I liked Matt Miller at lot when we worked on opposite sides of the White House during the early Clinton administration, but...
...when the phone buzzed was to meet with a publisher about a new book proposal—the next installment in what Jody lovingly mocked as my ‘one man government-in-exile’ series. The premise was that after two terms of a president seen by much of the country as a virtual socialist...
Note that Matt Miller does not, himself, endorse the assertion that Barack Obama is "a virtual socialist". But he does not qualify it either...
Wingnuts are supposed to think: Oh! Matt Miller gets it. Barack Obama is far-left!
Journalists with a clue are supposed to think: Well, he didn't tell a lie--even though Obama is not "a virtual socialist" and has tried to govern as a more-or-less old-style moderate centrist, "much of the country" does see him--because he has African-American, and because Rupert Murdoch's people have told them he is--"a virtual socialist".
But what are the voters of the 33rd congressional district of California going to think?
This is a district that gives Obama, Boxer, Feinstein, Brown something like 85% of their votes? The kind of person who would say, without qualification or explanation, that Barack Obama is "seen by much of the country as a virtual socialist" and has spent much of his time arguing for a Third Way to the right of today's Democratic and the left of today's Republican Party is not the kind of person who is likely to attract much grassroots support or raise much money in the 33rd congressional district of California.
And outside money-funded media-blitz campaigns are pushed as effective primarily by professional campaign consultants who get a cut from or are part of a reciprocal favor network funded by such media buys. Nevertheless:
Over at Equitable Growth: Martin Wolf's column this week contains a very nice precis of the main argument of his recent The Shifts and the Shocks:
...over more than six years is pathetic by historical standards--occurred despite the most aggressive monetary policies in history.... Yet this has not been nearly enough.... How do we explain such weak demand?... Three sets.... The first... stresses the post-crisis overhang of private debt and the damage to confidence caused by the sudden disintegration of the financial system.... The second... argues that the pre-crisis demand was unsustainable because it relied on huge accumulations of private and public debt.... The implication of this is that economies suffer not just from a post-crisis balance-sheet recession, but from an inability to generate credit-driven demand on the pre-crisis scale. Behind the unsustainability of pre-crisis demand lie global imbalances, shifts in income distribution and structurally weak investment.... The third set... points to a slowdown in potential growth, due to some combination of demographic changes, slowing rises in productivity and weak investment... feeds directly into the second.... The reason that extreme policy has been so ineffective is that the economies suffer from such deep-seated ailments. It is not just about weak supply. But it is also not just about weak demand. Nor is it just about the debt overhang or financial shocks. Each economy also has a different combination of ailments...
The deep-seated ailments that Wolf identifies are, I think, sixfold: READ MOAR
Over at Equitable Growth: I read Reihan Salam over at Slate.
My first, minor, thought is that the Slate editors seriously fell down on their job in failing to demand even a modicum of intellectual consistency here. Let me endorse Brian Buetler:
...to obscure and delay transfers so that budget analysts wouldn’t treat the law as they might a single-payer program where... everything coming in is a tax, and everything going out is an expenditure.... The right’s memory has grown conveniently spotty.... In 2011, in a different context, Salam mocked the kind of scolding he’s now directing at Obama. ‘Ah, he made the program marginally less politically poisonous, which will make it harder for us to demonize him. Now let’s attack him for hypocrisy!’ he wrote, paraphrasing critics. The policy architect in that instance was Paul Ryan, who proposed phasing out the existing Medicare program, but only after 10 years, and only for future retirees. At the time, Salam didn’t believe his opponents’ rhetorical strategy had much merit. ‘I mean, I get it,’ he added. ‘But also: let’s move on'...
My second, big, thought is that there are no live policy ideas--that the Republicans are now the captives of the nihilists they have turned their activist base into, and that their only strategy now is to hope that somehow, some way, ObamaCare can be made to collapse. READ MOAR
That the Cadillac Tax was an unnecessarily complex and inverted long-run Rube Goldberg way of accomplishing McCain's 2008 goal of eliminating the tax preference for employer sponsored coverage.
That CBO's distinction between mandates and taxes was unhelpful in either building a well-working system or understanding how it would work.
That the gamble that cost-control measures would be effective in the long-run was a gamble.
And the very sharp Jon Cohn agrees with me: READ MOAR
The continued absence of high-quality DeLong smackdowns on the internet distresses me.
It distresses me because it means that today, once again, for our Monday Smackdown Watch, we must continue our death-march read (see the [backstory][c]) of chapter 11 of David Graeber's Debt: The First 5000 Mistakes.
By now I am desperately hoping that I will come across even a single kindle screen that does not have egregious errors of fact or analysis on it--one single screen in which what Graeber says is at least arguably right. We are talking Alexander the Great's army in the Gederosian Desert here.
But this is not that day.
Today I read only one kindle screen before collapsing into a fit of some sort:
The extremely-sharp yet still Republican Josh Barro reports:
The Dynamics of Political Language: Partisan Asymmetries Weblogging (Brad DeLong's Grasping Reality...): The Dynamics of Political Language: Partisan Asymmetries Weblogging Comment on Jacob Jensen, Ethan Kaplan, Suresh Naidu, and Laurence Wilse-Samson, 'The Dynamics of Political Language':
Let me pick up and expand on the line of discussion initiated by David Gergen's excellent comment.
I think this paper does an excellent job of documenting and helping us understand ideological polarization.
I think this paper does not do a good job of understanding partisan polarization.
Theodore Roosevelt in 1896 was a Republican attack dog, denouncing Democratic Presidential candidate William Jennings Bryan as a mere puppet of the Alien Communist Anarchist John Peter Altgeld. Bryan, Roosevelt said:
would be as clay in the hands of the potter under the astute control of the ambitious and unscrupulous Illinois communist... free coinage of silver... but a step towards the general socialism which is the fundamental doctrine of his political belief... He seeks to overturn the... essential policies which have controlled the government since its foundation...
