July 2010
links for 2010-07-25
-
B: "If authenticity mattered Billy Ray Cyrus, born into a Pentecostal family in KY, would be a much better musician than Ingram Cecil Connor III, better known as Gram Parsons, who was driven to prep school by a chauffeur, but I’ll be damned if Hickory Wind isn’t an infinitely better song than Achy Breaky Heart."
Department of Complete 180 Degree Intellectual Reversals...
I haven't seen anything this big since John Yoo's pivot to his current position from his 2000 claim that Bill Clinton had exceeded his powers as commander-in-chief by placing U.S. forces under a British NATO general...
Niall Ferguson, New York Times December 12, 2003:
President Both: Bush Can Have Both Guns and Butter, At Least for Now SECTION: Section 4; Column 1; Week in Review Desk; Pg. 1 LENGTH: 1640 words: GUNS or butter: this is the choice historians conventionally say that governments face. Either they can build up their military capabilities to wield power abroad, or they can aim to increase their citizens' living standards.... The Bush administration is currently engaged in an audacious -- some would say reckless -- experiment to disprove this theory. To judge by his actions, President Bush's response to the question "Guns or butter?" is: "Thanks, I'll take both." This, in short, is the guns and butter presidency.
It's generally a safe assumption that, in politics as in life, you can't have it both ways. But there are exceptions -- provided you get the timing right. Today's economic circumstances mean that, in the short run, the administration can actually afford to spend billions simultaneously on conquest and on consumption.... All Mr. Bush needs to stand a good chance of re-election is 12 more months of guns and butter. In short, President Bush's second term depends on his being President Both.... In the runup to Thanksgiving... approval of a $401 billion military appropriations package for next year, the biggest ever... approval of a Medicare overhaul that increases the spiraling costs of the system by adding a drug prescription benefit. But these are only two parts of a wider guns and butter policy....
To critics of the White House, the rapid shift of the federal budget from surplus to deficit is a sign of profligacy -- part of what they would call the Enronization of public finance.... [R]ecall that the United States has broken the guns or butter rule before... President Ronald Reagan.... The crucial point, of course, is that in the short term at least, fiscal policy is not a zero-sum game: a government can easily increase military spending without reducing consumer demand if it finances the higher spending by borrowing rather than taxation (and provided taxpayers do not view borrowing as future taxation and reduce consumption in anticipation)....
[Bush] inherited an economy on the brink of a deflationary crisis.... Unlike Herbert Hoover, however, Mr. Bush did not respond to the crisis with spending cuts and tax increases -- quite the reverse. The tax cuts of his presidency... have had at least some countercyclical impact.... [T]he lessons of the Great Depression have been learned not just in the Federal Reserve... [but] in the Oval Office. That's why the downturn of 2001 was so shallow and short.... [F]alling interest rates have drastically lowered the cost of servicing the federal debt.... [T]he Bush administration has considerable fiscal room for maneuver....
An interesting question is why this fiscal black hole is not causing more alarm for financial markets.... So powerful are the deflationary forces today... that Washington can splurge on its military and social services with only a modest impact on expectations of inflation. It helps that the United States has a unique advantage over all other sovereign borrowers: central banks and other institutions around the world need to hold dollars as the currency most frequently used in international transactions.... America can count on selling large amounts of dollar assets, like 10-year Treasury bonds, to foreigners -- very large amounts.... The only imminent danger is that the dollar could slide sharply against Asian currencies, as it has against the euro. But the chief losers then would be the Asians...
Courtesy of James Gibney.
This Does Seem to Me to Be Another Unforced Obama Administration Error...
Sigh. It is very hard to do these things without your staff behind you, your briefing books at your right hand, and time to think. But Tim did not cover himself in glory:
'This Week' Transcript: Geithner: TAPPER: Job creation has not gone as well as you hoped. What more can you do? I know there's this small business lending initiative. What more can you do given the lack of appetite on Capitol Hill for any spending programs? Any more stimulus?
GEITHNER: Well you know, the President's proposed a very strong package of help for small businesses which you just referred to. He'd support giving more support to states so they can keep teachers in the classroom.
TAPPER: Fifty billion dollars in emergency spending but the Congress has not acted on that.
GEITHNER: They haven't yet, but we can (inaudible) case for doing it. They're going to, we're going to keep at that. But right now, the best thing the government can do in addition to those things, is help create the conditions for the private sector to start to invest in hiring again. Now, we've seen six months of positive job growth by the private sector. That's pretty good.
TAPPER: By the private sector.
GEITHNER: Pretty good this early in a recession.
TAPPER: Although you count in the public sector with the layoffs and the census jobs.
GEITHNER: But only because of census. But you know, what matters is -- is the private sector starting to hire people, add back hours and that's what's critical. And you're seeing that happen now. Now we want it -- we want to see it happen at a faster pace. But I think most people understand that you know, this was a deep crisis. The scars ran very deep. Devastating damage. It's going to take time to repair that damage, take time to grow out of this. But we're making progress...
Department of "Huh?!" (Has the Obama Administraton Lost Its Mind? Department)
Mark Thoma is, politely, puzzled:
Reverse Psychology?: Instead of a series of op-eds by Christina Romer, Larry Summers, Jared Bernstein and other members of the administration making a strong, strong case for more stimulus -- particularly that devoted to job creation -- along with the president himself making the case to the nation, the appearance of key administration officials on Sunday talk shows to bolster the effort, and so on, the administration has decided to try and sell a recovery that hasn't yet taken hold.
Thus, instead of a much needed and impressive effort to move Congress to action, or at least make clear to voters who is and who isn't trying to help those struggling with the recession, here's Timothy Geithner saying it's time for the government to back off because a solid recovery is underway:
Treasury Secretary Timothy Geithner said the economy has now recovered sufficiently for government to begin to make way for private business investment.... Mr. Geithner’s comments on Sunday, which echo previous sentiments expressed by President Barack Obama, reflect a turning point in the government response to the worst economic downturn since the Great Depression, a period marked by deep federal intervention in the financial, housing, auto and other industries...
The message is that the administration is pulling back, and maybe even starting to balance the budget because good times are just around the corner:
“We need to make that transition now to a recovery led by private investment,” Mr. Geithner said Sunday on NBC’s “Meet the Press.” Mr. Geithner hit two Sunday talk shows, delivering the Obama administration’s message that the economy was recovering...
I don't understand this strategy. The election is not that far way. If unemployment continues to be a problem, and it looks like it will, saying that things are fine and recovery is just around the corner will backfire.
I would put it much less politely: have Tim Geithner and Barack Obama lost their minds? The Administration's mid-session review--released last week--projects that the unemployment rate will rise in the next several months and will be at 9.3% in February 2011. It projects that Q4/Q4 real GDP growth will be 2.9% this year--and I don't see how we are going to get there with a 2.7% growth rate in the first quarter, a likely 2.0% growth rate in the second quarter, and with the tracking third-quarter growth aret at 2.9%. We would need 4.0% growth in the fourth quarter of this year. Nor do I understand where the 1.7% decline in unemployment over 2011 is supposed to come from: a simple Okun's Law coefficient of 2 would suggest that we need 2 x 1.7 + 2.6 = 6% real GDP growth to generate such a decline.
According to Mark Zandi, in the fourth quarter of this year the phase-out of the ARRA is likely to shave 0.3% off the real GDP growth rate. in 2011, the contractionary effects of the ARRA phase-out on the quarterly growth rates are likely to be -0.8%, -1.2%, -0.7%, and -0.2%.
It sure ain't morning in America. Maybe I need to go back and read Geithner's transcripts from this morning to see if the MSM is misrepresenting what he said...
Martin Wolf Makes the Case that America's Future Depends on the Destruction of the Republican Party
Like Paul Krugman, Martin Wolf is (almost) always right. And as in the case of Paul Krugman, given that Martin Wolf is (almost) always right I really really really wish he would be a little more optimistic. Perhaps if he drank more expensive wines at dinner?
Here Martin makes the case that America's future depends on the rapid destruction of the Republican Party and its replacement by an alternative opposition party to the Democrats:
Martin Wolf: I want to examine what is going on... inside the Republican party.... My reading of contemporary Republican thinking is that there is no chance of any attempt to arrest adverse long-term fiscal trends should they return to power. Moreover, since the Republicans have no interest in doing anything sensible, the Democrats will gain nothing from trying to do much either. That is the lesson Democrats have to draw from the Clinton era’s successful frugality, which merely gave George W. Bush the opportunity to make massive (irresponsible and unsustainable) tax cuts.... Indeed, nothing may be done even if a genuine fiscal crisis were to emerge. According to my friend, Bruce Bartlett, a highly informed, if jaundiced, observer, some “conservatives” (in truth, extreme radicals) think a federal default would be an effective way to bring public spending they detest under control....
