Book Review: “City on the Edge: Technology, Politics, and the Fight for the Soul of San Francisco” by Jonathan Weber

 Jonathan Weber has written an interesting book on aspects of the political history of San Francisco from 1990 to 2024 with a focus on the technology industry. He has been involved as a technology reporter and editor for various publications during this period. 

While the rise of the technology industry has been centered to the south of San Francisco in what is now called “Silicon Valley,” the city has played a significant role. At first, it was essentially a bedroom community for tech workers who commuted to their companies down the peninsula. This gave rise to much reported unhappiness of some San Francisco residents with the luxury buses the tech companies hired to ease the commute of their workers. Subsequently, some tech companies came to the city or increased their presence there. Weber singles out Twitter, which was given a tax break to locate in an area near the San Francisco Civic Center (it has since vacated that property after it became “X”). 

San Francisco’s downtown suffered from Covid-19 and its aftermath, as tech workers enjoyed the convenience of working from anywhere. Notably, San Francisco’s downtown has been slower to recover from the pandemic than the business districts of other major U.S. cities. Now the AI boom has been giving an economic boost to the city, and I am told that downtown is in the process of recovering.

There is much more to the book than I have summarized here, and for those interested in the San Francisco tech story and its reverberations on the politics of the city, which are much more complicated than simply liberal politics, this book provides a lot of information, some of which is based on the author’s direct experiences.  However, if one is looking for an informed discussion of  the “soul of San Francisco,” this book may be a start but it is limited.

The limitation is made obvious by the map at the beginning of the book, which is only of a slice of the city in the northeast, including the downtown area. San Francisco is small in land area, but there is much more to the city than this.

Amazingly, the book, which at times digresses from the tech story, does not even cover some significant history of the downtown area. For example, there is no mention of Chevron, once a large employer in San Francisco, moving its headquarters from the city to San Ramon, which is about 40 miles away and inland from the southeast portion of the Bay. (Since then, Chevron moved its headquarters out of California entirely, to Houston in 2024.) Also, missing from the book is the move of Bechtel’s headquarters out of San Francisco to Reston, Virginia, in 2024. (Bechtel, a large, privately-held engineering firm once headed by George Shultz, also moved its operations in Houston to Reston.)

These companies’ departure from the city and their effective replacement by the tech industry is an important part of the story that is missing. In addition, while the largest employer in San Francisco, the city and county itself, is discussed, the next largest current employer, the University of California, San Francisco, is not. UCSF is a medical school and owner of several hospitals and affiliated medical services. It is only mentioned in passing for its expansion into the new Mission Bay development. Also, Dr. Bob Wachter, the head of UCSF’s Department of Medicine, who was a prominent user of Twitter and webcasts during the pandemic, is quoted about Covid. 

In discussing the business environment of San Francisco, the author also does not mention the significant financial industry. While NationsBank bought BankAmerica in 1998 and the headquarters of the combined company now called Bank of America went to Charlotte, North Carolina, there remains a significant financial industry presence in San Francisco along with the Federal Reserve Bank of San Francisco (where I briefly worked a long time ago).

The problem is that the author has lived and breathed tech, and ignored much of what else has been happening in San Francisco. The large Asian population (primarily Chinese), with concentrations in Chinatown, the large Sunset area which borders Golden Gate Park to the north and ends at the Pacific Ocean on the west, and also to an extent in the Richmond, which parallels the Sunset on the north of Golden Gate Park, is not much discussed. This group is important and has become an important political force. The diversity of the population, including Hispanics, and those with Russian, Italian, Irish, and other backgrounds, as well as the declining population of African-Americans, is absent from the book. Also not much discussed is the significant influence of the gay community on San Francisco politics and culture. The southern sections of the city, much of which are not the pretty version which figure in postcards, are also not mentioned. In other words, San Francisco, a relatively small city (the fourth largest in population in California) though effectively the center of the much larger Bay Area, is a complicated place with a diverse population and a colorful history. While the tech industry is important, you need to look beyond the tech industry and the book’s much discussed Burning Man festivals, to understand San Francisco, not to mention its soul.

Trouble at the Sierra Club

 A recent New York Times article detailed Sierra Club troubles at the national level. It focused on a controversy concerning whether the Club’s mission included social justice as well as environmental issues. The article quotes Michale Brune, a former Sierra Executive Director,  stating that “we can’t defend the environment by shutting ourselves up in a big, green box labeled ‘environmental issues.’”

The current controversy at the Sierra Club brings to mind that, in 2004, there was a fight on whether the Sierra Club should advocate limits on immigration to the U.S. The argument was that people living in the U.S. pollute more than people living elsewhere. The main advocate of this was Richard Lamm, a former Democratic governor of Colorado. He led a dissident slate in an election to the Sierra Club's board of directors. The slate lost. If it had won, I believe the Sierra Club would have splintered.

One difference between then and now is that the earlier effort to broaden the Sierra Club policy issues came from people who were not in charge of the Club. The leadership of the Club was then strongly against taking a position on immigration. The current broadening of the Sierra Club mission to issues falling under the rubric of Environmental Justice and Democracy is an initiative of the current leadership.

In response to the New York Times article, the current Executive Director, Loren Blackford, who replaced her controversial predecessor, Ben Jealous, who was fired “for cause,” posted a rebuttal on the Sierra Club’s website. It was not entirely persuasive.

Ms. Blackford rightly indicates, though, that much of the Sierra Club’s political impact is at the local level. Given the number of local chapters and groups that comprise the Sierra Club nationwide, it is hard to judge its overall effectiveness. However, recent developments in the San Francisco Bay Area indicate some portending trouble.

According to the Alameda Post, mountain bikers have gained seats on the San Francisco Bay Chapter’s Executive Committee and have remove long-time environmentalists from various Chapter committees. The immediate issue is whether trails on land administered by the East Bay Municipal Utility District should allow off-road biking. As indicated in the article, organized groups can take over a Sierra Club Chapter in usually low-turnout elections.

Also, the listings on the outings meetup site and activities calendar for the San Francisco Bay Chapter suggest that there is another controversy. Most of the hikes listed on the meetup site since sometime in February include the following notice: “**PLEASE NOTE: *This is not a Sierra Club-sponsored hike. *** This hike is listed as a convenience to members who might be interested. To join, you must sign the waiver at our meeting point.” Clicking on outings on the online calendar often leads to the following notice: “The activity you have chosen is not sponsored nor administered by the Sierra Club. The Sierra Club has no information about the planning of these activities and makes no representations or warranties about the quality, safety, supervision or management of such activities. Click here to continue to activity details.”

Many of these hikes are listed by a long-time hike leader who is listed as the chair of the hiking section for the Chapter. The hikes he leads with the disclaimer are similar or identical to the ones he has led for years which were listed as Sierra club hikes. It is not clear what is going on here. There may be issues concerning liability raised by Sierra Club lawyers or an insurance company or there may be disagreements concerning what type of outings the Chapter should sponsor. Currently, I would note, there is no such disclaimer for hikes listed by the Sierra Club hiking group in the Washington, DC area.

As a long-time member of the Sierra Club, I have generally supported the club’s environmental goals and have participated on both coasts in many hiking outings (and a long time ago, served as a hike leader for the Sierra Club hiking group for the Washington, DC area). I have not, though, agreed with every policy position the Sierra Club has advocated but thought it important to support the Club as a counterweight to powerful interests on the other side of environmental issues.

Moreover, with respect to local hikes, I have noticed that the Sierra Club hiking groups for the Washington, DC area and the San Francisco Bay Area have not fully recovered from the pause in activity due to the pandemic. There continues to be a reluctance to organize carpools to hiking locations, which is somewhat peculiar for an environmental group, and there is a reduced list of activities, particularly noticeable in the San Francisco Bay Area because of the number of hikes it used to list for each weekend.