That's language as extreme as any we hear today.
Situate it in its context: relative to the Anglo American economy, the Iberian economies, the pre-conquest era, and--recently--the Pacific Rim as an example of an economy that works well...
Before 1850, it was Latin America that was the prize: Mexico, Peru, the Silver Mountain, the Sugar Islands
It was Europe's most prosperous, civilized, and technologically progressive peoples that grasped that opportunity--Portuguese mariners, Aragonese merchants, backed by Castilian crusader steel.
Parliamentary liberties and freedom of speech considerably more advanced in the Castile of Isabella Trastamera and the Aragon of Ferdinand Trastamera than in the England of Henry Tudor.
Indeed, the Empire of Liberty had a better advocate in Simon Bolivar than in George Washington and his successors.
Simon Bolivar freed not just his slaves, but all the slaves of Venezuela.
George Washington freed his slaves--but only after his death. Thomas Jefferson freed his--if they were his descendants. James Madison and James Monroe did not free theirs. John Adams and John Quincy Adams had none, and the latter fought all his life for the petitions for freedom of the slaves in the United States to be heard in Congress. But Andrew Jackson spent his life trying to buy more slaves. Martin Van Buren's slave Tom ran away--and then, when he was found, Van Buren sold him for $50 to the slave-catcher. William Henry Harrison tried to turn Indian into slave territory when he was governor. John Tyler, James K. Polk, and Zachary Taylor--not until we get to Millard Filmore do we get another American President even close to as free-soil as the Adams's were: "God knows that I detest slavery, but it is an existing evil, for which we are not responsible, and we must endure it, and give it such protection as is guaranteed by the Constitution, till we can get rid of it without destroying the last hope of free government in the world..."
Indeed, look at U.S. politics in the first 20 years after the Constitutional Convention. Washington thought his own Secretary of State--Jefferson--was on the point of betraying the U.S, to France, and would gladly sacrifice liberty in America to advance the cause of the French Revolution. Jefferson was certain that John Adams was plotting to restore the British monarchy--and Adams would have, if the alternative was the coming to power of some American Robespierre--and that Alexander Hamilton was ready to become a military dictator. Hamilton was shot dead by Jefferson's running mate and vice president, Aaron Burr, whom Jefferson then tried for treason. Burr was not convicted solely because the Chief Justice, John Marshall, thought that if he set Burr free he might be able to cause Jefferson yet more trouble. A banana republic--the ideal type of a banana republic, in fact--save that they grew no bananas...
Living standards, natural resources, population densities, and rates of demographic expansion give Latin America an edge over Anglo America through the first quarter of the nineteenth century, at least.
The coming of the steam engine and then, a generation later, the telegraph ought to have brought the world together in terms of ironing out economic divergences.
The technologies of the Industrial Revolution? The first generation of industrial technologies circa 1780 were potentially profitable only in Britain, with its uniquely high real wages and uniquely low price of coal at the factory gate. But by 1850 steam engines, spinning jennies, power looms, and railroads were potentially profitable everywhere.
Yet the story of economic development is of a steadily-widening relative-income gap: a widening gap between Anglo America and the Southern Cone on the one hand and the rest of Latin America up until 1918 or so; then a widening gap between Anglo America and all of Latin America save Venezuela up to 1950 or so; and then relative stasis--average growth in Latin America at about the same pace as Anglo America, with on average neither widening nor closing of the relative gap (save Venezuela and, after 1958, the peculiar case of Cuba).
By 1950, down to perhaps a quarter of Anglo American levels...
No worse than rest of exNorth Atlantic world, but no better..:
Since 1950, relative parity is normal...
Theories of economic relative retardation and growth inevitably fall into two broad categories: "the rich are so good, and the poor are so bad" theories; and "the rich are so bad, and the poor are so good" theories.
International trade and the international economy in general as engines of extraction theories: comparative-advantage traps, debt traps, vulnerability to cyclical fluctuations traps. Escape from the trap via neo-mercantilist protection, inward focus on resource accumulation, and import-substitution industrialization--turn the global economy into your servant rather than your master through clever technocratic policies of one sort or another. Raul Prebisch. (Early) Fernando Henrique Cardoso. Immanuel Wallerstein.
Unorthodox Marxist class-structure-a-fetter-on-development theories: latifundia and neo-feudalism, but not just rural neofeudalism: the heyday of the PRI in Mexico as a "new class" bureaucracy variant of robber baronage and clientage, focused on extracting rents for political powerbroker and their clients from the most productive pressure points of the economy--natural resources, high-productivity export manufacturing, tourism. Hernando de Soto, The Other Path. Andrei Shleifer et al., "Legal Origins". Acemoglu, Johnson, and Robinson, "Comparative Origins". What makes these people unorthodox Marxists is that Karl Marx believed in progress, and so a "bourgeois revolution" as inevitable: superstructure could not indefinitely contain the pressures being generated by the economic changes of the base. In the end, all of the feudal and neo-feudal and aristocratic and caste and estate-based blockages to market capitalism--and thus prosperity--would be "steamed away". "All that is solid melts into air..." really does not do the German justice...
One-unfortunate-accident-after-another theories: The long nineteenth century required either fluency in English or an exceptionally-favorable geographic environment--which the Southern Code had--in order to successfully adapt and adopt the technologies of the Industrial Revolution. In the twentieth century bets on globalization crapped out with the coming of the Great Depression, Imperial Preference, and the Smooth-Hawley Tariff. Bets on import-substitution then missed the biggest expansion of world trade ever in the Thirty Glorious Years. The switch to "neoliberal" policies then got squashed by the oil shocks, the coming of monetarism, and more recently the rise of China. Plus collateral damage from the Cold War--the Cold War in Asia gave Japan and the rest of the Pacific Rim preferential access to Anglo-America's markets, the Cold War in Europe was fought on terrain where the propertied right that had bet on Naziism kept its head down, but the Cold War in Latin America was different...