To understand modern Republican thinking on fiscal policy, we need to go back to perhaps the most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: “supply-side economics”. Supply-side economics liberated conservatives from any need to insist on fiscal rectitude and balanced budgets. Supply-side economics said that one could cut taxes and balance budgets, because incentive effects would generate new activity and so higher revenue.... Supply-side economics... allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?... [T]he Republicans were transformed from a balanced-budget party to a tax-cutting party. This innovative stance proved highly politically effective....
[T]he theory that cuts would pay for themselves has proved altogether wrong. That this might well be the case was evident: cutting tax rates from, say, 30 per cent to zero would unambiguously reduce revenue to zero. This is not to argue there were no incentive effects. But they were not large enough to offset the fiscal impact of the cuts.... Indeed, Greg Mankiw, no less, chairman of the Council of Economic Advisers under George W. Bush, has responded to the view that broad-based tax cuts would pay for themselves, as follows:
I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.
Indeed, he has referred to those who believe this as “charlatans and cranks”. Those are his words, not mine, though I agree. They apply, in force, to contemporary Republicans, alas....
The evidence shows, then, that contemporary conservatives (unlike those of old) simply do not think deficits matter.... But this is not because the supply-side theory of self-financing tax cuts, on which Reagan era tax cuts were justified, has worked, but despite the fact it has not.... So, when Republicans assail the deficits under President Obama, are they to be taken seriously?... Yes, they are politically interested in blaming Mr Obama for deficits.... But no, it is not deficits themselves that worry Republicans, but rather how they are caused: deficits caused by tax cuts are fine; but spending increases brought in by Democrats are diabolical, unless on the military. Indeed, this is precisely what John Kyl (Arizona), a senior Republican senator, has just said:
[Y]ou should never raise taxes in order to cut taxes. Surely Congress has the authority, and it would be right to — if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending, and that’s what Republicans object to. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans
What conclusions should outsiders draw about the likely future of US fiscal policy? First, if Republicans win the mid-terms in November, as seems likely, they are surely going to come up with huge tax cut proposals (probably well beyond extending the already unaffordable Bush-era tax cuts). Second, the White House will probably veto these cuts, making itself even more politically unpopular. Third, some additional fiscal stimulus is, in fact, what the US needs, in the short term, even though across-the-board tax cuts are an extremely inefficient way of providing it. Fourth, the Republican proposals would not, alas, be short term, but dangerously long term, in their impact.
Finally, with one party indifferent to deficits, provided they are brought about by tax cuts, and the other party relatively fiscally responsible (well, everything is relative, after all), but opposed to spending cuts on core programmes, US fiscal policy is paralysed. I may think the policies of the UK government dangerously austere, but at least it can act.
This is extraordinarily dangerous. The danger does not arise from the fiscal deficits of today, but the attitudes to fiscal policy, over the long run, of one of the two main parties. Those radical conservatives (a small minority, I hope) who want to destroy the credit of the US federal government may succeed. If so, that would be the end of the US era of global dominance. The destruction of fiscal credibility could be the outcome of the policies of the party that considers itself the most patriotic.
In sum, a great deal of trouble lies ahead, for the US and the world.
Where am I wrong, if at all?
Nowhere. He is not wrong.
What America Is
Cogitamus:
President George Washington on religious tolerance:
Gentlemen:
While I received with much satisfaction your address replete with expressions of esteem, I rejoice in the opportunity of assuring you that I shall always retain grateful remembrance of the cordial welcome I experienced on my visit to Newport from all classes of citizens. The reflection on the days of difficulty and danger which are past is rendered the more sweet from a consciousness that they are succeeded by days of uncommon prosperity and security. If we have wisdom to make the best use of the advantages with which we are now favored, we cannot fail, under the just administration of a good government, to become a great and happy people.
The citizens of the United States of America have a right to applaud themselves for having given to mankind examples of an enlarged and liberal policy—a policy worthy of imitation. All possess alike liberty of conscience and immunities of citizenship. It is now no more that toleration is spoken of as if it were the indulgence of one class of people that another enjoyed the exercise of their inherent natural rights, for, happily, the Government of the United States, which gives to bigotry no sanction, to persecution no assistance, requires only that they who live under its protection should demean themselves as good citizens in giving it on all occasions their effectual support.
It would be inconsistent with the frankness of my character not to avow that I am pleased with your favorable opinion of my administration and fervent wishes for my felicity. May the children of the stock of Abraham who dwell in this land continue to merit and enjoy the good will of the other inhabitants—while every one shall sit in safety under his own vine and fig tree and there shall be none to make him afraid. May the father of all mercies scatter light, and not darkness, upon our paths, and make us all in our several vocations useful here, and in His own due time and way everlastingly happy.
G. Washington
August 18, 1790
Tom Levenson on the Atlantic’s Megan McArdle
Some more powerful medications are clearly called for:
Why Friends Don’t Let Friends Cite The Atlantic’s “Business and Economics Editor”: Further to the Megan McArdle is Always Wrong chronicles: McArdle seeks to discredit Elizabeth Warren as a potential leader of the new Consumer Finance Protection Agency to be set up under the just-passed financial reform bill. To do so she tries to impugn both the quality and integrity of Warren’s scholarship, and she does so by a mix of her usual tricks... falsehoods... redacted descriptions... descriptions... that are inflammatory — and clearly wrong, in ways she seems to hope no one will bother to check.... [Y]ou find McArdle doing the respectable-society version of the same approach to argument that Andy Breitbart has just showed us can have such potent effect.
To see what I mean, you have to follow through two steps: how McArdle constructs her picture of a feckless, partisan and dishonest Warren — and then how she generalizes from it.... I’m going to focus on just one example where McArdle asks us to believe that her argument is strong and supported by the literature — without quite fessing up to what her supporting material actually says. As part of her sustained campaign to deny the significance of medical bankruptcy in the US, she writes,
A pretty convincing paper argues that the single best predictor of bankruptcy is simply how much debt you’ve accumulated–not income, job loss, divorce, or what have you. People who declare bankruptcy tend to have nicer stuff than others at the same income level.
The problem here is that the paper does not actually say quite what McArdle implies it does. She’s mastered here the trick Sally Field played in Absence of Malice — she’s managed to come up with a sentence that is accurate... but not truthful.... UC Davis finance prof, Ning Zhu... [writes] ”households with medical conditions are twice more likely to file for bankruptcy (33.5 percent) than households that do not have medical conditions (14.8 percent)...” And this: “Having medical problems increases the households’ filing probability by 7.6 percent and one standard deviation of increase in employment tenure is associated with an increase of 9.2 percent in the filing probability. Such changes represent 48.40 and 58.60 percent deviation from the baseline probability...” And this “our results provide qualitative support for both the adverse event and the over-consumption/strategic filing explanations.”
To be fair Zhu concludes that overconsumption — spending too much on housing, cars and credit cards account for more of the total burden of bankruptcy than medical events, divorce or unemployment, as McArdle wrote. But as McArdle completely failed to acknowledge, Zhu does so while using somewhat more stringent standard for counting medical expenses as a factor in bankruptcy than other scholars.... In other words: McArdle correctly describes one conclusion of this paper in a way that yields for its readers a false conclusion about what the paper itself actually says. And look what that false impression implies: if medical bankruptcy is a trivial problem, society-wide, then Warren can be shown to be both a sloppy scholar and, as McArdle more or less explicitly says, a dishonest one as well....
[W]hat we read in McArdle here is a genteel excursion into Andrew Breitbart territory... she misleads by contraction, by the omission of necessary context, by simply making stuff up.... And like Breitbart, she does so... first is simply to damage Elizabeth Warren as an individual, to harm her career prospects. Hence ad hominem stuff like this:
Her work gets so much attention because it comes from a Harvard professor. And this isn’t Harvard caliber material–not even Harvard undergraduate.
Which neatly sets up this punch line:
..this woman is now under consideration to head a powerful new agency. If this is how she evaluates data, then isn’t that going to hamper her in making good policy?...