The reduction in hiking activities also impacts Sierra Club membership. For example, when James Watt was Secretary of the Interior during the Reagan Administration, he unwittingly was a great recruiter for the Sierra Club. One hike leader at the time for the DC area, Water Wells, decided to lead monthly Sunday afternoon hikes in Rock Creek Park. These hikes did not entail long drives nor getting up early and were not physically very challenging. Part of Walter’s goal, as I recall, was to get new members involved in the Sierra Club so that they would not let their membership lapse in the coming years.

I want the Sierra Club to be successful now, especially with the current Administration’s assault on the environment. There does not appear to be the surge in membership that happened during the Reagan Administration. Fortunately, there are other organizations that are fighting for the environment, but the Sierra Club most likely is losing effectiveness because of its internal problems. I hope that the current leadership of the Sierra Club can admit that there are internal problems that need to be addressed.

Book Review: “When It Burns: Fighting Fire in a Transformed World” by Jordan Thomas

Jordan Thomas is an anthropologist who spent some time while in graduate school in Santa Barbara as a firefighter in an elite National Forest Service unit, Los Padres Hotshots. This book recounts his experiences as a firefighter and delves into California history in order to provide historical context.

Essentially, this book has two storylines. The first is about firefighting. The accounts of combating various forest fires are vivid, as are the descriptions of the various members of his firefighting group. It is a well-written and engrossing adventure story, and it also makes the case that the firefighters are way underpaid given the hardships, the hours, and the dangers involved.

The other storyline is how civilization has messed up when it comes to fire. There is an underlying anger. Thomas argues that indigenous people in California were ingenious in how they managed their environment with controlled burns, and that this was lost when California was settled by people of European origin. He does not shy away from using the term genocide and is harsh in his judgement of the Spanish priest and missionary Junipero Serra and his treatment of the indigenous population in California. (Junipero Serra was beatified by Pope John Paul II in 1988 and canonized by Pope Francis in 2015 during his visit that year to the United States. These actions were controversial, especially in California).

In contrast to the way the indigenous populations had dealt with fire, the policy of the National Forest Service was to actively suppress all fires and not use controlled burns. While this policy has been changing with some difficulty in recent years, the buildup of the fuel for forest fires resulted in disasters. Thomas is no doubt right about this, but I was surprised that he did not mention the role of the Pacific Gas & Electric Company’s power lines in setting off fires. (PG&E ended up filing under Chapter 11 of the Bankruptcy Code due to its liability in connection with its power lines and fires.) 

Finally, there is climate change that has extended the fire season. This is more evidence of the damage we have done to the environment, with one of its manifestations more large and dangerous wild fires. Thomas is not against fighting fires, especially where it gets close to places people live, but his book is a plea for more intelligent environmental policies to mitigate the dangers from fires and other environmental issues.

Book Review: “No More Tears: The Dark Secrets of Johnson & Johnson” by Gardiner Harris

Johnson & Johnson has had a good corporate reputation. In particular, the company has been much praised for its handling of the cyanide poisoning of Tylenol capsules in 1982, which has been used for a Harvard Business School case study. Gardiner Harris, a former pharmaceutical reporter for The New York Times, argues convincingly in his new book, No More Tears: The Dark History of Johnson & Johnson, that this reputation is undeserved. He offers detailed reporting about various J&J products, including Tylenol, baby powder, Risperdal, metal hip implants, and others. 

It makes for very disturbing reading. For example, J&J tried to minimize the asbestos issue with talc in its baby powder, which eventually has been replaced with cornstarch. The chapter on Risperdal is especially disturbing. This antipsychotic drug with J&J’s encouragement, has been used in assisted care facilities to calm down those living there, an off-label use for which there is convincing evidence can hasten death. This drug has also been prescribed for children with problem behavior. However, this drug can cause disturbing weight gain, and some boys can develop breasts from taking the drug, for which they need to have surgery to remove. 

As for the opiod crisis, while Purdue Pharma and the Sacklers have taken the lionshare of the blame, Harris points out that J&J was selling Duragesic, whose active ingredient is fentanyl, using the same arguments and marketing strategies as Purdue used to sell OxyContin. While fentanyl does not come from poppies, the active ingredient in OxyContin does, and J&J supplied the raw material for OxyContin and other opiod drugs to Purdue and others from a Tasmanian company it bought in 1982. After that purchase, J&J became the largest supplier of active ingredients from opium poppies in the United States to other drug manufacturers.

Harris also shows the effective marketing strategies J&J used to promote questionable uses of its products, including the charming pharmaceutical representatives who visit doctors, the rewards to doctors who write a large number of prescriptions for particular drugs, and the use of ghostwritten studies of particular products. Also, Harris argues that J&J had undue influence with the FDA, both because it could influence FDA appropriation decisions with Congress and could offer jobs to FDA employees when they decided to leave the agency.

To be fair to the FDA, Harris does provide instances when the FDA was trying to do the right thing even as it faced opposition from J&J. As for the pharmaceutical representatives, Harris says that some courageously blew the whistle on their employer and showed greater integrity than the people running J&J.

Unlike Patrick Radden Keefe’s book on the Sacklers and Purdue, Empire of Pain, Harris’s book does not provide the compelling, focused novelistic narrative as Keefe’s book. However, Harris’s book is decently written and is more disturbing from a public policy perspective. Purdue Pharma could be brought down, but that will not happen to J&J, which provides useful and beneficial medical pharmaceuticals and products. One suspects that J&J is not alone in using questionable tactics to sell its products, though they may be particularly good at public relations and lobbying.

Harris’s book has not reached the bestselling heights of Keefe’s book. That is too bad. It deserves greater attention.

Book Review: “Careless People: A Cautionary Tale of Power, Greed, and Lost Idealism” by Sarah Wynn-Williams

Careless People is the new bestseller that recounts the experiences of the author working for Facebook in a senior position from 2011 to 2017. Her depiction of work life at Facebook is not pretty, and, in particular, the portrayal of the behavior of three top Facebook executives, Mark Zuckerberg, Sheryl Sandberg, and Joel Kaplan, is harsh.

Facebook tried to suppress the book and succeeded in baring Wynn-Williams from promoting the book because of a non-disclosure agreement or agreements she signed. This, of course, increased interest in the book and it reached the top of the New York Times bestseller list. No author promotion was necessary.

Those who buy the book and read it will not be disappointed. It is well-written, interesting,  and a page-turner. 

The book, though, does lead to questions, and one can only hope that Wynn-Williams will be able to talk about it and answer questions outside of a Congressional hearing at which she recently appeared.

For example, why did she stay in this toxic workplace for seven years, and only left when she was fired? Her explanation at the end of the book is that she needed to find another job with health insurance (she details a serious medical issue in the book.) However, she does not say what she did after she was fired to get health insurance or employment.

Her husband, who goes by the name “Tom” in the book, is, according to The Times (London), Tom Braithwaite, an editor at the Financial Times. It seems that the FT would have provided or offered some health insurance to him and Wynn-Williams, when they were both based in the United States and did not have access to the UK’s National Health Service. Wynn-Williams and her husband now live in London and presumably no longer have to worry about medical expenses.

Another reason the author gives for not leaving Facebook has to do with a citizenship and visa issue (pp. 222-224). Wynn-Williams is from New Zealand. For “complicated reasons” never explained, she says that she needed to obtain U.S. citizenship. However, she does explain that her application for U.S. citizenship is denied because, when she applies, her residency in California falls short of the 90 days required by 17 days. In addition, her husband’s visa at the time was due to expire in five months, which is not enough time normally to finish the citizenship process. She says that she is relying on Facebook lawyers to expedite her citizenship and of course she will have to stay an employee for them to do this. However, we never learn what happened subsequently and are left in the dark about whether she ever obtained U.S. citizenship.   