But do we really have to choose? (17) can be evaded via clever technocrats pursuing state-led development--but, in Lant Pritchett's words, what can be worse than state-led development policies pursued by an anti-developmental state? The anti-developmental state that trapped Latin America in (17) and was the product of unfortunate early wealth concentration and frontier absence in history via (18) could have been surmounted except for the unfortunate accidents of (19)--which pre-dated the Cold War: it was FDR who said that while Somoza may be an SOB he is our SOB. And unfortunate accidents would not have had as large deleterious effects had the global economy of (17) been more genuinely open and stable.
From this perspective, Latin American relative retardation--even in the Southern Cone--from 1850-1950 looks overdetermined: it would have been a miracle had it not taken place.
Still, literacy, life expectancy, prosperity, etc. vastly better than in 1825--and, relatively, better than Africa, South Asia, non-coastal East Asia (for the moment?), and (perhaps?) Muscovy and its dependencies. Relative retardation is relative to the North Atlantic plus the Asian Pacific Rim only.
Nobody intelligent would say that they know the relative weight to be assigned to these different overdetermining factors. Only a strong desire to obtain tenure and to do so by publishing articles that establish or refute particular narrow theories could induce anybody sane to claim to do so.
Looking forward: But do the burdens of the past still lie on the future?
Chance of making the global economy your servant rather than your master? Here the news is bad: over the past two decades neither the North Atlantic nor the Pacific Rim has been able to master the global economy. Instead, episodes of policy disorder and macroeconomic stress that those of us who focused on the North Atlantic used to see as confined to Latin America are now global.
Class structure a fetter on development? As income inequality in the United States surpasses that of Brazil, and as rent-seeking in everything from Berkeley NIMBYism to the ability of a very narrow fossil fuel-complex interest group to block urgent action on global warming to the ability of the princes of Wall Street to extract their fortunes, it is not that Latin America has promise of attaining the kind of institutional successes seen in the post-WWII North Atlantic. Rather, the North Atlantic--plus Japan--appear to be copying institutional failure, or at least underperformance.
Could we pray for good luck? It is hard to see what else we can do.
God knows the North Atlantic broadly construed--extending to Tokyo and Moscow--has not been immune to history. But it was a history of grasping technological possibilities perhaps too well, and reactions to them. Now, perhaps, North Atlantic history is becoming more "normal"...
and that the building of new housing in downtown Berkeley will continue. Let’s build on this momentum, and get serious about addressing the massive housing shortage in our community that is hitting working families hard. Downtown is great, but we have to do an order of magnitude more to bring supply and demand into balance.
Only 18% of Alameda County families can afford to buy the average home. In San Francisco the average rent is a staggering 46% of the average household income. According to the National Low Income Housing Coalition, a family must earn $37.62/hour to afford the average 2 bedroom in San Francisco, and $30.35 to rent a 2 bedroom in the “affordable” East Bay. And the trend line is pointing way up.
For folks who want an overview of how we got in this situation, I highly recommend this article from back in April. It’s a long read and has a SF/tech industry perspective, but the dynamics discussed here apply to the whole Bay Area.
A few of the takeaways that I think are particularly pertinent to Berkeley:
...During my travels, I often heard, ‘We know what the rest of the country thinks of us.’ It would become a point of pride, then, that in 2007, Mississippi was leading a race it wanted to win. That fall, a full year before Obama’s election to the White House put national health care reform on the agenda, the governor, Haley Barbour, called up the newly elected state insurance commissioner Mike Chaney, a Vietnam veteran from Vicksburg. The two Republicans had been friends since college; Chaney had been the rush chairman for Sigma Alpha Epsilon at Mississippi State University when Barbour pledged the fraternity. Now, the governor had an assignment for his old friend.
As best as I can estimate, ObamaCare's Medicaid expansion right now has a benefit-cost ratio of 4-to-1. And, of course, its benefit-cost ratio for the power brokers of Missouri is ∞-to-1: they are not paying for it.
"Awesome in its evilness" was how Jon Gruber described ObamaCare nullification. How can anybody sane not agree?
...would fail and that it would result in worse rather than better health care. But after a rough start, the ACA is largely meeting its implementation goals. It is significantly reducing the number of the uninsured. And whereas health outcomes are improving in Massachusetts, the first adopter of ACA-like reform, Varney’s article suggests that in Mississippi the health care system is showing signs of collapse. It’s hard to look at Mississippi and conclude conservatives were right, for the ACA was hardly given a chance in that state, as Varney details.... Part of what has happened to Mississippi is likely the result of specific policy choices by elected officials. But a lot of it was baked into a terrible history. Nevertheless, Governor Kasich’s question is, we believe, on point:
‘The opposition to [Obamacare] was really either political or ideological,’ Ohio Gov. John Kasich (R) told the Associated Press earlier this month. ‘I don’t think that holds water against real flesh and blood, and real improvements in people’s lives.’
Principles matter, but how do you weigh principles that dictate opposition to access to basic health insurance against the costs borne by Mississippi’s rural poor?...
In the other 31 states, Obamacare is doing fine and is likely to keep doing fine in spite of whatever the Supreme Court rules in King. In those 31 states, they either have state exchanges that are unaffected by King or will quickly add a state wrapper to their federal exchange: no state politicians of any party are going to accept ObamaCare money to cover their Medicaid poor and deny exchange subsidies to their middle class.
But the politicians and Obamacare are now in much bigger trouble in the nineteen states with one-third of the population: Alabama, Alaska, Florida, Georgia, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, Wyoming. If King brings down the hammer, will the politicians of the nineteen nullification states throw away the $40 billion in exchange subsidies to their middle-class citizens that are currently anticipated for 2016? That seems a very heavy political lift.