McArdle is much more housebroken than many of her fellow travelers of course. She knows which fork to use (or perhaps better, that particular ocean margin from which the right people secure their salt). People who would not dream of taking Breitbart seriously still quote McArdle as a seemingly respectable source.... Caveat Lector.
Liveblogging World War II: July 25, 1940
The Battle of Britain:
World War II Day-By-Day: Day 329 July 25, 1940: Battle of Britain Day 16. Another fine day for flying. Waves of 20-40 German aircraft attack shipping and naval bases around Dover. Ju87s and motor torpedo boats attack 21 merchant vessels in Convoy CW8 in the Dover Strait, sinking steamers Corhaven, Polgrange (2 killed), Leo (6 killed), Henry Moon (1 dead) & Portslade. Germans lose 14 aircraft. RAF loses 4 Spitfires. Attacks on Portsmouth, Poole and Portland, on the South Coast, cost Luftwaffe 7 more aircraft (2 RAF fighters shot down).
Jonathan Bernstein on Why We Really Don't Need Our Current Press Corps
Pithy:
Twitter / Jonathan Bernstein: So what exactly would it t ...: So what exactly would it take to get reporters to stop calling Evan Bayh a fiscal conservative? http://ow.ly/2gapE
130 Years of the Graham Ratio
Mellon Pulled the Whistle...
Hoisted from Comments: Ronald Buck:
Ronald Buck wrote: The ditty form the Great Depression:
Mellon pulled the whistle
Hoover rang the bell
Wall Street gave the signal
And the country went to hell.Can be adapted to this situation:
Trichet pulled the whistle
Merkel rang the bell
The G20 gave the signal
And Europe went to hell
More on Keynes In Asia
Paul Krugman:
Keynes In Asia: In early 2009, the IMF estimated the size of stimulus programs.... [I]n the face of the crisis, Germany’s actions were very different from its rhetoric; it was pretty Keynesian in the crunch.... Korea and China both engaged in much more aggressive stimulus than any Western nation — and it has worked out well.
Part of the reason Asians felt empowered to do this was the fact that during the good years they did what you’re supposed to do. Keynesian economics is often caricatured as a policy of deficit spending always; but as I’ve tried to explain, deficit spending is what you should do only when the economy is depressed and interest rates are at or near the zero lower bound. When times are good, you should be paying debt down. Pilling:
The scale of Asia’s stimulus may have matched, even surpassed, the west. But the context has been entirely different. Asian governments had plumped-up their fiscal cushions after the 1997 crisis, building a formidable pool of reserves. Such “prudence” meant, rather bizarrely, that poor countries such as China were foregoing spending and investment in order to facilitate rich foreigner’ binge-buying. But it also meant that, when the crunch came, they had the wherewithal to spend.
So that was the fiscal sin of the Bush years: deficits continued even when times were good; there was no effort to prepare for future shocks.
And don’t say “what can you expect from politicians”. The ratio of federal debt to GDP (pdf) fell from 49 percent in fiscal 1993 to 33 percent in fiscal 2001; it could have continued on that downward path. But candidate George W. Bush declared that if the government is running a surplus, it means that it’s collecting too much in taxes; Alan Greenspan told Congress that we had to cut taxes to avoid paying off our debt too fast; then came an unfunded war, and the rest is history.
Despite all that, we actually did have enough room to take strong fiscal action. But we didn’t. And we’ll spend at least the next decade paying the price for the combination of irresponsibility when times were good and irresolution when they were bad.
Liveblogging World War II: July 24, 1940
The Battle of Britain:
The main activity was centred in the Channel. A combat involving approximately 90 aircraft took place at midday off Deal and North Foreland. Convoys and shipping were the main objectives. A few raids penetrated inland and dropped bombs without inflicting any serious damage except near Glasgow where a printing works was practically demolished.
links for 2010-07-23
-
TD: "Federal Reserve Chairman Ben Bernanke's Congressional testimony should leave little doubt about the stance of monetary policymakers. Swift reaction came from Mark Thoma, Paul Krugman, Scott Sumner, and Joe Gagnon. Simply put, an incipient second half slowdown and fears of an outright double dip are insufficient to prod additional action on the part of the Federal Reserve. Policymakers are comfortable with the idea that neither objective of the dual mandate will be met in the foreseeable future. And even should the economy deteriorate such that they are forced into additional action, the likely policy candidates are woefully insufficient to meaningfully change the path of economic activity."
-
FS: "The nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau seems to be a foregone conclusion at this point. Warren and the large team of Warren enthusiasts have been pushing her nomination aggressively, to the point at which no one in the Obama administration is going to want to face the political firestorm associated with not nominating her. This is no horserace: Warren’s running only against a vague conception of not-Warren, rather than against a flesh-and-blood Michael Barr or anybody else."
-
JW: "Double Star may well be Heinlein’s best novel. It’s generally a useless argument to try to determine what is the very best, but even those people leaping up at this very moment to push the “comment” button to shout out names of other books would probably agree that this one is certainly a contender. It dates from when a book could be short and still be respected—it won a Hugo, but it’s barely an afternoon’s read. I have always loved it because it does everything right."
Only Wonkette Can Deal with Today's Really Existing Republican Party
Josh Fruhlinger writes about Republican House leader John Boehner:
Wonkette: The Christian Science Monitor held some sort of confab on unemployment, and John Boehner insisted that... he does not want the unemployed ground up into hamburger per se. He made the following bumbling attempt at relating as a fellow human to America’s many unemployed, none of whom, we assume, were invited by the CSM to this little meeting:
I’ve got real empathy for those who are unemployed, as most of you know I’ve got 11 brothers and sisters. I know that three of my brothers lost their jobs, I’m not sure whether they’ve found jobs, yet, so I’ve got a lot of empathy for those caught in this economic downturn...
Ha ha, there are so many Boehners that he can’t even keep track of which ones are unemployed! Since John has a big-shot government job, couldn’t he find cushy gigs on his staff for some of his hobo brothers? No.... Anyway, this story about all his brothers and sisters answers a question that, according to Google, millions of Americans are asking: Yes, why is John Boehner orange?
Can This Possibly Be True?
David Goldman:
Most iPhone users love AT&T: 77% of iPhone owners say they'll buy another iPhone, compared to 20% of Android customers who say they'll buy another Android phone...
Unbelievable.
Europe’s Depression Is too Large
Paul Krugman writes:
Europe’s Gap: a huge gap has opened up between a reasonable estimate of potential output and actual output. Even if you believe that growth in Europe has picked up since the first quarter — and that the pickup will continue — it will take years to close that gap. The only way you could justify not doing more to promote growth is to assume that potential output has been drastically reduced by the crisis — and if you believe that, you should be working day and night to reverse that decline.
The idea that policy has done enough is just crazy.
Hoisted from Comments: "With Four Parameters I Can Fit an Elephant...
Joe Smith tells us about Johnny von Neumann on theory-mining:
Jean-Claude Trichet Rejects the Counsels of History: Joe Smith said...
Economists have none of that. The "economic principles" underpinning their theories are a fraud--not bedrock truths but mere knobs twiddled and tunes so that the right conclusions come out of the analysis.
John Von Neumann said: "With four parameters I can fit an elephant, and with five I can make him wiggle his trunk."
Any theory that requires fiddling with the parameters to make it work is no theory at all.
"There Is Little Debate in Asia About How Well [the Economic] Stimulus Has Worked..."
David Pilling:
Asia’s Keynesians take pride in prudence: [Asian] governments have been as bold as any in opening the fiscal sluices. One reason is the bitter memory of the 1997 Asian financial crisis when the International Monetary Fund imposed fiscal austerity on several Asian countries.... According to Fitch Ratings, fiscal stimulus packages as a percentage of gross domestic product amounted to 6.9 per cent for Vietnam, 7.7 per cent for Thailand, 8 per cent for Singapore, 13.5 per cent for China, and a whopping 14.6 per cent for Japan. Taiwan, with a relatively modest stimulus of 3.8 per cent, gave $100 spending vouchers to each of its 23m inhabitants, including convicts. The Singaporean government subsidised businesses that retained staff. In China, the mother of all stimulus packages funnelled $585bn of spending into the economy, and even more through directing state-controlled banks to increase credit....
Asian governments had plumped-up their fiscal cushions after the 1997 crisis, building a formidable pool of reserves. Such “prudence” meant, rather bizarrely, that poor countries such as China were foregoing spending and investment in order to facilitate rich foreigner’ binge-buying. But it also meant that, when the crunch came, they had the wherewithal to spend.
