Brad DeLong

Department of "WTF?!?!": Education Gap Weblogging

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

For at least half a generation, liberals--at least liberals that I know--have been hammering on the fact that the stepping-away from the commitment to universal free or nearly-free education has been a long-run disaster for America. With Claudia Goldin and Larry Katz's The Race Between Education and Technology serving as its analytical spearhead, the liberals I know spend lots of time talking about how the pace of technological progress requires a more-educated and thus more-skilled workforce, and about how the rise in college costs starting around 1970 stopped the normal American pattern by which each generation gets much more education in its tracks--with rising income inequality between the 80th and the 20th percentile being a big consequences:

Solutions proposed vary from having your college costs be an income-contingent grant recaptured from those who earn much in life by a surcharge on your form 1040 to a mammoth federal commitment to universal access to broadband and to free provision of the highest-quality education online.

Some liberals (e.g., Larry Mishel of EPI) go further, and say that rising 80/20 inequality is the result not just of our losing the race between education and technology but also the collapse of labor unions. The Goldin-Katz alliance (or which I am a part) tends to see the collapse of the union movement as a consequence of the loss of the race.

Now comes Timothy Noah to tell me that none of this focus that I see among the liberals I talk to ever happened:

The 1 Percent Are Only Half the Problem: Most recent discussion about economic inequality in the United States has focused on the top 1 percent… that if we would just put a tight enough choke chain on the 1 percent, then we’d solve the problem of income inequality. But alas, that isn’t true, because it wouldn’t address the other half of the story: the rise of the educated class. Since 1979 the income gap between people with college or graduate degrees and people whose education ended in high school has grown….

Conservatives don’t typically like to talk about income inequality. It stirs up uncomfortable questions about economic fairness….

Liberals resist talking about the skills-based gap because they don’t want to tell the working classes that they’re losing ground because they didn’t study hard enough. Liberals prefer to focus on the 1 percent-based gap. Conceiving of inequality as something caused by the very richest people has obvious political appeal…

And it is at this point that I say: "WTF?!?!"

Now let me say that Timothy Noah is one of the very best of mainstream American journalists--he isn't an opinions-of-shape-of-earth-differ-both-liberals-and-conservatives-have-a-point clown uninterested in policy substance who covers our nation from a celebrity-gossip perspective.

But here we have, I think, another example of the Michael Kinsley-Clive Crook disorder: Noah provides no links to and no quotes from "liberals" who "resist talking about the skills-based gap because they don’t want to tell the working classes that they’re losing ground because they didn’t study hard enough". So he winds up just making stuff up--and the New York Times editorial process is sufficiently jelly-like that nobody asks him "who are you talking about?". This produces bad thought.

Indeed, read further down in the article and you find, near the end, links to Larry Mishel definitely not being resistant to talking about the decline of unions, to Josh Bivens not being resistant to talking about workers' reduced bargaining power and the 80/20 wage gap, Barack Obama and his staff worrying about the rising costs of college--in a story reported by Timothy Noah himself.

Are these people not liberals?

Department of "Huh!?": George Borjas Says Richard Zeckhauser Chaired Jason Richwine's Thesis Committee?

Jennifer Rubin:

What the anti-immigrant movement really believes: I received the following e-mail attack from Borjas, who, keep in mind, is a Harvard professor:

Someone copied me on an email that contained your column trashing Jason Richwine’s dissertation work, and along the way you decided to trash me as well. Just for your info, the dissertation committee was formed of Richard Zeckhauser (who, by the way, was the chair of the committee), Christopher (Sandy) Jencks, a very influential sociologist whose lifetime work on inequality you may perhaps be familiar with, and myself. Perhaps next time around before you decide to trash anyone who disagrees with your ideological musings you may want to do some background reporting. I know that this request will fall on deaf ears, since it is not part of the modus operandi of people like yourself, but I would hope you correct the record in print. (I actually know you won’t since once the membership of the committee of faculty who advised Jason on his dissertation is well known you can no longer employ the by-association method of character assassination).

Martha L. Olney and Aaron Pacitti: The Service Sector and the Business Cycle

Martha L. Olney and Aaron Pacitti:

More services means longer recoveries: Recovery from recessions takes longer than it has in the past. The current crisis aside, this change has not happened because recessions themselves are longer. Nor has it occurred because recessions are deeper than in the past. Instead this change is the result of slower economic growth following the end of a recession. And slower growth means longer recoveries. As shown below, the four longest recoveries in recent history, as measured by the number of months it took until the economy recovered all of the jobs lost during the recession, also have been the four most recent recoveries—those that followed the recessions of 1981, 1990, 2001, and 2007.

There Are Two Unit Roots and Strong Mean Reversion in U.S. GDP per Capita

We have:

• highly-persistent shocks to the long-run level of GDP/Pop
• highly-persistent shocks to the long-run growth rate of GDP/Pop
• short-run transitory shocks to the level of GDP/Pop driven by changes in labor and capacity utilization

Univariate ARIMA just does not cut it as a description…

Ryan Avent: Inflation in the US

Ryan Avent:

Monetary policy: How does inflation matter?: THE IMF's recently published a thought-provoking analysis on changes in the apparent relationship between inflation and unemployment…. I've since reflected more on the work, and on some related writing by Nick Rowe…. The IMF notes the stability of inflation expectations and reckons that it is attributable to central bank credibility…. Inflation expectations became so well anchored that not even the worst few months of economic performance since the 1930s could produce deflation. I've been thinking about whether that narrative seems right….

Paul Krugman Makes (Justified) Fun of Allan Meltzer, Who Does Not Know His Basic Price Theory...

It really does seem as if Allan Meltzer does not understand the basic economics of money demand--does not understand that the short-term safe nominal interest rate is the opportunity cost of holding cash balances. And not understanding that makes it impossible to think coherently about nearly any issues in monetary economics…

Paul Krugman:

Trap Denial: OK, probably going on too much about this, but I want to return briefly to the issue of puzzled economists, specifically Allan Meltzer.

Four years ago Meltzer and I effectively had a debate about the effects of the rapidly expanding Fed balance sheet. He (and others) warned of inflation ahead; I (and others) said that we were in a liquidity trap, so that the Fed’s bond purchases would basically just sit there. So here we are four years later, the huge expansion of the Fed’s balance sheet has not, in fact, led to inflation. And Meltzer is puzzled by the fact that all those bond purchases just sat there:

Since late 2007, the Fed has pumped more than $2 trillion into the U.S. economy by buying bonds. Economist Allan Meltzer asked: “Why is there such a weak response to such an enormous amount of stimulus, especially monetary stimulus?” The answer, he said, is that the obstacles to faster economic growth are not mainly monetary. Instead, they lie mostly with business decisions to invest and hire; these, he argued, are discouraged by the Obama administration’s policies to raise taxes or, through Obamacare’s mandate to buy health insurance for workers, to increase the cost of hiring.