And I very much doubt that the King appellants will be able to round up their fifth vote: the Supreme Court would have to overrule long lines of statutory interpretation and break a great deal of administrative law in pieces to get there.
They might: this is a very partisan Supreme Court that follows the election returns.
But I think Roberts wishes to have a place in history different from that of MacReynolds.
the Supreme Court just agreed to review King v. Burwell, the Fourth Circuit’s decision upholding an IRS rule extending tax credits to federally established exchanges.... At least four justices... voted to take the case... The justices’ votes on whether to grant the case are decent proxies for how they’ll decide the case. The justices who agree with King wouldn’t vote to grant.... The justices who disagree with King... there are at least four such justices.... That means that either Chief Justice Roberts or Justice Kennedy will again hold the key vote. None of this bodes well for the government. That’s not to say the government can’t win. It might. As I’ve said many times, the statutory arguments cut in its favor. But the Court’s decision to grant King substantially increases the odds that the government will lose this case. The states that refused to set up their own exchange need to start thinking—-now—-about what to do if the Court releases a decision in June 2015 withdrawing tax credits from their citizens.
...Saez and... Zucman... uses a richer variety of sources.... The share of wealth held by the bottom 90% is an effective measure of 'middle class' wealth.... In the late 1920s the bottom 90% held just 16% of America’s wealth—-considerably less than that held by the top 0.1%, which controlled a quarter of total wealth just before the crash of 1929.... By the early 1980s the share of household wealth held by the middle class rose to 36%—roughly four times the share controlled by the top 0.1%.... From the early 1980s... these trends have reversed.... The 16,000 families making up the richest 0.01%, with an average net worth of $371m, now control 11.2% of total wealth—-back to the 1916 share, which is the highest on record.... The top 0.1%... hold 22% of America’s wealth.... The outsize fortunes of the few would not be too worrying were they largely the product of entrepreneurial activity.... The club of young rich includes not only Mark Zuckerbergs... but also Paris Hiltons.... The share of labour income earned by the top 0.1% appears to have peaked... held in the form of shares... levelled off... held in bonds has risen... hint[ing] that America’s biggest fortunes may be starting to have less to do with building businesses...
Most wealth will be deployed, at least at the relevant margin, not in productive entrepreneurial or labor-complementary activities but in at best parasitic rent-seeking activities.
Democratic politics will not save us--that only exceptional circumstances in the twentieth century allowed for a democratic politics of progressive social insurance to level society and so promote social welfare in the face of the Gramscian hegemony of the bourgeoisie.
Both of these seem to me to be quite plausible, and perhaps true. But I think Piketty would have been very well-advised to have spent a lot more time backing them up in his book than he in fact did...
Ylan Mui: I want to kick it off with a question to you Josh. There have been a lot fingers pointed when it comes to blame for the financial crisis--Wall Street greed, predatory lending, et cetera--but rarely has a finger been pointed at the economists themselves. Do you think your profession deserves blame?
Josh Bivens: The one word answer is yes. Jeff’s book is entirely right: most the ideas covered in his book have indeed been put to damaging use in US policy debates. But we should be careful to also say that a lot of the ideas actually contain useful nuggets. They are bad and dangerous ideas when they are improperly invoked—-when the people who invoke them cannot differentiate when one of the ideas should be taken as a description of how the world works versus a prescription for how we should make it work. That is one big way that they can be put to dangerous use. I can say more about that later. But I think, even more importantly, they are really bad and dangerous when they are mobilized by people... It’s tough to say this nicely... By people with either really weak minds or with old and ideological political motivations. READ MOAR
David Frum: Don't Knock the Reform Conservatives: "Sam Tanenhaus profiled a group of self-described "reform conservatives"...
...in respectful praise. The art director went even further: The magazine photographed 11 of the profiled people in an 18th-century hall, crumpled papers at their feet, an homage to J.L.G. Ferris’s well-known painting of the drafting of the Declaration of Independence...
But... but... but... of the 11 people only six--Levin (mentioned in 19 paragraphs), R. Ponnuru (10), A. Ponnuru (4), Strain (2), Wehner (2), and O'Beirne (1)--are mentioned by Tanenhaus at all in the article. It's not a profile of a group, of an intellectual movement. Frum wishes it were--I wish it were. But it isn't.
There are two questions that must be answered in the process of figuring out weather having the government borrow money and spend is a good idea:
What is the money being used for?
How expensive is the money to borrow?
Back in the Reagan-Bush I years--the steep run-up in the debt-to-annual GDP ratio in the 1980s and the first third of the 1990s:
The money was used to rapidly build up the U.S. military to counter the Soviet Union's overwhelming might--an overwhelming might that existed only in the fantasies of the neoconservatives who ran the "Team B" exercise initiated at the CIA by George H.W. Bush.
The money was used for tax cuts for the rich in the hope that increasingly incentivizing entrepreneurship would accelerate economic growth above the pace of the 1970s--a vain hope indeed.
The real interest rate at which the U.S. government could borrow was relatively high--between 3.5%/year and 8.5%/year, and averaging 5.5%/year in the 1980s. Plus there was the fear that as the debt-to-annual-GDP ratio rose further without any strategy for ultimately amortizing the debt, the real interest rate would rise higher. Plus there was the fear that the real interest paid on the debt understated the cost to the taxpayer of carrying it because a high debt would create expectations that inflation would rise--expectations that would require unemployment semi-permanently above the NAIRU to avoid another inflationary spiral.
...thanks to the disastrous consequences of his deep tax cuts, the Wall Street Journal has published an apologia for Brownback.... You know you’re in for a real doozy when Allysia Finley, a member of the Journal’s editorial board and the piece’s author, begins by comparing Brownback’s tax cuts with the 19th-century struggle against slavery. “During the 1850s,” Finley writes “Kansas turned into a battleground for a proxy war between abolitionists and slavery supporters. Today, Kansas has become the flash point in another national debate, this one over government’s role in promoting growth.” Well then. Unlike Brownback, whose theory is that his policies will soon start working )any day now!) but the liberal media is determined to create the impression that they’ve already failed, Finley assures us that Kansas’ tax cuts are working right now...