Unlike in the west, there is little debate in Asia about how well the stimulus worked. It has been spectacular. Asian output is well above pre-crisis levels. HSBC is predicting growth for Asia ex-Japan of 8.6 per cent this year.... Fears about unemployment have given way to concerns about labour shortages and spiralling wage demands. Thus the question in most of Asia is not whether to remove stimulus, but how fast. Asia is in orthodox territory, balancing well-trodden trade-offs between growth and inflation...
American Businesses Fear Not Taxes or Regulation But Rather a Lack of Demand
Ezra Klein:
Ezra Klein - Why businesses aren't hiring in two graphs: The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results.... As you can see, sales -- that is to say, demand for their products -- dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen...
Can't Anybody Play This Game?
David Dayen:
Twitter / David Dayen: Aron: Obama has confirmed ...: Aron: Obama has confirmed less judges in first year than at every time since 1952 #nn10
Is Nothing I Ever Wrote on Ezra Klein's Journolist Worth Pulling Out of Context and Misrepresenting?
I am somewhat offended...
Surprise, Surprise!
Dana Goldstein:
Twitter / American Prospect: RT @AdamSerwer: That study ...: RT @AdamSerwer: That study on college admissions really didn't say what Douthat said it said http://bit.ly/ckhN9Y
Paul Krugman on Jean-Claude Trichet and The Invisible Bond Market Vigilantes
Paul Krugman:
Jean-Claude And The Invisibles: One of these days someone will write a sequel to Liaquat Ahamed’s Lords Of Finance... about the men who helped turn the financial crisis of 2008 into a lost decade of high unemployment and deflation. And Jean-Claude Trichet will clearly be among the main protagonists. His column in today’s FT is almost a caricature of the austerity genre. Trichet’s explanation of why we must fear the invisible bond vigilantes would be funny if it didn’t have such serious consequences:
In extraordinary times, the economy may be close to non-linear phenomena such as a rapid deterioration of confidence among broad constituencies of households, enterprises, savers and investors. My understanding is that an overwhelming majority of industrial countries are now in those uncharted waters, where confidence is potentially at stake. Consolidation is a must in such circumstances.
Ask yourself, what evidence does he present in that passage? None, because the reality is that bond markets don’t look at all worried. What model does he refer to? None; the vague reference to “non-linear phenomena” is a giveaway that there’s no there there. So what are we to rely on for his definitive judgment that “consolidation is a must”? His “understanding” that “confidence is potentially at stake.” This is a basis for policy that affects hundreds of millions of workers?... [T]he message is now free-standing, relying neither on theory nor on evidence: austerity now now now.
A Very Interesting Question: EPA Regulation of Carbon Dioxide Emissions
Duncan Black asks:
Curious : It isn't something I follow closely generally, but I am a bit confused why the looming specter of EPA regulation hasn't melted some opposition to a decent climate/energy bill.
Exactly. If I were the energy industry or an energy-using industry, I would be absolutely desperately lobbying full-time for a cap-and-trade system rather than EPA-style regulation of carbon dioxide.
I suspect that the energy and energy-using industries are confident that the EPA will shy at the jump--that Obama doesn't want to get into a fight. But I don't see why they are so confident.
Jean-Claude Trichet Rejects the Counsels of History
We are, once again, live at the Financial Times with a critique of Jean-Claude Trichet.
They removed my first two paragraphs--the ones in which I attempted to delegitimize everybody who is not an economic historian. Here they are:
One of the embarrassing dirty little secrets of economics is that there is no such thing as economic theory properly so-called. There is simply no set of foundational bedrock principles on which one can base calculations that illuminate situations in the real world. Biologists know that every cell runs off instructions for protein synthesis encoded in its DNA. Chemists start with what the Heisenberg and Pauli principles plus the three-dimensionality of space tell us about stable electron configurations. Physicists start with the four fundamental forces of nature. Economists have none of that. The "economic principles" underpinning their theories are a fraud--not bedrock truths but mere knobs twiddled and tunes so that th right conclusions come out of the analysis.
What are the "right" conclusions? It depends on what type of economist you are, for three are two types. One type chooses, for non-economic and non-scientific reasons, a political stance and a political set of allies, and twiddles and tunes their assumptions until they come out with conclusions that please their allies and their stance. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones and the skeleton that emerge will teach lessons and suggest principles that will be useful to voters, bureaucrats, and politicians as they try to guide our civilization as it slouches toward utopia. (You will not be surprised to learn that I think that only this second kind of economist has any use at all.)
And here is the rest of my critique:
What lessons does history have to teach us about Jean-Claude Trichet’s call for immediate, rapid, and substantial fiscal and monetary retrenchment and austerity--about his full-throated endorsement of the agenda of the Pain Caucus?
Well, history tells us that there are times and circumstances when countries’ refusal to listen to calls for retrenchment and austerity has led to economic disaster. Times when a country’s supply of savings is inelastic and more government borrowing leads to sharp rises in and high real interest rates are times in which government budget deficits have drained the pool of savings, reduced private investment, and slowed growth--as they did in the U.S. in the second Reagan and the first Bush administration. Times when monetary and fiscal laxity leads to an expectation that government debt will be monetized and to rapid rises in inflation expectations are times in which policy has made a deep recession to restore price stability inevitable--as happened in the U.S. in the Nixon, Ford, and Carter administrations. And times when irrational exuberance on the part of foreign investors leads a country’s public or private sector to borrow heavily in foreign currency, it needs to pre-emptively retrench before foreign investor exuberance wears off, or else--as happened to East Asia in 1997-8, to Mexico in 1994-5, or to Argentina innumerable times since 1890.
The first key to the current situation, I believe, is that none of the core economies of the Global North--not France and Germany which are the heart of Eurozone, not Britain, not the United States, and not Japan--are in any of these three positions right now. All of the mechanisms and channels that have in the past made countries regret their failure to pursue policies of retrenchment and austerity are inactive. There are no clear and present dangers that would be fended off by retrenchment and austerity right now.
What else does history tell us? It tells us that in 1925 Chancellor of the Exchequer Winston Churchill was ill-served when he rejected the arguments of John Maynard Keynes and accepted the arguments of his Treasury staff that Britain required retrenchment and austerity: Churchill thus gave Britain a three-year head start on suffering from the Great Depression. It tells us that from 1930-1936 the belief of government after government of France’s Third Republic that if only they retrenched a little longer that the confidence of world capital markets in France would be so great that it could escape the Great Depression unscathed: the length of the Great Depression and the class war thus engendered in France weakened it enormously in the late 1930s--it is hard to stand up for freedom when the graffiti on the banks of the Seine reads “better Hitler than Leon Blum.” It teaches us that Weimar German SPD leader Rudolf Hilferding was extremely ill-advised to commit the SPD to policies of retrenchment and austerity when his labour economist Wladimir Woytinsky was calling for the SPD to develop a plan for a New Deal for Germany. And it teaches us that in his memoirs U.S. President Herbert Hoover, who was bitter about many things, was bitterest that he had let Treasury Secretary Andrew Mellon hamstring Hoover’s progressive impulses and lead the Hoover administration to policies of retrenchment and austerity.
History teaches us that when none of the three clear and present dangers that justify retrenchment and austerity--interest-rate crowding-out, rising inflationary pressures on consumer prices, national overleverage via borrowing in foreign currencies--are present, you should not retrench and austerity: don’t call the fire truck when there is no smoke. And history teaches us that when economies suffer from high unemployment, enormous excess capacity, incipient deflation, businesses terrified of a lack of customers, and an enormous excess demand for high quality assets, then is the time for expansion and stimulus: when the deck is awash, start bailing.
Yet Jean-Claude Trichet rejects these counsels of history. He seems to me to place himself in the position of, as British interwar bureaucrat R.G. Hawtrey described his precedessors at the start of the Great Depression, somebody: “crying ‘Fire! Fire!’ in Noah’s flood.”