He made a monetary prediction; I made a monetary prediction; his prediction was wrong. Therefore, it must be because of Obamacare!

And, of course, if ObamaCare was causing structural problems and reducing aggregate supply, that would make inflation not undershoot but overshoot Meltzer's forecast. What we have here on Meltzer's part is simply badly-prepared word salad.

Evan Soltas: The Anecdote Gap: Kauffman Foundation 2013 Economic Webloggers' Forum

Evan Soltas:

The Anecdote Gap: U.S. Senator Jerry Moran opened the Kauffman Foundation's Annual Economic Bloggers Forum with a short video address. And how he did so captured a critical gap between politics and policymaking.

Moran told the story of Asaf Darash, an Israeli entrepreneur who wanted to found a tech startup in the United States. When the entrepreneur did not receive a visa, Moran said, he was forced to relocate his business and his jobs to Israel. The story of this entrepreneur makes the case for high-skilled immigration reform, he said.

Global Trends in Inequality Are Not the Result of Local Factors: Tuesday DeLong Smackdown Watch

Kindred Winnekoff:

Global Trends Are Not Caused by Local Factors: Brad DeLong describes three types of inequality: 1. Global inequality, which was expanding from 1800-1975, and receding since (due primarily to China and India). 2. US inequality, which was declining from 1925-1980, but increasing since, in two ways: 2.a. The separation of the top 20% from the bottom 80%, partially as a function of college wage premium. 2.b. The separation of the top 0.1% from the rest of the top 20%, for reasons unexplained. 3. The rise of the top 1% globally -- the development of a new international plutocracy -- since... 1980 or so?

For reasons that escape me he does not link the three together…. This is something that has disappointed me about the conversation regarding American inequality over the past few years more generally. (I've written about it before.) Folks like DeLong, Krugman, Cowen, and others think in global terms quite frequently. But when they seek to explain the Great Stagnation and the rise of inequality they concern themselves almost entirely with local explanations. I think such analyses are very likely to suffer from omitted variable bias.

Around the 43rd minute, DeLong takes a direct question about this from the audience. He answers it fairly well, but still downplays the role of the global economy in influencing outcomes in the US, favoring cultural explanations (e.g. explosion of CEO pay) and changes to marginal tax rates. He does not consider that these might be related to global dynamics either. If global forces eroded the bargaining power of American Labor, then maybe that's why society has tolerated the enormous increase in executive pay. If global forces are pressuring American corporations through new competition, then maybe we've cut top-end taxation in an attempt to gain back some competitiveness.

Winston Leonard Spencer Churchill on the Real Moocher Class

Winston Churchill:

Here let me remark that the best way to insure against unemployment is to have no unemployment.

There is another point: unemployables, rich or poor, will have to be toned up. We cannot afford to have idle people. Idlers at the top make idlers at the bottom. No one must stand aside in his working prime to pursue a life of selfish pleasure.

There are wasters in all classes. Happily they are only a small minority in every class, but anyhow we cannot have a band of drones in our midst, whether they come from the ancient aristocracy or the modern plutocracy, or the ordinary type of pub crawler.

J. Bradford Delong for Democracy Journal: Shrugging off Atlas

J. Bradford Delong for Democracy Journal: Shrugging off Atlas: Issue #28: Exactly how did once-respectable conservative economists get swept up in “moocher class” mania?

Review of Nicholas Eberstadt (2012), A Nation of Takers: America’s Entitlement Epidemic (Templeton Press) http://www.amazon.com/Nation-Takers-Americas-Entitlement-Epidemic/dp/1599474352.

If there was a single moment when Mitt Romney lost the 2012 presidential election, it was in May when he stood in front of the $50,000-a-plate audience at Sun Capital honcho Marc Leder’s home in Boca Raton and spoke his soon-to-be-infamous words:

There are 47 percent of the people who will vote for the President no matter what…. There are 47 percent who are with him, who are dependent upon government…who believe that government has a responsibility to care for them, who believe that they’re entitled to health care, to food, to housing, you name it…. These are people who pay no income tax…. My job is not to worry about those people—I’ll never convince them that they should take personal responsibility and care for their lives…

This is what Mark Schmitt of the Roosevelt Institute calls “the theory of the moocher class.” And Romney is all in with it. In July, after a poorly received speech at the NAACP convention, he boasted:

When I mentioned I am going to get rid of Obamacare, they weren’t happy…. But I hope people understand this… if they want more stuff from government tell them to go vote for the other guy—more free stuff.

Those of us who know the numbers, or who simply live in America and look around, know that the 47 percent who aren’t paying federal income taxes this year are by and large not “moochers.” About a fifth are elderly retired. About two-thirds are in households with incomes of less than $20,000 a year—definitely not living high. And nearly one-third owe no income taxes because of the earned-income and child tax credits, which both became law with bipartisan support.

As a group, the 47 percent who pay no income taxes do not lack work ethic. They do take personal responsibility for their lives. They may not pay federal income taxes this year, but they pay plenty of sales, property, and payroll taxes. For the most part, they do not constitute the Democratic base. More than half of the 47 percent are the elderly white and Southern white voters who voted for Romney by substantial margins.

So how does someone like Romney, along with his peers and all their staffs and everyone else in that Boca Raton room, become convinced that 47 percent of Americans are the moochers, the takers, dependent on “free gifts” from the government, lacking work ethic, lacking personal responsibility?

Enter Nicholas Eberstadt of the American Enterprise Institute (AEI), with his contribution to the think tank’s “New Threats to Freedom” series. We need venture no further into A Nation of Takers than the bottom of the second page…

Did Stan Lebergott Implicitly Compare U.S. WPA Workers with Nazi German Labor Camp Inmates?

Sure looks like it…

Wow!

Eric Rauchway:

Louis Menand and New Deal Denialism in The New Yorker — Crooked Timber: Tyler, if you’d follow the link, you’d see, or possibly remember, that it’s Darby with whom I agree. It’s Lebergott to whose usage I object. I’ll quote him again here:

These estimates for the years prior to 1940 are intended to measure the number of persons who are totally unemployed, having no work at all. For the 1930′s this concept, however, does include one large group of persons who had both work and income from work—those on emergency work. In the United States we are concerned with measuring lack of regular work and do not minimize the total by excluding persons with made work or emergency jobs. This contrasts sharply, for example, with the German practice during the 1930′s when persons in the labor-force camps were classed as employed, and Soviet practice which includes employment in labor camps, if it includes it at all, as employment.