9 million people living in the Confederacy: 5 million white, 4 million Black.
1.2 million adult white males in the Confederacy. 900,000 served. 75,000 died in battle. 75,000 died of wounds and infections. 150,000 died of disease in camp. 200,000 maimed. 200,000 deserted. 200,000 still with the Stars and Bars at the end.
21 million people living in states that remained loyal to the Union. 2.3 million served--1.9 million white, 400,000 Black (including Blacks from the Confederate states). 90,000 died in battle. 90,000 died of wounds and infections. 180,000 died of disease in camp. 200,000 maimed.
Mobilizing for a total industrial war is a b*tch when (a) your rich have been investing by buying slaves rather than building factories, and (b) nearly half of your population is more likely than not to turn any guns they get against you...
Missouri sent about 140,000 men to the Union, and about 60,000 to the Confederacy...
Thursday, October 23, 2014
1:00 - 2: 30 p.m. ET
Economic Policy Institute
1333 H St., NW
Washington, DC 20005
Note that these are the cities themselves--what lies within the municipal boundaries--not the metropolitan areas:
...published in American Political Science Review and written by MIT political scientists Chris Tausanovitch and Christopher Warshaw. (via Bruce Sterling):
....For sixty years, he was one of my closest friends. My debt to him, both personal and professional, is beyond measure. Despite deep sadness at his death, I cannot recall him without a smile rising to my lips. He was as quick of wit as of mind. His wit always had a point, and was never mean or nasty — though some of the objects of his wit no doubt felt its sting. His occasional humorous articles — such as “The History of Truth in Teaching” — have become classics and demonstrate that had he chosen to become a professional humorist rather than a professional economist, he would have achieved no less fame in the one field than he did in the other. His death has left the world a far less joyful place for Rose and me, as for so many others.
...is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity.... To the extent that opportunity itself is enhanced by access to economic resources, inequality of outcomes can exacerbate inequality of opportunity, thereby perpetuating a trend of increasing inequality.... Society faces difficult questions of how best to fairly and justly promote equal opportunity. My purpose today is not to provide answers to these contentious questions, but rather to provide a factual basis for further discussion.... I will review trends... then identify and discuss four sources of economic opportunity in America.... The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education. The second two may come as more of a surprise: business ownership and inheritances.... In focusing on these four building blocks, I do not mean to suggest that they account for all economic opportunity, but I do believe they are all significant sources of opportunity for individuals and their families to improve their economic circumstances...
Over at Equitable Growth: Jonathan Chait has an interesting piece on the thought on healthcare policy of the likely future senator from Iowa, Joni Ernst:
...have failed. And yet conservative opposition... has not diminished. If you want to know why this is, listen to... Joni Ernst....
We’re looking at Obamacare right now. Once we start with those benefits in January, how are we going to get people off of those? READ MOAR
Daniel Davies: The World Is Squared--Episode 3: The Greek Calends--A Disquisition on the Nature of Debt: "What is debt?...
...It’s a promise to pay back a specific amount of money at a specific time. Why is it so popular--why do people always seem to end up getting into it? Why, for example, don’t people make more equity investments, buying a share of someone else’s profits and sharing their risks in the way in which Islamic banking is meant to operate?
Over at Equitable Growth: I think Mohamed El-Erian makes two analytical errors:
He argues that a faster American recovery requires that the private sector "decouple even more from Washington" and undertake "longer-term investments... [to] unleash underused resources and expand longer-term potential... [at the] scale and scope... need[ed] to validate the current level of excessive risk-taking by financial markets lest that, in itself, becomes a consequential headwind to economic growth and stability..." This morning's earnings yield is 5.1%. This morning's 5-year TIPS yield is 0.1%. That five percentage-point spread does not suggest a financial market in which demand for risky assets has outrun supply and pushed risky-asset valuations to levels that are inviting a crash and subsequent financial crisis triggered by the potential bankruptcy of institutions with normal equity cushions. And are there an unusually large number of institutions right now with normal or subnormal equity cushions whose business model is to sell unhedged out-of-the-money puts on a large scale, pocket their winnings until the strategy goes bust, and then declare bankruptcy and walk away? I'm watching. I don't see any concentration of such institutions...
El-Erian assumes that Washington can do nothing. That is not true. Washington may do nothing--it probably well do nothing. But it could do a lot. FHFA head Mel Watt has the power to offer every homeowner in America a refi at conforming-loan rates with an equity-option kicker attached to mortgages that do not have the 20% equity cushion or exceed appropriate conforming-loan limits. Federal Reserve head Janet Yellen has the power to do a Paul Volcker and undertake a regime change to the Federal Reserve's operating procedures and so alter the expected and actual future path of nominal GDP. Either or both of those could powerfully jumpstart the economy over the next two years. The FHFA and Federal Reserve regime change options should be on the table. El-Erian should not overlook them...
Mohamed El-Erian: US midterm elections offer limited prospect for economic change: "The main question is not whether the midterms will change the gridlock in Washington...
...that undermines economic growth, accentuates inequalities, and holds back prosperity; it is whether companies and individuals can decouple even more forcefully from yet another 'do-little' Congress.... There is little chance of change in the polarisation and dysfunction paralysing Congress.... The fiscal stance would not be altered to provide for higher and better balanced aggregate demand; supply responsiveness would not be enhanced by stepped-up investments in infrastructure, education, labour market strengthening and other areas that improve productivity; medium-term operational uncertainty would not be reduced by greater clarity on corporate tax reform; and damaging debt overhangs would not be lifted.... For stock markets to continue to prosper, the private sector would have to decouple even more from Washington.... It would require much bigger emphasis on longer-term investments in areas that, notwithstanding the continued shortfalls in Congress, unleash underused resources and expand longer-term potential. And the scale and scope would need to validate the current level of excessive risk-taking by financial markets lest that, in itself, becomes a consequential headwind to economic growth and stability...