British Fighter Pilot Denis Wissler Liveblogs World War II: 23 July 1940
Denis Wissler:
Diary Extract, 23 July 1940: We went over to Martlesham and did a hell of a lot of flying. Two patrols one of 1.05hrs and one of 1.45hrs, at about 7pm we were told to take off for Debden, but having got half way home we were recalled and brought to readiness again. Eventually we were released at 9.15 and arrived to make a dusk landing. I shall sleep very well tonight, given half the chance.
links for 2010-07-22
-
TD: "ut the failure to confront global warming – central not only to Obama's presidency but to the planet itself – is not the Senate's alone. Rather than press forward with a climate bill in the Senate last summer, after the House had passed landmark legislation to curb carbon pollution, the administration repeated many of the same mistakes it made in pushing for health care reform. It refused to lay out its own plan, allowing the Senate to bicker endlessly over the details. It pursued a "stealth strategy" of backroom negotiations, supporting huge new subsidies to win over big polluters. It allowed opponents to use scare phrases like "cap and tax" to hijack public debate. And most galling of all, it has failed to use the gravest environmental disaster in the nation's history to push through a climate bill – to argue that fossil-fuel polluters should pay for the damage they are doing to the atmosphere, just as BP will be forced to pay for the damage it has done to the Gulf."
-
SK: "Blanche Lincoln is pretty much doomed in her Senate reelection bid. Even in what for Lincoln is the best of the new surveys, she still trails her GOP challenger, John Boozman, by 19 points, 54 to 35 percent.... [I]t does reinforce a point I tried to make during Lincoln's campaign against Bill Halter this spring: Democrats would have been better off getting rid of her in the primary... with Halter as their nominee, Democrats would have at least introduced some uncertainty into the fall campaign. With Lincoln, a two-term incumbent and two-decade Washington veteran, there really is none."
Should You Trust Tucker Carlson's Daily Caller on Anything? No
In case you were wondering...
The Daily Caller:
DAVID ROBERTS, GRIST: It’s all I can do not to start bawling....
JOHN BLEVINS, SOUTH TEXAS COLLEGE OF LAW: It’s all I can do to hold it together.
The actual conversation on election night, which of course puts these lines in a much different and more history-conscious light:
DAVID: I've spent much of this election struggling not to contemplate what an Obama victory would mean. After the crushing disappointments of 2000 and 2004, I haven't allowed myself to feel much hope or excitement. It's been head-down, day-to-day fighting for a long, long time. Big picture stuff has been pushed out.
Yet I find that as an Obama victory seems more tangible, all that feeling is fighting its way to the surface. When I look at pictures like the one attached, it's all I can do not to start bawling. The same is true when I hear all these reports, like Rich's, about extraordinary turnout and energy in places like NC. It's true when I hear Obama's speeches. It's true when I think about the fact that people who experienced a time when blacks had separate drinking fountains are now voting for a black president....
John: David - well said. I've been experiencing the same thing -- it's all I can do to hold it together. I think the most touching moments are the interviews/accounts of elderly black people voting/volunteering/etc. Like the video below (Charles Meets Barack) -- it's just an unbelievable historical moment.
And what's truly touching is that you can really feel the weight of so many past generations who have sacrificed so much to make it possible today.
And Ezra Klein writes:
Ezra Klein - When Tucker Carlson asked to join Journolist: I hoped to let my quick accounting of the constant inaccuracies in the Daily Caller's selective quotations from Journolist stand as my last word on the matter. But Tucker Carlson's sanctimonious and evasive statement on the way his site has been covering this story deserves a response. So allow me one more post.
Tucker's note doesn't bother to mention the actual questions that have been raised: That his stories have misstated fact, misled readers, and omitted evidence that would contradict his thesis. He doesn't explain how a thread in which no journalists suggested shutting down Fox News can be headlined "Liberal journalists suggest government shut down Fox News." He doesn't tell us why an article about the open letter that originated on the list left out the fact that I subsequently banned any future letters from the list. He doesn't detail why his stories haven't mentioned that one of his own reporters was on the list -- his readers would presumably be interested to know that the Daily Caller was part of the liberal media conspiracy.
Instead, Tucker says, well, trust him. "I edited the first four stories myself," he writes, "and I can say that our reporter Jonathan Strong is as meticulous and fair as anyone I have worked with."
If this series now rests on Tucker's credibility, then let's talk about something else he doesn't mention: I tried to add him to the list. I tried to give him access to the archives. Voluntarily. Because though I believed it was important for the conversation to be off-the-record, I didn't believe there was anything to hide.
The e-mail came on May 25th. Tucker didn't ask that it be off-the-record, so I'm not breaking a confidence by publishing it. Here it is, in full:
Dear Ezra,
I keep hearing about how smart the policy conversations on JournoList are, and am starting to feel like I'm missing out by not reading them. Could I join?
I realize you and I don't share the same politics, but I can promise you I have no interest in flaming anyone or even debating (I get enough of that). I'm just interested in knowing what smart progressives are saying. It strikes me that's the one thing I'm missing in my daily reading.
Please tell me what you think. If it makes you uncomfortable, ask around. I'm pretty sure we know a lot of the same people.
All best,
Tucker Carlson.
At the time, I didn't know Carlson was working on a story about Journolist. And I'd long thought that the membership rules that had made sense in the beginning had begun to feed conspiracy theories on the right and cramp conversation inside the list. I wrote him back about 30 minutes later.
We definitely have friends in common, and I'd have no worries about you joining. The problem is I need to have clear rules, as i don't want to be in the position of forcing fine-grained membership tests based on opaque criteria. Thus far, it's been center to left, just because that was how people wanted it at the beginning in order to feel comfortable talking freely. I've been meaning for some time to ask the list about revisiting that, so I'll take this opportunity and get back to you.
I then wrote this e-mail to Journolist:
As folks know, there are a couple of rules for J List membership. One is that you can't be working for the government. Another is that you're center to left of center, as that was something various people wanted back in the day. I've gotten a couple of recent requests from conservatives who want to be added (and who are people I think this list might benefit from), however, and so it seems worth asking people whether they'd like to see the list opened up. Back in the day, I'd probably have let this lie, but given that Journolist now leaks like a sieve, it seems worth revisiting some of the decisions made when it was meant to be a more protected space.
As I see it, the pro of this is that it could make for more fun conversations. The con of it is that it becomes hard to decide who to add and who to leave off (I don't want to have to make subjective judgments, but I'm also not going to let Michelle Malkin hop onto the list), and it also could create even more possible leaks -- and now, they'd be leaks with more of an agenda, which could be much more destructive to trust on the list.
I want to be very clear about what I was suggesting: Adding someone to the list meant giving them access to the entirety of the archives. That didn't bother me very much. Sure, you could comb through tens of thousands of e-mails and pull intemperate moments and inartful wording out of context to embarrass people, but so long as you weren't there with an eye towards malice, you'd recognize it for what it was: A wonkish, fun, political yelling match. If it had been an international media conspiracy, I'd have never considered opening it up.
The idea was voted down. People worried about opening the archives to individuals who could help their careers by ripping e-mails out of context, misrepresenting the nature of the ongoing conversation, and bringing the world an exclusive look into The Great Journolist Conspiracy, as opposed to the daily life of Journolist, which even Carlson describes as "actually pretty banal."
Apologetically, I went back to Tucker and delivered the bad news. But I still liked the idea of a broader e-mail list, and I offered to partner with him to start one. "There was interest," I told him, "in creating a separate e-mail forum with a more bipartisan flavor (such that Journolist could keep its character, but something else could provide the service we're talking about), and if that's something you want to do, I'd be glad to work on it with you."
He asked again if he could join Journolist, maybe on a read-only basis. He never responded to the idea of creating a bipartisan list. I was disappointed, but didn't think much of it.
My mistake, obviously. But if this series rests on Tucker's credibility, that's a soft foundation indeed. At every turn, he's known about evidence that substantially complicates his picture of an international media conspiracy. He knows I tried to let him in, odd behavior for someone with so much to hide and so much to lose. He knows I let one of his reporters remain a member. He knows I banned -- and enforced the ban -- on the sort of coordinated letter that served as example one of the list's conspiracy. He knows -- and never, to my knowledge, corrected -- that his reporter misrepresented the dates of Dave Weigel's posts to make it look like things he wrote at the Washington Independent were written at the Washington Post. And that's not even to mention the more prosaic deceptions of his selective choice of threads, truncated quotations, and misleading headlines.
When I e-mailed him to ask about some of these omissions, his response was admission mixed with misdirection. "I don't have nearly the grounding in this that Strong does, but according to him you often come off as a voice for moderation, and I'm pretty sure he will make that clear in a subsequent story." Ah, the old "we'll be more truthful later."
Why oh why can't we have a better press corps?
DeLong Smackdown Watch: "Recovery"?!
Ken Houghton writes:
Our Jobless Recovery Continues: Jobless I'll give you. Recovery? 1.5-3% growth over a period when the "stimulus" accounts for about 2.5% is animating the body with paddles.
