Brad DeLong : Noted for March 8, 2013

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Mark Thoma sends us to Richard Schmalensee and Robert Stavins: Economist's View: 'The Sordid History of Cap-and-Trade': "The sordid history of Congressional acceptance and rejection of cap-and-trade: Implications for climate policy, by Richard Schmalensee and Robert N. Stavins, VoxEU.org: Not so long ago, cap-and-trade mechanisms for environmental protection were popular in Congress. Now, such mechanisms are denigrated. What happened? This column tells the sordid tale of how conservatives in Congress who once supported cap and trade now lambast climate change legislation as ‘cap-and-tax’. Ironically, conservatives are choosing to demonize their own market-based creation. The successful conservative campaign that disparaged cap-and-trade means it may now be politically impossible to promote it in the US. The good news? Elsewhere, cap and trade is now a proven, viable option for tackling large-scale environmental problems…"
Gavyn Davies: Is financial risk becoming excessive again?: "Fed Governor Jeremy Stein… concluded that a potentially dangerous 'reach for yield' might be taking place in US credit markets, and argued further that it might become appropriate to deal with this by raising interest rates…. The Fed doves have, however, now fought back….. So how can we tell whether this really is becoming a problem? This is where the BIS research enters the picture. In the past, the key metric used by central bankers in deciding whether the economy is becoming overheated has been the output gap. When output is above “potential”, the traditional argument is that policy should be tightened to prevent consumer price inflation from rising. The mistake made before 2008 was to place so much weight on this metric, and on the actual behaviour of the CPI, that all other evidence was ignored. In particular, falling real interest rates, surging credit growth and rocketing house prices, were given no weight in the monetary policy debate. Absolutely none!
Paul Krugman: Progressives Worry Too Much About Being 'Respectable': "Larry Summers is… indistinguishable from me on macro-policy. And he may be a bit to the left, because he’s even more certain than I am… that some extra spending now will actually help us more in fiscal terms. So he published a piece in the Financial Times that was meant to be a big statement about this. But before he got to that, he spend three paragraphs about the importance of dealing with the deficit in the medium term… to establish that ‘I am a respectable person; I am not like that rabble-rouser, Krugman.’ And… nobody inside the Beltway… got past those first three paragraphs. Larry['s] clearing his throat… drowned out the message."

Peter Orszag: The Diploma Gap Between Rich and Poor: "The widening gap in college completion rates is documented in a paper by… Martha Bailey and Susan Dynarski…. For children born around 1980, the college completion rate among low-income students rose to 9 percent, but among high- income students it jumped to more than half (54 percent)… over two decades, the college income gap widened to 45 percentage points from 31 percentage points… even after the researchers accounted for differences in students’ cognitive skills…. The gap… widened by almost twice as much for women as it did for men…. Gaps in high school graduation by income, the researchers find, account for about half of the gap in college entry rates…. Less than 60 percent of students enrolled full-time at four-year colleges graduate within six years, the College Board has shown, and less than 30 percent of full-time students at two-year colleges graduate within three years. Not surprisingly, but somewhat depressingly, those who don’t finish are disproportionately poor…. [T]he widening gap in college completion rates between rich and poor students undermines the traditional American notion of equal opportunity."
John Judis (January 13, 2011): Why The Republican Party Is Unlike Any Political Party America Has Seen: "For the first time since the Civil War, the United States has a political party that is ideologically cohesive, disciplined, and determined to take power, even at the cost of disrupting the political system. What accounts for this remarkable transformation?… Republicans filibustered legislation that they had previously backed but now opposed because the Obama administration supported it. In January 2010, for instance, six Republicans who had sponsored a bill to create a binding nonpartisan deficit commission filibustered it when it came to a vote. Senator John McCain, who, in 2003, 2005, and 2007, had sponsored the Dream Act—which would grant citizenship to the children of illegal immigrants who complete two years in college or the armed forces—filibustered it this past December when it came to a vote. Utah Senator Orrin Hatch, who joined the filibuster, had voted for the bill in 2007 and introduced it in 2003. These senators had probably not changed their minds about the merits of the legislation but instead were simply following the party line. The GOP justified this insurrectionary strategy on the same grounds that the conservative coalition justified its attempt to block the New Deal: Republicans described Obama and the Democrats’ proposals as alien to the Constitution. Just after Obama took office, John Boehner, who was then the minority leader, called Obama’s stimulus program and budget “all one big down-payment on a new American socialist experiment.” Former Speaker of the House Newt Gingrich warned of “a secular socialist model of government dominating and defining life that would be fundamentally alien to historical American experience.” By exaggerating differences—by framing the choice as capitalism versus socialism or liberty versus tyranny—Republicans have largely eliminated the possibility of compromise."

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