A Good Employment Report This Month; A Bad Labor Market

Robin Harding:

US adds 236,000 jobs in February - FT.com: Non-farm payrolls rose by 236,000 in February, compared with analyst forecasts of 165,000, as the US labour market continues to strengthen. The unemployment rate fell from 7.9 per cent to 7.7 per cent…

Note that the employment-to-population ratio is exactly where it was a year ago:

In fact, note that the employment-to-population ratio today is exactly where it was three-and-a-half years ago, at the recession trough:

There has been no closing of the output gap and no decline in the unemployment rate from putting a greater share of the adult population to work. All of the decline in the output gap and all of the decline in the unemployment rate is from the collapse in labor force participation. It is true that demography would lead us to expect labor force participation to fall by between 0.1 and 0.2 percentage points per year. But even over 3.5 years that 0.5 percentage point decline in potential labor force participation is absolutely dwarfed by the 5 percentage-point decline in the employment-to-population ratio: one-tenth of our labor market shift relative to 2007 can be attributable to demography; nine-tenths are the result of the Lesser Depression.

The parry I get from the people in Washington is: "Britain, Japan, and Europe are doing much worse!" True. So?

The Smart and Witty Michelle Goldberg Says: Sheryl Sandberg’s "Lean In" Is Reasonable, Thoughtful, and Necessary

Michelle Golberg:

The Absurd Backlash Against Sheryl Sandberg’s ‘Lean In’: Columnists are mercilessly attacking Facebook COO Sheryl Sandberg’s new book, Lean In. Michelle Goldberg says they might be surprised to find that her ideas are reasonable, thoughtful—and necessary….

“My hope is that my message will be judged on its merits,” she writes. She may have been hoping for too much…. [A] strange, sour backlash has already begun, aimed… at who Sandberg is. Joanne Bamberger, who either didn’t read Lean In or didn’t comprehend it, lumps Sandberg in with Yahoo CEO Marissa Mayer, accusing both of launching “the latest salvo in the war on moms.”… [S]upercilious Maureen Dowd evince[s] a sudden concern for feminist authenticity…. Melissa Gira Grant, writing in The Washington Post, carps that “this is simply the elite leading the slightly-less-elite, for the sake of Sandberg’s bottom line,” which makes sense if you believe that a woman worth hundreds of millions of dollars would go into feminist publishing for the money. (Skirting feminist self-parody, Grant proceeds to complain that Sandberg fails to grapple with the struggles of domestic workers, the unemployed, people whose caretaking duties extend beyond children to aging parents as well as “close friends and extended families,” women who can’t have children, and those who are lesbian, bisexual, or transgender.)… Deanna Zandt admits that she didn’t bother trying to get a review copy of Lean In, but nonetheless claims that Sandberg’s message is “buck up, little campers. It’s a tough world, and you’ve got to be tough.”… [Thus] there’s already a lot of public misunderstanding of her book’s message. One would think she was peddling a multilevel marketing scheme, not the most overtly feminist mainstream business book ever written….

Yes, Thoughtful Economists Think Raising the Minimum Wage Right Now Is a Good Idea

I would point out that the EITC and the minimum wage have different weak points--too high a minimum wage will have a substantial disemployment effect, and too high an EITC does create incentives to pad your hours. A mixed strategy helps attenuate both these flaws.

Steve Roth:

Leading Economists Vote on Raising the Minimum Wage: I’m delighted to see the U Chicago IGM Forum ask a really useful, non-softball question.

The panelists are evenly split on whether an increase to $9 would make it “noticeably harder for low-skilled workers to find employment.”

A 4:1 majority thinks that weighing the costs and benefits, “this would be a desirable policy.”

I note how many who commented bring up the EITC, suggesting that an increase in that support might be better than a minimum-wage increase. I note further that they apparently haven’t read the very good reasoning and research suggesting that the two together very effectively address the problems of each. But Paul Krugman has. And his surprise helps explain why the others haven’t thought about this:

Second — and this is news to me — the usual notion that minimum wages and the Earned Income Tax Credit are competing ways to help low-wage workers is wrong. On the contrary, raising the minimum wage is a way to make the EITC work better, ensuring that its benefits go to workers rather than getting shared with employers. This actually is Econ 101, but done right.

Mark Thoma Sends Us to Jonathan Chait: Scarborough and Friends 'Bug-Eyed, Table-Pounding Terror'

Mark Thoma:

After two relatively wonky posts, let's turn to Jon Chait for a bit of (serious) fun:

Scarborough and Friends Trying to Make ‘Debt Deniers’ Happen, by Jonathan Chait: The deficit scold cause has suffered significant intellectual erosion…. In the short run, the interest rate spike they keep insisting will happen keeps not happening. In the long run, the health-care-cost inflation that is at the root of the long-term fiscal predicament is growing markedly less dire. The case for prudent fiscal adjustment remains strong, but the case for bug-eyed, table-pounding terror is growing increasingly ridiculous. But bug-eyed, table-pounding terror is the stock-in-trade of the fiscal scold movement. And so they are striking back by labeling anybody with a calmer view of the deficit as a “debt denier.” Joe Scarborough… has a new op-ed in Politico brandishing the epithet….

Paul Krugman: The Japan Story

The Japan Story:

Dean Baker is annoyed at Robert Samuelson, not for the first time, and with reason. The idea of invoking Japan, of all places, to justify fears that stimulus leads to inflation or asset bubbles is just bizarre….

[W]hat remains true is that Japan has run budget deficits for many years while delivering what appears on the surface to be very disappointing economic performance. What’s the story there?… First, you should never make comments on Japanese growth or lack thereof without taking demography into account…. [T]here were two long periods of depressed output relative to trend, one in the mid-1990s and another, much worse, between 1997 and 2007. And one other thing: Japanese monetary policy was still up against the zero lower bound in 2007, leaving it no room to counter the Great Recession, and hence leaving Japan open to a deep slump when exports plunged.

So how do we think about this problem? Here’s my take. Japan has pretty much spent the past 20 years in a liquidity trap… the amount that people would want to save at full employment exceeds the amount they would be willing to invest, also at full employment…. A debt overhang from the 1980s bubble surely started the process; but surely it’s reasonable to suggest that the demography also contributes…. What you need in this situation is a negative real interest rate — which means that you need some expected inflation, because nominal rates face the zero lower bound. But Japanese policy has never sought to achieve this. Deficit spending has put part, but only part, of the excess desired private saving to work; this has mitigated the slump, but not produced a booming economy….

Japan’s experience is perfectly consistent with an IS-LM type story, with nothing in there to suggest that fiscal stimulus has somehow backfired; stimulus has done exactly what you’d expect given its limited size and the refusal to take the opportunity to break out of the liquidity trap.

What Abenomics seems to be is an attempt, finally, to do what should have been done long ago: combine temporary fiscal stimulus with a real effort to move inflation up.

