knew and approved of this practice, it's hard to imagine he was unaware of it, and there's no evidence that he publicly objected to it, or made any effort to curtail it. My intent here is not to single out either McLaws or Longstreet  alone for condemnation—the de facto policy did not originate with either—but to demonstrate that the forcible abduction of free African Americans and escaped slaves was known and tolerated throughout the Confederate army, from the lowest private to the most senior generals.

There are many questions, many aspects, of the Civil War that are legitimate sources of controversy and dispute. There are questions that serious historians will argue about as long as anyone remembers this conflict, saying that this politician's actions were justified by that event, or that general made the right decision because he didn't know those troops were on the other side of the river. The abduction of free blacks and escaped slaves from Maryland and Pennsylvania during the Gettysburg campaign is not one of those events. It cannot be justified, or rationalized, or denied. It can only be ignored.

But it shouldn't be.

Department of "Huh?!": I Think David Leonhardt May Have Gotten One Wrong

The excellent, hard-working, and intelligent David Leonhardt writes:

or Those With Jobs, a Recession With Some Benefits - NYTimes.com: One of the distinctive features of the Great Recession has been the enormous number of people who have been out of work for months on end. Almost 45 percent of today’s unemployed workers have been without a job for at least 27 weeks. In no other downturn since World War II did the share exceed 26 percent. For many of these long-term unemployed, the financial and psychological damage will last for years. For most other workers, however, the situation has had a perverse, and mostly overlooked, silver lining. Unemployment has been concentrated among a surprisingly small number of people, given how deep the recession has been. The nation’s pool of jobless workers has not been constantly changing. Instead, it’s been relatively stable — mostly because the hiring rate of new workers plunged in 2008 and still has not recovered. The drop in hiring has actually been steeper than the rise in layoffs.

Compare the current slump with that of the early 1980s, which was similar in severity. Over the course of 1980, 18.1 percent of the labor force was unemployed at some point. In 2008, the first year of this slump, only 13.2 percent was, according to the Labor Department’s most up-to-date data. That number surely rose in 2009, but it is unlikely to have come close to the 1982 peak of 22 percent...

Wait a minute.

Unemployment in 1980 averaged 7.2%--and affected 18.1% of the labor force. Unemployment in 1982 averaged 9.7%--and affected 22% of the labor force Unemployment in 2008 averaged 5.8%--and affected 13.2% of the labor force. In those three cases the total number of those affected by unemployment at some time during the year was 2.3, 2.5, and 2.3 times the average unemployment rate.

In 2010 the unemployment rate will average 9.5% of the labor force, and 2.3 times that will be... 22% of the labor force.

And, as Bob Reich pointed out at coffee at Brewed Awakening yesterday afternoon, there are many more two-earner households than there were in 1982: the share of households affected by an unemployment spell is thus likely to be significantly higher than it was back in 1982.