Seems a bit early to say the heart is beating on its own. But you know that.
Thursday Morning Turandot
Hey! Deficit Hawks! Adding a Public Plan to the PPACA Is Low-Hanging Fruit!
Doug Elmendorf:
Doug Elmendorf Writes to Pete Stark: Taking into account all of the relevant factors, CBO estimates that roughly one-third of the people obtaining coverage through the insurance exchanges would enroll in the public plan. CBO estimates that about 25 million people would purchase coverage individually through the exchanges in the 2017– 2019 period under the proposal; in addition, about 13 million people would be expected to obtain employment-based coverage through the exchanges —so total enrollment in exchange plans would be about 38 million. Total enrollment in the public plan would thus be roughly 13 million. Given all of the factors at work, however, those estimates are subject to an unusually high degree of uncertainty.
Compared with projections of enrollment under current law for the 2017–2019 period, CBO estimates that about three-quarters of a million more people would obtain individually purchased coverage and about three-quarters of a million fewer would have employment-based coverage. The proposal would have minimal effects on the number of people with other sources of coverage and on the number of people who would be uninsured.
CBO and the staff of the Joint Committee on Taxation (JCT) estimate that the proposal would reduce federal budget deficits through 2019 by about $53 billion. That estimate includes a $37 billion reduction in exchange subsidies and a $27 billion increase in tax revenues that would result from changes in employment-based coverage, partly offset by an $11 billion increase in costs for providing tax credits to small employers. (The proposal would have minimal effects on other outlays and revenues related to the insurance coverage provisions of PPACA.) The bulk of those effects would occur in the second half of the decade; the savings estimated for 2019 are about $14 billion. Although CBO and JCT have not yet extended to 2020 the models they use to estimate insurance coverage, the proposal would probably reduce the federal budget deficit by about $15 billion in that year, bringing the total budgetary savings through 2020 to about $68 billion...
Chris Hayes Writes a Very Nice Piece on the Pain Caucus
Chris Hayes:
Are Depressions Necessary?: [T]he current crisis has also reawakened a long-obscured, but far more profound debate about the very nature of cyclical capitalism. That is: Are economic contractions, like the one we're currently experiencing, a good thing?... [S]cratch the surface a bit and you'll find a surprisingly vibrant school of thought, one that reaches back all the way back to the Great Depression, that holds precisely this view.
Famed economist Joseph Schumpeter said that "a depression is for capitalism like a good, cold douche," one that rinses off accumulated dysfunction. Robber baron Andrew Mellon (who served as Herbert Hoover's treasury secretary) welcomed the Great Depression with these infamous words: "It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people" It's not hard to find this same view among bankers, financiers and sundry Wall Streeters today. Recently a bond trader told me he hoped that the Fed would raise interest rates and plunge economy into a truly deep, painful (but he hoped, quick) depression. "I don't think that would be good for you," I said. "Oh, I'd be fine," he responded. ( I meant politically: as in, there'll be people with pitchforks at your door. We were talking past each other I suppose.)... The stakes for this argument are very high: if steep economic contractions are like forest fires, a necessary part of the system's self-calibration, we should more or less let them burn. If they are more like five-alarms raging through dense city neighborhoods, we should call in the fire department.
But surely Hayes could have found a more intelligent, more thoughtful, more honest liquidationist than Robert Samuelson to highlight?
Paul Krugman, to put it mildly, disagrees. In 1999 he published a book with the prescient title the The Return of Depression Economics. While folks like Samuelson and Robert Lucas were celebrating the fruits of neoliberalism, a strange thing was happening: Financial crises of larger and larger scale and scope were wreaking havoc on the global financial system. Mostly, as Krugman notes, we ignored the tremors.... Low inflation became a central obsession of the so called "Washington Consensus," the term given for the uniform prescription of stiff free-market medicine -- balanced budgets, privatization of government services, and tight monetary policy -- that dominated global economic policy in the 1980s and 1990s. What animated much of this advice was not just a rigid and dogmatic economic consensus, but also the puritanical normative assessment that a wicked economy must now pay its penance. (Of course said penance was never paid by those who caused the crisis: It was paid out of the pockets of the starving, the poor and working class.)
It's exactly this notion that Krugman seeks, above all, to dispel. To do so he repeatedly returns to the true story of a baby-sitting co-op in Washington, D.C.'s Capitol Hill neighborhood. The co-op allowed couples with young children to have babysitters for nights out in return. In order to track people's credits, the co-op issued scrip: a coupon good for one night out. But a funny thing started to happen. People wanted maximal flexibility and so started hoarding their coupons, meaning there were too many people wanting to supply baby-sitting, and not enough who wanted to use the service. The co-op ground to a halt.
Why, Krugman, asks did this happen?
It was not because the members of the co-op were doing a bad job of baby-sitting.... It wasn't because the co-op suffered from "Capitol Hill values" or engaged in "crony baby-sittingism" or had failed to adjust to changing baby-sitting technology as well as its competitors. The problem was not with the co-op's ability to produce, but simply a lack of "effective demand.... The lesson for the real world is that your vulnerability to the business cycle may have little or nothing to do with your more fundamental economic strengths and weaknesses. "[B]ad things," Krugman concludes, "can happen to good economies."... [R]ecessions, and depressions and assorted downturns are not useful, cleansing opportunities to "purge the rottenness out of the system," but more often vicious cycles, auto-catalytic processes that result in massive amounts of human suffering, and waste human capital and an economy's productive capacity. More like the forest fire caused by a careless camper than the natural cleansings produced by mother nature....
As Krugman persuasively argues, economies need management and policy to maintain some kind of equilibrium. If we agree they need to be saved from their own tendency to spiral into disaster, to cycle through booms and busts, then it will be politics, not technical expertise, which provides the principles and rules that regulate. Samuelson and those of the Mellonist school have an innate distrust of politics; meddlesome and vulgar and prone to demagoguery. Lately the political system as seemed to be working over-time to confirm their worst fears. But ultimately there is not economics without politics, and as terrifying as this may be, economists can't save us from this crisis. Only politicians can.
Why Isn't the Federal Reserve Boosting Aggregate Demand Further?
Joe Gagnon:
Joseph E. Gagnon: Time for a Monetary Boost: In his testimony to the Congress this week, Fed Chairman Ben Bernanke left the door open to further monetary stimulus but made it clear that such action is not imminent. This reluctance to act may seem puzzling given the widespread view that the economic recovery is too weak.... The Federal Reserve's own forecast shows that it will take at least three or four years for employment to return to its long-run sustainable level. This extended period of high unemployment represents a massive waste of productive labor and untold personal suffering of unemployed workers. The Fed should be aiming to get us back on track within two years. And the urgency of Fed action is all the more important because Congress has refused to provide more stimulus....
Clearly, the case for monetary stimulus is strong. But what form should it take?... [T]he Fed... should return to its traditional roles of lending to the banking system and buying Treasury securities.... [T]he Fed should lower the interest rate it pays on bank reserves to zero.... [T]he Fed should bring down the rates on longer-term Treasury securities by targeting the interest rate on 3-year Treasury notes at 0.25 percent and aggressively purchasing such securities whenever their yield exceeds the target.... Finally, the Fed could bolster the stimulative effects of these actions by establishing a full-allotment lending facility to enable banks to borrow (with high-quality collateral) at terms of up to 24 months at a fixed interest rate of 0.25 percent.
These measures are all within the Federal Reserve's established powers. They pose essentially no risk to the Fed's balance sheet. They would reduce unemployment roughly as much as a 2-year $600 billion fiscal package and yet they would actually reduce the federal budget deficit. And they can be reversed quickly should the balance of risks shift from deflation to inflation.
Given the unsatisfactory outlook for unemployment and inflation and the lack of action by Congress, that is the right medicine for the US economy now.
Our Jobless Recovery Continues
Greg Robb of Marketwatch:
The number of people applying for initial state unemployment insurance benefits rose 37,000 to 464,000 in the week ended July 17, the Labor Department reported Thursday. Economists surveyed by MarketWatch had expected an initial claims level of 450,000.