Needless to say, he has good reason:
Paul Krugman Plays Ming the Merciless: Gross Gone: "I don’t know anything about what’s been going on internally at Pimco...
I just read the same stories as everyone else. I have, however, written a lot about Pimco’s macroeconomic analysis (which drove its bond-investment decisions). The interesting thing is the Pimco was initially a bond bull, based on the correct understanding that deficits don’t crowd out lending when the economy is in a liquidity trap; but it then went off the rails, with Bill Gross insisting that rates would spike when the Fed ended QE2. I tried to explain why this was wrong, and got a lot of flak from people insisting that the great Gross knew more than any ivory-tower academic. But I knew what I was talking about!
The University of California Press has put out a new edition of Charles Kindleberger's World in Depression early next year.
J Bradford DeLong and Barry J. Eichengreen: New preface to Charles Kindleberger,* The World in Depression 1929-1939*:
The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.
Lives lost from Ebola to date are tiny, even in West Africa, compared to HIV, TB, and malaria. Ebola still not (yet) the biggest public health problem in West Africa.
Yes, the epidemic will spread to more countries.
Ebola will not become the biggest public health problem in West Africa unless deaths reach the high seven figures--which they may: it is highly likely that deaths in the six figures are now baked in the cake.
Unless the virus changes dramatically, we are almost surely safe. If you want to worry, worry that influenza or something already airborne will become more deadly, not that Ebola will become airborne.
Those at risk from the Ebola virus are overwhelmingly (a) those who love them and (b) those medical professionals who treat them--you get it from direct fluid contact with symptomatic patients. Thus risks here in the United States are very low. It is scary, but unlikely to be a serious problem here.
Why, then, are risks high in West Africa? The major problem with control is that there is no functioning health system in most of sub-Saharan Africa. Not only are resources poor, but they are uncoordinated. What we really need is a helicopter drop of trained people.
The health system was especially poor in Liberia. You have issues like no supply of gloves to hospitals. Few doctors even to begin. Had the epidemic started in Ethiopia or even Uganda, the probability of it getting out-of-control epidemic would have been much less--Uganda, for example, has excellent hospitals, good supply, competent public health, and even a decent medical school. Just how bad Liberia’s system was should not be underestimated.
Secondary problems in West Africa are that: (1) Ebola can be difficult to diagnose; (2) Ebola is easily transmitted in cultures where people are expected to die at home in non-sterile and non-antiseptic environments; and (3) Ebola is easily transmitted in cultures where people--still infectious--are prepared for burial at home.
The economic cost of Ebola to the countries most affected is and will be immense, in addition to the loss of life.
In general, we are not well-equipped for some types of global pandemics. The advance from years of nothing on AIDS to stopping SARS in its tracks was immense. But it relies on functional organizations--and we did and do not have any such in the affected West African areas.
Nevertheless, it is surprising how unprepared the WHO and international community was for for this kind of emergency. The WHO is a UN organization, and it is a mistake to expect much bureaucratic competence of UN organizations. Nevertheless, the international response should have been swifter and more effective.
The Ebola crisis is eating up resources in West Africa that are desperately needed in other areas of health and society. It's not so much money as people--doctors pulled in from caring for pregnant women to manage Ebola patients, NGOs working on violence reduction in Sierra Leone now counting the dead. Really sad. We are likely to lose most of the health-care professionals in the most severely affected sub-Saharan African countries.
The importance of investing in strong public health infrastructure--which is both massively underfunded and very cost-effective compared with acute care.
Courtesy of Chris Blattman, David Cutler, Ann Marie Marciarille, and others...
Paul Krugman: Those Lazy Jobless - NYTimes.com Last week John Boehner, the speaker of the House, explained...
...People, he said, have “this idea” that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.” Holy 47 percent, Batman! It’s hardly the first time a prominent conservative has said something along these lines.... But it’s still amazing — and revealing — to hear this line being repeated now. For the blame-the-victim crowd has gotten everything it wanted: Benefits, especially for the long-term unemployed, have been slashed or eliminated. So now we have rants against the bums on welfare when they aren’t bums — they never were — and there’s no welfare. Why? First things first: I don’t know how many people realize just how successful the campaign against any kind of relief for those who can’t find jobs has been. But it’s a striking picture.... The total value of unemployment benefits is less than 0.25 percent of G.D.P., half what it was in 2003, when the unemployment rate was roughly the same as it is now.... Strange to say, this outbreak of anti-compassionate conservatism hasn’t produced a job surge.... Why is there so much animus against the unemployed, such a strong conviction that they’re getting away with something, at a time when they’re actually being treated with unprecedented harshness?...
Dean Baker: Influencing the Debate from Outside the Mainstream: Keep it Simple: "If people working outside of the mainstream of the profession are going to have any impact...
...on economic policy debates in the United States it is essential that they understand the forum in which the debate is taking place. This is not a contest of ideas where the best arguments and evidence win out. If we are talking about a debate within the economics profession, think of debating the morality of abortion with the pope in front of the College of Cardinals. That is pretty much what it is like to try to challenge any of the main precepts of economics within the economics profession.
Q: How much of regional variation in real health-care (Medicare) costs is due to the fact that some regions have sicker populations than others?
A1 (micro): If we examine how much sicker people in different regions are, and multiply the difference in average sickness by how much extra treatment sicker people get on average, we get an incremental regional R2 ~ 0.1: an extra 10%-points of the regional real cost variation can be accounted for because some regions are sicker than others.