Oh, and what about the US relevance? We are, for the time being, in the same situation…. [B]ecause we don’t share Japan’s demographic challenge, our liquidity trap is probably temporary… so… fiscal stimulus is much more likely to serve as a bridge to a revived era of normal macroeconomics. That said, I welcome efforts by the Fed to modestly raise inflation expectations, and would like to see more. So, is Japan a cautionary tale? Yes, but not the tale everyone tells. Its performance isn’t that bad given the shortage of Japanese; and it’s a tale of fiscal and monetary policy that have been too cautious, not of stimulus that failed.

Middle Class Political Economist: America Shows No Increase in College Graduation Rates over the last 30 Years

Middle Class Political Economist: America Shows No Increase in College Graduation Rates over the last 30 Years:

Jared Bernstein (via Paul Krugman) highlights an amazing breakdown in the prospects for reducing economic inequality any time soon. Over the last 30 years, the U.S. has made no progress whatsoever in increasing college graduation rates. To be specific, 25-34 year olds in 2009 had a college degree rate of about 40%, almost exactly the same as for 55-64 year old baby boomers. In the meantime, other industrialized countries were racking up substantial gains, most spectacularly in the case of South Korea where a little over 10% of 55-64 year olds have college degrees, but more than 60% in the 25-34 age group do. If you want to understand how South Korea has gone from a poor developing country to an industrial powerhouse within our lifetimes, this is one big reason.... As we can see, the U.S. has fallen from a tie for second with Canada among current OECD members (Russia is not a member) to 15th in the OECD. The big question is why this is happening. One major reason is rising college costs, which have far outstripped overall inflation....

As we can see, the rate of cost increase for public four-year universities was the most rapid of all. One big reason for that, of course, is reduced state support of higher education.... As Alan Krueger noted in January, there is a strong relationship between higher inequality and lower social mobility. The OECD data show that the U.S. is making no progress on one of the most important tools for social mobility, college. If access to higher education in this country actually declines, as it is threatening to do, our inequality problem will become infinitely harder to solve.

Employment Report: The Soft Bigotry of Low Expectations Department

Unemployment Edges Up to 7.9 percent as Economy Adds 157,000 Jobs:

The economy added 157,000 jobs in the month. The unemployment rate has essentially been unchanged the last five months. While the January job growth was pretty much in line with expectations… growth for the prior two months was revised up by 127,000. This brings the average rate of job growth over the last three months to 200,000, considerably better than the average of 168,000 over the last year.

And enough so that we can say that the economy is--at least now--creating more jobs than trend labor-force growth.

The average duration of unemployment spells fell by 2.8 weeks, the largest drop ever. The median duration fell by 2 weeks and the share of long-term unemployed fell by 1.0 pp. This decline undoubtedly reflects the shortening of the period of extended benefits following the fiscal cliff deal. Since worker are required to look for jobs to get benefits, it appears that many of the unemployed stopped looking for work when their benefits expired, and therefore are no longer counted as unemployed.

Nicholas Oulton and María Sebastiá-Barriel Report That Hysteresis Effects of Financial Crises Are Large

Since an average financial crisis is associated with an increase in the output gap of about 5% points of GDP, the Oulton and Sebastia-Barriel finding that each year of ongoing financial crisis leads to a 1% point permanent fall in labor productivity gives us an η coefficient of 0.2 in the model of DeLong and Summers (2012).

UPDATE: Stimulus or Stymied? The Macroeconomics of Recessions: 10:15 AM-12:PM, January 6, 2013, San Diego, CA, Manchester Grand Hyatt, Elizabeth Ballroom F

Panel Moderator: J. BRADFORD DELONG (University of California-Berkeley)

Panelists:

• CARLO COTTARELLI (International Monetary Fund)
• PAUL KRUGMAN (Princeton University)
• VALERIE A. RAMEY (University of California-San Diego)
• HARALD UHLIG (University of Chicago)

Between 1985 and 2007--the period of the "Great Moderation"--the Federal Reserve and the rest of the U.S. government on the west edge and the central banks and institutions of the European Union on the east edge of the Atlantic Ocean provided a broadly stable macroeconomic environment within which private-sector businesses, workers and investors could make their economic plans. In the U.S., on an annual basis: the rate of nominal GDP growth dropped below 4% for only 3 of those years and rose above 7% for only 2 of those 22 years; the rate of consumer price inflation rose above 5% for only 3 and fell below 2% percent for only 2 of those 22 years; and the civilian adult employment-to-population ratio remained between 60% and 64% for that entire period. And Western Europe experienced a similar "Great Moderation" with low inflation, relatively smooth growth, and diminishing unemployment.

Then in 2008-9 the rate of nominal GDP growth in the U.S. crashed to -3%--a major, major downward surprise to anybody expecting and relying on a continuation of "Great Moderation" rates of nominal spending growth--the rate of consumer price inflation on an annual basis bottomed out at -2%, and the employment-to-population ratio dropped from 63% to between 58% and 59%, since when it has flatlined. In Western Europe the initial recession was smaller, but the subsequent labor market performance was even more disappointing, so that now the net fall relative to trend in Western European productio and employment exceeds that in the United States.

In this context, we are here to explore four questions:

1. Are their policies that the Federal Reserve and the rest of the U.S. government on the west edge and the ECB and the governments of the European Union on the east edge of the Atlantic Ocean could adopt that would quickly move the civilian adult employment-to-population ratio back toward what from 1985-2007 we thought of as "normal"--that could produce in the next couple of years rates of employment growth that are, say, within shouting distance of those the U.S. economy experienced over the Reagan boom of 1982-1989?

2. If so, what are those policies?

3. If so, are those policies desirable ones that the Federal Reserve and the rest of the government should adopt?

4. How is your view on questions (1) through (3) different today than it was six years ago?

---

Alas! I failed in my task as moderator: communication among the panelists was by and large not achieved…

Valerie Ramey brought bad news for multipliers--but left a glimmer of hope in that there is still no evidence or argument that the multiplier at the ZLB would not be much greater than the normal-time monetary-offset multiplier. She talked about the need for comprehensive cost-saving health-care reform, an argument would have applied just as well to 2007 or 2017 as to today.

Carlo Cottarelli presented the IMF’s new, revised view on the multiplier. He did not promise that there were policies that could lead to a rapid recovery to full employment or criticize government.

Paul Krugman ably presented his view, which is my view, that governments should borrow and spend more to boost employment and production and that the limits to fiscal policy for credit-worthy governments are so far beyond the bounds of the politically-feasible that there is no point in talking about them.