Yes, It Is Warm
From NOAA:
State of the Climate | Global Analysis | June 2010: The combined global land and ocean average surface temperature for June 2010 was the warmest on record at 16.2°C (61.1°F), which is 0.68°C (1.22°F) above the 20th century average of 15.5°C (59.9°F). The previous record for June was set in 2005. June 2010 was the fourth consecutive warmest month on record (March, April, and May 2010 were also the warmest on record). This was the 304th consecutive month with a global temperature above the 20th century average. The last month with below-average temperature was February 1985. The June worldwide averaged land surface temperature was 1.07°C (1.93°F) above the 20th century average of 13.3°C (55.9°F)—the warmest on record. It was the warmest April–June (three-month period) on record for the global land and ocean temperature and the land-only temperature. The three-month period was the second warmest for the world's oceans, behind 1998. It was the warmest June and April–June on record for the Northern Hemisphere as a whole and all land areas of the Northern Hemisphere. It was the warmest January–June on record for the global land and ocean temperature. The worldwide land on average had its second warmest January–June, behind 2007. The worldwide averaged ocean temperature was the second warmest January–June, behind 1998...
Liveblogging World War II: July 22, 1940
The story of Jan Zwartendijk:
Lithuania Honours a Holocaust Rescuer: What was the role of Jan Zwartendijk (1896-1976) in the Kovno rescue episode? Why has Lithuania now recognized him for courage fifty-nine years after the event?... The Polish Jews who had fled to Lithuania precisely to escape Soviet rule felt especially vulnerable and desperate during the annexation process. By July virtually all consulates in Kovno, the Lithuanian capital, were in the process of closing. Panic set in among the Jewish refugees. At the point Jan Zwartendijk, voluntarily and at great personal risk, took on a role which quickly evolved into the rescue of the Jews.
Since May 1939 Jan had represented Philips, the Dutch electronics manufacturer, in Lithuania. In May 1940 the Germans over-ran Holland and a Dutch Government-in-Exile, technically a resistance organization, was established in London. L.P.J. De Decker, the Dutch Ambassador to the Baltic states who was based in Riga, Latvia, suspected the then-Dutch consul in Kovno of pro-Nazi sympathies. In June 1940 he asked Zwartendijk to take over in Kovno as consul in Lithuania representing the Dutch Government-in-Exile. In spite of the fact that Zwartendijk had no diplomatic experience and a wife and three young children in Kovno, he readily accepted this potentially risky assignment.
Zwartendijk's work almost immediately entailed the even more dangerous task of rescuing Jews. In July 1940 Pessla Lewin, a former Dutch citizen who was now a Polish refugee living in Lithuania with her husband Isaac and son Nathan, took the gamble of writing to De Decker, who was still the Dutch ambassador. She requested authorization to emigrate to the Dutch West Indies. She learned that no visa was required but that she would need a landing permit from the local governor. Such permits were only rarely issued. Nevertheless the ambassador tried to help by inscribing in her Polish passport, in French, the statement that "for the admission of aliens to Surinam, Curaao, and other Dutch possessions in the Americas, an entry visa is not required." This stipulation, dated July 11 1940, came to be known as a "Curaao visa." It gave the impression of being as good as a visa since it omitted the key phrase that a landing permit was required.
On July 22, Isaac Lewin approached Zwartendijk in Kovno. According to Lewin, Zwartendijk, "after seeing what De Decker had done, copied (the Curaao visa) into my Lithuanian safe-conduct pass." Armed with this documentation, Pessla and Isaac Lewin, plus her mother and brother who were still Dutch citizens, went to the Soviet and Japanese consuls in Kovno and were routinely issued seven-to-fifteen-day transit visas allowing them to pass through each of those countries. The Japanese consul was Sugihara Chiune, who has been featured in movies and is far better known than Zwartendijk. Without Zwartendijk's fictitious destination visas, however, neither Sugihara nor his Soviet counterpart would have been able to issue one single transit visa through their respective territories....
[W]ith Zwartendijk's help, the Lewins' single-family trip rapidly became a mass exodus of beleaguered Jews.... Zwartendijk originally had received De Decker's concurrence to issue phoney visas only for a few of Gutwirth's friends. But Zwartendijk went on to write approximately 1,300 visas by hand between July 24 and 27 and another 1,050 with the help of a rubber stamp between July 29 and August 3, when the Soviets took over Zwartendijk's office, obligating him and his family to return to Holland. The highest known visa number is 2,345, issued to Elisasz Kupinski and his family....
On June 4, 1999, on the grounds of the Jewish State Museum in Vilna (Vilnius), the present-day capital of Lithuania, three stone monuments were dedicated in his memory by Lithuania.
links for 2010-07-21
-
From $300 billion down to $34 billion. But $34 billion > $0. Kudos to the Obama Economic Team
Listserves in the Age of Google Archives
James Fallows:
On Today's Hot Media Stories: Virtues: at its best, it was a way of getting informed comment from people you wouldn't otherwise be in touch with. For me, this meant hearing from people: with experience in Afghanistan or Iraq; with expertise on financial regulation; with sharply diverging views about the importance of controlling the federal deficit; with informed views about what it would take to implement the new health care bill; with experience in reporting about intelligence agencies; with some knowledge of what is up with California state government; and so on.
Faults: Flame wars... inbox-clogging IM-style replies... the inevitable reality was that most messages would not be of interest to any given member. And -- as with most of the other listservs I've been on over the years and am still on -- many people, especially the young ones, wrote with an innocent assumption that they were talking within a community, rather than for potential years-later out-of-context quotation. I am chagrined to note that virtually the only thing I ever contributed to this group was a sadder-but-wiser warning that nothing in digital form was ever "private," so people should write only what they were willing to stand behind in public.
The "informed" parts of the discussion were useful; for the rest, I just pushed DEL. It's the same with all the other listservs I've been on over the years -- and there are half a dozen I'm on now.... Anthropologically they are all the same.... But all participants think they're operating within some kind of community -- rather than speaking, politician style, as if any half-sentence could be used against them in its most damaging construction at any later time.
In the other listservs I know -- about China, software, aviation, defense, cybersecurity, etc -- some people's careers could be gravely damaged if their least judicious single sentences were used against them out of context years later. I really, really hate to see that done to young people now. "Have you no decency?" is the right question for Andrew Breitbart. It's also the right question for the Daily Caller, whose editor (Tucker Carlson) asked for membership in the dreaded Journolist -- and was turned down -- just before it began seriatim publishing of damaging quotes against young writers.
Their Names Are Written in the Book of Life...
Carl Hulse:
Senate Gives Final Approval to Jobless Benefits: The Senate gave final approval Wednesday evening to legislation providing added unemployment benefits through November to millions of Americans who have been out of work for six months or more, ending a politically charged fight.
From $300 billion down to $34 billion. But $34 billion > $0.
Kudos to the Obama Economic Team, and to Pelosi, Reid, and company...
No kudos to Carl "He Said, She Said" Hulse, however: practitioners of he said-she said journalism do not get their names written in the Book of Life...
Effects of Extending the Under $250,000 Income Portion of the Bush Tax Cuts...
...would produce a fifty-year hit to the primary deficit of $4,000,000,000,000--although the number is ambiguous because the interactions with other tax provisions, especially the AMT, is so large.
Just as it was a catastrophic mistake to pass the Bush tax cuts in 2001 and 2003 without triggers to reverse them if the structural deficit became a problem, so it would be a catastrophic mistake to permanently extend any portion of the Bush tax cuts without triggers to reverse the extensions if the structural deficit remains a problem.
Federal Debt and U.S. Growth: I Think the Intelligent Simon van Norden Is Slightly Off...
Simon writes:
Worthwhile Canadian Initiative: Ninety percent worries: With this and other data, Rogoff and Reinhart document that, historically, there is not much of a relationship between government indebtedness and growth except for the over 90% of GDP group. For debt loads up there, growth seems quite a bit lower...
The problem is that the United States debt-to-GDP ratio got above 90% once and only once--at the end of World War II.
And then World War II ended, and we demobilized, and real GDP fell.
To say that American growth slows whenever the debt-to-GDP ratio rises above 90% is, really, to say that whenever the debt-to-GDP ratio rises above 90% a terribly destructive global war ends, we step down from our posture of total mobilization, and so economic growth is slow while we demobilize.
I don't think anybody really wants to make that argument...