More importantly, the book has a primary focus on Facebook’s influence on politics in the U.S. and abroad. When it comes to the 2016 U.S. presidential election, she attributes Trump’s surprise victory due to help from Facebook, for which the Trump campaign apparently financed. She says that Facebook made the same offer to the Clinton campaign but was rebuffed. Surprisingly, she does not mention the activities of Cambridge Analytica.

There is not, though, any analysis about why she thinks Facebook was the decisive factor in the U.S. 2016 election or in other countries. Facebook, while huge, is not the only place where voters get their information. She ignores the importance of Twitter for journalists and others, and, in the U.S., she does not mention the influence of right-wing talk radio and Fox News, not to mention more conventional news sources. It would be difficult to isolate the impact of Facebook on elections here and abroad, but she may be too focused on Facebook because that was her employer.

Nevertheless, her accounts of Facebook and foreign politics, such as those of Myanmar and ultimately a failed deal with China, are interesting, and will probably be useful for further investigations by journalists or government entities. 

Regarding the anecdotes of bad behavior, some of those who were there have said or will likely say that their memories or perceptions of certain incidents are different. It is impossible for outsiders to know, but, while some details may be challenged at some point, her writing is fairly convincing.  

Finally, one is left with the question why she chose to publish this book now, more than seven years after she was fired. Part of the reason looks like revenge, but there is probably more to it than that. There must be a backstory to this. While the author recounts lots of details, she is vague about other things, including exactly what she does now in London. Nevertheless, if one is at all interested in the subject, including the strange people who are in charge of the large technology companies, I recommend this book. While you may not agree with the author on everything and may even have doubts about some of what she says, the book is both informative and engrossing. 

Book Review: Reagan: His Life and Legend by Max Boot

Max Boot’s new book, Reagan: His Life and Legend, is now the definitive biography of Ronald Reagan. The author, who once characterized himself as a Reagan Republican, did a prodigious amount of research over 10 years, which ultimately impelled him to a more balanced view of our 40^th U.S. President.

The book is most interesting in the chapters of his pre-presidential life. In these sections, spanning his childhood, his Hollywood career, his leadership of the Screen Actors Guild, and his governorship of California, there is much that was new to me and some that reminded me of certain episodes. It is interesting and provides some understanding of a man, who, for all his charming demeanor, remains somewhat of a mystery, even to his children.

One aspect of Reagan’s career in the 1960s that the book does not discuss in more than a glancing fashion is his association with J. Edgar Hoover. This is a sordid tale of a mutually beneficial relationship and is detailed in a 2012 book by Seth Rosenfeld, Subversives: The FBI’s War on Student Radicals, and Reagan’s Rise to Power. Boot is aware of this book by a former investigative reporter for the San Francisco Examiner and the San Francisco Chronicle and lists the book in his bibliography, but does not appear to have used it very much. It is part of the Reagan story.

As for Reagan as President, Boot is particularly critical of the invasion of Grenada, the Iran-Contra affair, and the response to the AIDS crisis. Moreover, Boot depicts Reagan as a bad manager; he did not pay much attention to what “the fellas” were doing. In some cases, they performed very well (for example, James Baker); at other times, it was disastrous.

Boot argues that the worst personnel move Reagan made was allowing James Baker, then Chief of Staff, to swap jobs with Don Regan, then Treasury Secretary. This was bad for the White House and Boot thinks that Nancy Reagan did the right thing by forcing Don Regan out (though the way she did it can be criticized). What Boot does not mention since this is a book about Ronald Reagan, was that the job swap was good for the Treasury Department, as I can attest from personal experience. Don Regan as Treasury Secretary made sensible policy decisions, but he created and encouraged open bureaucratic warfare among sections of Treasury. (I was involved in some bitter disagreement between Domestic Finance, where I worked, and the International division of Treasury, then known as “OASIA,” about various debt management issues. This also involved Tax Policy and the Economic Policy sections of Treasury. An organization cannot sustain that level of animosity for very long. The hostility abruptly ended when Baker became Secretary.)

Surprisingly, Boot mentions but hardly discusses a major bipartisan legislative accomplishment of the Reagan Administration, the Tax Reform Act of 1986. Whole books have been written about this; given its importance, Boot might have devoted more than a paragraph to this.

As for the ending of the Cold War, Boot takes a contrarian position that its end was due to Reagan. He thinks most of the credit should go to Mikhail Gorbachev and argues that Reagan’s insistence on the Strategic Defense Initiative (“Star Wars”) and the military buildup may have increased domestic pressure on Gorbachev to divert from his chosen path. Boot makes a strong case, and does credit Reagan for having a productive relationship with Gorbachev and putting pragmatism above his ideology.

Reagan was a significant President, and he successfully moved U.S. politics to the right. In many of his decisions he was pragmatic rather than ideological. For example, he recognized that his first major tax legislation went too far and effectively raised taxes in the following years. He also can be given credit for not interfering with Paul Volcker in the punishing and successful Federal Reserve efforts to conquer inflation.

This book is a necessary corrective to the sunny recollections many have of the Reagan years. As President, Reagan had a mixed record and at the end of his Presidency he was hardly the “great communicator.” He also appealed to racism in his campaigns but with much more subtlety than the openly racist Donald Trump. Boot comments at the end of the book:

“...by 2016, Reagan’s party had left his seemingly genteel brand of politics for the harder-edged populism of Donald J. Trump. Many analysts wonder if Trump represented a repudiation of Reagan’s legacy or a continuation of it. The truth, as with question of Reagan’s intelligence, was complicated.”

 Boot notes both policy and demeanor differences between Reagan and Trump, and clearly is much more of an admirer of Reagan than Trump, whom he probably despises. However, Boot concludes, perhaps reluctantly:

 

“...If Reagan had been alive in 2016, he undoubtedly would have been derided as RINO (Republican in name only) like the two Bushes, John McCain, and Mitt Romney; indeed, conservatives had frequently expressed their frustration with Reagan even during his presidency. Yet Reagan had helped set the GOP–and the country–on the path that ultimately led it to embrace divisive figures such as Donald Trump. Reagan’s legacy included, after all, not only empowering the Christian Right and a growing white backlash against minority empowerment but also economic policies that helped hollow out the middle class, thereby creating the conditions for Trump’s populist movement. (Of course, once in office, Trump’s policies favored the well-off as much as Reagan’s had.)”

Memories of Ronald Reagan’s presidency are fading and the current Republican Party is significantly different from the one that Reagan headed, even if he was viewed then as on the right. His presidency was consequential and important, and, even though this book has some omissions I have noted and a great amount of detail about other aspects of his life and political career, I recommend it for anyone interested in Reagan’s life or the period of American history were he loomed large. The book is both a detailed history of Reagan’s life and career and a balanced assessment of the man.

Review of “The Wealth of Shadows” by Graham Moore

The Wealth of Shadows is a historical novel based primarily on attempts at the U.S. Treasury Department to kneecap Germany economically in 1939 and 1940 and to enshrine the U.S. dollar as the linchpin of the global financial system at the end of World War II. It is based on real events, but it reads as a thriller, though there are no violent scenes. The main characters are real, including senior U.S. Treasury official Harry Dexter White, Treasury Secretary Henry Morgenthau Jr., and John Maynard Keynes. The book is narrated from the perspective of a Mr. Ansel Luxford, a tax lawyer who works for White. Though little known, Luxford is a real person who was involved in White=s efforts against Germany and his successful besting of Keynes at the Bretton Woods Conference in New Hampshire.