Harald Uhlig… I am going to have to listen to Harald’s presentation again. It is clear that Harald Uhlig agrees with Valerie Ramey that there are no policies “that the Federal Reserve and the rest of the U.S. government on the west edge and the ECB and the governments of the European Union on the east edge of the Atlantic Ocean could adopt that would quickly move the civilian adult employment-to-population ratio back toward what from 1985-2007 we thought of as ‘normal’”. But it is not at all clear to me why he believes this…

Work and Search in Recessions: Theory, History and Measurement: Elizabeth Ballroom F: Manchester Grand Hyatt

Jan 06, 2013 8:00 am, Hyatt, Elizabeth Ballroom F American Economic Association

Presiding: VALERIE RAMEY (University of California-San Diego)

• Cyclical Variation in Labor Hours and Productivity Using the ATUS MICHAEL C. BURDA (Humboldt University Berlin) DANIEL S. HAMERMESH (University of Texas-Austin) JAY STEWART (Bureau of Labor Statistics)

• Hours and Work Sharing during the Great Depression: Comparisons and Contracts with Other Downturns in the 20th Century PRICE FISHBACK (University of Arizona) TODD NEUMANN (University of California-Merced) JASON TAYLOR (Central Michigan University)

• Job Search Theory and Unemployed Job Search over the Lifecycle MARK AGUIAR (Princeton University) ERIK HURST (University of Chicago) LOUKAS KARABARBOUNIS (University of Chicago)

Discussants:

• VALERIE A. RAMEY (University of California-San Diego)
• BRADFORD DE LONG (University of California-Berkeley)
• DALE MORTENSEN (Northwestern University)

A Getting-Slightly-Slightly-Better Payroll Report

The BLS Employment Situation Summary:

Nonfarm payroll employment rose by 155,000 in December, and the unemployment rate was unchanged at 7.8 percent….

The number of unemployed persons, at 12.2 million, was little changed in December. The unemployment rate held at 7.8 percent and has been at or near that level since September…. [T]he number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 4.8 million and accounted for 39.1 percent of the unemployed. The civilian labor force participation rate held at 63.6 percent in December….

Total nonfarm payroll employment increased by 155,000 in December. In 2012, employment growth averaged 153,000 per month, the same as the average monthly gain for 2011…. The change in total nonfarm payroll employment for October was revised from +138,000 to +137,000, and the change for November was revised from +146,000 to +161,000.

And Jon Hilsenrath of the Wall Street Journal Gets One Wrong...

Jon Hilsenrath: >Fed's Computer Models Pose Problems:

When the Federal Reserve said in December that it would keep short-term interest rates near zero until the unemployment rate falls to 6.5%, it was backed by… [the] computer-modeling programs the central bank uses…. In December…. Fed officials decided to announce they would keep interest rates near zero until the unemployment rate drops to 6.5%. The models told them such a commitment would help nudge unemployment lower—it was 7.7% in November—and wouldn't risk a big burst of inflation.

But here is the problem: The models are deeply flawed. They failed to foresee the financial crisis in 2008 and have tended to overestimate the strength of the economy for several years. Could they fail the Fed again?… Despite all their complexity and sophistication, they have long been plagued by gaps in how they read and project the economy. One of the biggest is that they have ignored the nuances of the financial system—one of the primary channels through which Fed policy works….

The financial gaps in the models worry Nathan Sheets, a Citigroup C -0.62% economist who was Mr. Bernanke's top international adviser at the Fed from 2007 to 2011. Mr. Sheets points to 1994 as an example of why. Back then, small increases in short-term interest rates by the Fed led to a surge in long-term interest rates. The models didn't foresee the financial chaos that would ensue, including the collapse of investment bank Kidder Peabody & Co., the bankruptcy of Orange County, Calif., and the Mexican peso financial crisis…

I was just last week going through my notes from 1994. Yes, the Federal Reserve's model (and other models) "failed": they all forecast that the 1994 raise in the Federal Funds rate from 3%/year to 6%/year would carry with it an increase in long-term nominal Treasuries from 6%/year to 6.75%/year; instead, long-term Treasuries peaked at 8%/year because of (a) an absence of forward interest rate guidance by the Fed and (b) unexpectedly-large endogenous moves in the duration of MBS.

But the unexpectedly-adverse reaction of the bond market in 1994 did not cause the Mexican peso crisis: an extra 1% rise in U.S. bond interest rates is not big enough to cause the Mexican peso to lose 75% of its value. Neither Orange County nor Kidder Peabody had any business holding a portfolio that would be bankrupted by a 10% fall in the value of the long-term Treasury bond. And it is not the business of the Federal Reserve to make sure that nobody holding an over leveraged portfolio goes bankrupt. The "financial chaos" of 1994 had no effect on the real economy in the United States: there was no recession in 1995, but rather the beginnings of the great dot-com boom.

The point of Hilsenrath's article appears to be that something bad may

happen when Fed officials raise interest rates…. The models make predictions about unemployment and inflation, but Mr. Sheets worries they might not foresee new financial shoes poised to drop. "They've really internalized these models and that's very risky," Mr. Sheets said…. in a lower interest rate, and Ferbus spits out predictions of how much growth and inflation should follow. Punch in some other event—like a sudden contraction in government spending or a jump in tax rates—and it spits out predictions of how the economy should respond…. The fingerprints of Ferbus and its friends are all over the Fed's latest interest-rate decisions…. [G]iven the unknowns about unconventional Fed policies, Mr. Sheets's warning warrants attention.

Mr. Sheets's warning certainly warrants attention if you are a hedge fund or an investment bank thinking of replicating Kidder Peabody's or Orange County's portfolio--but you should have already known not to do that.

But should Mr. Sheets's warnings have led the Federal Reserve to do something different than it has done? In retrospect the Federal Reserve certainly wishes that it had given more guidance at the start of 1994 as to the likely shape of its interest-rate tightening cycle and that it had at the start of 1994 incorporated the endogenous duration of MBS into its models in the way that it had incorporated them by the end of 1994. However, if the employment and output recovery evolves going forward as the recovery of the 1990s evolved in 1994 and thereafter, the Federal Reserve will be not dismayed but ecstatic.

Duncan Black: There's Another No Work Option: Laid Off

Eschaton: There's Another No Work Option: Laid Off:

Ed Glaeser writes a lot of words dancing around the obvious issue:

I believe that recipients of the [SSDI] aid are typically in pain, but many have a choice between suffering at work and going on disability. In boom times, the work option may seem more attractive, but as labor options contract, a steady check from the federal government can seem the better choice. The recession surely explains much of the 24 percent increase in the number of people receiving Social Security disability insurance since 2007.

It's an economist way to think about things, that someone being in the labor force means they're choosing the "work option." But in recession the options for some are no work and no money (otherwise known as "homelessness") or managing to qualify for disability (average monthly payment about $1100, max benefit about $2500). If you have some form of disability, you might be able to work if you have a job and employer that can accommodate you, but lose that job and you're probably going to be out of luck.