A2 (macro): If we just regress regional real costs on some plausible indicator of regional average sickness, we get an incremental regional R2 ~ 0.5: an extra 50%-points of the regional real cost variation can be accounted for because some regions are sicker than others. READ MOAR
Every day I get down on my knees and thank The One Who Is that I did not, back in 1982, and thereabouts sign up for the Republican team--as a liberal, technocratic Republican. I could easily have done it: Democrats back were as likely as not to be philosophically opposed to market-based mechanisms. Those of us of a neoliberal bent who back then thought that often market-based mechanisms were the best means of achieving social-democratic ends were not as unwelcome in the Democratic Party as it stood at the end of the 1970s as reality-based technocrats are in today's Republican Party. But it was clear in the early 1980s that the Democratic Party's activist base were not about to start slaughtering the fatted calf for us--let alone the ring, sandals, merriment, and best robe part. Besides, back then the Democratic Party's deformations back then seemed to be something that smart economists could help fix. The Republican Party's deformations back then, not so much.
Daniel Kuehn administers the smackdown:
Daniel Kuehn: Facts & Other Stubborn Things: Kuehn Smackdown Watch: Bastiat Edition" "Brad DeLong thinks that Bastiat would be a modern liberal...
...(I had said the other day that he likely would be a libertarian but that Smith, Jefferson, Locke, Paine, etc. were classical liberals that would very plausibly be left-liberals today). I think he makes a good case. I've discussed many of the passages he presents to make the claim here, and I think they are important for libertarian fans of Bastiat especially to be aware of. And anyone that's followed the blog for a few years know that I think most modern invocations of the broken window are God-awful and that Bastiat's understanding of general equilibrium is far more sophisticated and closer to people like me or Krugman who make important distinctions between stocks and flows (wealth and income) in arbitrating the effects of, for example, a disaster.
I would only say this in my defense (because I still think he would be more of a libertarian, simply due to the center of gravity of his commentary): he would certainly be more of a libertarian in the vein of Hayek of the Constitution of Liberty or Law, Legislation, and Liberty than a libertarian like Bob Murphy (for example).
Should be good:
Stephanie Kelton, Joseph Haslag, Mike Shanin: The Economy: Does More Government Help or Hurt? | Kansas City Public Library:
How much does the government really know about people’s wants and needs? And is there a clear market failure that policy can address? A back-and-forth expression of conflicting views spills into this event featuring Stephanie Kelton, chair of the University of Missouri-Kansas City’s Department of Economics, and University of Missouri economics professor Joseph Haslag, who will discuss the government’s proper role in the economy and take audience members’ written questions. Mike Shanin, who leads the weekly roundtable of conservatives and liberals on KCPT-TV’s Ruckus, will moderate.
Co-sponsored by the Jobs Now! Coalition and the Show-Me Institute.
Over at Equitable Growth: John Mearsheimer is only one of a surprising number claiming that the current crisis in Ukraine is predominantly the U.S.'s, and NATO's, and the Ukraine's fault:
John Mearsheimer: How the West Caused the Ukraine Crisis: Why the Ukraine Crisis Is the West’s Fault: "The United States and its European allies share most of the responsibility...
...The taproot of the trouble is NATO enlargement.... For Putin, the illegal overthrow of Ukraine’s democratically elected and pro-Russian president--which he rightly labeled a “coup”--was the final straw.... Realpolitik remains relevant--and states that ignore it do so at their own peril. U.S. and European leaders blundered in attempting to turn Ukraine into a Western stronghold on Russia’s border....
Soviet leaders... and their Russian successors did not want NATO to grow any larger and assumed that Western diplomats understood their concerns. The Clinton administration evidently thought otherwise.... The first round of enlargement... 1999... the Czech Republic, Hungary, and Poland. The second... 2004... Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia. Moscow complained bitterly.... The alliance considered admitting Georgia and Ukraine.... Putin maintained that admitting those two countries to NATO would represent a “direct threat” to Russia.... READ MOAR
The extremely thoughtful Adrianna Macintyre looks down the Mississippi:
Adrianna Macintyre: GAO slams HHS over Arkansas’s Medicaid expansion budget: "On Monday, the Government Accountability Office issued a report...
...taking HHS to task for failing to assure budget neutrality in Arkansas’s Medicaid expansion, which uses Medicaid dollars to fund enrollment in private plans through the state exchange. Excerpted....
HHS did not ensure budget neutrality. Specifically, HHS approved a spending limit for the demonstration that was based, in part, on hypothetical costs—significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program—without requesting any data to support the state’s assumptions.... The 3-year, nearly $4.0 billion spending limit that HHS approved for the state’s demonstration was approximately $778 million more than what the spending limit would have been if it was based on the state’s actual payment rates for services provided to adult beneficiaries under the traditional Medicaid program.
Ian Millhiser: Gov. Bobby Jindal’s Bizarre Scheme To Stop His Own Education Plan By Suing The Obama Administration: "Louisiana Gov. Bobby Jindal (R) actively pushed for [the CommonCore] 2012 law...
...Recently, however, Jindal decided that he actually opposes Common Core, although he’s not been successful in convincing White, the state education board or the state legislature to join him in opposition. So Jindal... is suing the Obama Administration in federal court. If you are confused, you should be. Louisiana’s decision to embrace Common Core standards was... made by Louisiana state officials and Louisiana state lawmakers. One of them was Bobby Jindal....
The Obama Administration... administer[s]... programs... which offer money to states... [in the] Common Core.... The crux of Jindal’s lawsuit, however, is that the grant programs... violate the Constitution and federal law because they force Louisiana to enter into an entirely voluntary program that it did, in fact, enter into voluntarily.... This claim... is false...