For those interested in this historical period, this novel is not only good entertainment but interesting history, along with ruminations about what money is. There is even a side trip to a used car dealership which provides the author an opportunity to discuss Pareto optimality and the importance of reading the fine print. This foreshadows how White manages to trick Keynes at Bretton Woods. Mr. Moore has helpfully provided endnotes which detail what is historically accurate in selected chapters and what he imagined, made up, or changed. 

Secretary Morgenthau[1] is well-known for having tried, not all that successfully, to get the Roosevelt Administration to do more to help European Jews. He is, therefore, supportive of White=s unconventional and sometimes extra-legal maneuvers against Germany at a time when the United States was officially neutral. However, White is opposed by a faction at the State Department led by Breckinridge Long, an antisemitic senior State Department official, whom White eventually manages to sideline.

For those with even a passing familiarity with the period, it does not give anything away to mention that at the end of the novel Luxford discovers that White has been providing classified information to the Soviet Union. This is a subject about which I know little, not having read the various books and articles about White=s espionage activities. According to Moore, most historians believe he did spy for the Soviet Union. Assuming they are right, it is unclear how much harm to U.S. national security or interests White=s spying did. White apparently received information from the Soviets in exchange for the information he provided. It is probable that White thought he was smarter than the Soviets and that he was using them. The Soviets most likely thought they were using White. (Pareto optimality? I don=t know.) It is probably true that White did not consider himself a traitor.

Moore does not pass judgment on White and says in his endnotes that information on White=s espionage remains murky. White died before he could be tried for spying.

Much of what happens in the novel and in reality, in addition to White=s espionage activities, is morally ambiguous. Moore does not hammer this point, but he does leave it to the reader to ponder the ethics of what people did.

For those looking for an engrossing summer read, I recommend this book. It may even motivate some to learn more about this period, perhaps by looking at some of the books Moore said he consulted.[2]

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[1] Secretary Morgenthau deserves praise for his efforts to help the Jews. However, as Secretary, his record is mixed. For example, the journalist Diana B. Henriques, in her book Taming the Street: The Old Guard, the New Deal, and FDR=s Fight to Regulate American Capitalism (2023) writes: AFDR=s conservative Treasury secretary, his Hyde Park neighbor Henry Morgenthau Jr. was a decent but limited man with vague economic ideas firmly rooted in the Victorian era. Even as the market slump worsened, he argued that only a balanced budget would provide the big dose of >business confidence= the economy needed.@ Also, after the war he proposed that Germany be deindustrialized and made into an agrarian economy, the AMorgenthau Plan.@ Fortunately, President Truman opted in 1948 to implement the Marshall Plan.

 [2] Among other recommendations, the author notes that The General Theory by Keynes is Ahis most accessible book.@ However, reading and understanding that book is a challenge.

Brief Book Review: New Cold Wars: China’s Rise, Russia’s Invasion, and America’s Struggle to Defend the West by David Sanger with Mary K. Brooks

David Sanger, a long-time journalist for the New York Times, has written an interesting book with his researcher, Mary K. Brooks, about major global issues confronting the U.S. Most of the focus is on Russia’s invasion of Ukraine; the economic and political relationship of the U.S. with China, including Taiwan; conflicts in the Middle East (e.g., Iraq, Iran, Israel); and cyber warfare. The narrative jumps around from issue to issue and location to location, but the main point is that the world has become an exceedingly dangerous place with multiple players, any of whom might make a catastrophic mistake. Also, the three main countries (U.S., Russia, and China) have made policy and judgement errors and have had to deal with internal problems with implications for foreign policy. The book recounts fascinating, though selective, recent history.

The analytical points, though, are less well-developed than the stories of recent events. Analysis gets a bit lost in the skipping from story to story and also seems not to be completely formulated. Key questions are sometimes only tangentially addressed. For example, the original Cold War was characterized as both a power and an ideological competition. The new cold wars (plural), as Sanger points out, includes one power, China, having important economic relationships with the other two main antagonists. Is this global state of affairs the result of policy mistakes or was some kind of dangerous competition among these three countries inevitable?  How should policymakers deal with this new, more complicated configuration? Are there policies that can reshape the current relationships among great powers or are we fated to ad hoc reactions to crises as they arise and hope that we can muddle through?

It is unfair to be too critical. The questions, such as the ones I have posed, are difficult, and they and others will generate debate among political scientists and historians. Sanger is right to conclude that recent history demonstrates the dangers we are facing and that the great power relationships are challenging. Fortunately, rationality triumphed to bring an end to the most dangerous episode in the Cold War, the Cuban missile crisis. There can be hope, but not assurance, that rationality would triumph once again if the world again faces the abyss. Sanger concludes with more aspiration than prediction that the current great powers can continue “an eight-decade-long streak” of avoiding “direct conflict,” no matter their differences.

Treasury Considers Green Bonds

The U.S. Treasury’s financing decisions are not something most people need to pay much attention to unless their profession requires they pay close attention to fixed income markets. Now that I am no longer involved in Treasury’s debt management I rarely pay attention to the Department’s Quarterly refunding announcements. However, recently it caught my attention that Treasury may be considering issuing green bonds. The Treasury Borrowing Advisory Committee recommended it as one of the innovations that Treasury should consider. (Here is a TBAC document  where green bonds and other possible debt management innovations are discussed.)

The proceeds of green bonds are restricted to environmental initiatives, which would need to be defined. The rationale for issuing these bonds would be that it would broaden the market for Treasury securities to entities which have restrictions on their investments. The TBAC document suggests that green bonds may have a lower yield than regular Treasury securities, but they are unsure about that.

The issuance of green bonds would be a significant departure from the way Treasury debt management has been conducted. Treasury does not issue securities to the public to fund particular expenditures. In determining its planned issuance, Treasury makes estimates of the daily cash inflows and outflows for the month or so ahead, and sells enough securities so that its cash balance at the Federal Reserve does not go negative. It may have targets for a particular amount of cash. If Treasury issued green bonds, it would need to segregate those funds somehow to meet the expenditure requirements. If Treasury set up a trust fund for green expenditures, the result would be a lot of accounting with little real effect. Treasury would issue green bonds, the funds would be credited to a trust fund. Treasury could then issue non-marketable securities to the trust fund and spend the money. Alternatively, it could not invest the money in the trust fund. In either case, the funds raised by the issuance of green bonds would actually go into Treasury’s account at the Fed and would be spent. Since money is fungible, there would be no determination on what the initial money raised was spent on. The press would presumably explain all this, and green bond investors would likely not be happy.

Given the issues with a trust fund, another option would be for the Treasury to deposit the proceeds from the green bonds into a fund at the Fed separate from its general account. Then the Treasury could tell the Fed to transfer the funds to the general account when it needed them for green expenditures. This arrangement would probably satisfy green bond investors.

However, note that even using the Fed option, this does nothing to increase green expenditures. Treasury cannot affect government expenditures by using debt management. Congress must appropriate the expenditures. In fact, all this accounting does not accomplish anything, except presumably make some investors happy that their money is not being used to finance expenditures they do not like. However, since money is fungible, nothing has really been accomplished here except to make debt management more complicated.

Book Review: “Ours Was the Shining Future: The Story of the American Dream” by David Leonhardt

The declining belief in the “American dream” is the story presented in New York Times journalist David Leonhardt’s new book, Ours Was the Shining Future: The Story of the American Dream. The book is part political science and part history, and helps explain the current troubling U.S. political situation.

The current rise of the right in the United States and European countries is dismaying to many. In the U.S., those of us not charmed by Donald J. Trump can be mystified about his appeal to many of our compatriots. For one, I am at a loss to understand or explain the attraction or even the entertainment value of his long rants at his rallies.