This isn't really mysterious stuff. Someone is 61, has a moderate disability, and loses his/her job. There is no work option.

Matt O'Brien Asks for a Graph of the Year...

From Rand Ghayad and William Dickens: What Can We Learn by Disaggregating the Unemployment-Vacancy Relationship?

Brad DeLong: Are Your Wages Set in Beijing?

CENTER FOR LATIN AMERICAN STUDIES, UC BERKELEY: INEQUALITY: DIALOGUES FOR THE AMERICAS, FALL 2012: OCTOBER 15, 2012 http://www.clas.berkeley.edu/Events/series/inequalityfall2012/index.html

• Full cleaned-up transcript
• Video

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This is I think an argument from my old teacher Richard Freeman, about how in the eighties and nineties effectively 2 billion workers were added to the potential global manufacturing work force. Developments in communication and trade, the coming of the container, the coming of the Deng Xiaoping policy reforms in China, reform in India, confidence these policy changes would persist--all these meant that businesses all around the world wondering where to locate manufacturing could be confident that they could if they wanted to, if it made sense, draw on a labor force that was 2 billion bigger than it had been in the 1970s.

In that context, the fact that the United States had a lot of highly-skilled manufacturing workers who had an immense productivity edge was no long an effective factor in world production. Thus the claim is that an awful lot of the rise in inequality in the United States between 1980 and today is the result of this global pressure on the American economy.

Back in the mid 1990s when I was working for the Clinton Administration, I wrote a bunch of memos about how this was then nonsense--that is, it was simply too small to matter.

Since the mid 1990s, this factor has become significantly larger.

Jeremie Cohen-Setton Has a Bunch of LInks as He Summarizes the Current State of the "Robots" Debate

Bruegel:

Paul Krugman (HT Mark Thoma) writes that skill bias may be yesterday’s story… twenty years ago… capital bias didn’t look like a big issue. But… profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy….

James Heckman: Yes, Charles, Poverty Can Be Fought Via Early Childhood Programs

http://www.bostonreview.net/BR37.5/ndf_james_heckman_reply_social_mobility.php

Charles Murray mischaracterizes the quality of the evidence on the effectiveness of early childhood programs. In doing so he suggests that my evidence is highly selective. The effects reported for the programs I discuss survive batteries of rigorous testing procedures. They are conducted by independent analysts who did not perform or design the original experiments. The fact that samples are small works against finding any effects for the programs, much less the statistically significant and substantial effects that have been found.

Murray questions whether any early childhood interventions can be effective because while some have worked, others have failed. His methodological stance is peculiar. In evaluating drugs to control blood pressure, we do not dwell on the failures except to learn from them. We should implement the successes. That is common sense and sound science. Perry and Abecedarian are rigorously evaluated, subjected to long-term follow-up scrutiny, and have shown high economic rates of return. Neal McCluskey’s claim that Perry is costly and has few benefits does not hold up. Perry’s high rate of return takes account of the program’s costs.

Murray misrepresents the evidence from the Infant Health and Development Program (IHDP) in an attempt to bolster his argument. IHDP was not a replication of Abecedarian, but rather an application of the Abecedarian model to a low–birth weight population—not the target population of Abecedarian. The designers of IHDP recognized in advance of collecting the data that severely low-weight children had medical needs not likely to be addressed by the Abecedarian curriculum. IHDP had substantial benefits for high–birth weight babies at ages of eight and eighteen. It was particularly effective for children from low-income families, and it promoted maternal employment.

The right interventions empower people to be what they want to be without forcing them to adopt one way of life over another.

In addition, the evaluations of IHDP (discussed by Murray) and Head Start (discussed by Almagor and McCluskey), do not account for David Deming’s point that many members of the control groups of those (and other) studies were enrolled in other early childhood programs, biasing downward simple treatment-control comparisons. (This is called “substitution bias” in the literature.) For these and other programs, there is the additional problem that treatment intensity varies among subjects. Adjusting for these biases boosts estimated program treatment effects. Also, Head Start is a very heterogeneous program and has not had any long-term follow-up, so evaluations of it are not comparable to those of Abecedarian and Perry...

 

The Deterioration in the Unemployment-Vacancy Relationship Is a Long-Term Unemployment Fact

It is not an "emerging structural skills mismatch" fact. It is a "long-term unemployed lose the weak ties that help them get jobs" fact…

A major empirical win for Rand Ghayad and William Dickens: "What Can We Learn by Disaggregating the Unemployment-Vacancy Relationship?":

Northern Civil War Widows vs. the Marriage Mart: Lunch with Laura Salisbury of BU

Laura Salisbury of BU has a fact: It look as though northern Civil War widows with pensions (as opposed to northern Civil War widows without pensions) delay remarriage for three years. This surprises me: I had thought it likely that women with pensions would be attractive on the marriage mart--yes, they lose their pension when they remarry, but the lost pension goes to their kids, and money is fungible. But apparently not: female agency--the desire to stay independent rather than marry that drunkard--trumps the male eye for placing a widow with assets earlier in the wooing queue.

Clearly my knee-jerk reactions underrate female agency...

 

The Collapse of Long-Run Potential GDP Estimates Continues…

Some happy thoughts…

May I Say That I Really Have Absolutely No Idea What Robert Lucas Is Talking About...

…when he claims that the post-World War II evidence "overwhelmingly supports the dominant importance of real shocks" to tastes and technologies in explaining fluctuations in unemployment at frequencies higher than 1/10yr?

What is that evidence?

Where is it? What shocks to tastes drove the unemployment rate up from 5.3% in 1989 to 7.6% in 1992? What shocks to technologies did so?

Lane Kenworthy: How the United States Stopped Being the Land of Opportunity

http://www.foreignaffairs.com/articles/138368/lane-kenworthy/its-hard-to-make-it-in-america

How to Govern America in 2013 II: Mortgages, Housing, and the Recovery

What Tim Geithner ought to be saying:

"In December 2008, it was clear that the economy needed (1) stabilization of the banking sector, (2) expansionary fiscal policy, (3) the rescue of Detroit, and (4) support for the Federal Reserve's low-interest rate policies. Via the TARP, the stress tests, the Recovery Act, and through the actions of the Federal Reserve, we accomplished those goals.

"As a result, the bad times of 2008-13 have been less bad in the United States than elsewhere in the North Atlantic.

"But what I did not understand, and should have understood, was that there was a very good chance that more would be needed to generate a strong recovery.

"I should have pressed hard for a Director of the FHFA who would understand the importance of refinancing mortgages to keep foreclosures from dragging down housing construction and employment.

"I should have pressed for Federal Reserve governors who would have adopted in late 2009 the open-ended quantitative-easing policies adopted three years later.