David Leonhardt on the Disfunctional U.S. Government and the Global Climate
David:
Economic Scene - Overcome by Heat and Inertia: This city just endured its hottest June since records began in 1872, according to the National Oceanic and Atmospheric Administration. So did Miami. Atlanta suffered its second-hottest June, and Dallas had its third hottest. In New York, the weather was relatively pleasant: only the fourth-hottest June since 1872. Then again, New York is on pace for its hottest July on record. Yet when United States senators and their aides file into work on Wednesday, on yet another 90-degree day, they may be on the verge of deciding to do approximately nothing about global warming. The needed 60 votes don’t seem to be there, at least not at the moment.... [T]he odds of a major climate bill are not great. And if this White House and this Democratic Congress can’t pass one, you have to wonder what the future of climate policy looks like. All the while, the risks and costs of climate change grow. Sea levels are rising faster than scientists predicted just a few years ago. Himalayan glaciers are melting. In the American West, pine beetles (which struggle to survive the cold) are multiplying and killing trees.
According to NASA, 2010 is on course to be the planet’s hottest year since records started in 1880. The current top 10, in descending order, are: 2005, 2007, 2009, 1998, 2002, 2003, 2006, 2004, 2001 and 2008.
Hot is the new normal.
The most efficient way to begin attacking the global swelter is no mystery. It involves raising the price of carbon emissions, which are warming the planet, and then letting the private sector find innovative ways to use less dirty energy. Conservative economists, like Gregory Mankiw, support this approach. So do liberals, like Joseph Stiglitz. But taxing carbon has never had much of a political chance. It’s too honest. It acknowledges that the best way to reduce the use of a product is to increase its price. We would all prefer a free lunch. So Congress has been laboring to disguise a price increase in a more palatable package.... Republican leaders, though, were only too happy to cast cap and trade as “cap and tax.”... The sad paradox is that cap and trade — which trusts in the efficiency of markets — was originally a Republican policy, signed by the first President Bush to reduce acid rain....
[T]he fuel economy rules from the 1970s that required car companies to make fewer gas guzzlers. The newly imposed scarcity of guzzlers, in turn, increased their price. But the relationship wasn’t obvious. Americans do not think of fuel economy rules as a tax on large vehicles. This explains why the rule-based approach seems to be the best bet for winning Republican votes. Senator Richard Lugar, Republican of Indiana, has proposed new rules not just for vehicles but also for appliances, building codes and power plants. If these regulations were tough enough, they could make a difference, as the fuel economy rules have. So some Democrats and environmentalists see this approach as their best remaining chance.... On the other hand, such rules would require government regulators to make all kinds of decisions — about which dishwashers qualified as efficient, about which alternative energies power plants had to use and the like.... The result would almost certainly be higher, albeit better disguised, costs than with a carbon cap or tax.... Thus the opposition among other Democrats and environmentalists to accepting the Lugar approach as a compromise — and Mr. Reid’s difficulty in finding 60 votes for it....
Robert Stavins, the Harvard economist, told me he would actually prefer a bill that cut emissions less in the short term but created a template for much bigger cuts in the future. “Success, to me, would be the beginning of political acceptance of carbon pricing,” he said. I’ll confess to being torn about these arguments. A utility-only cap, even a flawed one, really would represent a whole different kind of progress than a souped-up version of fuel economy rules. A cap — any decent cap — remains the best benchmark of success. Yet if the Lugar approach were the only one that could pass, should we be so confident that it would put off further action? It’s not clear to me how another failure on energy policy will somehow make success more likely in the future.
All of this will be decided in the next few weeks, before the Senate breaks for its August recess, or in September, before the midterm election campaign takes over. Meanwhile, the temperature in Washington this week is supposed to hit 99.
Kudos to National Review Online
Daniel Foster emails:
Here's me saying NRO should get some credit for circling the wagons around Shirley Sherrod after watching the full, unedited tape. Is it convenient that Sherrod's forced resignation makes the White House, or at least Vilsack, look bad? Sure. But there is a lot of genuine feeling for Sherrod, and not a little regret over having overreacted to the initial story.
Here's Spruiell http://corner.nationalreview.com/post/?q=OWU0Y2ZlYzcwYmRlZjQ1MmQzMDdmYmQ4NWY2MTMyMjE=
Here's Lowry http://corner.nationalreview.com/post/?q=ODQyN2I2ODRjMDA4YWY5MDlkMWY4ODk5ZDQyZmQ3MWY=
Here's Golbderg http://corner.nationalreview.com/post/?q=NDNmYTk4ZmVjYzU0Zjk3OTU5ODNhODhjOTE4NmM1NmU=
Here's Coffin http://corner.nationalreview.com/post/?q=YTkzNjZlZDlhMDVkODA5ODI4YzhmMmQ4ZGE1MjQ0NDA=
Very true. Kudos to National Review Online...
DeLong Smackdown Watch: Niall Ferguson
Niall Ferguson writes, over at the FT:
FT.com / Comment / Opinion - 1939 and all that ...: Economists really do seem to struggle with history – and sometimes geography, too. Brad DeLong needs to remember that the Financial Times is published in London. As far as most combatants were concerned, the second world war broke out in September 1939...
Touché...
I would point out that China and Japan by themselves are "most" combattants, and that they think WWII began in 1937, but that is too weak a parry to even attempt...
Liveblogging World War II: July 21, 1940
Puppet Quisling legislatures of Lithuania, Latvia and Estonia declare their countries annexed to the Soviet Union.
Are Libertarians Serious About Liberty?
Timothy Lee on how the conservatives snookered the libertarians:
How to Talk Liberaltarian: Nick Schulz weighs in on the liberaltarianism debate:
The original fusionist project of Frank Meyer and others was predicated on a belief that libertarians and conservatives (social/religious/paleo) actually agreed on some basic philosophical principles, not just shared goals such as opposing Soviet communism (as important as that was). Two of these have always been paramount: The importance of protecting individual liberty, and an appreciation for the vital role played by civil society and traditional mediating institutions that made American culture and ordered liberty possible...
This seems completely wrong to me. Conservatives care about “protecting individual liberty” for some people, but the conservative movement includes many people who are indifferent, if not hostile, to the liberty of foreigners, immigrants, drug users, gays and lesbians, women who want abortions, broadcasters, sex workers, criminal defendants, Muslims, publishers of pornography, atheists, and so forth.... What libertarians and conservatives share isn’t a shared commitment to freedom so much as a common way of talking about freedom... the Founding Fathers... free markets... limited government... Hayek.... But... fusionist slogans... often combined with calls to “keep your government hands off my Medicare”, promote “energy independence”, and build a police state along our Southern border suggests that these slogans are little more than empty rhetoric.... Because libertarians and conservatives share a political vocabulary we find it relatively easy to communicate with each other. Liberals and libertarians obviously “agree on some basic philosophical principles.”... But many libertarians talk about liberty in a right-wing way... liberals... talk about liberty in a way that’s alien to most libertarians. This “language barrier” exaggerates the degree of disagreement....
This is why I think it’s important for this kind of debate to move beyond manifestos to actually discovering and working on areas of shared agreement. Conservatives and libertarians feel an emotional bond because libertarians spend most of their time working on “conservative” issues.... To develop a similar rapport with liberals, libertarians need to focus more on issues where they can count liberals as allies. As they do, they’ll find that there are actually lots of liberals who care about freedom...
Prometheus 6: An Open Letter To Agriculture Secretary Tom Vilsack
Can I sign on to this somewhere?
Prometheus 6:
An Open Letter To Agriculture Secretary Tom Vilsack | Prometheus 6: I am sure you know by now that your department has been had. You are not alone; the ACORN debacle was a more significant failure, in the number of people who lost their jobs as well as the far greater number of people who lost access to the services ACORN provided. This time the libel was caught immediately.
Hopefully you will rescind your acceptance of Shirley Sherrod's forced resignation. That would be the first step. This should be done publicly. Read the NAACP's statement for guidance if you need it.
Having reviewed the full tape, spoken to Ms. Sherrod, and most importantly heard the testimony of the white farmers mentioned in this story, we now believe the organization that edited the documents did so with the intention of deceiving millions of Americans.
You should be that direct.
Fiscal Drag...
Paul Krugman:
Fiscal Drag: From Alec Phillips at Goldman Sachs (no link):
Congress looks increasingly unlikely to extend ay more fiscal aid to state governments, despite ongoing shortfalls in state revenues, and they have already let several other items lapse. We are therefore removing from our estimates an assumption of further fiscal stimulus beyond the policies in law (including this week’s unemployment extension), though we continue to expect extension of most of the expiring 2001/2003 tax cuts. This adds almost a full percentage point to the drag on growth from Q4 2010 to Q4 2011 to what we had already estimated.
DeLong's Grasping Reality © J. Bradford DeLong 1995-2019