One aspect of the appeal of the right’s siren call, though, has been glaringly obvious: the failure of liberalism to deliver for the working class. The growing disparity of income over the past decades has generated anger and unpleasant political consequences. This is the theme of Leonhardt’s book.

Leonhardt begins by praising the glory years after World War II, which were marked by government investments in infrastructure (e.g., the interstate highway system) and education (e.g.the GI Bill, the reaction to the Sputnik scare), the increasing power of labor unions, and improvement, albeit slow, on race issues. However, later in the last century and continuing in the current one, things shifted. Republican policies, especially starting with the Reagan Administration, hastened the decline of the labor movement, and generally benefitted the more wealthy. Government investment declined, with the idea that a “rough and tumble” capitalism with less government intervention would best serve the country. On the Democratic side, Leonhardt argues that there was an emphasis on social issues and the professional elites dominating the party paid too little attention to working class concerns such as crime and visible job losses due to immigration. Democrats de-emphasized the useful government role in the economy, with Clinton famously saying that “the era of big government is over.”

I generally agree with many of the points the book makes, but there are some important developments that I think it misses. For example, in tax policy, the book makes no mention of the Tax Reform Act of 1986, which was a Reagan Administration initiative but enacted with bipartisan cooperation and enthusiasm among many Democrats in the Congress. This legislation strived to tax various sources of income equally and to make the Internal Revenue Code fairer. It has been mostly undone in subsequent years. For example, the current difference in tax rates for favored investment income, including long-term capital gains and most dividend income, and those for ordinary income is contrary to what the Tax Reform Act was trying to do. An analysis of the initial success and subsequent political failure of this initiative would have been useful.    

In addition, Leonhardt could have provided more discussion concerning Social Security and Medicare. Much of the current public discussion is misleading, with, among other issues, sleight of hand being played regarding confusing government accounting issues. Leonhardt is well qualified to cut through the debates on these issues and to discuss the real motivations of those advocating changes to these programs.

Because the book is U.S. focused, it does not discuss that a growing disparity of income and the rise of the right have also been taking place in European countries. The postwar history of Europe is different from that of the U.S., as have been government policies. This suggests that something more general has been afoot in both continents fueling growing inequality of income and the migration of some of the working class from the left to the right. (In Western Europe, the postwar left had been much further to the left than in the U.S.) Of course, a comparative politics study of the rise of the right would be another book.

It is interesting to note that under President Biden, some of the “third-way” Democratic policies have been effectively jettisoned. Biden is in favor of using tariffs and tax incentives to promote a type of industrial policy favorable to the environment. Also, he is wary of the Chinese and is not averse to using tariffs and other measures. Leonhardt believes that this is warranted. 

As far as whether the right will be successful, it is anyone’s bet about whether it will be in the U.S. for the short-term. Unlike other western countries, the U.S. has political arrangements that are currently helpful to the right, such as the unrepresentative U.S. Senate and the Electoral College. On the other hand, it has a political culture that is wary of the extremes. It is reasonable to think that ultimately the right will fail, but it may take longer than many of us would wish.

Even though, as I have argued, this book does not provide a complete view of how we have arrived at the current state of affairs, I can strongly recommend it for its analysis and the interesting history it presents. Moreover, it is well written and engaging. Whether or not one agrees with the author in general or on particular points, it provides the reader with a better understanding of how we have arrived at our current situation and provides information and analysis that should serve as fodder for thinking about current problems

Book Review: “Material World: The Six Raw Materials that Shape Modern Civilization”by Ed Conway

Ed Conway is a British economics journalist who works for Sky News and writes a column for The Times (London). His book, Material World, focuses on six raw materials: sand, salt, iron, copper, oil, and lithium. The point the book relentlessly drives home is that, for all our attention to the virtual  world, we are all dependent on real, material things. It also points out environmental tradeoffs. For example, making solar panels is an international endeavor requiring mining and a good deal of energy. Another example is electric cars, which require considerably more copper wiring than car with internal combustion engines, and the mining of copper is not without its problems. Moreover, the use of these materials, which involves mining, transportation, processing, and manufacturing of useful products, is not the province of a single country and requires considerable international trade.

While the author tries to be optimistic in his conclusion, the message of the book is the complexity of dealing with the environmental challenges. While the chants on the right of “drill, baby, drill” are nonsense as a solution to our real problems, environmental groups are also often simplistic in their approach in opposing many projects. Environmentalists might want to set up input output models or other analytical techniques to evaluate tradeoffs.

Also, while Conway praises the use of fertilizers to grow the necessary crops to feed the world’s population, he does not discuss that continuing population growth may be part of the problem. Also, deforestation in order to make more land available for farming with the miracle fertilizers has its environmental problems, as does animal agriculture. The benefits from these materials in making possible more food, in other words, create other problems. There are tradeoffs everywhere.

This book also provides some interesting history. For example, during World War I, Britain had a shortage of binoculars and Germany had a shortage of rubber. According to this book, there is evidence that Britain and Germany effectively traded binoculars and rubber in neutral Switzerland during the war. One can also learn why Bolivia is a landlocked country because of a 19th century war during which Chile obtained Bolivia’s coastal regions, which also happen to be mineral-rich.

In addition, one can learn a bit of chemistry in reading about the processing of various materials and their conversions into useful products, such as batteries. Perhaps there is more detail than some readers may want, and it is difficult to recall it all, but it is interesting.

Conway did a great deal of research to judge by his endnotes and bibliography as well as the international travels he recounts to various mining and production sites around the world. While competently written, the book is not exactly a page-turner. Amusingly, he relies, perhaps a bit much, on his inner Kurt Vonnegut in the repeated use of the phrase – “So it goes in the Material World.” Reading the book all at once, as I did, may not be the best approach. There is a lot of information to absorb. 

I recommend the book as a useful contribution to understanding the environmental challenges ahead from a different perspective than is usually offered. It is not the whole story, but an important part of the story.

Book Review: “The Times: How the Newspaper of Record Survived Scandal, Scorn, and the Transformation of Journalism” by Adam Nagourney

 I have read that many journalists were inspired in part to join the profession after reading Gay Talese’s, The Kingdom and the Power, a book published in 1969 about the New York Times, and the Watergate book, All the President’s Men by Carl Bernstein and Bob Woodward. No young person, though, will read Adam Nagourney’s book, The Times, and come away convinced that The New York Times has been a great place to work, whatever they may think about journalism as a career. 

The book dwells on the challenges and the missteps of The New York Times from 1977 to 2016. During this period, there was the challenge to newspapers’ business model relying on advertising by the rise of the internet, and The New York Times committed serious journalistic errors, such as publishing Judith Miller’s articles on Iraq and Jayson Blair’s made-up stories, among others, which damaged the paper’s reputation. 

The story Nagourney tells, though, has a happy ending. While the paper was slow to embrace the internet, it finally bowed to the inevitable and has regained its financial footing. It did not have to do this the way The Washington Post found its financial salvation by selling itself to a billionaire savior, Jeff Bezos. The New York Times has in recent years become more a digital news outlet, with more of its revenue coming from digital rather than print subscriptions. However, missing in Nagourney’s telling is the role of Carlos Slim, a Mexican billionaire, who is barely mentioned. Mr. Slim provided loans and investments which enabled the New York Times to survive difficult financial times. 

The book’s focus is on how the two publishers and seven executive editors during the period covered coped with the challenges. Other employees of the paper appear when they become important to the top people. There is much detail concerning personal rivalries, maneuvers to get promoted, management style, and so on. It makes for an interesting and long story. 