Josh Marshall: "Top Romney advisor Dan Senor says the election result shows there is “some kind of systemic crisis today in the world of polling.”

Dan Senor:

There is some kind of systemic crisis today in the world of polling, I think particularly on the right-of-center polling. The modeling was way off.

Indeed! You can't get hired as a pollster by Republicans these days unless you produce a Republican-friendly likely voter pool!

And http://www.theatlantic.com/politics/archive/2012/11/the-limits-of-political-reporting/265521/ Ta-Nehisi Coates:

The Unemployment Gap Between Europe and America

Yes, contractionary policies are contractionary…

Paul Krugman watches Europe's train wreck:

Transatlantic Divergence - NYTimes.com: pursuing the theme that America is doing the least worst among major economies, here’s a chart…. In the early stages… unemployment rose more rapidly in the US than in Europe. This mainly reflected differences in institutions: it’s much easier to fire people in America. From some point in 2010 onward, however, the US situation has gradually improved; initially some of the drop in unemployment was basically people leaving the labor force, but more recently there have been solid though modest gains in the ratio of employment to the relevant population (you have to adjust for aging). Meanwhile, Europe has gotten much worse; now formally in recession, but the truth is that it has been going downhill all along.

Why the divergence? The obvious answer is that the austerity stuff broke out in 2010, and the austerians took over policy much more completely in Europe than in the United States.

Macro and Other Market Musings: A Great Vacation or a Great Recession?

David Beckworth:

Macro and Other Market Musings: A Great Vacation or a Great Recession?: Casey Mulligan is back:

A high ratio of unemployed to job openings [could] mean… a reduction in labor supply in the form of additional subsidies for unemployed people… [who] would be choosier about the jobs they accept, especially the low-wage ones….

[But] unemployment across all groups has been slow to come down, not just with the low-skill laborers looking for low-paying jobs…. Weak labor demand is a powerful explanation for much of these developments and is borne out by the data from the NFIB's Small Business Economic Trend survey… [which] asks firms what is the single most important problem they face…. The number one answer over the past few years has been concerns over a lack of sales…. Labor concerns are near the bottom of this list, not something one would expect if the labor market distortions were as important as Mulligan thinks they are….

[W]eak labor demand is not the whole story.  Demographics are important too…. [C]hanges in the labor force over the past few years can be explained in part by long-term trends in the baby-boom population…. But looking at the employment-population ratio for prime-age workers (which controls for retiring baby boomers) in the age bracket of 25-54 years shows that this ratio is recovering in a pattern similar to that of unemployment…. There is no need to resort to implausibly large labor supply effects arising from distortionary government policies…. [I]ncentives matter… [but there] are far easier ways to explain the Great Recession than claiming it was a Great Vacation.

Update: Below is a modified Beveridge Curve. It shows the relationship between employment and   job vacancies.  Presumably, employment would rise with increasing job vacancies. Following Soberlook, I have drawn the Beveridge Curve with job vacancies plotted against the employment to population ratio for prime age workers (to avoid the demographic changes noted above).  

The figure shows the expected positive relationship up through August 2009, after which it seems to break down for about 20 months.  Some have attributed this to structural shifts in the economy.  However, this figure also shows that the relationship picks back up in early 2011 as seen with the red triangles.  I am not sure how to interpret the black diamond period, but given the return of the relationship I would wary to attribute it to structural shifts.  Especially with studies like these.

Mark Thoma: The Need for Countervailing Power

Mark Thoma, May 2012:

Economist's View: The Need for Countervailing Power: [B]efore the recession started I could not have imagined that policymakers would fail to put the unemployed first and foremost in all policy decisions. I was sure the unemployed would come before inflation, before banks, before debt reduction and contrived fights over the debt ceiling. How could we possibly turn our backs on millions of struggling households, especially when doing so creates so many additional long-run problems for individual households and for the economy as a whole? Nothing else would be more important than putting people back to work, and we would, of course, come together and mobilize in a national war against high unemployment.

But I forgot something. With the decline in unions in recent decades, the working class has lost both economic and political power. And at the same time, those at the top end of the income scale have gained power both relatively and absolutely. So why would I have ever thought that the unemployed would come first when they have so little organized political power? Is it any surprise that policy has paid most attention to the issues that just happen to be the things those with the most political power care the most about? What was I thinking?...

[We need] to provide (or at least not discourage) a countervailing force, something that replaces the role that unions played for the working class. I'm not completely sure what form this institution should take, workers lack both economic power in wage negotiations and political power to shape legislation in their favor, or how it could happen short of fed up workers finally demanding change. But workers need to have their interests better represented, and the need for a new institution of some sort is clear.

How to Govern America in 2013 I: Liming the Playing Field Weblogging

Persuading Congress to enact pro-growth pro-employment pro-America policies over the past six months requires that Republican senators and representatives look ahead and see obstruction now--as they have been obstructing over the past four years--leading to a future that they do not like.

It is not a case of the President becoming willing to compromise with Republicans on substantive policy issues. The President has, after all, pursued Ronald Reagan's (second term) foreign policy, George H.W. Bush's spending policy, Bill Clinton's tax policy, Rick Perry's immigration policy, the Squam Lake Group's financial regulatory policy, John McCain's climate-change policy, George W. Bush's countercyclical fiscal policy, Richard Nixon's environmental policy, and Mitt Romney's health-care policy--and he has appointed a Republican from South Carolina to head the Federal Reserve. Yet Republicans have tried and have in large part succeeded in obstructing his policies--not because they would not have been extraordinarily enthusiastic supporters of exactly the same policies had they been put forward by a President Romney, a President McCain, a President Bush, or a President Dole, but because they saw political advantage in obstruction.

So the President's task over the next month is to make sure that when Republicans look forward into the future they see obstruction plausibly leading to a future that they do not like.

The Morgenthau Plan and the Marshall Plan

J. Bradford DeLong: Comment on Albrecht Ritschl on the Morgenthau and Marshall Plans: University of Pennsylvania Social Science History Seminar: November 2, 2012:

Let me pick up on some threads we’ve already heard this afternoon.

Let me provide a complementary, but I think supportive, perspective on what was going on with Morgenthau versus Marshall in Washington DC in the three or four years after World War II. Possibly my story will have some lessons for the present and the future. But possibly it will not.

Perhaps the most fruitful way to look at the debate between Morgenthau and Marshall that was carried on--largely below the surface, largely without explicit confrontation--at the end of WWII is that it was an attempt to figure out how to resolve call it two historical problems: the problem of European military culture, and the problem of modern industrial war.