One that the intelligent and eminent Justin Fox got wrong, not so much at the time but prospectively. The bad actors had a great deal of influence on policy after September 2009…
From the archives: five years ago:
Paul Krugman tells how economists got it all wrong: the one big issue I have with the piece is that, while economists certainly got lots of things wrong before the crisis (as did almost all of us), many members of the profession have acquitted themselves pretty well since things turned really ugly last year. Krugman goes on and on about the "freshwater" economists (at the Universities of Chicago, Rochester and Minnesota) and their crazy ideas about perfect markets. But what's telling is that the hardcore freshwaterites have had almost no impact on economic policy for the past year—neither in the Bush months or the Obama ones. Sure, Nobelist Ed Prescott, a former freshwater economist who now teaches in Phoenix and thus should probably be described as a no-water economist, made the statement that:
"I don't know why Obama said all economists agree on [the need for a stimulus bill]," Prescott said. "They don't. If you go down to the third-tier schools, yes, but they're not the people advancing the science."
Unless you believe that pretty much anyplace other than Arizona State University is a third-tier school, this is patently untrue, evidence of the extreme isolation of the remaining true believers in rational expectations and real business cycles and other such elegant but profoundly unhelpful macroeconomic theories developed since the 1960s.
Over at Equitable Growth: My four biggest intellectual mistakes over the past decade--and all four are huge--are:
My belief from 2003-2007 that the serious threat to the American financial system came from universal banks that had used their derivatives books to sell lots of unhedged puts against the dollar rather than universal banks accepting lots of house-value puts without doing any due diligence about the quality of the underlying assets.
My fear from 2008-2010 that although nominal wages were downward-sticky they were not that downward-sticky and we were on the point of tipping over into absolute deflation.
My confidence in 2009-2010 that the major policymakers--Bernanke, Obama, and what turned out to be Geithner--both understood how to use the ample monetary, fiscal, banking, and housing finance tools at their disposal to effectively target nominal GDP and understood the urgency of doing whatever it took to return nominal GDP to its pre-2008 growth path.
My failure to even conceive that "Washington" starting in 2010 could possibly be sufficiently happy with the pace of recovery that serious measures to further boost demand would vanish from the agenda.
(1) and (2) and (3) I have written about elsewhere. Today we have a piece of (4) to deal with--why do so many people prioritize low-pressure economy policies that they regard as the only safeguard of hard money over economic recovery? Paul Krugman constitutes himself the συμποσιαρχ, decides that we will be drinking κρασί ακρατος, and poses the question: READ MOAR
OK. It's time to try to pull everything together on the Red States, the Republican Party, ObamaCare, "repeal and replace", and starting at the top of the evil tree and hitting every branch all the way down...
Let's start with a catch from Austin Frakt last January:
Austin Frakt: These two tweets tell you all you need to know about the politics of health reform: January 29, 2014 at 12:30 pm: Two of Avik Roy’s tweets yesterday...
...pertaining to the recently released Senate GOP health reform plan (the Patient CARE Act [of Burr (R-NC) Coburn (R-OK), and Hatch [R-UT) and discussion thereof, are very revealing.
@matthewherper: @Avik it still seems to me that this is going to hit a lot of voters harder. Even if it makes economic sense.
@Avik: .@matthewherper By repealing and replacing Ocare, the plan is more disruptive than it needs to be. But repeal needed for Right viability.
And, of course, it had no right-wing viability at all even so.
...But not only was Hamilton more progressive for his time, he has lessons for our response to climate change. Two hundred years ago, Alexander Hamilton was mortally wounded by then Vice President Aaron Burr in a duel at Weehawken, New Jersey. Their conflict, stemming from essays Hamilton had penned against Burr, was an episode in a larger clash between two political ideologies: that of Thomas Jefferson and the anti-Federalists, who argued for an agrarian economy and a weak central government, versus that of Hamilton and the Federalists, who championed a strong central state and an industrial economy.
$423 billion over the next decade if the red states continue to reject Medicaid expansion. This won't be enough of a cash shortfall to send the red states into a near-permanent recession or stagnation--it's only 0.5% or so of gross economic product over the next decade. But it will hurt, and hurt a lot: the right multiplier to apply here is the Moretti long-run geographic multiplier of 6, which means that economic activity in red states in a decade will be 3% less and in blue states 1.5% more than in the baseline.
Richard Mayhew: Rejecting free money is expensive: "Forbes Magazine is using little words to explain to its readers...
...that hospitals in states that are rejecting Medicaid Expansion are hurting:
Over at Equitable Growth: Over in Yurp:
Paul de Grauewe: "[European policymakers] are doing everything they can...
...to stop recovery taking off, so they should not be surprised if there is in fact no take-off. It is balanced-budget fundamentalism, and it has become religious. We know from the 1930s that if everybody is trying to pay off debt and the government then deleverages at the same time, the result is a downward spiral. The rigidities in the European economy have been there for ages. They have absolutely nothing to do with the problem we face today...
Mario Draghi said differently at Jackson Hole last weekend. READ MOAR
John Maynard Keynes (1926): The End of Laissez-Faire } "Panarchy - Panarchie - Panarchia - Panarquia - Παναρχία - 泛无政府主义: I The disposition towards public affairs...
...which we conveniently sum up as individualism and laissez-faire, drew its sustenance from many different rivulets of thought and springs of feeling. For more than a hundred years our philosophers ruled us because, by a miracle, they nearly all agreed or seem to agree on this one thing. We do not dance even yet to a new tune. But a change is in the air. We hear but indistinctly what were once the clearest and most distinguishable voices which have ever instructed political mankind. The orchestra of diverse instruments, the chorus of articulate sound, is receding at last into the distance.
H.G. Wells: “It seems to me that I am more to the Left than you, Mr Stalin”: "In 1934, Wells arrived in Moscow...
...to meet a group of Soviet writers. While there Stalin granted him an interview.... His deferential conversation was criticised by J M Keynes and George Bernard Shaw, among others, in the New Statesman.
Wells: I am very much obliged to you, Mr Stalin, for agreeing to see me. I was in the United States recently. I had a long conversation with President Roosevelt and tried to ascertain what his leading ideas were. Now I have come to ask you what you are doing to change the world...