Nagourney, himself, a longtime political journalist who eventually gave up his mostly national politics focused beat when he moved to Los Angeles, nowhere appears in the book. For a while, he was the Los Angeles bureau chief and then a cultural correspondent and now is back to covering national politics, though still based in Los Angeles. For some of us, it had been a bit of a mystery of what he had been up to, but now we know. He was writing this heavily researched and detailed book. 

As a longtime reader of The New York Times, I wish there had been more discussion of its editorial and op-ed pages. For example, while William Safire’s controversial hiring in 1973 took place before this book begins, there might have been some mention of his success at being a mostly conservative columnist who also wrote a brilliant column on language for the paper’s Sunday magazine supplement. (Safire had been a speech writer for Vice President Spiro Agnew and was famous for phrases heavy in alliteration, such as “nattering nabobs of negativism.”) The New York Times has not been as successful in hiring other interesting conservatives as columnists. The book’s discussion of columnists is mostly about their being consulted by others.

In addition, missing is much discussion of how the reporters were impacted by this tumultuous period, except in broad generalities. Also, there is no discussion of the work life at foreign bureaus or U.S. regional bureaus, with the exception of Washington, DC. The tensions between the home office in New York and the Washington, DC bureau does play a significant role in the narrative. 

Nevertheless, this book, while both long and limited in focus, is interesting, especially for devoted readers of The New York Times.  For all its troubles and missteps, the Times is undoubtedly the most important English language newspaper in the world, and its influence is broader than its readership, because it plays a significant role in setting the news agenda for other news outlets in the United States, including for television and cable news. 

It is reassuring that the story Nagourney tells has a mostly happy ending. That was not inevitable; the paper could have disappeared in a bankruptcy proceeding. It is also reassuring that the Washington Post, with a significant assist from Jeff Bezos, is providing serious competition. This makes both papers better. In addition, The Wall Street Journal does provide some competition in its news pages. I wish that other papers, such as the Los Angeles Times, would provide more competition at the national level. 

To an extent, the British newspaper, The Guardian, provides web competition for U.S. papers, especially because it provides significant coverage of U.S. news. During the buildup to the U.S. invasion of Iraq, I thought The Guardian’s coverage was more reliable than that of U.S. papers, including the Times. It turns out I was right. 

Nagourney ends his book on an optimistic note concerning how The New York Times has reinvented itself and continues to provide much needed journalism. I agree with that and can recommend his book to those interested in journalism in general or The New York Times in particular. The book is well-written and, for all its length, never boring.

Additional Comments on Cryptocurrencies

As I indicated in my review of Ben McKenzie’s book on cryptocurrency, my interest and knowledge of this subject is limited. Given this, here are some additional comments.

One place to get an analytical, though dated, view of cryptocurrencies is Gary Gensler’s 2018 MIT course on the subject. It is free, but you do have to spend the time to watch it and do the readings. (I have not done this.) The crypto enthusiasts were initially pleased by Gary Gensler being appointed to head the SEC, but the crypto press is now harshly critical of him because of SEC enforcement actions.

From what I gather, Gensler now thinks most cryptocurrencies are securities except for bitcoin. He does seem though impressed with blockchain technology, which could be used for other purposes than transferring crypto. However, that is uncertain.

The regulatory dilemma with crypto is that setting up a formal regulatory regime provides legitimacy for crypto. To me, trading in bitcoin and similar “coins” looks like gambling with no benefit for society. In effect you are betting that someone in the future will be willing to pay you more than you paid for your cryptocurrency. In the meantime, it is up to the courts to decide what role the SEC and the CFTC can play in this space. Congress can of course decide to pass legislation on the subject, but that will probably take some time.

Some people putting actual money into crypto may be betting that crypto will become like dollars and euros and become embedded in our financial system, but it is hard to see that happening. It does not inspire trust; it does not have a central bank and a banking system to create it; and it is not embedded in the economy and the legal system as money. Perhaps, bitcoin can be a little like gold as a place to park money and, if there continues to be enough people who believe in it, maintain some fluctuating value, but that is uncertain. That could happen, though, with a few cryptocurrencies playing a small role in financial markets.

Finally, some major players are getting into the crypto game. For example, Fidelity Investments offers a trading platform for bitcoin and ethereum. I think this is a mistake, but, to its credit, Fidelity says that accounts in its crypto affiliate do not have the regulatory protections that its normal brokerage accounts benefit from. Other firms, such as Blackrock, want to offer ETFs in crypto. The SEC has not yet approved this, but it may.

Book Review: Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie with Jacob Silverman

I usually do not pay much attention to cryptocurrencies except when they make a good deal of news. Call me a crypto skeptic: I have never understood the attraction. To begin with, what purpose do they serve?

One of the touted purposes is to eliminate the need for financial intermediaries and all the concomitant regulation. However, holding cryptocurrency without the assistance of some kind of intermediary is more than most people have the time or technical savvy to do. Moreover, the lack of regulation for trading platforms that are unregulated has given rise to investors and traders (probably a better term is “gamblers”) losing money due to scams.

It is hard to determine what crypto really is. Is bitcoin an asset, even if there is nothing underlying it but clever computer code and a network of computers? Stablecoins, by contrast, sometimes do have some underlying assets other than other cryptocurrencies and some sponsoring group or entity, but it is difficult to determine how trustworthy the backing is. We can say, though, that one thing crypto is not, and that is money. As taught in introductory economic classes, money serves three functions: a store of value, a medium of exchange, and a unit of account. Crypto does none of these things. While El Salvador has made bitcoin legal tender in that country; this experiment does not seem to have gone well.

Ben McKenzie, a TV actor in shows I have not watched, decided during the shutdown of television production during the pandemic to research and write a book on cryptocurrency. He had the same skepticism I do about crypto. However, while my inclination is generally not to think about it too much unless someone asks what I think, McKenzie was much more curious and decided to research and write a book about it. For assistance he recruited a journalist from his Brooklyn neighborhood, Jacob Silverman. The book, though, is written in the first person, with the narrator being McKenzie.

I decided to purchase and read this book after I heard McKenzie speak about his book on the public radio program Marketplace. I thought what he had to say was interesting.

The most interesting and readable portions of the book are the descriptions of the various encounters the authors had with various denizens of the crypto world. The interviews with Sam Bankman-Friedman, with whom they talked before and after his financial empire collapsed and indicted for fraud. It amounts to a fascinating portrayal of a very strange man.

Another episode is an encounter at the 2022 South by Southwest conference in Austin, Texas. This story seems a bit off. Two men, claiming they are CIA agents, take McKenzie and Silverman to dinner and, according to the book, attempt to recruit them as informants on crypto. The description of this makes the recruitment seem extremely amateurish. It also leaves questions. What is the CIA doing operating domestically? Doesn’t the CIA have better ways of learning about crypto than talking to a TV actor and journalist who are just beginning their research on the topic and are not players in this market? What was really going on here? If these guys are not with the CIA, who are they and what do they want? These and similar questions are not answered, probably because the authors do not know what to think about what happened. In any case, they got a nice dinner, and the two supposed CIA agents do not reappear in the book.

The weakest parts of the book are the description of both the 2008 financial crisis and the 2022 debacles in crypto. They seem to have been written quickly, there are some typos, and in one place there appear to be some missing words. This book does not provide a clear account of market developments or exactly how people were taken advantage of. There are probably better accounts of the skullduggery that took place elsewhere.

In other words, read this book for a description of the crypto world and an argument for why one should resist any feeling of “FOMO” (fear of missing out). If you are more interested in the technicalities of crypto than I am, you will probably want to go elsewhere.

Book Review: The Postcard by Anne Berest, translated from the French by Tina Kover

 About a month ago when I was in San Francisco, I found out about a book talk by Anne Berest at Green Apple Books on the Park. The woman who told me about this raved about the book, and given the subject matter, Jews in Europe during the Nazi period in Germany, I decided to attend and was impressed enough by the author that I ended up buying the book.