The Hobson-Reich View Is That Inequality is a Major Source of Macroeconomic Instability

Ribert Skidelsky muses:

Keynes, Hobson, Marx: In chapter 23 of the GT, Keynes quoted the following passage from Hobson's The Physiology of Industry (1889), which Hobson had co-authored with a businessman A.F.Mummery:  

Now saving, while it increases the existing aggregate of Capital, simultaneously reduces the quantity of utilities and conveniences consumed; any undue exercise of this habit must, therefore, cause an accumulation of capital in excess of that which is required for use, and this excess will exist in the form of general over-production.   In this passage, Keynes wrote, can be found the 'root of Hobson's mistake', namely:

his supposing that it is a case of excessive saving causing the actual accumulation of capital in excess of what is required which is, in fact, a secondary evil which only occurs through mistakes of foresight; whereas the primary evil is a propensity to save in conditions of full employment more than the equivalent of the capital which is required, thus preventing full employment except when there is a mistake in foresight.

Soup Kitchens DId Not Cause the Great Depression Weblogging

Duncan Black watches Casey Mulligan continue to refuse to mark his beliefs to market in any way:

Eschaton: The Worst Person In The World: Casey Mulligan. The list of people I thought were smart when I was a grad student, but who are actually f@#$king idiots, grows.

Paul Krugman says--correctly--he is too busy to engage. He is correct. Paul has other much better things to do with his time:

Soup Kitchens Caused the Great Depression: Some readers have been asking me to reply to Casey Mulligan’s latest attack on my recent book. Um, no. Life is short, and if I spent my time responding to every attack on yours truly — or indeed, every thing Mulligan himself writes that I consider foolish — I would have no time to do anything else. So let me just outsource this to John Quiggin…. Quiggin does an admirable job…

Doing Absolutely Nothing Over the Next Four Years Would Create 12 Million Jobs

That is the forecast baseline off of which effects of policies are estimated. All Mitt Romney is claiming with:

My plan will create 12 million new jobs over the next four years — helping lift families out of poverty and strengthening the middle class…

is that at the margin his nonexistent economic plan will not be positively harmful to employment growth.

Is that a good enough economic plan--barring its nonexistence--to win an election in America in 2012?

Today's Employment Report Is Genuinely a Big Fracking Deal!

Adding in 171K of September-October employment growth to 84K of upward revisions, we know think that the U.S. economy in October had 255K more jobs on a seasonally-adjusted bases than we yesterday that it had employed in September. That is a noticeably stronger economy, and that is very nice to see. The "2" in the hundred-thousands place makes me very happy...

A Relatively Good Employment ADP Number

ADP National Employment Report: U.S. added 158k private sector jobs in October.

— The Dismal Scientist (@dismalscientist) November 1, 2012

Relatively good only: we are still suffering from the soft bigotry of low expectations...

Immigrants Needed, and All Kinds

By the end of 2012 there were 312 million Americans out of 7 billion people on the planet. By 2062--if we stay on the current policy track--there will be 500 million Americans out of 10 billion people on the planet, as compared to 340 million if we were to end net immigration now and if birthrates remained the same. In this sense, America in 2062 will--if we stay on our current policy track--be a nation that is 1/3 post-2012 immigrants.

The thoughtful Adam Ozimek thinks that isn't enough.

He thinks the United States needs more high-skill immigrants. I think the United States needs more immigrants--more people willing to take risks and work hard to seek a better life for themselves and their children, and illiterates from Chiapas seem to me as good as doctors from Calcutta:

Adam Ozimek:

[A] great article from Noah Smith on why we need a huge amount of Asian immigration. Noah is good at thinking about immigration more broadly than typical economists, and this article is no exception:

East Asia, South Asia, and Southeast Asia together have over half the world’s population, but Asians make up only 5% of the United States. If our ethnic makeup was a portfolio of stocks, we would be severely underweight Asia. Asia is important not just because it is huge, but because it is growing rapidly. Trade with these countries will be incredibly important to the American economy this…. Furthermore, I believe that the cultural benefits of Asian immigration will be just as big as the economic and political benefits. Adding diversity to our melting pot will speed up America’s inevitable and necessary transition from a “nation of all European races” to a “nation of all races.”…

The second article is from Matt Yglesias who emphasizes what is perhaps the most important and least appreciated truth of our times: immigration is more important than most of the issues we spend all our time arguing about.

Imagine a counterfactual history of the United States… in which we never opened our borders to the ethnic “others” of the past—the Catholics and Jews of Eastern and Southern Europe, then more recently Asians and Latin Americans. That is a very different vision of America. Not a bad place, necessarily, but probably one that looks a lot more like New Zealand—pleasant, much less densely populated, much more focused on primary commodities, somewhat poorer, and much more monolithically focused on the originally settled port cities.

It’s the most important economic issue of our time, far more important than tax reform, and it is a lever that could help improve a lot of problems we have in this country. We should be shouting this from the rooftops daily.

How Does CBO Model the Response of Labor Supply to Changes in Tax and Spending Policies?

http://www.cbo.gov/publication/43680

Steve Benen: The Death of Romney's Biggest Talking Point

The hard-working Steve Benen:

The death of a talking point: If I had a nickel for every time Mitt Romney has said the unemployment rate has been above 8% throughout the Obama presidency, I'd have, well, nearly as much money as Mitt Romney…. [T]he talking point [has] died. The unemployment rate… [is] 7.8%.

As we've discussed before, decreases in the jobless rate are not always good news -- the figure sometimes falls when discouraged Americans drop out of the workforce altogether -- but that's the case with the new data. The employment-to-population ratio went up, job creation went up, and the labor force went up. In other words, the drop in the unemployment rate is heartening, not discouraging….

In February 2009, President Obama's first full month in office, the jobless rate was 8.3% and climbing. As of today, it's 7.8% and falling.

Literally every day for a long while, Romney and his allies have said Obama must be a failure based on this metric alone. The Republican said in Wednesday's debate, "We've had 43 straight months with unemployment above 8 percent."

It's always been a ridiculous argument -- blaming Obama for the jobs crisis he inherited and helped alleviate is absurd -- but now it's also a bogus one.

Of course, the news also seems to lead to a follow-up question for Romney: if unemployment above 8% is proof that Obama should lose, does an unemployment rate below 8% prove that Obama deserves to win?

Live by the unemployment rate; die by the unemployment rate.

The thing I think that every American voter needs to focus on is that while Obama's plans to deal with the jobs crisis are inadequate, Romney's are disastrous: the policies that have sent Britain into a double-dip recession over the past 2.5 years.

Mark Thoma: We Should Stop Blaming China For Our Economic Problems

http://economistsview.typepad.com/economistsview/2012/10/we-should-stop-blaming-china-for-our-economic-problems.html

Video: Brad DeLong and Oscar Landerretche, "The Politics of Inequality": Berkeley Center for Latin American Studies

http://www.youtube.com/watch?v=80zPkYzDFfU

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