The Postcard is a novel based on the true story of Anne Berest’s search for the sender of a postcard to her mother’s house on which was written the name of four relatives who had been murdered at Auschwitz. She does eventually discover the origins of the postcard, which is a bit, but only a bit, of a surprise. In truth, the postcard in question is what Alfred Hitchcock called a MacGuffin, a device to keep the plot moving but not in itself terribly important. The real subject matter is a case study of the history of Berest’s family during the Nazi era, in France and other countries in Europe and Palestine, and what it means to be Jewish, even if one has not been brought up in the religion.

Once the story gets going it is fascinating. Much of it is based on the research Anne Berest’s mother had done until the book gets into the subsequent search for information about the postcard. Amusingly enough, at the book talk I attended, Berest said her mother had insisted that the “bad” words in the quotations attributed to her be removed because that is not how she speaks. The author said this was a “lie,” because her mother uses a lot of bad words; nevertheless, in deference to her mother, she cleaned up the language for the novel.

The book has been a bestseller in France, and it has recently been translated into English. It will likely not do as well here, partly because World War II and its accompanying horrors are not felt to be as much a part of U.S. history as it is for France. One of the issues Berest addresses in this novel is current and past antisemitism in France. In her talk in San Francisco, Berest said that France is a complicated country, and this novel shows that some of the French used the German occupation to go after the Jews, while others did what they could to protect them.

Writing the book was a way for Berest to consider her own Jewish background. Berest, who was not brought up religiously, recounts a Seder she went to with her boyfriend where her knowledge of this ceremony is revealed to be paltry compared with her knowledge of the works of leftist intellectuals. This event and the subsequent research into her family’s history forced her to reflect on what it means to her to be Jewish and to reject the criticism of another person at the Seder who questioned her Jewishness.

In her book talk, Berest reflected on the current world situation briefly. She remarked that “the signals” are not good. (Her English is fine but not completely fluent.) I think she had in mind growing antisemitic incidents and the growth of right-wing authoritarian tendencies both in the U.S. and Europe. In her book, some take the threat posed by the Nazis more seriously than others. Not only does she want to remember her relatives who had perished but also to be alert to the warnings of history.

A Few Debt Limit Observations

Treasury Secretary Janet Yellen was very careful in how she responded to questions from George Stephanopoulos on Sunday about any contingency plans the Administration might have if Congress does not increase the debt limit before the Treasury runs out of cash. She said that there were no good options and that she did “not want to consider emergency options.”

The news media, though, has been highlighting the use of the 14^th Amendment to the Constitution to allow the Treasury to continue issuing Treasury securities. In that Amendment which was put into the Constitution in the aftermath of the Civil War, there is the following sentence: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” There is some ambiguity here, and the phrase “authorized by law” might be cited by those who do not believe that the 14^th Amendment provides a way to avert an economic disaster.

Laurence Tribe, a noted Constitutional expert, used to believe that the 14^th Amendment was not a way for the Treasury to ignore the debt limit, but in a recent article in the New York Times, he explains why he has changed his mind.

“The question isn’t whether the president can tear up the debt limit statute to ensure that the Treasury Department can continue paying bills submitted by veterans’ hospitals or military contractors or even pension funds that purchased government bonds.

“The question isn’t whether the president can in effect become a one-person Supreme Court, striking down laws passed by Congress.

“The right question is whether Congress — after passing the spending bills that created these debts in the first place — can invoke an arbitrary dollar limit to force the president and his administration to do its bidding.

“There is only one right answer to that question, and it is no.

“And there is only one person with the power to give Congress that answer: the president of the United States. As a practical matter, what that means is this: Mr. Biden must tell Congress in no uncertain terms — and as soon as possible, before it’s too late to avert a financial crisis — that the United States will pay all its bills as they come due, even if the Treasury Department must borrow more than Congress has said it can.”

There has been speculation about the litigation that might follow if the Administration were to invoke the 14^th Amendment. I wonder about that. First, I am not sure who would have standing to sue. I am not sure if the Supreme Court would say that Speaker McCarthy by himself has standing, and I am not sure if he got a vote on the House floor to litigate what the courts would do. In any case, given the financial market turmoil that would likely occur, I doubt that politicians would think that it would be in their benefit to try to call into question debt the Treasury issued above the debt limit.

Also, there are practical difficulties in considering that some of the public debt is invalid. For example, Treasury issues 3-month and 6-month bills every week. The 3-month bills, once issued, are indistinguishable from the 6-month bills already issued which mature on the same date (technically, the bills maturing on the same date have the same CUSIP number). There would be no way to determine which of these bills when issued breached the debt limit if Treasury issued an amount more than what it needed to pay off the maturing bills.

I think the House would try to get at President Biden some other way, perhaps even including commencing impeachment hearings. There is of course no way that there would be enough votes in the Senate to remove him from office even if there were enough votes to impeach him in the House.

There are of course other alternatives to using the 14^th Amendment which have been publicly discussed. We can all of course keep speculating what the Administration would do if the Treasury runs out of cash; all the options, including default, look bad. We don’t know, though, and we can all hope that we don’t find out.

What makes the possibility of the debt limit not being increased in time more worrisome than in past episodes is the weakness of the Speaker. In order to pass a debt limit with whatever other language is acceptable to 60 Senators and which the Administration can grudgingly accept, Speaker McCarthy will likely need some votes from House Democrats to offset the loss of votes from some House Republicans. Given that it only takes one member to call for a vote “to vacate the chair,” McCarthy could well lose his position if he chooses to put the debt limit legislation for a vote on the floor.

Of course, in October there could be a government shutdown due to a failure to pass appropriation bills. We’ll get to see how that works out after the debt limit issue is resolved one way or another.

Book Review: “Empire of Pain: the Secret History of the Sackler Dynasty” by Patrick Radden Keefe

 I came to read Empire of Pain not because of any strong interest in learning about the family and the pharmaceutical company which profited greatly and met their downfall from marketing a version of oxycodone, OxyContin, but because of my appreciation of the author. I had read another book by Patrick Radden Keefe, Say Nothing: A True Story of Murder and Memory in Northern Ireland, which I greatly liked and came to the conclusion that any book Mr. Keefe writes is probably worth reading. Both Empire of Pain and Say Nothing are nonfiction but read like novels. Keefe does a prodigious amount of research and then tells a captivating story. In addition to be entertained by the narratives, both books impart a great deal of information in a painless way. In reading Say Nothing, the reader will learn a great deal about sectarian conflict in Northern Ireland, and in reading Empire of Pain, the reader may come away somewhat horrified by pharmaceutical industry marketing practices and political influence.  

Empire of Pain recounts a multi-generational history of the Sacklers. The first part of the book devotes considerable attention to Arthur Sackler, who personally had nothing to do with OxyContin, having died before Purdue Pharma started selling the drug. In fact, his direct descendants did not profit from OxyContin either, since they did not have an ownership interest in the company when it was selling OxyContin. It was Arthur’s two younger brothers and their children and descendants who reaped the benefit.

Keefe’s rationale for focusing on Arthur until his death is that he pioneered the marketing techniques that later were used to sell OxyContin.  Roche had developed two minor tranquilizers to compete with Miltown (derisively referred to as “mother’s little helper”), Librium and Valium. These tranquilizers, especially Valium, became widely prescribed starting in the 1960s, but they can be abused and can lead to dependency or addiction. Of course, they are not as dangerous as opioids.

Arthur Sackler became rich from his company helping Roche to market Valium and then used some of his wealth for philanthropic purposes, especially for art museums. The tale of his business practices, including convincing doctors to prescribe Valium, interactions with the U.S. Food and Drug Administration, and secretly having part ownership of his principal competitor are fascinating to read.

The rest of the book is mainly about OxyContin, which when used as directed, provides time-released oxycondone to relieve pain. It was the main drug that Purdue sold, and the company did nothing to monitor its use, such as certain pharmacies and doctors dispensing and prescribing enormous amounts of the drug. Purdue continued to send their marketing teams to doctors’ offices to convince them of the safety and usefulness of the drug even though they knew it was being abused in dangerous ways. The company blamed those who became addicted on the addicts. 

All of this was a major factor in the opioid addiction crisis. For many years, the Sacklers and Purdue were able to fend off legal challenges from prosecutors concerned about what was happening in their communities. The problems eventually became too much for Purdue and it declared bankruptcy in 2019. None of the Sacklers were prosecuted for crimes. While they left the company, they were able to keep most of their wealth. However, to the extent it matters, the Sackler name was erased at many of the museums and other institutions which had benefitted from Sackler donations.

Keefe’s book is partly an indictment of the Sackler family. For example, he is quite harsh towards the granddaughter of one of the Sackler brothers, who is a documentary film maker. Madeleine Sackler has never had anything to do with Pharma, but of course some of her wealth is likely derived from what she inherited. At a minimum, she should probably be more upfront about that, but does that mean her films are forever tarnished?

The book does forcefully document the ways the legal system can sometimes let the rich get away with crimes. This is indicated in the prologue, which describes Mary Jo White, a former prosecutor who was appointed chair of the SEC by President Obama, assisting one of the Sacklers in a 2019 deposition.

When I read the prologue, I thought this deposition, just as Chekhov’s gun, would resurface at the end of the book. It does not. But Keefe does quote a lawyer as saying, “Everyone is entitled to a lawyer, but it doesn’t have to be you.” That will have to do.

Finally, the book reminds me of the mangled rendition of what Honoré de Balzac once wrote: “Behind every great fortune lies a great crime.” What Balzac actually wrote in Le Père Goriot was: “Le secret des grandes fortunes sans cause apparente est un crime oublié, parce qu'il a été proprement fait.” While this has been translated in various ways, a literal translation is: “The secret of great fortunes without apparent cause is a forgotten crime, because it was properly done.” In this book, Keefe is trying to make sure that the Sackler’s crimes are not forgotten.

The Lexington Column on the U.S. Budget and Debt and Deficits

This will be a brief note on the “Lexington” column in The Economist of February 4, 2023.  The article mainly hammers away at the political dysfunction of the U.S. government budget process: “Both parties have learned that, by luxuriating in polarisation, they can ignore that governing requires trust and compromise. Republicans can have their tax cuts, Democrats can have their spending, and they can blame each other for the debt.”

This is simplistic political analysis. For example, the Trump Administration was not adverse to spending, and deficit reduction has been more of note during Democratic rather than Republican Administrations. Tax cuts have been more characteristic of Republican administrations, but, after a tax cut that went too deep at the beginning of the Reagan Administration, it endeavored to increase revenues. And, parenthetically, I would note that the one of the best tax bills to pass Congress in the last 40 years (or more) was the Tax Reform Act of 1986, which required a bipartisan effort and was set in motion by Republican Treasury Secretaries Donald Regan and James Baker. (Some of its more notable features have since been jettisoned.)

In addition, there is the implied assertion that the current level of the debt is bad or dangerous and that the coming additions to the debt through future deficits is also bad or dangerous. Perhaps this assertion is correct, but the nearest the article comes to making this case is to point out that the debt to GDP ratio is high, that the debt held by the public is $24 trillion, and that the cost of servicing this debt represents 7% of federal outlays and that this will increase as interest rates go up. Numbers meant to be scary are not by themselves a convincing analysis.

Nevertheless, I am happy to note that Lexington did not refer to the headline figure of the debt limit ($31.8 trillion) but rather to debt held by “the public.” In the peculiar way the English language is used by the Treasury, the “public’ excludes government trust funds, such as Social Security, but does include the Federal Reserve Banks, which are technically “private” corporations. If you subtract out from the publicly held public debt the holdings of the Federal Reserve, the resulting number is sometimes referred to as the “privately held” public debt. It’s all very confusing.

For reference, here is my recent post about public debt numbers. A good, objective explanation of the statutory debt limit is in this Pew Research Center article, “5 facts about the U.S. national debt.”

The Debt Limit: A Note on the G Fund and the Exchange Stabilization Fund

The G Fund is one of the funds offered to federal employees as part of the Thrift Savings Plan, the federal employee equivalent to a 401(k) plan.  This fund is invested in one-day non-marketable Treasury securities with an interest rate determined monthly. There is a special provision in the law creating the Thrift Savings Plan that makes the G Fund whole if the Secretary of the Treasury decides to disinvest it entirely or partially due to a debt limit problem once the debt limit issue is resolved. The nonmarketable Treasury securities in the G Fund count against the debt limit, thus, disinvesting the G Fund makes room under the debt limit for the Treasury to issue marketable Treasury securities in order to raise needed cash.

The G Fund is included in intragovernmental accounts. As of the end of December 2022, its assets were $210.9 billion.

The Exchange Stabilization Fund (ESF) is a fund managed by the Secretary of the Treasury. It is primarily used for foreign exchange operations. Here is the Treasury’s brief description of the ESF.

As of November 30, 2022, the ESF had $210.3 billion in assets, of which $17.6 billion were in non-marketable Treasury securities. When the ESF is disinvested because of a debt limit problem, the Treasury does not have the authority to make it whole once the debt limit impasse is resolved.

The Bipartisan Policy Center (BPC) has a description here of what it calls “the big three” extraordinary measures. These are the G Fund, the ESF, and federal employee retirement funds.

Interestingly, Jerome Powell, before he was nominated by President Obama and confirmed to be a governor of the Federal Reserve, worked at BPC. He took a particular interest in debt limit issues, which he knew first hand as an Under Secretary of Treasury for Domestic Finance in the George H. W. Bush Administration. (He was for a time my boss at Treasury.) Probably his efforts at lobbying Republicans in Congress on the debt limit while at BPC during the Obama Administration was a factor in his nomination to the Fed Board.

Debt Limit and Treasury Securities Held by the “Public”

The debt limit reporting in the media is fairly good on the political aspects of the issue, but less good on other relevant aspects.

One issue has to do with the size of the debt. The debt limit is $31.4 trillion and the debt subject to that limit is bumping up against that number. However, reporting I have seen fails to mention that of that $31.4 trillion, about $6.9 trillion is held by intragovernmental accounts, including the Social Security trust funds. The Treasury consequently reports that about $24. 6 trillion is held by “the public.”

However, included in “the public” is the Federal Reserve System. Federal Reserve outright holdings of Treasury securities currently stand at about $5.5 trillion. (The system also reports owning $2.6 trillion of mortgage-backed securities, which they state are “fully collateralized” by Treasury securities.)

Subtracting the $5.5 trillion from $24.6 trillion leaves about $19.1 trillion of “privately-held” debt of the type subject to the limit. This includes foreign holdings, including foreign governments and central banks.

While the Federal Reserve Banks are technically private corporations owned by the member banks, for most analytical purposes they should be considered part of the government. The Fed remits “excess earnings” to the Treasury. Its major expenses are for its operations, interest paid on bank reserves, and interest paid in connection with its open market operations. A major source of income is interest received on Treasury and other securities. (For more on this, see this Fed press release.)

While $19.1 trillion is still a large number, the current reporting misses that close to 40 percent of  the debt subject to limit is debt that the government essentially owes itself or to the Federal Reserve.